Association of Costs Lawyers launch

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The following is an edited version of the address given by Iain Stark, chairman of the Association of Costs Lawyers, at the recent launch of the Association’s new name, which appeared in Costs Lawyer magazine, and is reproduced with his kind permission:

Henry Ford once said that coming together is the beginning. Keeping together is progress. Working together is success.

We have now formally marked the birth of the Association of Costs Lawyers, which reflects the hard work of my predecessors since the inception of the Association in 1977.

The rights and responsibilities attaching to Costs Lawyers mean that no longer can members of the Association be constrained to the description of draftsmen, charge predominantly with the task of preparing a calculation of legal costs.

You will have read elsewhere in this issue that the standing of a Costs Lawyer has been elevated by the introduction by the Legal Services Commission of a policy providing that a Costs Lawyer with a practicing certificate, who is an authorised litigator in accordance with the Courts and Services Act 1990, will henceforth be able to sign forms.

This will be welcomed by Costs Lawyers, their clients and employers. It will speed up the process of claims for the claimant and will also enable independent Costs Lawyers to add an extra service to their clients. This right will become all the more important if and when online billing is introduced. Will this be the catalyst for the preparation of bills of costs to become a reserved activity?

Solid foundation

As a profession, we’ve undertaken change and must continue to evolve if we are to keep pace with the current reforms in relation to legal costs generally. We must look to the future and embrace the reforms by diversifying and utilising our new-found status as Costs Lawyers to facilitate growth within our profession. Failure to do so and to remain stagnant will lead to our demise.

The unification of the membership provides a solid foundation upon which to grow. He who rejects change is the architect of decay. The only human institution which rejects progress is the cemetery.

An element within the legal costs community fear for their jobs. The inference drawn from Lord Justice Jackson’s report led many practising within the legal costs industry to fear for the future of the profession. This has been further amplified by the invitation to frontline regulators to respond to the consultation for the reform of legal aid funding in England and Wales.

We are entering a period of great change where the Association as frontline regulator must have a voice in moulding the future of legal costs. The recognised status of the Costs Lawyer can provide a platform from which to do this.

As I look back to 2006/7, it is clear that part 1 of the Legal Services Act has been the driving force behind the inevitable changes that had to occur if, as an Association, we were to have a future. I strongly believe that regulation affords us the opportunity to aspire to become the driving force in legal costs.

The Legal Services Act contains ‘professional principles’. These apply to services provided by authorised persons, including services which do not involve the carrying out of activities which are defined as reserved legal activities, such as bill preparation.

The professional principles are that an authorised person should act with independence and integrity. An authorised person should maintain proper standards of work. An authorised person should act in the best interests of their clients. That persons who exercise before any court a right of audience or who conduct litigation, must act with independence in the interests of justice. And that the affairs of their clients should be kept confidential.

As authorised persons, professional principles are what set Costs Lawyers apart from those within the legal costs industry who are not regulated. In my firm opinion, this must be to our advantage.

Embracing regulation

With the passage of the Legal Services Act and a necessity for regulation within the legal community generally, the importance of a Costs Lawyer affords assurances for the wider legal profession and public. The Act defines a Costs Lawyer by complying with professional principles. To retain a Costs Lawyer ensures professional standards through regulation. It is not only important that as an Association we embrace regulation. It is vital for our future if we are grow and fulfil our role as a frontline regulator.

With the advent of the Costs Lawyers Standards Board, the retention of the services of a member of this Association guarantees standards akin to any other regulator professional practising within the law. As such, the skill of a Costs Lawyer must be viewed as an integral part of any litigation.

With this in mind, it is my wish that only individuals entitled to carry out reserved activities appear in the future. With the status of Costs Lawyer, it is my hope and aspiration that the current trend to allow individuals who have not been granted rights of audience cease. To ignore the status of a Costs Lawyer when appearing in court is a discourtesy to those who have worked so hard to obtain recognition.

So, what for the future? Well, it must be for the Association to continue to raise the bar insofar as standards are concerned within the legal costs community at large. To encourage those non-members practicing within legal costs to join the Association. And as an Association and frontline regulator, we must continue this proactive approach.

