Tag Archives: costs draftsmen

Late settlements

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Those of us who work in the legal costs world have countless stories of last minute costs settlements where the other side crumbles at the last moment. In fairness, both claimants and defendants are probably equally to blame. Naturally, the closer a matter gets to a final hearing the more it focuses the parties’ minds. The same behaviour can be seen in substantive litigation with door-of-the-court settlements. However, in costs matters, this problem is usually due to a failure by someone appropriately experienced to consider the merits of a case at an early stage. Instead, a proper analysis is often only undertaken very late in the day. The following recent example is by no means the worst case I have seen.

A personal injury claim was settled in June 2007 and the Claimant subsequently presented a schedule of costs totalling about £21,000. The Defendant offered £7,800 in August 2007. The Claimant made a counter-offer of £13,500 in September 2007. The Defendant made a final offer of £8,500 in November 2007 which was rejected. A Bill of Costs was served totalling about £23,000.

At this stage Gibbs Wyatt Stone were instructed to act for the Defendant. We advised against increasing the Defendant’s offer and drafted Points of Dispute requesting disclosure of the Claimant’s CFA. These Points of Dispute were served in December 2007. In January 2008 Replies were served which declined to give disclosure of the CFA. After further communications the CFA was eventually served in March 2008. It was clear that there were serious issues as to the validity of the CFA. Supplemental Points of Dispute were served in April 2008 challenging the validity of the CFA. The Claimant made a further settlement proposal of £12,300 in May 2008. In February 2009 the Claimant served Replies to the Supplemental Points of Dispute that claimed the CFA was valid.

In March 2009, having paid a court fee of £600 for the privilege, the Claimant requested a detailed assessment hearing. The Court issued directions requiring the parties to hold a joint discussion to narrow the issues. The parties undertook the joint discussion and prepared a joint statement identifying the issues still in dispute.

The Court listed the matter for a pre-hearing review in June 2009. Two days before the hearing the Claimant contacted the Defendant seeking to accept the Defendant’s offer of £8,500 made back in November 2007. After further discussions, settlement was agreed at £7,500 to allow for a contribution to the Defendant’s costs that had been incurred since the offer in November 2007. Once the Claimant had paid the court fee, their costs draftsman’s fees for preparing the Bill and the other costs incurred between November 2007 and June 2009, the Claimant probably recovered something in the region of £4,500 net as against the offer of £8,500 previously made by the Defendant.

Running a case all the way to assessment and losing is one thing but marching all the way to the top of the hill only to march back down again is less easy to understand.

Feel free to post your own favourite examples.

Jackson Costs Review – Part 3 – Cost Shifting

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Lord Justice Jackson’s Preliminary Report on Civil Litigation Costs (see previous post) seriously considers whether the current two-way costs shifting rules should continue. He writes: “The first possible modification would be to introduce one-way cost shifting. One-way cost shifting means that when the defendant loses, he pays the claimant’s costs; when the claimant loses, each side bears its own costs. Such a system would self-evidently benefit claimants. Ironically, such a system would also benefit defendants in certain areas. A one-way cost shifting regime would be cheaper for defendants than a regime under which they recover costs when they win, but pay ATE premiums (as well as all the other costs) when they lose. A crucial consideration, however, would be the need to provide incentives for claimants to accept reasonable offers”.

The Report goes on: “On looking at the data which has come in during Phase 1 of the Costs Review, it seems to me that a one-way costs shifting rule would (a) be cheaper for defendants than the present two-way rule and (b) reduce the burden on claimants. It is therefore necessary to look at this proposal and its implications in further detail. The proposal which I raise for consideration during Phase 2 is whether it would be more cost effective to remove the claimant’s liability for costs in respect of unsuccessful cases. … Whilst there are different arguments for cost shifting for and against claimants, it is appears that in most categories of litigation the case for retaining cost shifting in favour of successful claimants is a strong one. My working assumption is, therefore, that cost shifting in favour of claimants, in the sense that successful claimants should generally expect to recover their costs, should continue”.

