Need to serve statement of costs

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Forthcoming change to Costs Practice Direction deletes the current CPD 45.3:

“No party should file or serve a statement of costs of the detailed assessment proceedings unless the court orders him to do so.”

That will mean that the existing CPD 13.5(4) will kick in:

“The statement of costs must be filed at court and copies of it must be served on any party against whom an order for payment of those costs is intended to be sought. The statement of costs must be filed and the copies of it must be served as soon as possible and in any event –

(b) for all other hearings, not less than 24 hours before the time fixed for the hearing.”

I wonder if this was intended.  The current system works perfectly well, even if it does sometimes cause some nasty shocks at the end of a hearing.  

Replies to Points of Dispute – Goodbye

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One of the superficially innocuous forthcoming changes to the Costs Practice Direction relates to the contents of Replies. Replies are currently, of course, optional and one therefore might have expected these only to be drafted in cases, and in relation to specific disputes, where it might usefully narrow the issues or where positive concessions are being offered. Not in this writer’s experience.

CPD 39 will now read:

“39.1 A reply served by the receiving party under rule 47.13 must be limited to points of principle and concessions only. It must not contain general denials, specific denials or standard form responses.

39.2 Whenever practicable, the reply must be set out in the form of Precedent G.”

Sharp intake of breath from a large number of law costs draftsmen and costs lawyers. This particular gravy train is coming to a crashing halt.

The example of a point of principle given in the new Precedent G is: “The claimant was at the time a child/protected person/insolvent and did not have the capacity to authorise the solicitors to bring these proceedings.”

A challenge to whether a matter required a Grade A fee earner or whether it was reasonable to instruct non-local solicitors is not a point of principle. No reply needed or allowed (note the use of the word “must” in CPD 39.1). A challenge to the number of hours spent in attendances on the claimant is not a point of principle. A challenge to a conference with counsel is not a point of principle. A challenge to the level of success fee is not, under ordinary circumstances, a point of principle (not that we’ll have those shortly). With the changes (clarification) of how points of dispute should look, we’ll no longer have item-by-item challenges to document schedules. Even if we did, this is not a point of principle and no reply allowed.

There are no doubt plenty of law costs draftsmen and costs lawyers who make almost as much money drafting prolix replies as they do from anything else they do. I currently have a case where I drafted points of dispute running to 8 pages. In response I received replies running to 34 pages which resembled a skeleton argument, but did nothing to narrow the issues. Those days are about to end.

In fact, there is now no justification to continue the current abuse of the system until the rule change formally comes into force. Next time, as a receiving party, you receive points of dispute, pause and reflect. Unless there is a point of principle or you are making a concession, no need for replies. That is why they are optional.

In future, most points of dispute will not justify replies. Where replies are justified they are likely to be limited to a few narrow points and it will be rare for more than 30 minutes to be required on the task.

I look forward to making my first application to have replies struck for failing to comply with CPD 39.1.

Open offers in detailed assessment proceedings

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The forthcoming changes to the Costs Practice Direction substitute for paragraph 35.3:

“The paying party must state in an open letter accompanying the points of dispute what sum, if any, it offers to pay in settlement of the total costs claimed. The paying party may also make an offer under Part 36.”

I really don’t know what to make of this.

Under the current rules, which will remain, Points of Dispute must be served within 21 days of service of the Bill (subject to any extension being obtained). Receiving parties have the luxury of 3 months to prepare a Bill (why the huge difference in timescale?). It can be bad enough for paying parties to instruct a costs draftsman, get the papers to them, the costs draftsman to draft the points of dispute (which can require several days of reading in time), arrange for approval and serve within 21 days. There are many cases where quantifying an offer and obtaining instructions (especially where there are multiple defendants or insurers) within 21 days is simply not realistic.

What will be the sanction for failure to make the open offer? The new rules are silent. Does it invalidate service of the Points of Dispute? Or does one just shrug?

What happened to the suggestion of being able to make a conditional offer, such as where there was an issue over a retainer?

The paying party’s offer is meant to be contained within an open letter. Does this mean it can be referred to during a detailed assessment hearing? If so, it potentially prejudices paying parties. There is no corresponding requirement for the receiving party to make an open offer.

What role does this open offer play? The rule is absolutely silent. We are expressly told that the general rules relating to Part 36 will apply in the future to assessment proceedings. A paying party can therefore make an improved Part 36 offer at any stage, notwithstanding the open offer.

Costs Practice Direction 46.1 currently states:

“An offer made by the paying party should usually be made within 14 days after service of the notice of commencement on that party. If the offer is made by the receiving party, it should normally be made within 14 days after the service of points of dispute by the paying party. Offers made after these periods are likely to be given less weight by the court in deciding what order as to costs to make unless there is good reason for the offer not being made until the later time.”

Although most courts will currently take into account offers made long after 14 days, offers made at a very late stage are often given less weight. CPD 46.1 is to be scrapped and a Part 36 offer may therefore be made at any stage. A paying party may not have any costs protection until they do make a good Part 36 offer (subject to how “successful party” is to be interpreted for the purposes of CPR 44.3(2)), but overall the change to the rules makes an early offer less important than under the current rules. Why then the mandatory open offer requirement?

