Jackson implementation

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The recent lobbying by claimant organisations has paid-off as the Government has entirely abandoned plans to implement the Jackson costs reforms.

Oh … sorry. I had pre-prepared two different posts in advance of the announcement yesterday to deal with either eventuality.

Let’s start again.

The recent lobbying by claimant organisations has been a complete waste of time and money and the Government has announced plans to press ahead with the Jackson costs reforms virtually in full.

As the Response to proposals for reform of civil litigation funding and costs in England and Wales says: “The Government intends to implement the reforms to no win no fee conditional fee agreements (CFAs), proposed as a package of measures by Lord Justice Jackson”. The plans include:

• Abolish the general recoverability of the CFA success fee from the losing side. In future any CFA success fee will be paid by the CFA funded party, rather than the other side. In personal injury cases, there will be a cap on the amount of damages that may be taken as a success fee. The cap will be set at 25% of the damages other than those for future care and loss. Maximum success fee to remain at 100%. – Yes. It’s really going to happen.

• Abolish the general recoverability of after the event (ATE) insurance premiums. The Government intends to have a tightly drawn power to allow recoverability of the ATE insurance premiums to cover the cost of expert reports only in clinical negligence cases. – The end of most of the ATE industry? There will probably be some left to pick up the pieces of ATE for own disbursements, unless solicitors decided to fund this risk themselves.

• There will be an increase of 10% in non-pecuniary general damages such as pain, suffering and loss of amenity in tort cases, for all claimants. – A small price to pay for defendants and insurers given the large savings that ending recover of success fees and ATE should bring.

• The recoverability of the self-insurance element by membership organisations, equivalent to the ATE insurance premium, will also be abolished. – Who would have guessed that a Conservative led government would be prepared to end this trade union gravy train?

• A regime of Qualified One Way Costs Shifting will be introduced for personal injury cases, including clinical negligence. This means that an individual claimant is not at risk of paying the defendant’s costs should the claim fail (except in limited prescribed circumstances), but that the defendant would have to pay the individual claimant’s costs should the claim succeed. The exceptions will be: (i) on behaviour grounds – where the claimant has acted fraudulently, frivolously or unreasonably in pursuing proceedings – so a reasonable claimant will not be at risk of paying the other side’s costs on behaviour grounds; and (ii) on financial means grounds – only the very wealthy would be at risk of paying any costs. This will not be extended beyond personal injury at this stage, so the normal costs shifting rules will continue to apply in other cases. – This is the bad news from defendant panel solicitors’ perspective as there will no longer be higher hourly rates recovered in successfully defended CCFA funded cases. Also the worry for defendants that it may not be commercially sensible to defend many low value claims. Not immediately obvious as to whether costs shifting to apply if a claimant fails to beat a defendant’s Part 36 offer (although the next proposal would seem to imply it would). If two-way costs shifting continues to apply in relation to Part 36 offers then it may leave a market for ATE cover for this risk.

• Part 36 will be amended to equalise the incentives between claimants and defendants to make and accept reasonable offers. This will apply to all civil cases. In particular, it will be made clear that where a money offer is beaten at trial, by however small a margin, the costs sanctions applicable under Part 36 will apply. An additional sanction (equivalent to 10% of the value of the claim) will be introduced to be paid by defendants who do not accept a claimant’s reasonable offer that is not beaten at trial. – The formal reversal of Carver v BAA.

• Damages-based agreements (DBAs/contingency fees) will be allowed to be used in civil litigation. Successful claimants will recover their base costs from defendants as normal but in the case of a DBA the costs recovered from the losing side would be set off against the DBA fee, reducing the amount payable by the claimant to any shortfall between the costs recovered and the DBA fee. The amount of the payment that lawyers can take from the damages in personal injury cases will be capped (at 25% of damages excluding for future care and loss). – Unlikely to take off in personal injury claims but will be attractive to claimants in commercial disputes.

• A new test of proportionality in costs assessment will be introduced. This will mean that only reasonable and proportionate costs may be recovered from the losing party. – It will be fascinating to see how this rule will be drafted if it is to avoid becoming the damp-squib that the current test of proportionality has become and is to avoid sparking-off enormous uncertainty and satellite litigation.

• The prescribed rates which successful litigants in person may recover from losing opponents will increase in line with inflation since they were set.

Changes to the CFA regime requiring primary legislation will follow as soon as Parliamentary time allows. Other changes will require changes to the Civil Procedure Rules or other secondary legislation. Further consultation will follow in due course, as appropriate. It is envisaged that the reforms will be implemented together, once the legislation is enacted, aside from the reversal of Carver v BAA and increases to recoverable fees for litigants in person which can be taken forward independently more swiftly.

Those hoping that a rebellion in Parliament might stop these proposals being brought in are likely to be disappointed if the initial reaction in the House of Commons is anything to go by. Some muted concerns, but broadly received cross-party support.