Michael Zander QC, writing in the New Law Journal, stated: “If I were a betting man I would put some money on there being a recommendation in the final report that in personal injury litigation we should move to one-way fee shifting (as existed under legal aid) so that the claimant would no longer need, and losing defendants would no longer have to, pay for the claimant’s ATE insurance cover”.These suggestions would have a major impact on two groups if they find their way into the rules. Firstly there would be a significant reduction in work for costs draftsmen, both defendant and claimant. If one-way costs shifting removed recoverability of defendants’ costs this would remove the need for defendants’ bills of costs to be drafted or opposed. Of course, defendants do not win a high proportion of cases but this loss of work would not be insignificant. The second group who would be affected is ATE insurers. I will deal with them in a future post.

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qc march 4 97
 

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Jackson Costs Review – Part 2 – Fixed Fees

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Lord Justice Jackson’s Preliminary Report on Civil Litigation Costs is, in general, careful to avoid reaching any final conclusions or making any firm recommendations (see Part 1). However, even from a cursory reading, it seems all but inevitable that the final report will recommend the introduction of fixed fees to all stages of fast track claims.

Jackson LJ writes: “I have canvassed views from my panel of assessors and it is our unanimous view that we should take forward this work and try to achieve a fixed costs system in fast track cases”. This is as I previously predicted (see previous post). Further, it is suggested that: “There appears to be a strong case for some method of applying fixed costs in fast track cases at all stages” and not just pre-issue as in the current low-value RTA scheme. This is supported by FOIL who the Report states: “believe that there should be fixed costs for all cases within the fast track”. The conclusion reached is that: “It should be possible to devise a fair system of fixed costs for all cases within the new fast track limit”. To avoid one of the perceived problems with the current fixed fee regime, he writes: “I would propose an annual review mechanism to be included in any such fixed costs regime”.

Unlike other elements of his Report, he appears to have reached a clear view already on this issue. Good luck to those who try to persuade him to change his mind.

Of course, the idea of extending fixed costs in fast track cases is not exactly new. That is what was proposed in the Ministry of Justice’s consultation paper: Case track limits and the claims process for personal injury claims. Those proposals were largely abandoned when the new claims process was announced. It remains to be seen whether the final report carries sufficient weight to persuade a (new) government to resurrect this idea. However, at the very least, this Preliminary Report does seem to finally kill off the new claims process. Or, more accurately, delay any implementation of the new claims process pending a decision being taken as to Jackson LJ’s final proposals. The Report states: “It may therefore be sensible to dovetail in the development of the new claims process with whatever implementation programme may be put in place following completion of the 2009 Costs Review. The introduction of two different packages of reforms addressing the same subject matter may be unsettling for both practitioners and court users”. I have previously reported on the problems the new claims process has been facing. The sooner an announcement is made to, at least, put into hibernation the introduction of the new claims process the better. To see how bizarre the whole issue has become read this article on the RTA claims process (external link) from Anthony Hughes, President of the Forum of Insurance Lawyers.

What impact would Jackson LJ’s proposals have if fixed fees are rolled out to all stages of fast track cases? The new fast track limit is £25,000. The Report gives details of “a substantial firm of claimant personal injury solicitors” who informed Jackson LJ that 92% of all personal injury cases which they undertake fell within the bracket £1,000 to £25,000. This would therefore catch the vast majority of such personal injury claims. In addition to impacting on the revenue of claimant solicitors (for better or worse) it would wipe out a large proportion of law costs draftsmen and other costs professionals. This proposal has massive implications.

 

Jackson Costs Review – Part 1 – Introduction

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Lord Justice Jackson’s Preliminary Report on Civil Litigation Costs was published on 8 May 2009. I did not immediately rush to comment on this report for three reasons:

  1. The Report runs to almost 700 pages plus appendices and takes some reading.
  2. Given the importance of this report to the future of the legal costs system it seemed appropriate to give some time to reflect on the Report before rushing to reach any conclusions.
  3. I was on holiday when the Report was first published.

The first thing to note about this report is how truly masterful it is in its scope, clarity and ambition. Jackson LJ, and those who have assisted in its writing, are to be congratulated on their work. If nothing else, large sections of this report should be compulsory reading as an introduction to the basics of the current costs system.

Over coming posts I will comment on key aspects of this report. These will focus on the elements that will potentially have the widest impact on the legal profession. Inevitably, this will mean some important but niche areas, such as defamation, will not be covered.