If the normal Part 36 rules will apply to assessment, which is what we are told, where does the open offer come into play? For example, a paying party makes an open offer of £10,000 on a £100,000 bill. Six months later the paying party makes a Part 36 offer of £90,000. At assessment the bill is assessed at £80,000. The receiving party will get their costs from 21 days after they made their Part 36 offer plus interest on those costs. What relevance then the open offer of £10,000? Why have a rule requiring an offer to be made that becomes irrelevant once a better Part 36 offer is made?

Or, is this to deal with the issue I raised the other day about the fact the new rules appear to remove the presumption a receiving party is entitled to the costs of assessment? Is the open offer to be the key factor the court takes into account unless and until a successful Part 36 offer is made? Will beating the open offer be treated as meaning the receiving party is the successful party for the purposes of Part 44.3(2) and, if not, that the paying party is the successful party?

Rules committee, please explain.

The new rules are presumably meant to simplify matters but I am struggling with the basics at this point. I’m going to have a right go at the costs lawyers sitting on the rules committee who came up with this mess. Please remind me of their names again.

Provisional assessment pilot hailed a success

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The Provisional Assessment Pilot, only one year into the two year pilot, has been hailed a success by Lord Justice Jackson (see Report on the Provisional Assessment Pilot). He recommends that it is rolled out nationally.

The scheme covers bills up to £25,000. The first thought is how are junior law costs draftsmen and costs lawyers going to gain advocacy experience if these bills are all assessed on paper (a similar kind of problem the junior bar faces with the loss of much low level advocacy to solicitors)? The second thought is how many bills under £25,000 will there be once fixed fees are extended across the fast-track? The third thought is have I got a big enough pension pot to consider early retirement?

The report advises there were 119 cases in the pilot during the first year. After provisional assessment only 2 cases proceeded to an oral hearing. In neither case did the requesting party achieve an improvement of 20% or more upon what it had secured in the provisional assessment. There’s a surprise.

The average time spent on each provisional assessment was 37 minutes and the median time was 40 minutes. Experience during the second year of the pilot suggests that where provisional assessment is carried out by a district judge who is not a regional costs judge (and therefore has less experience of assessing costs) 60 minutes should be allowed for the exercise. Make of that what you will.

The report found that the process is far cheaper for the parties than traditional detailed assessment, because (save in rare cases) they avoid the costs of preparing for and attending a hearing. DJs Hill and Bedford estimate that the savings for the parties are at least £4,000 per case. (Not a thought for the poor lawyers who find themselves out of pocket. It’s like trying to encourage healthy lifestyles without a thought for the doctors and nurses who may find themselves out of work as a result.)

It looks as though provisional assessment will be rolled out nationally at the same time as the other major costs reforms (currently October 2012 although there are some suggestions this may be pushed back to April 2013).

Sir Rupert’s recent lecture on Assessment of Costs in the Brave New World reveals a number of important forthcoming amendments to the CPR and Costs Practice Direction. I’ll deal with some of these in bite size pieces over the coming days.

Costs in infant approval hearings

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Lisa Wright, barrister at 4 King’s Bench Walk, recently wrote a couple of interesting articles in the New Law Journal (18 February 2011 and 15 & 22 April 2001) on costs in RTA infant approval hearings.

The second article dealt with costs under the new fixed costs regime under CPR 45.27 to 45.40. The article, when considering hearings to assess damages, stated:

“Where the defendant is ordered to pay the claimant’s stage 3 costs, the court can order the stage 1 and stage 2 costs to be paid. CPR 45.38 does not provide for this, however, it is presumed that the court can make such an order given that in adult claims, such costs are paid at the end of each stage (paras 6.18 and 7.61 of the Protocol).”

The fact that CPR 45.38 “does not provide for this” picks up on the point I identified when the draft rules were first released (see New RTA scheme rules and win a bottle of champagne). Given the rules were introduced back on 30 April 2010, would it not make more sense for the rules to be updated to fill this lacuna rather than expect judges to have to make it up as they go along?

Discretionary rights of audience?

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The debate as to whether non-Costs Lawyer costs draftsmen can appear before the courts on detailed assessment continues to rumble on. Although a further detailed analysis of this issue will have to wait for another day, I will briefly pick-up on some observations recently made in an article in Costs Lawyer magazine on the subject.

This reviewed a recent judgment from His Honour Judge Holman in Bank of Scotland v Whiteside (16 February 2011). The issue in that case was whether the court should grant a debt collection agency, which was not a firm of solicitors, the right to conduct litigation. That judgment also considered the earlier Court of Appeal decision of Clarkson v Gilbert [2000] 2 FLR 839. In that case the issue was whether it was appropriate to grant the claimant’s husband, who was not a qualified lawyer, rights of audience in relation to the claimant’s case. The court determined that it should only exercise its discretion to permit him to act if there was a ‘good reason’.

