Costs management fees

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Practice Direction 3E – Costs Management, paragraph 2.2(1):

“the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the approved budget”

Which of the following is included within the cap:

1. One hour discussion with the client explaining the figures within the budget and the costs consequences of any budget set.
2. One hour of time obtaining various quotes and estimates from experts and counsels’ clerks for inclusion in the budget.

Paragraph 2.2(2):

“All other recoverable costs of the budgeting and costs management process shall not exceed 2% of the approved budget.”

Case listed for two hour CMC to deal with directions and costs management. How much of the preparation for and attendance at the two hour hearing and any counsel’s brief fee falls within the cap?

Association of Costs Lawyers’ Chief Executive Officer

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The Association of Costs Lawyers recently announced the appointment of its first professional chief executive officer.

The ACL announcement stated:

“He will act as the focal point of the ACL’s campaign, highlighting the importance of solicitors using only fully qualified and regulated costs specialists in the costs management era.”

It is interesting that the broader term “costs specialist” has been used in place of “Costs Lawyer”, perhaps conscious of the fact that other qualified lawyers may work in the area of costs law.

But, the issue that keeps dwelling on my mind is that of “fully qualified”. Fully qualified at what? There are no Costs Lawyers (or any other legal professionals that I know of) who have qualified in the area of costs budgeting/costs management. None of those who qualified as Costs Lawyers would have had any “qualification” in this area as it would not have been incorporated into any of the old ACL training material and would not have formed part of the exam syllabus. It will presumably be incorporated into the new revamped one, with the next intake of students not being until September 2014.

There will no doubt be many costs professionals who will have undergone in-house costs budgeting training and/or attended costs budgeting seminars. The effectiveness of such training in helping to guarantee the budgets produced are accurate remains to be seen.

The first people who undertook modern brain surgery were no doubt already skilled and qualified surgeons, but did they claim to be qualified brain surgeons from day one or simply that they were rather optimistic pioneers with even more optimistic patients?

Costs budgeting lessons

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Claim with total value of £1.1 million. The claimant’s costs budget was in the sum of £821,000 odd together with VAT and the defendant’s cost budget was in the sum of £616,000. Case management hearing devoted solely to costs management.

Judge concludes that the costs shown in the costs budgets are disproportionate and unreasonable. Judge unhappy with level of detail contained in budgets. Judge concludes:

“In all those circumstances, I expressly decline to approve either party’s costs budget. I consider them to be disproportionate and unreasonable. I therefore have no option but to decline to make a costs management order. And, whilst I could order the parties to return at an adjourned hearing with new budgets, I am concerned that there is much work that the parties need to be getting on with in order to be ready for the trial at the end of the year, and I am anxious not to increase the costs burden any further. In addition, of course, any new budgets would show increasingly higher figures for costs incurred, and lower figures for estimated costs, making any costs management order less and less effective. I will therefore require the parties to keep their costs budgets up to date, and to provide them to the court at the PTR, but I do not think it is productive to order a further hearing simply to consider further costs budgets.”

I’m sure there is an important principle to be extracted from this case, I’m just not sure what: Willis v MRJ Rundell & Associates Ltd & Anor [2013] EWHC 2923 (TCC).

Overseas costs drafting work

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I was recently contacted by a company in Pakistan offering to prepare schedule of costs and Bill of costs. Apparently they have worked for several UK legal costing services.

My first thought was how do they deal with the logistics of obtaining the solicitors’ file of papers?

Then it dawned on me. All these schedules and bills I see from so many costs firms, that appear to bear to relation to the underlying claim, have been prepared by draftsmen in Pakistan without sight of the papers and just making it up as they go along.

No. Only kidding. They must have full access to the solicitors’ electronic case management system and timesheets. Mustn’t they?

The future for legal costs firms?

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The mantra currently running through the legal profession is:

Get big, get niche or get out.

This is a big issue in the field of personal injury with the advent of ABSs. This view is not universally held, there are those such as Kerry Underwood who passionately believe in the traditional law firm model.

Nevertheless, the “get big” approach is currently gaining much traction with the legal press regularly reporting some of the big players busily gobbling up other law firms.

This trend is also beginning to be seen amongst costs firms. In part, this is of little surprise with the combination of the Jackson reforms and major legal aid changes. When the Jackson Report was first published I predicted: “Firms will be looking for mergers and management buy-outs for what remains of these businesses, if anything”. The volume work will start to dry up over the next six months and we will then start to see a flurry of such activity.

The shake up to defendant costs firms will be rather less than for claimant firms. Insurer panel firms have already seen significant consolidation over recent years. Although there will no doubt be further consolation as volume work starts to decline for defendant solicitors, the pace will be much less than for claimant firms.

Whether acquisitions of competitors is a good thing is a questionable point. Mark Feeney, writing in the Solicitors Journal, highlighted some interesting statistics from:

“a KMPG study which looked at a series of major PLC acquisitions between 1990 and 2000. Only 17 per cent successfully created value, a third appeared to ‘break even’ and a half were unsuccessful and caused losses. This study mirrors many in that acquisition appears a quick and easy way of developing a business but all too often it seems the opposite occurs.”

How many looking for aggressive takeovers will discover they have been sold a pup?

Costs budgeting tip

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The former chief whip Mr Mitchell is suing the Sun newspaper for reporting that he called police officers “plebs”. It has now been announced that Toby Rowland, the police officer at the centre of the row, is in turn to sue Mr Mitchell for libel, presumably on the basis that Mr Mitchell wrongly said the police officer lied as to whether he had used the word “pleb”.

Note to solicitors acting for Mr Rowland: try to remember to file your costs budget at least 7 days before the first CMC.

End to hourly rates

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The Jackson reforms have led to a significant increase in fixed fees in personal injury litigation. The judiciary has already made threatening noises that if the Jackson reforms do not work it may be necessary to scrap the current hourly rates system entirely.

But, who would have thought that the threat would come from within? QualitySolicitors have announced their network is to abandon hourly rates in favour of fixed fees for all their services next year, with the new model to be piloted at 15 member firms this month where they will stop charging for work by the hour for all services, including litigation.

The beginning of the end?

Costs budget for pre-1 April 2013 cases

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The following question and answer appeared in the Judicial Line section of the recent edition of New Law Journal:

Q Is there power for the court to apply the multi-track costs budget regime to pre-1 April 2013 claims?

A The costs management powers in the CPR (r 3.12 et seq) only apply to multi-track cases commenced on or after 1 April 2013. However, nothing prevents a judge in the exercise of his general case management powers from ordering the filing of costs budgets if they were so minded. The order would need to expressly provide for the sanction for non-compliance.

I am not sure the need for the sanction to be expressly provided for in the order is still correct in light of Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1526. In that case the claimant had failed to comply with the rule requiring the filing of the costs budget 7 days before the CMC, the pilot scheme contained no sanction, but the Court of Appeal nevertheless held that applying the sanction (costs limited to court fees) was appropriate.