Changes to the assessment process


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At the end of July I attended the last of Jackson LJ’s Costs Review Seminars. This seminar focused on detailed assessments and explored various ways to try to improve the process. The majority of those attending were costs draftsmen, costs judges and other costs professionals.

What was interesting was the way that some of the ideas that emerged were met with virtually unanimous support from those present except for one or two individuals who clearly passionately believed that these very same proposals were either unworkable or entirely counter-productive.

One of the suggestions was that the current format for bills of costs was inappropriate and should be replaced with a new format. Rather than, as now, largely focusing on a list of chronological items of work, the bill should be more focused on providing an explanation as to why certain work was necessary or why this work was unusually time consuming. This proposal received virtually unanimous support and a costs judge and a regional costs judge have been tasked with producing a new model bill to incorporate this suggestion.

Although understanding the logic behind this proposal, I was one of the very few who strongly opposed this idea. Preambles to bills are already often unnecessarily long and self-serving, trying to justify the level of costs claimed by highlighting the supposed difficulties in the matter. My concern is that any formal requirement to explain and justify at the outset the costs claimed will turn bills into pages of lengthy prose that serve little purpose other than to drive up costs. Worse, much of this may prove to be entirely wasted. Time will be spent seeking to justify work that the paying party may have had no intention of disputing. Hopefully the model bill and any changes to the rules will overcome my concerns.

A second proposal was to introduce provisional assessments for lower value claims for costs. These would be conducted on paper with an option to proceed to a full detailed assessment if a party was unhappy with the provisional assessment, though possibly with strict costs penalties if a party failed to do better at the full assessment. I shared the majority view that this was a sensible proposal. There were only two dissenters and these were, interestingly enough, a regional costs judge and a costs officer. Their concern was that the provisional assessment option would be so attractive to parties that it would lead to a far higher number of cases reaching the courts than currently proceed to detailed assessment. This would lead to the courts being swamped with work they could not cope with. Of course, given any proposals emerging from the Jackson Review will almost certainly include fixed costs for fast-track claims this concern may be somewhat misplaced. Based on the figures being discussed at the seminar, for cases to be eligible for provisional assessment, most multi-track claims would be excluded. There would be relatively few claims likely to qualify once fast-track claims are removed from the process. Further, the workload of the courts should significantly decrease, in terms of costs disputes, as a result of fixed costs.

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qc june3 1997

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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 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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ATE premiums – What impact market forces?


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The heart of the problem concerning ATE premium levels was identified recently by Paul Ashurst writing in the New Law Journal: "one party buys insurance cover without handing over any cash and then hands the bill to the other party, who has no say in selecting either the cost or provider". The self-insuring deferred premium, which has become the norm, is central to this problem. Although this is a wonderful product from a claimant’s perspective, it removes any real market force from the system.

Lord Justice Jackson’s Preliminary Report on Civil Litigation Costs recognised this problem: "An issue which is sometimes raised is whether ATE premiums generally are unduly generous to insurers. In any given case, the insured demonstrates to the court the reasonableness of the premium paid by producing a statement as contemplated by the Court of Appeal in Rogers v Merthyr Tydfil CBC [2006] EWCA Civ 1134. That, however, is separate from the wider question of whether ATE premiums generally are too high or about right. In relation to this issue, insurers make the point that there are now 36 ATE providers (insurers and agents/intermediaries) active in the field. They contend that market forces bring premiums down to a proper level. This argument may have more force in relation to personal injury and clinical negligence litigation (where many insurers offer cover) than in relation to niche areas (where fewer insurers are competing for business). On the other hand, it has been suggested that the decision in Callery v Gray approving a figure as a reasonable premium in road traffic cases at the time has set that figure as a base-line and has resulted in the eradication of downward pressure in the market; and that the requirement for a Rogers v Merthyr Tydfil statement does not in practice ensure that premiums are competitive".

Later the Report observes: "In Callery v Gray (Nos 1 and 2) [2002] UKHL 28 Lord Hoffmann expressed the view that no market forces restrain the levels of ATE premiums. At paragraphs 43-44 he said this: ‘ATE insurers do not compete for claimants, still less do they compete on premiums charged. They compete for solicitors who will sell or recommend their product. And they compete by offering solicitors the most profitable arrangements to enable them to attract profitable work. There is only one restraining force on the premium charged and that is how much the costs judge will allow on an assessment against the liability insurer. Again, the costs judge has absolutely no criteria to enable him to decide whether any given premium is reasonable. On the contrary, the likelihood is that whatever costs judges are prepared to allow will constitute the benchmark around which ATE insurers will tacitly collude in fixing their premiums.’ Seven years have elapsed since Lord Hoffmann delivered that speech. There appears to have been a substantial growth in ATE insurance during that period. Whether or not market forces now exert any effective control over premium levels is very much a live issue, which I have touched upon in chapter 14 above. It is a fair point made by defendants that claimants have no interest in the level of ATE insurance premiums, because – win or lose – the claimants are never going to have to pay those premiums".