In addition, the Ministry of Justice is issuing a further consultation (closing date 30 June 2011) Solving disputes in the county courts: creating a simpler, quicker and more proportionate system which sets out, and seeks views on, proposals to reform the civil justice system in the courts in England and Wales. These include:

• Introducing a simplified claims procedure on a fixed costs basis, similar to that for road traffic accidents under £10,000, for more types of personal injury claim; exploring the possibility of extending the framework of such a scheme to cover low value clinical negligence claims; and examining the option of extending the upper limit of those simplified claims procedures to £25,000 or £50,000. The extension of the RTA PI Scheme to other areas of personal injury will not require a change in primary legislation and could be introduced by extending existing protocols or introducing new ones. A review of the existing scheme will be undertaken to decide if and when any extension should be introduced.

• Introduce fixed fees for fast track personal injury claims that fall outside the extended RTA PI process (for example where liability was not admitted).

• Increasing the upper jurisdiction threshold for small claims (excluding personal injury and housing disrepair) from £5,000 to £10,000, £15,000 or £25,000.

• Requiring all cases below the small claims limit to have attempted settlement by mediation, before being considered for a hearing.

• Introducing mediation information/assessment sessions for claims above the small claims limit.

How likely is it that these further proposals will see the light of day and is frantic lobbying going to help those worried about their jobs? Well, the Government has already made the difficult decision (which many believed would never be made) to scrap recoverability of success fees and ATE premium. These further proposals are, from their point of view, just further tweaking.

Jackson won.

Would the last person to leave Costsville please remember to turn off the lights?

Future of CFAs and ATE announced today

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The Ministry of Justice will make a statement today as to its response to the Jackson consultation.  Press leaks suggest that the government will push ahead with ending the recoverability of success fees and after-the-event insurance premium from the losing side.

As usual, Legal Futures is likely to be first to report the details and they invite you to check their site after 3.30pm.  (Fingers ready at the keyboard Neil?)

Kenneth Clarke speaking earlier today on: the Today programme.  Sounds like clinical negligence claims will be hit as well as other claims.

Gray v Toner – Interest on costs

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Writing the Legal Costs Blog is great fun (so long as you don’t mind the hate mail, death threats and excrement shoved through the letter-box).

However, one of the drawbacks is that readers come to expect absolutely all costs developments to be reported immediately and in full and complain bitterly if they feel I have let them down. Sadly, pesky clients keep sending me work and topics I mean to discuss on the Blog sometimes get overlooked.

Of the various omissions I have made lately, the most unforgivable, of course, is the case of Gray v Toner (11 November 2010, Liverpool County Court) (see link for judgment). This was a decision by His Honour Judge Stewart QC where he held that as a matter of principle interest does not begin to run on costs until they have been assessed, rather than the date of the costs order (eg acceptance of Part 36 offer, Consent Order, etc).

Alternatively, if he was wrong on this point, he held that in CFA funded cases the court should exercise its discretion under CPR 40.8(2) and only allow interest from the date costs are assessed. The judge held that as the primary purpose of interest on costs was to compensate a party for being kept out-of-pocket, and CFA funded parties have not usually paid as the claim has progressed, it would be appropriate that interest should only run from the date of assessment of costs and not from the date of the order for costs to be assessed.

The decision on the point of principle, as to when interest runs as a matter of right, is surprising and certainly contrary to everyone’s previous understanding (which does not of itself mean it is wrong). It also appears to be a different reading of the rules to that which those who drafted the CPR had.

CPR 47.8 deals with the “sanction for delay in commencing detailed assessment proceedings” and at CPR 47.8(3) reads:

“3) If –

(a) the paying party has not made an application in accordance with paragraph (1); and
(b) the receiving party commences the proceedings later than the period specified in rule 47.7,
the court may disallow all or part of the interest otherwise payable to the receiving party under –
(i) section 17 of the Judgments Act 1838; or
(ii) section 74 of the County Courts Act 1984,

but must not impose any other sanction except in accordance with rule 44.14 (powers in relation to misconduct)”

If interest does not begin to run on costs until assessment then interest never was “otherwise payable”, there is nothing to disallow for late service and no “sanction” to apply.

The correctness of this aspect of the decision is highly debateable. However, the argument as to the exercise of the court’s discretion in CFA cases is far more persuasive. This would also be consistent with CPR 44.3B(1):

“Unless the court orders otherwise, a party may not recover as an additional liability –
(a) any proportion of the percentage increase relating to the cost to the legal representative of the postponement of the payment of his fees and expenses”

Permission to appeal this decision to the Court of Appeal was granted but the appeal has been discontinued (due to financial resources, allegedly).

Apparently His Honour Judge Charles Harris QC, in the case of Bridle v Ikhlas on 22nd February 2011 reached a similar conclusion to HHJ Stewart.

An interesting article on the subject appeared in Costs Lawyer magazine and a copy can be read: here.

This issue is likely to be at the forefront of costs disputes, at least in larger cases, until the Court of Appeal (or higher?) has the final word in due course. If, and when, it does, I’ll try to let you know a bit more quickly then I reported this case. 