Jackson LJ is under no illusions when he states in his opening comments to the Report: “Whatever I may recommend at the end of this year (and at this stage I still have an open mind) one thing is inevitable. My final report will generate protest from at least some directions and quite possibly all directions. … This report does not reach any firm conclusions”. This passage contains two important warnings. Firstly, the Preliminary Report is intended to do no more than set the background and identify the issues that need to be determined. The Report does contain some tentative conclusions and one could read too much or too little into these. However, nothing has yet been decided. Secondly, Jackson LJ does not seem to be afraid to upset certain groups and no doubt sees such an outcome as an inevitable part of any proper overhaul of the current system. His comment that: “The personal injury litigation industry is populated by numerous interest groups and middlemen, all of whom have to meet their overheads and make a profit on top. If any layer of activity can be removed from the process … it may be thought that this will serve the public interest”, should have particular concern not only to ATE insurers but also claimant solicitors dealing with low value claims, costs draftsmen and other costs professionals.

The next two stages of the Costs Review are:

May to July: Phase 2 – consultation
September to December: Phase 3 – preparation of final report

I will comment on some of the specific issues in more detail and the potential options considered over the coming days.

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qc jan 4 97
 

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Costs draftsmen – Good times or bad?

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Costs draftsmen and other costs professionals are currently living through an interesting period (or possibly that should read “worrying period”).

The Legal Costs Division of recruitment agency Adept Recruitment have been sending out marketing literature reporting: “As the 2nd Quarter of 2009 draws to a close we continue to see high levels of Legal Costs Recruitment throughout the UK. Despite the economic downturn many of our Clients have continued with ambitious expansion programmes, whilst some have opened large, new departments in major cities as their workload continues to increase”. Sounds like good news, but there is a catch.

In previous postings I have commented on the potential increase in work for costs draftsmen (link to post) that may result from the current economic downturn. However, it is far too early for this work to have yet worked its way through to the legal costs industry. There is no “extra” work out there beyond what there was a few years ago. Indeed, some work, such a RTA work, has dramatically declined.

So what is happening? The short answer is that some firms are taking work at the expense of others. This has certainly been the pattern over the last five years or so in relation to defendant work. A number of the previous big players in the legal costs negotiating industry have either disappeared or shrunk dramatically. This, in part, has been caused by reductions in real terms in work volumes but has also been caused by work moving to new providers. A similar process seems to be in progress now in relation to more traditional costs draftsmen and particularly those in the claimant field. There are one or two large players who have recently been engaged in aggressive and successful expansion plans. Over recent months I have heard from claimant costs draftsmen who have told me how they are feeling the pinch as a result of the success of their rivals’ expansion programmes. The claimant costs industry is going down the same road the defendant side previously travelled where it is becoming dominated by a smaller number of large players. Whether that is good news or bad depends on your perspective.

All this redistribution of work may be interesting but will potentially become an irrelevant sideshow if some of the suggestions in the Jackson Review see the light of day. More on that subject shortly.

Legal costs uncertainty continues for costs draftsmen and lawyers

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In previous posts I have been commenting on the proposed new claims process and the problems that arise as to what the relationship will be between the proposed new staged fixed fees under the new claims process and the existing fixed predictable costs (CPR 45.7-45.14).

This problem is beginning to look more acute as time goes on. At the recent Legal & Medical conference, Amanda Stevens, President of APIL, raised concern over the level of consultation yet needed to deliver a tight and clarified costs process by the expected reform start date of October 2009.

There will be a continuing period of uncertainty for insurers, lawyers and law costs draftsmen.

Don’t be surprised if the whole concept is scrapped and they go right back to the drawing board. You heard it here first.

"NHS leeches"

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Although The Legal Costs Blog is unashamedly defendant biased, and always ready to have a go at claimant lawyers, even we were somewhat taken back by the attack launched on claimant clinical negligence lawyers in yesterday’s Sunday Times.

One article was headed “Lawyers use NHS as £100m cash cow” and another “Lawyers get m0re than victims in NHS compensation scandal“. The leading article ran with the headline “Taking a knife to the NHS leeches“. The source of this fury seems to have been The NHSLA submission to civil litigation costs review.

The NHSLA paper states that “the whole costs structure is indefensibly expensive in relation to the compensation awarded or agreed”. It highlights the large discrepancies between the amounts charged by defendant and claimant lawyers in clinical negligence cases and claims that “claimant legal costs are more than double the defendant legal costs on average and that the gap … has been widening over recent years”.