A recent edition of Litigation Funding reported Temple Legal Protection as recently providing ATE insurance for a case with a premium of £2.5 million with another case rumoured to have attracted an even larger premium. The sums at stake are significant.

The Rogers decision has been interpreted in many quarters as giving ATE insurers a blank cheque to set their premiums at whatever level they choose in the knowledge that the courts will not interfere with those premiums. Is that view correct?

Gibbs Wyatt Stone
recently appeared for the Defendant in the case of Priest v CMT Engineering Insulation Ltd (17/3/09) in the Supreme Court Costs Office. The case concerned an asbestos related disease and an ATE policy with DAS 80e had been entered into by the Claimant with a three stage premium. The matter settled pre-trial and therefore only the first two elements of the staged premium were payable. These were calculated at £6,500. A third and final premium would have been payable 21 days pre-trial and that premium would have been individually calculated to reflect the risks of the case. Principal Costs Office Lambert agreed with the Defendant’s submissions that the first two premiums claimed were excessive. Using his own experience of other comparable ATE policies available on the market he reduced the amount to £2,750. The Claimant is appealing. It will be interesting whether the Court on appeal upholds the decision or decides, in effect, that an experienced costs officer or judge no longer has the power to interfere with an ATE premium following Rogers.

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qc oct 14 97
 

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New claims process stumbles


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As anticipated, the new RTA claims process will not be ready by the original date of October 2009 due to problems agreeing how the scheme will work. A new date of April 2010 has now been set. 

This latest news coincides with Lord Justice Jackson’s recent comments commending the German costs recovery model. With his preliminary report on the future of legal costs about to be published it seems increasingly likely that some form of extended fixed fees will be recommended. That, in turn, is likely to have an impact of the new claims process. (Read more.)

Expect further delay and uncertainty.

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qc nov 26 96
 

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The law firms costing NHS millions


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The Sunday Times followed on from last week’s attack on the costs paid out in clinical negligence cases (see previous blog) with a Top 10 list of the firms who were paid the most by the NHSLA in 2007/08:

Irwin Mitchell £10.75m

Leigh Day £4.87m

Pannone LLP £4.83m

McMillan Williams £3.01m

Kingsley Napley £2.96m

Gadsby Wicks £2.40m

Russell Cooke £1.86m

Challinors Lyon Clark £1.58m

Keeble Hawson £1.55m

Withy King £1.53m

Total: £35.34m

The list was presumably meant to be a Hall of Shame but one suspects that there will be a number of firms looking at the list and their one regret will be that that they were not higher up the list.

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qc june 11 96
 

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Signatures to CFAs


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In a previous post I commented on the fact that Cook on Costs 2009 is wrong when it says: "With the removal of the [CFA] Regulations [2000] from 1 November 2005 a CFA needs only to be in writing and signed…".

As confirmed by Senior Costs Judge Master Hurst, in Findley v Jones and MIB [2009] EWHC 90130 (Costs): "As things stand at the moment there is no need for a CFA to be signed by the client. As at 4 May 2004 the CFA Regulations 2000 did require such a signature". The same view was expressed in Birmingham City Council v Forde [2009] EWHC 12 (QB).

The requirement for a CFA to be signed by the client and the legal representative disappeared with the revocation of the Regulations. However, what is the consequence if a pre-November 2005 was not signed? It will obviously be a breach of the Regulations but is it a material breach such as to render the agreement unenforceable?

In Fenton v Holmes [2007] EWHC 2476 (Ch) the Court was faced with a CFA document which had been signed by both the solicitor and client. However, the CFA lacked a crucial clause necessary to comply with the Regulations. This clause was contained within a seperate letter sent to the client. This letter was not signed by the client. Mann J found this to be a material breach and the CFA was found to be invalid.

In Preece v Caerphilly CBC (Cardiff CC, 15/8/07, unreported) (Lawtel Link) the CFA had been signed by the client but not by the solicitors. Hickinbottom J held: "I do not suggest for one moment that the solicitor’s signature in this case was omitted for anything other than the most innocent of reasons: but, if a CFA is not signed, then a less scrupulous solicitor may for example seek to enforce his right to be paid his reasonable costs if the client’s claim fails. The signature of the solicitor affords the client some real protection against that possibility, as rare as that hopefully might be in practice". The CFA was held to be invalid.

However, in Findley, Master Hurst decided that the failure of a Litigation Friend to re-sign a CFA previously signed by the Claimant was not a material breach. The facts of this case are so unusual that it is unlikely that much comfort can be taken from this judgment by others who find their CFAs not properly signed.

As a general rule, a CFA entered into before November 2005 that is not signed by the client and the legal representative is likely to be held invalid.

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qc nov 19 96
 

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Proposed court fee increases


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The Ministry of Justice has issued a consultation paper, Civil Court Fees 2008, on proposed increases in certain court fees (closing date 4/3/09). The most eye watering increase is the fee for filing a request for a detailed assessment hearing by a legally aided party where no other party is ordered to pay the costs of the proceedings. The proposed increase is from the current £105 up to a new figure of up to £5,000.

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qc may 21 96
 

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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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