Monthly Archives: August 2010

Competent law costs draftsmen

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The Association of Law Costs Draftsmen, when responding to concerns about the recent changes being made to the membership structure and qualification requirements, stated:

“The rights which [the ALCD] will regulate include rights of audience and rights to provide legal services, and may in due course include the right to practise reserved legal activities. This means that the relevant test has to be one of competence, not excellence. The ALCD would be failing in its duty to entrants and the public if it were to set the bar so high that only a select few could clear it.”

The relevant test being “competence, not excellence” is clearly correct. The Bar does not expect junior barristers to have the skill and knowledge of a QC. Unfortunately, this test does no more than beg the question as to what amounts to “competence” for those acting in the field of legal costs.

The fact that a newly qualified solicitor or barrister may be “allowed” to handle a murder trial or a catastrophic clinical negligence brain injury claim does not mean they should. One would hope they would have the sense to turn the instructions down, on the basis of lack of experience, given the importance of the matter. The same should apply to costs (although whether those of us who work in this field have already disqualified ourselves, in terms of having “sense”, is another matter).

In fact, the examples of a murder trial or catastrophic injury are perhaps misleading. Those types of claim are immediately obvious to identify, as are their importance and potential complexities. (Barristers also have the benefit of a clerk to act as an initial filter for cases out of the barrister’s depth.)

The position in relation to those who work in the field of legal costs is less straightforward. The ALCD’s stated aim is to have its members able to “deal with the vast majority of costs disputes without the assistance of counsel”.

From the perspective of those who act for the receiving party, there appear to be four key elements to competence:

1. The ability to recognise, when instructed to deal with a new case, that there may be problems with the retainer. This has many potential strands:

i. If the CFA pre-dates the revocation of the Conditional Fee Agreement Regulations 2000, is there a potential breach?

ii. If the CFA post-dates the revocation, is there still potentially a breach of primary CFA statute. (Yes, this is still a problem. I have already had one post-revocation CFA struck down as invalid by a Regional Costs Judge. The other week I had another case settle at the door of the court with the claimant taking a heavy hit to reflect the fact the CFA was potentially defective. There are plenty of others out there.)

iii. Are there potential problems caused by complicated rules surrounding retainers not made at the solicitors’ offices? How many of those working in the field of legal costs are really 100% up to speed on this?

iv. I previously mentioned Cook on Costs 2010, page 438, reporting on a Costs Practitioners’ Group meeting at the SCCO “whose view was that while Grade D fee earners might be able to draw straightforward bills of under £10,000, all other bills ought to be drafted by a Grade C fee earner, since costs are a technical matter, and matters such as the operation of the indemnity principle need more experience than a Grade D fee earner is likely to possess”. (I am note sure the Group really did say this but it is clearly Cook on Costs’ view.) The question of whether there ultimately has been a breach of the indemnity principle – eg is any given CFA invalid – may well be a complex and unpredictable question. However, the basic indemnity principle should not be complex to understand and, in my view, those who have not grasped the principle within the first few days of starting to be taught legal costs law have no place practising in costs at any level. Nevertheless, the fact that a work such as Cook on Costs expresses this view does suggest that there probably are some working in the field of legal costs who do not understand the indemnity principle (and I fear this may be correct) and really does beg the question as to what we are to judge “competence” by.

2. The ability to recognise a serious challenge when it is raised in points of dispute. At that stage it may be necessary to seek assistance from someone more experienced/specialised. Unfortunately, experience suggests that the seriousness of a challenge, to a retainer for example, is often not appreciated until a day or two before a detailed assessment hearing, when the matter is presumably referred up the chain. Worse, sometimes the seriousness of the challenge is not appreciated until the end of the detailed assessment when costs have been disallowed in their entirety. At this stage the receiving party has to purse the unsatisfactory course of trying to appeal the matter and bring in specialist costs counsel.

3. The ability to deal with any of the unexpected arguments that can arise during a detailed assessment hearing. This can arise in all types of advocacy and is the cornerstone of the “competent” advocate. This is not a skill that comes easily, except to a gifted few, and the limited amount of advocacy that the majority of us undertake in the role of law costs draftsmen brings limited opportunity to learn by experience. As a reader commented on a previous post: “the young barrister is in court almost every day, perfecting his craft. How can costs draftsmen compete?”.

4. The ability to properly draft a bill of costs. (I’m not just talking about claiming the correct VAT rate). Issues such as apportionment or division of costs, where there were a number of defendants, or where there are unusual costs orders, can be very complicated. Obviously, sometimes a bill is simply drafted in the most favourable way for the receiving party and arguments are awaited as to why it might be wrong. However, I am sure that bills are often drafted on a fundamentally wrong basis because the costs draftsman has not understood there is even an issue to address. When challenges are raised, the defect with the bill is still not understood.

