Author: Andrew McAulay

Will 2021 be the year for Damages Based Agreements (DBA)?

Andrew McAulayLeave a comment

The case of Zuberi v Lexlaw Ltd provides much needed clarity in respect of the termination of a DBA by a client.

Background

  • Lexlaw Limited acted for Miss Zuberi in a financial mis-selling claim against her bank.  
  • The claim was funded by way of a Damages Based Agreement, entered into in 2014.
  • Lexlaw Limited helped to obtain a settlement for Miss Zuberi of over £1 million.
  • Miss Zuberi terminated the DBA and argued that no fees were due to Lexlaw Limited because the DBA was unenforceable. This was on the basis that the agreement contained a termination payment clause which was not allowed under the Damages Based Agreements Regulations 2013.

Costs Litigation

  • Lexlaw Limited issued Proceedings for the recovery of their unpaid fees.
  • In July 2020, HHJ Parfitt ruled in favour of Lexlaw Limited i.e. the termination provision in the DBA did not render the agreement unenforceable.
  • Miss Zuberi appealed and, on 15 January 2021, the Court of Appeal handed down its Judgment and confirmed the decision of HHJ Parfitt: The inclusion of a termination clause is permissible and does not render a DBA unenforceable.

2021 and beyond

The decision is sensible and will help to encourage litigators, particularly commercial litigators, to use a DBA as a source of funding. LJ Jackson introduced DBAs in order to improve access to justice, but they have been rarely used due to the concerns around termination. The Court of Appeal decision will certainly make DBAs more attractive to litigators.

What would really make DBAs attractive to litigators, and again, commercial litigators, would be hybrid DBAs i.e. the ability to charge an hourly rate whether the case is won or lost and a percentage charge if the case is won – similar to a discounted Conditional Fee Agreement. Lord Justice Lewison was supportive of this in the Judgment, but Lord Justice Newey was not. Many legal experts and commentators think that the Court of Appeal’s decision has opened the door for Hybrid DBAs, however, there is no clear authority on that point and the writer suspects that this point will make its way to the Court of Appeal.

So, will 2021 be the year for DBAs? The writer thinks that there will be a growth in the use of this funding option due to the Court of Appeal’s decision on termination clauses. The writer also thinks DBAs will increase as law firms will test the waters and engage with clients under hybrid arrangements. So, the writer’s answer to the question is Yes BUT law firms should proceed with caution as the “Door has been partly opened, but the stairs are slippery” which is what Dominic Regan (adviser to the Costs and Litigation Funding team) recently stated to the writer during a discussion about the case.


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 on 07764501252 or at andrew.mcaulay@clarionsolicitors.com  

Civil Procedure (Amendment) Rules 2021 & the 127th Practice Direction Update – Vulnerable Parties

Andrew McAulayLeave a comment

Back in May 2020 I wrote a blog following the annual open meeting of the Civil Procedure Rules Committee which was held via Skype for the first time. One of the costs related matters covered at that meeting was the proposed amendment to the CPR in respect of cases involving vulnerable parties. This followed the publication of recommendations in the Vulnerable Witnesses and Parties within Civil Proceedings report.

Those changes are now to be included in the Civil Procedure (Amendment) Rules 2021 & the 127th Practice Direction Update and will come into force on 6th April 2021.

The amendments include a change to the overriding objective and a new Practice Direction 1A to cover the participation of vulnerable parties or witnesses . The text of the practice direction can be found here at schedule 1.

The CPR 44.3(5) proportionality factors will also be updated to specify that costs incurred will be proportionate if they bear a reasonable relationship to “(f) any additional work undertaken or expense incurred due to the vulnerability of a party or any witness.”.

Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.

2021 Senior Courts Costs Office Guide now available

Andrew McAulayLeave a comment

The updated SCCO guide has now been published and is available here.

The changes since 2018 are not extensive. The document provides a comprehensive guide to costs procedure and a helpful section of precedents for practitioners.

The guide will now exist only electronically to enable future changes to be included by regular revision.

Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.

Consultation on Guideline Hourly Rates now open

Andrew McAulay2 Comments

The current guideline hourly rates have not changed since 2010. A long awaited review was announced last year and a Civil Justice Council working group was established. For more details of the working group see https://www.judiciary.uk/related-offices-and-bodies/advisory-bodies/cjc/working-parties/guideline-hourly-rates/

The working group has now published their report and you can find it here.

The working group’s recommendations are set out below.

The consultation is open until 31st March 2021 at 4pm. You can respond online here

 

Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.

Ensuring the validity of Part 36 offers – Essex County Council v UBB Waste (Essex) Ltd (No. 3) [2020] EWHC 2387 (TCC)

Andrew McAulayLeave a comment

The High Court judgment in Essex County Council v UBB Waste (Essex) Ltd (No. 3) [2020] EWHC 2387 (TCC) considers a number of interesting costs issues. This article will focus on the intended Part 36 offer made by the receiving party and the judgment regarding the validity of the same.