Denis O’Riordan’s retirement

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Principal Costs Officer Denis O’Riordan is retiring from the Senior Courts Costs Office.

Over the years I may not have always achieved the exact result I might have hoped for, but it has always been a pleasure to appear before him.

What stands out is that I cannot recall a single occasion where I have had a hearing before him where he has not mastered the papers and the progress of the case better than either of the advocates appearing. There is therefore no chance, and he never allowed it, for either advocate (but particularly the one for the receiving party) to mislead the court (or the other side) as to how certain costs have come to be incurred. This can only be possible through the countless hours of reading time and preparation he must have consistently put into each case. I am sure I am not alone in noticing and appreciating this devotion to his work.

The Legal Costs Blog wishes Denis a well earned and happy retirement.

Vituperative responses

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Some interesting thoughts on anonymous comments appearing on websites from Joshua Rozenberg writing in the Law Society Gazette:

“Write an article for publication these days and the chances are that it will attract ill-informed comments. No longer content with sending in a letter to the editor and waiting to see if it is printed, readers now demand an instant right of reply on the publisher’s website. And why do so many readers post vituperative responses that they would not dream of making to a writer in person? It must surely be because most such comments appear anonymously.”

The fact I allow these on the Legal Costs Blog seems to please and infuriate readers in equal measure. 

[Yes.  I had to reach for my dictionary too.]


New court fees

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Court fees are due to increase from 4 April 2011.  In addition to increases across the board, are increases to the fees for detailed assessment:

(a) does not exceed £15,000 – £325
(b) exceeds £15,000 but does not exceed £50,000 – £655
(c) exceeds £50,000 but does not exceed £100,000 – £980
(d) exceeds £100,000 but does not exceed £150,000 – £1,310
(e) exceeds £150,000 but does not exceed £200,000 – £1,635
(f) exceeds £200,000 but does not exceed £300,000 – £2,455
(g) exceeds £300,000 but does not exceed £500,000 – £4,090
(h) exceeds £500,000 – £5,455

A link to the the full order can be found on the Court Fees section of Legal Costs Central, in addition to previous orders so you can make sure the correct amounts have been claimed in older bills.

(Have you set Legal Costs Central as your homepage yet?)

Legal costs conference

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At any one time there are always a number of interesting upcoming legal costs conferences. Unfortunately, these often come at a fairly eye watering price.

If I told you there was a full-day costs conference (5.5 CPD hours) in London with speakers including a number of specialist costs counsel such as Gordon Wignall, Simon Brown and Roger Mallalieu, with other prominent speakers including Kerry Underwood, Michael Bacon and David Marshall, you would expect a fairly hefty price. If I told you that the price was only £199 plus VAT you would probably agree this will be the best value paid for costs conference of the year. If I then told you that readers of the Legal Costs Blog can secure a £40 discount, bringing this down to £159 plus VAT, I would expect a mad dash for places.

But you will have to be quick as the conference is on 31 March 2011 and places are limited.

Full conference programme and booking details available here: Costs, Jackson, CFAs and ATE Insurance.

Those of us costs lawyers who attended the Association of Costs Lawyers’ National Conference and who also attend this conference will have managed to meet our CPD requirements by the end of March.  After that we can put our feet up for the rest of the year and give no further thought to the subject.

VAT Practice Notes

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Links to updated Law Society practice notes on VAT on disbursements and VAT increase to 20%, and Bar Council guide on VAT increase now available via the VAT section on Legal Costs Central.

Costs Law forum

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I recently mentioned access to the Members’ Forum as being one of the benefits of membership of the Association of Costs Lawyers. This is, for obvious reasons, available only to members.

Some readers may recall the excellent open forum that there used to be on the Costs Monkey website. Unfortunately, this has been down for several years.

A reader of the Legal Costs Blog recently suggested I might set up a forum on the Blog. I did consider the possibility but was reluctant to lose what little is left of my spare time to yet more costs related activity by running such a forum.

I have now had my attention drawn to an existing legal costs forum, open to all. As I’ve only just discovered it I’m assuming that I’m not the only one. So, if you are a non-ACL member and want an open legal costs forum, there it is: Costs Law forum.

New Association of Costs Lawyers’ Council member

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I spent much of Saturday being carried aloft by crowds of cheering costs lawyers following my surprise election to the Association of Costs Lawyers’ Council.

The election as a whole was a surprisingly close run thing, with the voting suggesting a fairly wide, and possibly relatively evenly balanced, range of views amongst the membership about the future. Now that these differences have been fully aired, I am sure that the whole Council (with its new member) will shift the focus onto the common ground (and the differences have perhaps been overemphasised at the expense of overlooking the large amount of common ground). Although I will be but a single voice on the Council, I will strive to advance as many of my stated goals as possible.

Over the weekend, and before the election results had been declared, a number of those attending the ACL National Conference informed me that I had received their vote. Various different reasons were given as to why I had received their votes, but they mainly boiled down to: “we’d rather have you on the inside pissing out than the outside pissing in”. I guess that’s the closest I’ll ever get to a ringing endorsement.