Put simply, the Association has come of age and through regulating members we must become an integral component in the future of defining legal costs. If success is measured by what is as an Association we have achieved to date, whilst I accept we’ve got a long way to go, we are reaching our goals.

I may have read too much into this but I thought I detected a subtle nod of approval for my candidacy for the ACL Council.

Legal costs developments

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The Court of Appeal decision in Sousa v London Borough of Waltham Forest [2011] EWCA Civ 194 may be (but probably won’t be) the final word on what the law currently is in relation to recoverability of success fees.

However, the Court went out of its way to give further support to the Jackson costs reforms with Ward LJ saying: “Let Lord Justice Jackson’s reforms be enacted sooner rather than later”. Although some in the claimant lobby may have been buoyed by some of the recent “independent” reports casting doubt on the Jackson proposals, it must be remembered that there is powerful backing for his reforms and this in not limited to those in the insurance camp.

Other interesting developments come from rumours that are circulating and were reported by Dominic Regan writing in New Law Journal. The small claims limit of £5,000 in non-injury claims in apparently under review, as is a proposal to increase the fast track limit to £50,000. Other news concerns Lord Young’s proposal to extend the new claims process to non-RTA claims by April 2012. Apparently the Portal committee was of the view that this extension could not be implemented that soon.

Fortunately none of this uncertainly will impact on anyone’s business planning.

Sousa v London Borough of Waltham Forest

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Judgment was handed down yesterday by the Court of Appeal in Sousa v London Borough of Waltham Forest [2011] EWCA Civ 194. This case concerned a claimant who suffered subsidence damage to his property caused by tree roots of a tree owned by the defendant. The claimant’s damages were insured under an insurance policy between the claimant and an insurer. The claimant made a claim upon the policy. The insurer satisfied the claim and exercised its rights of subrogation to bring proceedings against the defendant in the name of the claimant. The claim was brought under the terms of a Collective Conditional Fee Agreement between the solicitors for the claimant and the insurer. The defendant objected to payment of the success fee. The judge as first instance disallowed the success fee on the basis that as the claimant was never at risk of having to pay costs, because he had the benefit of an insurance policy for the loss, and it was therefore unreasonable for a CFA to be entered into. The claimant successfully appealed that decision and the success fee was reinstated. The Court of Appeal has now dismissed the local authority’s appeal.

The Court of Appeal ruled that the insurer’s had the same right to enter into a CCFA and recover a success fee as the claimant would have done. The House of Lords’ decision in Campbell v MGN (No. 2) [2005] UKHL 61 was followed so that “the mere fact that a person is able to fund litigation without resorting to a conditional fee agreement does not make it unreasonable for him to do so”.

Important though this decision is for cases of this type, what observers were really looking for was the response of the Court of Appeal to the recent decision in MGN v United Kingdom. The Court had received written submissions in light of MGN and it was expected that this would give an early indication as to whether challenges to success fees in light of MGN might succeed.

Ward LJ, giving the leading judgment said:

“I prefer the view of the respondent that the Court of Appeal remains bound by the decision of the House of Lords: see Kay v Lambeth LBC [2006] UKHL 10, [2006] 2 A.C. 465. If the House of Lords regarded the fees as reasonably incurred, so should we.

The appellant floated a second argument, not previously raised. That is that success fees have such a “chilling” effect as to amount to a denial of justice and a fetter on the freedom of access to the court in breach of Article 6. I agree with the respondent that this is not an argument the appellant should be allowed to run at this stage of the proceedings. I am not prepared to entertain the argument: indeed I am far from convinced on cursory examination that it is well founded.”

The Defendant was therefore not given the opportunity of running the Article 6 arguments that would be clearly central to such a challenge succeeding. This fact alone means that this decision is unlikely to be the last word on the matter.