Tomorrow we’ll look at “competence” from the paying party’s perspective.

RTA claims process savings

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So, has the new road traffic accident claims process been a success from a defendant perspective?

This month’s edition of Litigation Funding refers to figures from AXA showing they are admitting liability within 15 days in 61% of cases and costs have fallen by £200 a claim.

Admitting liability promptly is obviously a crucial aspect of the process. It is perhaps unfortunate that this coincides with news that “cash for crash” scams are at a record high (see link) -  There is an obvious tension between trying to admit liability early and weeding out fraudulent claims. It may be too early to conclude whether any perceived costs savings have outweighed any additional fraudulent claims that have slipped through.

A more obvious problem appears to be the fact that it is surely too early to know whether there really has been an average saving of £200 per case. The scheme only applies to those cases where the accident was on or after 30 April 2010. We are only four months into the scheme. No doubt those claims that have settled this quickly have had average costs come in at a lower level than those recoverable under the predictable costs scheme.

If any claims have already managed to proceed as far as a Stage 3 hearing, they must be few and far between. When a significant number of claims start to get that far there will be an obvious spike in the cost of the average claim.

This is before we begin to consider the extent to which claimant solicitors seek to avoid the scheme entirely. The predictable costs scheme revealed the willingness of some firms to seek to play the system and issue proceedings at the first opportunity. It could be a good two years before these claims have settled, and the detailed assessment proceedings arguing over the costs have been concluded, before we know what level of costs will be recovered. Only then can average costs really be determined.

Added to all this will be the resources needed to fight the costs battles ahead.

It is probably somewhat premature to conclude what costs savings, if any, this scheme will produce.
 

Leeds detailed assessment pilot

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The last of Jackson LJ’s Civil Costs Review Seminars was concerned with the detailed assessment procedure. There was overwhelming, if not unanimous, support for the introduction of provisional assessments of costs on paper.

In the recent Written Ministerial Statement by Parliamentary Under-Secretary of State for Justice (Jonathan Djanogly MP), confirming that the Government planned to press ahead with the Jackson proposals, it was announced that there were a range of continuing judiciary-led costs and case management work including a “pilot of assessing disputed costs under £25,000 on the papers rather than at a hearing, in Leeds, Scarborough and York County Courts from October 2010”.

The new rules relating to the pilot scheme are incorporated in the 53rd CPR Update and will run from 1 October 2010 to 30 September 2011.

The first thing to note is that the pilot applies to cases where the base costs are £25,000 or less. With success fees and ATE premiums this will catch a large number of claims. It is not immediately obvious from the new rules whether the onus will be on the receiving party to specifically request the provisional assessment or whether someone at the court will be sitting there with a calculator to check the level of base costs is above or below £25,000. If the onus is on the receiving party, it is not clear what the sanction, if any, would be for getting this wrong.

The aim of the new scheme is clearly twofold:

1. Reduce the amount of court time taken up by detailed assessment hearings.

2. Reduce the high costs to the parties that are currently incurred in relation to fully contested detailed assessment hearings.

It is worth exploring the likely success of the pilot scheme in achieving these aims.

Apparently, the current thinking is that it is estimated that under the pilot scheme it should only take the judge about 45 minutes to review the documents provided and come to a decision. This is clearly significantly faster than the time taken currently in relation to detailed assessment hearings where much longer is needed for even the lowest value and most straightforward claim. There are, however, a number of potential problems.

At the last of the Jackson Review Costs Seminars, hosted by the Supreme Court Costs Office Practitioners’ Group and Reed Smith LLP, there were only two dissenting voices to the idea of provisional paper assessments. One was a regional costs judge and the other was a principal costs officer. Their concern was that such a process would lead to an unmanageable surge in detailed assessments that would overwhelm the courts. Far from reducing the amount of time the courts spent dealing with costs matters, it would have the opposite effect.

Currently, the detailed assessment route is an expensive one. With lower value claims the costs of detailed assessment can outweigh the costs of the substantive claim. Even on no more than medium sized bills, the detailed assessment costs can easily run into five figures. Therefore, parties, or at least those properly advised, will be reluctant to proceed down this route if it can be avoided. With the provisional assessment, the only cost that will be incurred, beyond the costs of Points of Dispute and any Replies already incurred, will be the court fee. The court fee for bills that do not exceed £15,000 is £300. For bills which exceed £15,000 but do not exceed £50,000 the fee is £600. Either party can therefore obtain a provisional assessment for a bill of up to £50,000 for no more than £600. This is certainly set at a level where the costs of assessment are unlikely to act as a disincentive, unlike the current level of costs.