The impact of CFAs is particularly criticised, with it being claimed that “they are effectively a means of claimant lawyers virtually doubling their profit costs having cherry-picked their cases”. It also claims that the effect of CFAs is to produce hourly rates of potentially over £800 an hour.

The papers makes a number of proposals for reform including the introduction of routine costs capping orders and fixed staged success fees.

The NHSLA’s submission paper is for the benefit of Lord Justice Jacson’s ongoing review of the current costs system. It appears that it is now being generally accepted that he really has neither ruled anything in nor ruled anything out. We can now start to expect a growing number of similar submissions from various interested parties trying to influence his thinking.

The Sunday Times leading article concluded: “The NHS Litigation Authority is right. We need to reform this process and end the party for lawyers.” It is fair to say that the Sunday Times is not an entirely uninterested party. The Ministry of Justice is currently engaged in the Controlling costs in defamation proceedings consultation. The press has been attempting to limit CFA funded costs in such claims and a general attack on claimant lawyers’ fees will do no harm to that cause.

It might be thought that the Jackson review is coming rather late in the day. Given the damp squib that, so far as costs proposals went, emerged from the Ministry of Justice’s Response on the new claims process it seemed that the current government had no real appetite for a major shake-up of the current costs system. However, the Sunday Times quoted Mark Simmonds, the shadow health minister as saying: “It is unacceptable in some cases that the legal fees are many times higher than the awarded damages”. With there being every chance of a new government next year, anything now looks possible.

Just as costs draftsmen and other costs professionals were beginning to think there might be some stability emerging, it now looks as if we are in for another period of uncertainty.

Cole v News Group – The unread judgment

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Many years ago, when I was studying for my law degree, I was told never to simply rely on the headnote of a law report, but to read the judgment in full. This was for two reasons. Firstly, it was often only by reading the full judgment would one properly understand the decision and the reasoning behind it. Secondly, and perhaps more importantly, the headnote was sometimes inaccurate and misleading. Of course, at the time, I ignored that advice.

The modern equivalent to that advice is never trust case summaries you have simply read on the internet (this blog included) but to actually read the full judgment yourself.

A perfect example of the problems that arise from not following this advice is the strange case of Cole v News Group Newspapers Ltd (18/10/06, SCCO, unreported). I say “strange” because of the way this case has been reported. The background to the judgment was a libel claim brought by a certain well known footballer. I don’t need to repeat the salacious details of the original story, but I’m sure Ashley would be intrigued to discover this case has become best known in certain circles as a legal costs law authority rather than for the original allegations.

A quick Google search for “Cole v News Group” produces a number of legal websites offering case summaries of this judgment. They all appear to be inaccurate. I say “appear” because the difficulty with this case is it truly does seem to be unreported and is not available on any of the normal resources such as Bailli or Lawtel. This seems to have encouraged a number of individuals to pass on details of this case on a Chinese whispers basis without actually obtaining and reading a copy. Further, a growing number of claimant costs draftsmen routinely quote this case to resist requests for disclosure of CFAs. It may be that the transcript of the case that I have seen is not the final decision and that a further decision exists. If that is the case, and any reader can produce a more recent decision, I will happily write a further post on the subject.

Of the various case summaries that do exist on the internet, three of them refer to this being a decision of Master Haworth in the SCCO. Two of those give the date of the judgment as being February 2007. The third states it is a decision of the Court of Appeal in February 2007. All the summaries seem to suggest that the Court (whichever Court it was) held that a court would not order disclosure of a CFA unless the paying party had first raised a “genuine issue”. I don’t propose in this post to address what the law actually is on that point.

So what did the judgment actually say? I believe the summary in Cook on Costs 2009 provides a true account of the decision (if not the law): “With the removal of the [CFA] Regulations from 1 November 2005 a CFA needs only to be in writing and signed but that did not stop an application for disclosure in Ashely Cole v News Group (2006) Oct 18 SCCO. That application failed simply because no points of dispute had been served hence CPR 47.14 and CPD 40.14 did not apply. No decision was made as to the applicability of Hollins to post 1 November 2005″.

