Author: Andrew McAulay

Prevention is better than cure

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The recent case of  Stella v Hodge Jones & Allen LLP demonstrates the importance (and benefit) of a law firm having a retainer in place with a client which clearly sets out the type (or types) of bills that will be raised.

Types of Bills

There are 4 types of invoices that can be raised:

  1. Statute Final.
  2. Payment on Account.
  3. Gross Sum.
  4. Chamberlain (a series of bills which are treated as payment on account bills, but which all become final bills upon delivery of the statute final bill)

Retainer

Law firms should clearly set out in client care letters and terms of business how a client will be billed i.e. will the bills raised be interim statute final bills or will they be payment on account bills.

Stella v Hodge Jones & Allen (HJA)

The Claimant requested an assessment of 34 bills raised to him by HJA.

There were a number of legal arguments in relation to the Claimant’s ability to challenge all the bills, but this blog only focuses on the arguments in relation to the type of bill raised.

HJA’s position was that only 8 of the 34 bills were capable of assessment, because the other 26 bills were outside the time limits for assessment i.e. the 26 bills (totalling £140,492.20) were interim statute final bills and, as a result, those bills were outside the period for challenge (s70 Solicitors Act 1974).

Judge Whalan determined that the bills were payment on account bills; therefore, the time limits under the Solicitors Act 1974 had not commenced. The primary reason being the wording in the HJA retainer in relation to billing arrangements. This meant that the Claimant was entitled to assess all the bills, despite some of them dating back to 2017.

Judge Whalan made an interesting comment (obiter dicta) in his Judgment:

“There is no real excuse for imprecision, uncertainty or ambiguity. If a solicitor wants to provide for the demand and payment of interim statute bills, then the retainer should express an unequivocal provision to this effect. The profession’s consistent failure to do so is, frankly, baffling.”

In reaching his decision, Judge Whalan relied on this test:

  1. The burden of proving that the retainer provides for the delivery of interim statute bills falls on the receiving party.
  2. When considering a retainer, it is necessary to refer to the relevant contractual provisions as a whole.
  3. When determining whether a retainer does allow the solicitor to render interim statute final bills, the court should resolve any fundamental ambiguity against that construction.

This is a common dispute on solicitor/own client assessments, and an argument which, more often than not, falls in favour of the client (because of the above test and, in particular, paragraph 3). The client is in a position of strength if there is ambiguity or doubt over the contractual terms because the burden of proof falls on the law firm.

Points to consider for good practice 

These are basic points, but if followed, will help a law firm to avoid such a dispute:

  • Harmony 

Ensure that what is said in your client care letter aligns with what is said in your terms of business. Also, ensure that someone who has expertise in costs law has the responsibility of drafting the relevant parts of your client care letter and terms of business.

  • Bill (invoice) template 

Ensure you have a bill template (or templates) which cover the 4 types of bills mentioned earlier. Also, ensure the communication sending the bill to the client (email or letter) provides the correct information.

Summary

A lack of consistency is usually the problem. Ensuring harmony between the client care letter, terms of business, bill and communication with the bill is key to avoid a dispute.

As a law firm, it is sensible to have a default type of bill that you want to raise for most of your matters. For example, your template client care letter and terms of business may cater for statute final bills, so that would be the default bill template. However, you should provide your lawyers with the knowledge and autonomy to modify template client care letters and terms of business to change the type of bill to be raised, where appropriate. For example, payment on account bills would be appropriate for a matter funded by way of a discounted Conditional Fee Agreement.

We are regularly instructed by law firms to review their retainers and provide advice to ensure compliance with the latest developments in costs law and litigation funding. Please contact Andrew McAulay (andrew.mcaulay@clarionsolicitors.com or 07764501252) if you have any questions.

Fixed Recoverable Costs – 9 months away?

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At the Civil Procedure Rules Committee meeting on 13 May 2022, it was confirmed that the extension of fixed recoverable costs (FRC) is planned for April 2023. Please follow this link for a summary of the meeting which provides updates on other topics as well as FRC.  

FRC for the whole of the fast track and ‘lower reaches’ of the multi-track were first proposed by Lord Woolf during the last century! No progress was made and the topic went stale. Lord Justice Jackson raised FRC in his reports ahead of the LASPO reforms in 2013. Since 2013, progress has been delayed due to Brexit and COVID-19, but the government are now firmly focused on ensuring that the extension of FRC is rolled out. I recently spoke to Dominic Regan who confirmed that he thinks implementation will be April 2023, whereas I am of the view that it will be October 2023.