A large number of cases currently settle after the matter has been listed for an assessment hearing but before the actual hearing. This is often only a day or two before the hearing. No doubt this is usually caused by the approaching hearing suddenly focusing the minds of those involved. Even a very late settlement will avoid the majority of the assessment costs. The judiciary routinely complain about late settlements of costs disputes. (This is a routine occurrence in substantive litigation as well, of course.) In reality, it is probably only because of late settlements that judges are able to keep on top of some of their paperwork. If late settlements did not occur, the courts would probably grind to a halt.

With the provisional assessment process will there be any incentive on parties to review and try to settle costs in advance of hearings? The court fee will already have been incurred and no further saving will be available. There is certainly every possibility that parties will be more likely to request assessments in the first place and then less likely to look to compromise matters before the assessment has actually occurred.

The second problem is that there is an automatic right to seek a full oral detailed assessment if either party is unhappy with the provisional assessment. Given it appears that there will be no reasons given for reductions made, or not made, to bills, there has to be a real possibility that there will be just as many full detailed assessments as there are presently. The worst case scenario is that the courts are faced with a large number of provisional assessments that they did not previously have to deal with and no reduction in the number of full assessment hearings.

Whether the provisional assessment pilot increases or decreases the workload of the courts remains to be seen.

We’ll examine the other issues on another day.
 

Supreme Court guideline hourly rates

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The Practice Directions to the Supreme Court Rules 2009 have been updated with new guideline hourly rate figures for the provisional assessment of costs.  Funnily enough, they are identical to those for summary assessment in other courts.

For those who keep pretending that the Guideline Hourly Rates are only relevant for low value fast-track claims, and should play no part in detailed assessment, think again.  These rates also operate as the starting point figures for assessment in matters heard in the Supreme Court.

Costs Counsel v Costs Lawyer – Round Two

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Not long ago I commented on the perceived differences in the skills of specialist costs counsel compared with costs lawyers and concluded that the latter could not realistically expect to compete with the former.  The comments that were made on the post suggest that I am not alone in this view.

You can therefore imagine the sense of irony I felt in relation to the telephone call I received a day or two later from a defendant solicitor client.

They had previously instructed specialist costs counsel to attend a detailed assessment hearing.  Unfortunately, the bill of costs had been assessed for a few pounds more than the defendant’s offer and the the claimant had therefore been awarded the costs of the detailed assessment hearing.

Now, losing by a small margin is not exactly unknown in costs matters but there were one or two unfortunate features:

1. The defendant had made an offer before the bill of costs was drafted.  Excluding the costs of drafting the bill, the defendant would have won comfortably on the offer (see Forward v Burton [2005] EWHC 90003 (Costs)).  Counsel failed to argue this point.

2. The bill had been correctly drafted, at the time, claiming VAT at 15%.  The defendant’s offer had been based on 15% VAT.  No request had been made to amend the VAT claim in the bill.  Apparently, or at least so the court subsequently ruled, the defendant’s counsel had agreed VAT at 17.5% when doing the calculations with the other side outside court.  No attempt had been made to argue that consideration of whether the original offer had been successful should have been based on the VAT rate that applied when the offer had been made.  This made the difference between winning and losing. 

The barrister in question shall remain nameless but, from my limited experience of being against him in court, is a gifted junior (as specialist costs counsel almost invariably are).  So what went wrong?

I suspect this was a typical example of the potential limitations and drawbacks of relying on specialist costs counsel.  Or, at least, relying solely on costs counsel.

Specialist costs counsel are often fiendishly clever when it comes to arguing complex and novel points of costs law but often have much less of a grip on the rough-and-tumble of day-to-day disputes.  Issues that are, or at least should be, bread-and-butter for law costs draftsmen are ones that costs counsel are often far less familiar with because they tend to be instructed to deal just with the big issues, such as CFA compliance, rather than run-of-the-mill detailed assessments.  I know a number of costs counsel who would immediately agree that this is correct and often prefer to have a costs draftsman attend a detailed assessment with them to deal with the routine arguments.  The drawback with this, of course, is the extra cost of having both attend with every chance the judge will only allow the fees of one.

So, I’m now going to have to refine what I said before.  Costs counsel will generally be far more appropriate to instruct to deal with complex legal costs arguments and for cost appeals.  Law costs draftsmen/costs lawyers may be better for routine detailed assessments and, sometimes, to assist costs counsel on cases that span both complex and routine issues (even if you shouldn’t expect to recover two sets of fees). 

To add to the problem faced by instructing solicitors, they often have to rely on their costs draftsman/lawyer to advise them on whether there is indeed a problem complex enough to merit involving specialist costs counsel.  I’ve seen enough cases to know that sometimes this is only appreciated during the middle of the detailed assessment when the costs draftsman/lawyer finds themselves floundering.  Or worse, at the end of the assessment hearing when it has all gone horribly wrong.