The transcript I have is dated 18 October 2006 (the same as the one quoted in Cook on Costs) and I am therefore proceeding on the basis that it is indeed the only judgment made in this case on that point. Cook on Costs’ summary is accurate. The application was dismissed simply on the basis that it was premature. There is absolutely no mention of “genuine issue” in the judgment, let alone any finding on this point. Indeed, the judgment concludes that when the matter comes back to the Court for the detailed assessment hearing “it may very well be that at that stage a disclosure of the CFA is appropriate”.

So my advice, particularly to any claimant law costs draftsmen reading this blog, is obtain and read the actual judgment in this case before seeking to rely on a decision that does not actually support your position.

I’ll come back to why Cook on Costs was wrong on the law on another day.

Good news for costs draftsmen and costs consultants

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In a previous posting I reported some good news for personal injury lawyers and, in due course, law costs draftsmen and other costs professionals in the announcement that clinical negligence claims were predicted to increase.

Similar good news comes in a survey conducted by legal recruiters ASA, carried out among law firms. Only 18% expected the economic downturn to adversely affect them, with 46% expecting work to increase. One partner was reported as commenting: “people are always more likely to claim when money is tight”.

Further, in the current edition of Litigation Funding, Peter Smith, managing director of ATE insurer FirstAssist, was quoted as reporting a 40% increase in the past few months in the number of professional negligence cases it had funded. He stated: “Everything suggests that if you are unhappy with work that’s been done, then you might fight harder trying to obtain recompense during the credit crunch”.

In the next 12-24 months, costs draftsmen and costs consultants can expect to see an upturn in work. So long as contingency fees haven’t been introduced first.

Offers to settle costs

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One of the more unfortunate costs provisions in the CPR is the general presumption that the receiving party is entitled to the costs of the detailed assessment proceedings. This encourages some receiving parties to submit inflated and unrealistic bills and, unless the paying party makes an offer that they consider puts them at real risk, pursue the matter to an assessment hearing without making any attempt at settlement or making any offers of their own.

It is worth mentioning at this point that an offer to settle a costs claim made under Part 47.19 does not carry any automatic consequence, unlike a Part 36 offer. The courts certainly do place enormous weight on Part 47.19 offers but it would be a mistake for either party to think that beating such an offer is determinative.

However, the approach of failing to actively engage in negotiations carries its its own dangers. CPR 47.18 lists the various factors that the court "must" have regard to when deciding whether to make an order other than that the receiving party recovers their costs. This includes the conduct of the parties and the amount by which the bill is reduced.

Referring to the case of Butcher v Wolfe [1999] 1 F.L.R. 334, the Court of Appeal in Codent Ltd v Dyson Ltd EWCA Civ 1835 stated:

"The second point to be derived from the case of Butcher is that there is an obligation to negotiate, placed upon the parties, which, as that case held, was not limited purely to family proceedings. A party who has refused a Calderbank offer point-blank and failed to negotiate might be penalised in costs if such refusal was unreasonable."

This approach has been reemphasised by Jackson J (now Jackson LJ) in Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC) where he held that if one party makes an offer to settle a claim which is nearly but not quite sufficient and the other party rejects that offer outright without any attempt to negotiate, then it might be appropriate to penalise the second party in costs.

In my experience, judges are willing to apply this reasoning to detailed assessment costs. Further, even where (rarely) I have not succeeded on my own Part 47.19 offer, I have often been able to persuade a judge to make a costs order in the paying party’s favour or no order for costs where the bill has been significantly reduced.

As readers are no doubt aware, Jackson LJ has now been given the task of undertaking a fundamental review of litigation funding. I am sure he is a regular reader of this blog and he may wish to consider the following modest proposal. Receiving parties have an enormous advantage in detailed assessment proceedings because they have access to something the paying party does not: their own file of papers. A receiving party is in a far better position than the paying party to actually calculate what their bill is really worth. Paying parties must always engage in a certain amount of guess work, however "educated" that guess is.

Why not introduce a rule that the receiving party must make an offer to settle in relation to their own bill of costs and they will not be able to recover their assessment costs if they fail to beat that offer? Something similar was proposed, but dropped, in respect of quantum hearings for the new claims process. This offer should be made at the same time as serving the bill and any further offers would provide no further protection. This would force receiving parties to sensibly value their costs from the outset and would almost certainly dramatically reduce the number of detailed assessment hearing.

I would be interested to hear readers’ views.

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qc april 16 96
 

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