Regardless of the implementation date, it is important that all law firms who undertake contentious work (with damages under £100,000) start to prepare for implementation. Fees recovered inter partes will be very different, here is an example:

  • Band 2 case under the expanded fast track
  • Pleaded value of £50k but settles for £25k
  • Settles at Stage 5 – Witness Statements and Experts Reports
  • No JSM or Mediation
  • L3 firm instructed (12.5% uplift)
  • Fee would be £9,500 plus 16% of damages (£4,000) plus 12.5%
  • Total = £15,187.50 plus any disbursements and VAT

The fee of £15,187.50 allows circa. 82 hours at £185 per hour (Grade C SCCO GHR for an L3 firm). Remember, the £15,187.50 fee is for the lawyer and Counsel except where Counsel are instructed using one of the ‘bolt-on’ fees. The ‘bolt-on’ fees are not factored into the calculation, but if they were then they would allow no more than £3,250 for external Counsel drafting of statement of case and for a written opinion and/or advising in conference. I suspect £15,187.50 represents grim reading for most litigators and is significantly lower than a litigator would expect to recover inter partes at present for a case with the above assumptions.

The extension of FRC will bring significant change to inter partes costs recovery and create further pressure on solicitor/own client relationships. However, FRC will create opportunities for many law firms but those firms will need to rely on increased economies of scale. Efficiency, efficiency and guess what? Efficiency will be key! The Costs and Litigation Funding team at Clarion has followed the topic of FRC extensively since 2013 and can provide training on the reforms for law firms.

Please do not hesitate to contact Andrew McAulay at andrew.mcaulay@clarionsolicitors.com or on 077645 01252 for further information or Rob Patterson at Robert.Patterson@clarionsolicitors.com or on 07961 875496.

Further Costs Reforms…

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The Civil Justice Council recently issued a consultation paper (Costs working Group – Consultation Paper – June 2022 (judiciary.uk)) in response to a request from Sir Geoffrey Vos (The Master of the Rolls) earlier this year for a full review of the legal costs landscape. The review is just over 9 years since the LASPO reforms and issued at a time when fixed recoverable costs (FRC) are due to be extended and implemented from April 2013.

A ‘Costs Working Group’ has been established and their terms of reference are:

  1. Costs Budgeting;
  2. Guideline Hourly Rates;
  3. Costs under pre-action protocols/portals and the digital justice system; and
  4. Consequences of the extension of FRC  

Responses to the questions raised in the consultation paper must be submitted by 12 pm on Friday 30 September 2022.

This blog was written by Andrew McAulay who is a Partner at Clarion and the Head of the Costs and Litigation Funding team. Andrew can be contacted at andrew.mcaulay@clarionsolicitors.com or on 07764501252.

Annual open meeting of the Civil Procedure Rules Committee – 13 May 2022  – Costs update

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The CPRC annual open meeting took place today via Teams in keeping with the format of the previous two years.

The meeting was opened by the Master of the Rolls, The Rt. Hon. Sir Geoffrey Vos, who spoke about the Civil Justice Committee’s current holistic review of costs as a whole in light of the various radical changes coming forward. The group will look at the recent changes to guideline hourly rates, costs budgeting (which he said remained controversial and needs another look), costs in the pre action space, and upcoming fixed costs changes. It was confirmed that there may be recommendations to the CPRC following the CJC’s report as it is important to look at how these issues interact and to ensure that things are working smoothly.

The open meeting includes time for questions and, perhaps unsurprisingly, there were plenty of costs issues raised, particularly in respect of the upcoming changes to fixed costs. The following costs matters were discussed and the full minutes will likely be published in June:

Fixed Recoverable Costs

There are currently 2 open consultations in respect of QOCS and vulnerability. Comments are due in by 20 June. Thereafter, the rules are scheduled to be approved at or by the CPRC December 2022 meeting, with a view to implementation in April 2023. Additional questions were asked regarding late acceptance of Part 36 offers and whether the new FRC rules would include any penalties. It was confirmed that this was not covered by the consultation.

QOCS/Part 36

A question was asked regarding any proposed changes to the QOCS position where there is late acceptance of a Defendant’s Part 36 offer. It was confirmed that the QOCS review looks at the position arising from Ho v Adelekun only.

