Christmas Greetings

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The Legal Costs Blog will sign off for this year with something seasonal, if off-topic.

Whoever did the visuals for this monologue obviously spent an enormous amount of time on the job but I don’t feel it adds anything and recommend simply sitting back in your chair, closing your eyes and enjoying.

The only piece of background information that you might find helpful is this: the historical St Nicholas (Santa) was a bishop in what is current day Turkey.

You may need to adjust your security settings if you receive this via email or view online.

Happy Christmas and a prosperous New Year.

Unlawful and grotesque funding arrangement?

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My latest Update: Costs for Solicitors Journal is now available to view online.  The “apportionment” subject is fraught with complexity and I won’t pretend this is meant to be a definitive analysis of the issue or that the two first instance decisions mentioned, where I was acting for the defendants, would necessarily be decided the same way by different judges.  This is an issue that many law costs draftsmen don’t appear to even recognise as a potential problem when drafting bills.

Also available is a further book review for Civil Costs: Law and Practice.

For non-subscribers, I think access is for only a limited period.

Jackson LJ’s attack on “grotesque” funding arrangements (see link) raises an issue I have been meaning to comment on for some time.  I am not at all sure that the funding arrangement in that case was even lawful.  This is based on the fact the CFA had been entered into where there was “no risk” of non-payment of ordinary fees.  There was no “conditional” event. 

In Arkin v Borchard Lines Ltd [2001] NLJR 970 Coleman J held:

“26. It is further argued that, if the February 2001 Agreement effected a variation of the CFA with retrospective effect, that variation would be unenforceable as being contrary to public policy. This submission is based on the foundation that, unless permitted by statute, conditional fee agreements are unenforceable on public policy grounds. That proposition is firmly founded on the unreported decision of the Court of Appeal in Awwad v Geraghty & Co 25 November 1999 (Lord Binghal LCJ, Schiemann and May LJJ). The relevant statutory provision is section 58 of the Courts and Legal Services Act 1990 in its unamended form. On the proper construction of that section the only permissible conditional fee agreements are those entered into before it is known whether the condition of success has been satisfied. The provision in section 58(1) that:

“In this section a ‘conditional fee agreement’ means an agreement in writing between a person providing advocacy or litigation services and his client which – (b) provides for that person’s fees and expenses, or any part of them, to be payable only in specified circumstances”.

clearly referred to circumstances which have not eventuated at the time when the agreement is entered into. The legislative purpose of the legalisation of such agreements was to enable those who could not afford to employ the legal profession to present their case on the basis that their obligation for fees and legal charges by their solicitors and counsel would arise only if the proceedings which were yet to be heard had been successfully prosecuted. It was no part of the purpose of the legislation to provide for agreements to pay fees and expenses which were entered into after the successful conduct of the proceedings.”

I did run a challenge, unsuccessfully, along these lines a while ago in the unreported case of Priest v CMT Engineering Insulation Ltd (SCCO, 13 July 2009) (see transcript).  Master Gordon-Saker was almost certainly correct on the facts of the case (judgment in default and a disease claim where causation might not be made out).  However, a “proper” judgment in a catastrophic injury claim is quite different.  I intend to write more fully on this topic in due course but I wonder what Jackson LJ would have made of this line of attack if the MIB had not already agreed to pay a 35% success fee. 

Lord Justice Jackson wins award

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Lord Justice Jackson has won a Golden Bull award from the Plain English Campaign for one of the year’s “best” examples of gobbledygook. 

This was from an excerpt from his Review of Civil Litigation Costs: Final Report on page 184.

“Personal injuries litigation is the paradigm instance of litigation in which the parties are in an asymmetric relationship, as discussed in chapter 9 above.”

The Plain English Campaign suggested that perhaps Lord Jackson could have said:

“Personal injuries cases are the examples of court cases between different parties.”

As Solicitors Journal pointed out: “Sadly this appears to make no sense”.

“Grotesque” funding arrangement

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Lord Justice Jackson, giving the leading judgment in the case of Pankhurst v White [2010] EWCA Civ 1445, described the claimant’s solicitors’ funding arrangement as “grotesque”.

What generated this fury, aside from the fact that there was a success fee claimed and the claimant had the benefit of ATE obviously?