Ghadami v Lyon Cole – Indemnity principle challenge

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Whenever a legal costs dispute arises you can be sure that our old friend the indemnity principle is never far behind. There has been a long line of case law on this subject where the costs are actually being funded by a third party such as a trade union or legal expenses insurer.

The Court of Appeal has recently given us a useful reminder of some of the basic principles in the case of Ghadami & Ghadami v Lyon Cole Insurance Group Ltd [2010] EWCA Civ 767.

The claimants brought a claim against the defendant, a firm of insurance brokers. The defendant had the benefit of professional indemnity insurance which covered the costs of the proceedings subject to an excess of £1,000. The defendant paid the £1,000 and the rest of the costs of defending the claim were paid by the insurers. The claimants, who lost their claim and became liable for the defendant’s costs, argued that, on the indemnity principle, they should only have to pay the £1,000 paid by the defendant.

The solicitors acting for the defendant had failed to send them a client care letter. Nor had they complied with the obligations contained in the Law Society’s client care code. During the course of the claim, a letter had been sent to the defendant saying: “All costs which exceed £1,000 are payable by your insurers”.

The district judge at first instance accepted the claimant’s arguments and limited the recoverable costs to £1,000.

At the initial appeal, Judge Moloney reached the opposite conclusion. He concluded that there was no evidence that showed an agreement that the defendant would not be liable to pay their solicitors more than £1,000 in any circumstances. He held that if the letters sent to the defendant by the solicitors had been sent to a client who was not in any way active in the insurance market he would have been well inclined to construe the letters in favour of the client, resolving any ambiguity or doubt in their favour, so as to find that the client was not liable for the solicitor’s fees beyond £1,000. The judge drew a distinction by reason of the fact that the present client was in the insurance business and would therefore be familiar with the basic concepts of the insurance market including the fundamental concept that insurance companies indemnify people in respect of their own liabilities.

The matter went to the Court of Appeal who reviewed the relevant authorities on this issue.

The Court agreed with the conclusions of Judge Moloney and interpreted the letter to the defendant as doing no more than indicating that the defendant had to bear the first £1,000 of the costs and the insurers would indemnify them for the balance of the costs. The Court agreed that there was no agreement such as to show that the defendant would not, under any circumstances, have to pay the solicitors’ costs themselves. Recovery of full costs was therefore allowed.

Now, on the one hand this judgment simply highlights the difficulties that paying parties will always face trying to mount this kind of challenge. On the other hand, it did succeed at first instance and Judge Moloney may well have reached a different conclusion if dealing with a less sophisticated client. The Court of Appeal very much left that door open. This issue, naturally, will more often arise with unsophisticated clients. Of course, the other problem paying parties face is trying to obtain enough evidence to start to mount such a challenge.

I suppose this type of problem could be avoided entirely if solicitors simply complied with Law Society obligations concerning the costs information to give to clients.

Sorry. I’ve just realised how silly that sounds.
 

Jackson Report – Dominic Regan responds

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Continuing with our occasional series of responses to the Jackson Costs Review from the “great and the good” in the legal and costs world is Dominic Regan.  Dominic is a legal writer, broadcaster and speaker on civil litigation matters. He is professor at City University London and a member of the Civil Justice Costs Committee. He spends much of his time speaking on the vagaries of the Part 36 rules. He has written and spoken extensively on the Jackson Costs Review.
 

THE JUDICIARY AND REFORM

The Jackson Report was commissioned by the then Master of the Rolls and not by the Government. Whilst it is now obvious that the new administration is looking to act upon Jackson what is more interesting is that the Judiciary has already started! Sir Rupert enjoys tremendous support from the senior bench.

Look at the recent suffocation of Carver v BAA Plc [2008] EWCA Civ 412 in the L G Blower Ltd v Reeves [2010] EWCA Civ 726 decision. The Court of Appeal at paragraph 40 of the transcript recite the criticisms of Carver made in the final Jackson report before proceeding to render it an impotent authority. Take the Fiddes v Channel Four Television Corporation [2010] EWCA Civ 730 libel action against Channel 4 where a decision to deny the claimant the norm of a jury trial was upheld by the Appeal court. Why? It would prolong the hearing and make it more expensive. Can you not hear the resonance of Jackson in there? The Senior Master in Goodale v The Ministry of Justice [2009] EWHC B41 (QB) ordered the Ministry of Justice to complete an electronic disclosure questionnaire even though formal powers to do so do not come into being until October.

My simple point is that the Judiciary is demonstrating an increasingly assertive approach. Case management powers are vast; expect to see muscles flexed with much more regularity and confidence.