Moore-Bick LJ held:

“Finally, it is necessary to mention briefly the recent decision of the European Court of Human Rights in the case of MGN v The United Kingdom (Application No. 39401/04), in which the court held that the award of costs in favour of Miss Campbell against MGN that included a success fee (upheld in Campbell v MGN (No. 2)) involved an infringement of the defendant’s right to free speech. Mr. Bacon submitted that the decision supported the wider proposition that it is unreasonable for a claimant who can finance the litigation without recourse to a conditional fee agreement to do so and that therefore Mr. Sousa should not be allowed to recover the success fee as part of the costs in this case.

I am unable to accept that submission for two reasons. First, because in MGN v The United Kingdom the court was concerned with the question whether the liability to pay a success fee involved a disproportionate interference with the newspaper’s right of free speech and was unreasonable on that account. The case is not, therefore, remotely comparable to the present. Second, because unless the liability to pay a success fee can be said to infringe the defendant’s rights under the Convention (which is clearly not the case here), questions of proportionality and reasonableness do not arise. It is for Parliament to decide what arrangements viewed overall will best serve the general requirement for access to justice. Moreover, the submission is contrary to the decision of the House of Lords in Campbell v MGN (No. 2), which remains binding on this court.”

The fact that the Court of Appeal has found itself bound by an earlier House of Lords’ decision, not withstanding MGN v UK, is no surprise. The real question is what will the Supreme Court decide if, and when, this issue reaches them?

Sibthorpe & Morris v London Borough of Southwark

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In Sibthorpe & Morris v London Borough of Southwark [2011] EWCA Civ 25 the Court of Appeal declined to strike down as unlawful (on the basis of champerty) CFAs where the claimants’ solicitors agreed to indemnify the claimants against adverse costs orders.

The February 2011 edition of Litigation Funding reported the claimants’ solicitors as saying that they ran their housing disrepair cases on CFAs and:

“We haven’t lost one of these cases against Southwark since 1994. [We have] probably 30 cases a year [against Southwark]”

The CFAs set the level of success fee at a relatively modest 10%. However, with a 100% success rate over a period of the last 16 years or so, even 10% looks somewhat cheeky.

Keep pedalling

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In recent years the call for ever closer European integration has grown much quieter. Those in this country who argued that joining the single currency would lead to growth and economic stability have fallen strangely silent in light of events in Greece, Ireland, etc.

However, going back a few years, those at the heart of the European project used to use the analogy of the EU being like a bicycle and that if members stopped pedalling forwards it would fall over. This naturally begged the question as to what the ultimate destination would be. Single taxation system? Single legal system? Single language? Single country?

As an analogy it was never very convincing. If I use a bicycle, it is to get from A to B. When I get to B, I stop pedalling and get off. Call me old fashioned.

Whatever the valid arguments were in favour of closer EU integration, avoiding the total collapse of the EU has never been one of them.

In fact, whenever an argument for change is presented on the basis that we “must move forward” in a certain direction or such-and-such an organisation will “die”, you can be sure that you are being presented with a false choice and faulty logic is being deployed to seek support for the particular change of direction favoured by the proponents of that new direction.

This is the type of false choice much loved by politicians. “This reform is designed to help the poorest and most vulnerable is society”. Implicit in the statement is that those who want to help the “poorest and most vulnerable” will have to support the policy and that those who oppose the policy are cruel and wicked people who don’t care for the poor and vulnerable. It avoids having to engage in the arguments as to whether it actually is a good policy or whether it will even achieve its stated aims. It becomes a simplistic “good vs evil” proposition. Change for the good vs maintaining the evil status quo.

Naturally, all organisations must be willing to adapt to a changing world. This does not just mean being willing to move forward from where one was five years ago. It may also mean that sudden developments in the last year or two might mean it is appropriate to review the direction that was set out upon three or four years ago. To quote John Maynard Keynes: “When the facts change, I change my mind. What do you do, sir?”.

Changing times almost invariably bring difficult choices. But to suggest that the choice is always limited between choosing one direction or choosing total self-destruction is rarely true.

Sorry, I don’t know what brought this on. I usually try to steer well clear of discussing European politics on the Legal Costs Blog.