The Legal Costs Blog has been a bit quite over the last few days. This is because I’ve been on holiday in sunny Turkey. Indeed, I’m writing this post lying on a sun-lounger by the pool with the laptop precariously balanced on my stomach and with a drink on the table beside me with an extra long straw to avoid any danger of accidentally performing a sit-up.

However, my time has not been entirely wasted with my holiday reading material.

In a previous post I commented on the problem that costs judges face in that the only bills of costs they are likely to see are the most unreasonable ones. Reasonable bills almost invariably settle. Judges perception of what is “normal” is formed by the most unusual bills that come their way.

The following comes from Kevin Dutton’s fascinating book Flipnosis.

Ask a colleague the following question:

How many litres of diesel does it take to fill up a jumbo jet? Is it more of less than 500?

Now ask another colleague the same question with a subtle twist:

How many litres of diesel does it take to fill up a jumbo jet? Is it more of less than 500,000?

Then ask each of them to give a concrete estimate of how many litres of diesel it really does take to fill up a jumbo yet.

Almost inevitably, the first person will give a lower estimate than the second person, and probably by a very large margin. The reason for this is something called anchoring. Both colleagues will quite literally use the numbers you put in their head (500 or 500,000) as their frame of reference – anchoring points – on which to base their judgements.

Dutton’s books goes on to describe how this concept of anchoring influences even judges, as shown in a study by German psychologists Birte Englich, Fritz Strack and Thomas Mussweiler:

“The team took a group of experienced judges and asked them to read an outline of a case. The case involved a man who’d been convicted of rape. Once they’d familiarised themselves with the details, the judges where then divided into two groups. One group were to imagine the following: that while the court was adjourned, they received, in their chambers, a telephone call from a journalist. This journalist posed them the following question: Would the sentence be higher or lower than three years? The other group were presented with a slightly different scenario. They, too, were told that they’d received a telephone call from a journalist – only in this case the journalist would enquire whether or not the sentence would be higher or lower than one year. … [T]he average length of sentence handed down by the judges in the first group was 33 months. In the second, it was 25.”

Strangely, Dutton fails to follow this up by exploring the relevance of this concept to the world of legal costs and I will therefore have to take the baton and run with it.

One of the areas that my firm, Gibbs Wyatt Stone, specialises in is legal costs in catastrophic injury claims. Lets take a typical catastrophic injury claim (if there is such a thing) that settles shortly before trial. A bill of costs is presented claiming 150 hours on documents. Hopefully we can all agree that 150 hours is too much, although, depending on the facts of the case, this may not be outrageous for this type of claim. So what would a judge allow adopting a broad-brush approach?

With high value costs claims there is no real sensible way of dealing with the document time other than on a broad-brush basis. With the current bill of costs format, work done on, for example, drafting the claimant’s witness statement, will often be scattered over various dates throughout the document schedule. Trying to deal with this on an item-by-item basis is a lost cause. When drafting points of dispute I will often try to total the time claimed to see how long has been spent on a specific task in total. If this totals, for example, 20 hours on the claimant’s witness statement, then a judge can begin to consider whether this is reasonable given the length of the final statement. However, in general, a broad-brush approach to the document time is often the only way to sensibly proceed.

So, given my example of a total of 150 hours for such a claim, what can we expect the court to allow? Members of the judiciary who are reading this can play along at home. I’m going to suggest a likely figure of somewhere between, 120-130 hours.

Now, let’s play the game again with a case with the same facts but with a bill claiming 400 hours on documents. We all should be able to agree that this would usually be a silly amount of time. But what would the court allow? Acting for defendants, I would think I had done rather well if the court reduced this to 200 hours. That is not to say that I would consider 200 hours to be a reasonable figure but rather that, in my experience, it is very rare for a judge to reduce document time by more than 50%. I previously put this down to a reluctance on the part of judges to make a finding that virtually amounted to a finding of gross incompetence on the part of the solicitors (because the time spent was more than twice what a competent firm would have taken) or a finding of fraud (more time was being claimed than had actually been spent). I now think that the anchoring concept may be playing a part. The bigger the figure first claimed, the more likely it is that a large figure will be allowed. The amount claimed acts as the anchoring point in the costs judge’s mind.

The courts do appear to be willing to allow much higher overall figures on the most excessive bills than they ever would allow on the more reasonable ones. Ironically, the more reasonable the bill of costs presented, the less the firm will probably recover. The more outrageous the claim, the bigger the final award is likely to be. If costs judges and costs officers are likely to suffer from this problem, despite their experience, how much worse will this be for less experienced district judges? Other than the anchor of what is claimed, what do they have to help them determine what a reasonable figure is? Judges need to take an extra critical view of the largest bills and avoid worrying that they may be being too harsh simply because the size of the reduction looks very large.