Judge Holman had noted: “Perhaps most significantly, the right to conduct litigation will only be granted in exceptional circumstances to those who are acting for reward”.

Interesting though this decision is, I would suggest it has no direct relevance to the issue of costs draftsmen’s rights of audience.

The Bank of Scotland and the Clarkson cases were dealing with the question of whether the court should exercise its discretion to grant rights of audience or rights to conduct litigation to those who otherwise did not have them. That was an issue of discretion and the conclusion was that the court would be slow to exercise such discretion in favour of the unauthorised company or individual.

In relation to detailed assessment hearings, the position was previously governed by section 27 of the Courts and Legal Services Act 1990. Law costs draftsmen, not otherwise having rights of audience, were permitted to appear by virtue of falling within s27(2)(e):

“where –

(i) he is employed (whether wholly or in part) or is otherwise engaged to assist in the conduct of litigation and is doing so under instructions given (either generally or in relation to the proceedings) by a qualified litigator; and

(ii) the proceedings are being heard in chambers in the High Court or a county court and are not reserved family proceedings.”

The matter is now governed by the Legal Services Act 2007 and non-Costs Lawyer costs draftsmen are permitted to appear by virtue of being ‘Except Persons’. Paragraph 1(7) of Schedule 3 defines ‘Exempt Persons’:

“The person is exempt if -

(a) the person is an individual whose work includes assisting in the conduct of litigation,

(b) the person is assisting in the conduct of litigation -

(i) under instructions given (either generally or in relation to the proceedings) by an individual to whom sub-paragraph (8) applies, and

(ii) under the supervision of that individual, and

(c) the proceedings are being heard in chambers in the High Court or a county court and are not reserved family proceedings.”

Under both acts the costs draftsman was and is entitled to act by virtue of being properly instructed by a solicitor in relation to a hearing in chambers. There is no question of the court exercising its discretion one way or the other. The ‘right’ to appear is automatic if the conditions are met. This contrasts entirely with the position in Bank of Scotland and Clarkson where there was no instructing solicitor. An unrepresented claimant was seeking to have an unauthorised company or person exercise restricted rights.  In that situation the court’s discretion came into play.

A costs draftsman acting for a litigant-in-person would equally have no ‘right’ to appear and would have to ask the court to exercise its discretion.  It is very probable that persmission would not be given.

Of course, none of this answers the question as to whether rights of audience in detailed assessment hearings should be limited to Costs Lawyers. But, as the law stands, no such restriction applies.

Proportionate bill of costs?

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Dominic Regan’s blog summarising Motto & Ors v Trafigura Ltd & Anor [2011] EWHC 90201 (Costs):

“£107,707,772.72 – That was the amount of the bill presented by Leigh Day to the defendants in the Trafigura pollution injury claims where it was ultimately accepted that most claimants had flu like symptoms. … Please do not mention this case to Sir Rupert Jackson; I fear the poor man would implode.”

Proportionality anyone? Don’t make me laugh. You’ll make my sides hurt. And where there’s blame, there’s a claim.

Despite the valiant efforts of those representing the claimants, Master Hurst held: “I have no hesitation in saying that the base costs, excluding additional liabilities, have the appearance of being disproportionate.”

Motto v Trafigura Ltd

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For those yet to read the preliminary judgment of Master Hurst, the Senior Costs Judge, in Motto & Ors v Trafigura Ltd & Anor [2011] EWHC 90201 (Costs) (15 February 2011) don’t make the mistake that I did when visiting BAILII and press the print button. (My invoice for five reams of papers and a new printer cartridge is on its way to Master Hurst.)

Given the Claimants’ bills of costs totalled £104,707,772.72 it is perhaps not surprising that this is a fairly lengthy judgment.

To give a feeling for the nature of the detailed assessment, in the words of Master Hurst:

“I have been given electronic copies of the bills, which I am told run to some 55,000 items, all of which are challenged in the Points of Dispute. For the purpose of these key issues I was presented with in excess of 60 ring-binders of documents, and in spite of the remarks of the President of the Queen’s Bench Division, Sir Anthony May, in Khader v Aziz [2010] EWCA Civ 716; [2010] 1 WLR 2673, being drawn to the attention of the parties, the Defendants’ skeleton argument, including supporting schedules, ran to over 1,000 pages, this being in addition to a witness statement of Mr Nurney dealing with the key issues, which, with exhibits, ran to over 3,000 pages. The Claimants’ skeleton runs to 73 pages, and their supporting witness statements, including exhibits, run to 923 pages.”

There were three barristers acting for each party, including five QCs. However, given Nick Bacon QC acted for one side and Ben Williams for the other, one does have to wonder whether the others were somewhat surplus to requirements.

The scope of the judgment covers a wide range of preliminary issues. Although it is important to remember that this judgment is not binding, and there are some aspects of the judgment that other costs judges in the Senior Courts Costs Office are not following, this judgment is nevertheless likely to be produced at countless detailed assessments in the future as “authority” for various propositions. I will therefore try to put together a handful of short posts to discuss some of the more interesting aspects of this decision.

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.