Guideline Hourly Rates

Various questions regarding the increased GHRs were raised, including whether this would lead to an increase in the £1,500 cap for Provisional Assessment costs and whether periodic reviews/updates are anticipated to prevent stagnation.  It was confirmed that the CJC’s costs group, led by LJ Birss, is looking at costs as a whole and Guideline Hourly Rates is one of the specific areas that will be considered along with pre action costs, budgeting and fixed costs. They will report soon and invite consultation responses with a final report due in the autumn. That report will not include detail of any proposals but will look at broader principles.

Aldred v Cham

Changes to CPR 45.29(h) were agreed in principle at last year’s open meeting but have not yet been implemented. The detail of that proposal can be found here. It was confirmed that that decision was subject to the wider work of the fixed costs committee on CPR 45 in its entirety. The Aldred point will be dealt with in those changes due in April next year.

Fee Remissions

There are conflicting judgments regarding the recoverability of Court fees between the parties when a party has chosen not to seek a fee remission. The lacuna committee considered the issue but work is currently paused as the MOJ considers the policy implications.

N260

Some minor changes to the N260 were suggested during the consultation on the electronic statement of costs. These fall into two categories, firstly, changes arising from the GHR report involving a certificate to show where the work was carried out and, secondly, minor changes to make the form more user friendly. There is currently no time frame for those changes.

Belsner v Cam Legal Services Ltd

The issues arising from Belsner v Cam will again fall within the CJC costs group’s work on pre action costs.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Consultations open in respect of QOCS and Vulnerable Parties

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Following the fixed costs consultation published in September 2021, two further consultations have now opened in respect of provisions for vulnerable parties and the QOCS issues arising from Ho v Adelekun [2021] UKSC 43.

The consultations close on 20 June 2022 and details of how to respond can be found here.

QOCS consultation

We looked at the judgment in Ho v Adelekun back in December. The case clarified the position in respect of the interplay between CPR 44.12 and CPR 44.14, and the effect of QOCS on a Defendant’s ability to offset an order for their own costs against the Claimant’s costs. You can read that article here.

The decision confirmed that Defendants can only enforce their costs orders up to the amount ordered for the Claimant’s damages and interest (CPR 44.14 (1)). It was suggested at the time that this may lead to results that appeared unfair and that the CPRC may need to consider the issue to put right any ambiguities.

The proposed changes seek to address those concerns by adding the amount of any costs order to the sums set out in CPR 44.14 (1) and by including ‘deemed orders’ under Part 36:

Full details can be found here.

Vulnerable Parties Consultation

The vulnerable parties consultation proposes to add additional provisions for an amount in excess of fixed costs to be claimed where a party or witness is vulnerable, where that vulnerability has caused additional work to be required, and the claim is for an amount at least 20% greater than the applicable fixed costs.

Such claims will be assessed and, if the assessed sum is less than 20% greater than fixed costs, the court will make an order for the lesser amount of fixed costs or the assessed costs.

Full details can be found here.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

CPRC Costs Sub-Committee provides update on fixed costs

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The minutes of the CPRC’s March 2022 meeting were published today and can be found here.

The Costs sub-Committee confirmed that work has commenced in respect of the extended fixed costs regime which was reported last year. The committee’s first meeting was held last month but a precise timetable has yet to be fixed.

The Sub-Committee will also be considering FRC in the context of vulnerable witnesses/parties and there is likely to be a substantive review of the structure of CPR 45.

It was also confirmed that a consultation is anticipated in respect of Qualified One Way Costs Shifting (QOCS).

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Consultation open on fixed recoverable costs in clinical negligence claims

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Clinical negligence matters have so far been excluded from fixed costs reforms and do not form part of the changes already due to be implemented in October 2022 (which can be found here).

A separate review has been carried out in respect of lower value clinical negligence matters and the Department of Health & Social Care published their proposals on 31 January 2022.

The consultation document sets out proposals for a streamlined pre-issue claims process for claims outside of the small track valued up to £25,000 in damages. Proposed exclusions include claims requiring more than two liability experts, claims with multiple defendants (where the allegations are different), claims involving stillbirth or neonatal death and claims where limitation is raised as an issue.

Matters would fall into a standard track or a light track according to complexity. Streamlined processes are set out for each track and template documents are proposed. 

The proposed fixed costs for each track are set out in the tables below and include provision for an additional ‘bolt-on’ for cases involving protected parties. We would recommend that the costs grid be read in conjunction with the flow charts detailing the process for each track at the end of the consultation report.  