The claimant’s solicitors had entered into a conditional fee agreement (CFA) some two months after obtaining judgment on liability with a 100% success fee if the action went to trial. “Success” was defined as any recovery of damages. The claim related to a catastrophic injury case where there could be no question of damages being assessed at zero once primary liability was resolved. Therefore, even if the claimant lost at a quantum trial on a defendant’s Part 36 offer, as indeed he did, the solicitors would still be entitled to their base costs in relation to the quantum trial. This would come out of the claimant’s damages.

As Jackson LJ observed:

“In the circumstances of this case there was no risk whatsoever that the claimant’s solicitors would not be paid their base costs in full. Yet the solicitors were charging a ‘success fee’ on top of their base costs for running a non-existent risk. This makes a mockery of what is said to be the justification of the present conditional fee agreement regime.”

This case represents a perfect example of how to kill a golden goose. This is why claimant lawyers’ pleas that the Jackson proposals will hinder access to justice are likely to fall on deaf ears.

This case has an interesting twist. It appears that the MIB, who were defending the claim, agreed “with the benefit of legal advice” to pay a 35% success fee to the claimant. What strange legal advice the MIB appear to have received.

Typical blogger

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As Andrew Marr recently noted:

“A lot of bloggers seem to be socially inadequate, pimpled, single, slightly seedy, bald, cauliflower-nosed young men sitting in their mother’s basements and ranting. They are very angry people.”

What a cheek.  I’ve still got a full head of hair.

Costs management the future?

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Professor Dominic Regan, writing in the New Law Journal, explained the recommendations he has made following his review for Jackson LJ of the Birmingham Mercantile Court costs management pilot:

“My considered recommendation is that the process be applied to every multi-track action whatever the content. … Fast-track cases will be self policing with the arrival of fixed costs sometime soon.”

So, no role for costs professionals in fast-track matters and multi-track matters become subject to costs management. The court approves or adjusts the parties’ budgets at the outset. If, at the conclusion of the case, a party’s claim for costs comes within budget, will there be an argument about costs or will the figure generally just be accepted? I suspect the latter.

What role for costs professionals?

Legal costs seminar

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Dr Mark Friston and Professor Dominic Regan are repeating their seminar on the future of the legal marketplace and the impact of Gibbon on Part 36 settlements in Leeds on 24 January 2011 (see link).

Association of Law Costs Draftsmen warning

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The Association of Law Costs Draftsmen’s chairman Iain Stark was reported in Post Magazine (see link) as warning law firms against using uninsured legal costs advisors to draw up complex bills. This was on the basis that: “If a mistake or a delay in delivering the bill of costs is detrimental to the client, the client can – and will – sue the law firm for compensation and the firm will pass that claim on to the costs advisor. If the advisor does not have PI insurance the law firm’s own insurer will be picking up the compensation bill.” The ALCD therefore advised that only costs lawyers are instructed to undertake this work.

The importance of ensuring that the costs advisors that law firms instruct are properly insured should obviously not be underestimated.

As the chairman highlighted: “We have reports of several mistakes and delays in bills of costs resulting in compensation claims, some for hundreds of thousands of pounds”.

At this stage, ALCD members will be having a good chuckle to themselves. Costs lawyers, who are regulated by the ALCD, are indeed required to have professional indemnity insurance. However, they are required to have insurance with an indemnity of up to only £100,000. Not much good if a mistake has led to a loss of “hundreds of thousands of pounds”. You might have thought it appropriate for the ALCD chairman to mention this small detail.

Interestingly, I’m not sure the ALCD really understands exactly what it does require from its members in terms of insurance. Professional indemnity policies can have different definitions as to what is covered by the limit of the indemnity. For example: Costs lawyer has nervous breakdown. Thinks he’s Lady Gaga. Fails to attend five detailed assessment hearings. Client loses £50,000 as a result in each case. Client sues solicitors. Solicitors sue costs lawyer. Costs lawyer recovers from nervous breakdown and makes claim on insurance. Is the claim under the insurance policy going to be treated as five different claim, each well within the £100,000 limit, or a single claim (caused by the single event of a nervous breakdown) for £250,000 leaving a £150,000 shortfall? Different polices deal with this differently. The ALCD doesn’t specify which type of policy is required.