Both tracks include mandatory neutral evaluation. The evaluators fees would also be fixed and shared equally.

Sanctions are proposed for failure to comply with the scheme. For Defendants, failures to meet the initial response times would result in the claim moving from the light track to the standard track, or from the standard track out of the FRC scheme entirely. For other failures, a 50% percentage uplift or reduction is proposed depending on which party defaults.

The consultation closes on 24 April 2022 and can be completed online here.

This article was originally featured in our February newsletter which can be found here.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Ho v Adelekun – update

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The long awaited judgment in Ho v Adelekun [2021] UKSC 43 was handed down in October with the appeal being unanimously allowed.

The judgment clarifies the position in respect of the interplay between CPR 44.12 and CPR 44.14, and the effect of QOCS on a Defendant’s ability to offset an order for their own costs against the Claimant’s costs.

The issue arose from a personal injury claim which settled by way of Part 36 acceptance. A dispute ensued regarding whether fixed costs applied and the Defendant was successful on that point in the Court of Appeal. The Defendant was awarded their costs in the sum of £48,600. The Claimant had recovered damages of £30,000 and fixed costs of £16,700. As QOCS applied, and there was no order for damages, the Defendant could not offset their costs against the Claimant’s damages but argued that they could still offset part of their costs against the Claimant’s costs under CPR 44.12. 

CPR 44.14 states :

44.14 – Effect of qualified one-way costs shifting

(1) Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.

(2) Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.

(3) An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record

The judgment confirms that off-setting under CPR 44.12 constitutes an enforcement for the purpose of CPR 44.14, above. As such, a Defendant’s costs can be set-off against opposing costs orders but only to the extent that those costs do not exceed the amount ordered for the Claimant’s damages and interest (absent any QOCS exceptions such as fundamental dishonesty). In this case, as there was no order for damages, there could be no offset against costs and the Defendant would recover nothing.

The word ‘order’ is key, any other form of settlement will mean that the Defendant cannot recover any of its costs unless an exception applies. A Part 36 acceptance or a Tomlin order where the damages provision is not within the order will not suffice. Similarly, where there is an order for damages but those damages are small, a Defendant’s costs (which may significantly exceed those damages) will be capped at that damages amount, even where the Claimant has recovered some costs.

The judgment has serious implications for Defendants and it was conceded that it may cause results that look ‘counterintuitive and unfair’. At paragraph 9, it was suggested that the issue may need to be reviewed by the Civil Procedure Rules Committee to put right any ambiguities. The minutes of the CPRC November meeting are now available here and confirm that the review is likely to be delayed until after the work on fixed recoverable costs is concluded.

This article originally featured in our November newsletter which can be found here. It has been updated to include the outcome of the recent CPRC meeting.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Fixed recoverable costs to be extended as Jackson proposals accepted

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The government’s response to the MOJ consultation on Extending Fixed Recoverable Costs in Civil Cases has now been published and can be found here.

The report confirms that the recommendations made by Sir Rupert Jackson in 2017 will largely be implemented, save for the introduction of an ‘Intermediate Track’ as those cases will fall into an expanded Fast Track for cases valued up to £100,000.

Mesothelioma, clinical negligence, actions against the police, child sexual abuse claims and IP matters will be excluded. There will also be a fixed costs regime for noise induced hearing loss claims and costs budgeting will be introduced for judicial review claims where costs exceed £100,000.

Cases within the new expanded Fast Track will be allocated to one of four bands based on complexity with uplifts to apply where a Part 36 offer is beaten (35%) or there has been ’unreasonable behaviour’ (50%). The figures set out by Sir Rupert Jackson in 2017 will be adjusted for inflation, the original Fast Track and Intermediate Track proposals are, however, set out below:

The draft rules will be submitted to the Civil Procedure Rules Committee for consideration before being finalised. It is anticipated that the changes will be implemented in April 2023.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Increased Guideline Hourly Rates approved by Master of the Rolls

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Following the publication of the Civil Justice Council working group’s final report on guideline hourly rates, the proposed changes have now been accepted by the Master of the Rolls.

The revised rates are as follows and are expected to come into force on 1st October 2021 together with the revised Guide to the Summary Assessment of Costs.

For more details see the recent video on our youtube channel where Professor Dominic Regan and Stephanie Kaye discuss the report, including the practicalities and potential issues going forward for both COP practitioners and commercial litigators.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.