The ALCD also requires the insurance to include £100,000 cover for “loss of documents”. What does “loss of documents” mean? Is it meant to cover the cost of trying to recover or replace the physical papers themselves or the consequential losses of losing the papers (ie being unable to draft a bill)? The last time our firm renewed our insurance the ALCD was unable to give a clear answer as to what was required.

It goes without saying that £100,000 is entirely inadequate for costs lawyers doing anything but the most low value work, and my firm has always had cover that far exceeds this level, but I would not be surprised if many ALCD members carry no more than the minimum requirement.

It is understandable for the ALCD to promote the interests of its members (of which I am one) and to highlight the benefits of using one of its members. I’m not so sure that the majority of members would agree that the best way to promote members’ interests is to try to destroy the livelihoods of non-members by embarking on publicity campaigns to try to persuade solicitors that non-members are unsuitable to undertake costs work; but perhaps I missed that vote. However, if the ALCD is to go down that road, it needs to make very sure it is presenting its case on very strong ground. The issue of ALCD members’ professional indemnity insurance is not currently one of them. Indeed, it is one area the ALCD would have been better advised keeping rather quiet about.

The question I am left pondering is the following. Insurer follows Mr Stark’s advice and instructs costs lawyer to prepare “complex” bill of costs. Costs lawyer messes up. (Hey, it might happen). Client suffers £300,000 loss. Client sues solicitors. Solicitors sue costs lawyer. Costs lawyer makes claim on his insurance policy and insurer pays out £100,000 limit. Will the ALCD be pursued for the shortfall on the basis of statement made by ALCD chairman that instructing costs lawyers eliminates the risk of a claim being made on the solicitor’s insurance, when this is clearly not the case?  I wonder what the ALCD’s own professional indemnity policy covers. 

ALCD rethink?

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Association of Law Costs Draftsmen member Sue Nash has written the following letter to ALCD members:

Dear All,

I am very aware having seen and read e-mail correspondence between members (as well as the GWS blog) as well as through discussions with fellow draftsmen, that there is a considerable amount of unease and dissatisfaction with the ALCD’s decision to effectively re-invent itself as the Association of Costs Lawyers. There was little or no consultation with the membership and indeed the decision must have been taken some time ago as the deadline for publication of the ALCD’s annual diary is usually late summer. A couple of letters have been printed in “The Costs Lawyer” (I am sure I am not the only one to still think of it as “The Journal”) but I am aware that several other letters have been submitted to the Editor but have simply not been published. The most recent edition of course made no reference to this issue at all.

Although the impact of the change of membership status is probably most keenly felt by those who deal almost solely with Legal Aid costs, there are other draftsmen who are also unhappy with the changes. I am aware that there has been discussion about the formation of a separate association to represent costs draftsmen (the Association of Law Costs Draftsmen perhaps?!) and whilst this might indeed be the solution that suits most people, I would be loathe to see a split profession as I do not believe it would be in the best interests of either costs draftsmen or costs lawyers.

Any representations to the Council will carry more weight if they are supported by a significant number of members and I have canvassed with a few others the idea of holding a meeting for everybody to air their views and to consider what alternatives we might be able to put forward to the Council. There is considerable enthusiasm for such a meeting and I have therefore provisionally booked a meeting room in London on Saturday 8th January between 11.00 am and 2.00 pm and invite you to attend. The cost will only be £30.00 to include lunch and all other refreshments and the time has been arranged to suit those who may have considerable distance to travel. The rooms are at 25, Southampton Building, London WC2A 1AL (very near the SCCO!).

Could you please let me know as soon as possible if you wish to attend, preferably by next Friday, 17th December. Also please can you pass on details to anyone else you know who may be interested in attending.



Legal costs hell

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A man was sent to hell for his earthly transgressions.

Hieronymus Bosch 058

As he was being led to his place of eternal torment, he passed a room where a costs lawyer was in intimate conversation with a beautiful young woman. “Wait a minute,” the man protested to his demon escort. “I have to roast in hell for all eternity, and someone else gets that?” The demon jabbed the man with the pitchfork and snarled, “Who are you to question that woman’s punishment?”