The parties agreed that the local authority was successful in the substantive litigation and was therefore entitled to a costs order in its favour. There were, however, a number of issues in dispute, including whether an offer made by the receiving party in March 2019 complied with CPR 36.

In order to comply with the requirements of CPR 36 an offer must follow the form and content provisions set out at CPR 36.5 (1). Specifically, it must (a) be in writing, (b) make clear that it is made pursuant to CPR 36, (c) specify a period of not less than 21 days within which the Defendant will be liable for the Claimant’s costs in accordance with rule 36.13 or 36.20 if the offer is accepted, (d) state whether it relates to the whole or part of the claim and (e) whether it takes into account any counterclaim.

The offer in question, intending to comply with CPR 36.5 (1) (c), stated:

“If the Defendant accepts the offer within 21 days of the date of this letter (the ‘Relevant Period’), the Defendant will be liable for the Claimant’s costs of the Proceedings (including pre-action costs) up to the date on which written notice of acceptance of this Offer is received by the Claimant, in accordance with CPR 36.13.”

The key issue is the reference to the ‘date of this letter’. The offer was dated 7th March 2019 and was served by email at 4.54pm. It was therefore deemed served on 8th March 2019 (CPR 6.26).

The Defendant argued that, as the 21 days ran from the date of the letter (7th March), the relevant period expired only 20 days from service and the offer was therefore not compliant with the requirements of CPR 36.5 (1) (c).

The Claimant’s position was that the Court should construe the offer such that the 21 days ran from the date of deemed service as per C v. D [2011] EWCA Civ 646, [2012] 1 WLR 1962.

The judgment provides a detailed discussion of the approach to construction in respect of Part 36 offers and the preference to bring rational sense and consistency to the document as a whole. Mr Justice Pepperall concluded that, in the applicable context, the statement could be construed in either way, however, in accordance with C v D, it was preferable to construe the 21 days as running from 8th March which was “consistent with the clear intention to make a Part 36 offer and ensures that the offer is effective rather than ineffective”.

Whilst that concluded the issue, Mr Justice Pepperall went on to consider the position had the offer not been found to be compliant. Specifically, the Claimant’s ‘fallback’ arguments that any non-compliance was de minimis or that the Claimant could rely on estoppel.

In respect of de minimis errors, Mr Justice Pepperall concluded that Rule 36.3(2) is clear that an offer that does not comply with CPR 36.5 will not have CPR 36 consequences. The Court would, however, have the general discretion as to costs under CPR 44.

Similarly, as Part 36 is a self-contained procedural code, the rues of estoppel cannot be introduced. Again, the offer could be taken into consideration under CPR 44 but would not attract the advantages of CPR 36.

Mr Justice Peppernall concluded that the critical issue was one of construction and pointed out that similar difficulties could be avoided in future if parties used form N242A.

Points to take away

Part 36 offers need to fully comply with the mandatory requirements of CPR 36.5 to be effective. Where there is an ambiguity, the Court will prefer a construction that finds an intended Part 36 offer to be compliant, however, this should not be relied upon. If the Court is unable to make such a construction then estoppel and/or de minimis mistake will not assist in obtaining the advantages of CPR 36, such offers can only be taken into consideration under the general discretion under CPR 44.

When making (or indeed considering) Part 36 offers, practitioners should check the requirements carefully, if in doubt, use form N242A to avoid mistakes.

Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.

Mis-Certification of a Bill of Costs – Be careful!

Andrew McAulayLeave a comment

Back in May, I posted a Vlog about the SRA’s decision following the Court of Appeal’s Judgment in Gempride v Bamrah [2018] EWCA Civ 1367. You can view that Vlog here.

I was therefore very interested to read the recent decision of Master James in the case of Farmer v The Chief Constable of Lancashire [2019] EWHC B18 (Costs) and to share it with you. Here are the key points:

  1. Mr Farmer (“the Receiving Party”) had the benefit of a costs order against the Defendant (“the Paying Party”).
  2. A Bill of Costs was prepared, and detailed assessment proceedings were commenced. The original Bill of Costs totalled £174,565.79.
  3. There were issues over the validity of Conditional Fee Agreements, recoverability of success fees and incorrect hourly rates which led to the service of an amended bill in the sum of £116,192.50.  That total was also incorrect, and the Court found that the bill should have been drawn in the region of £66,000 to £69,000.
  4. The Bill of Costs had been certified as accurate and true. Certain points/items were also maintained through Replies and a Witness Statement.
  5. Had the Bill of Costs been prepared correctly, then the matter would have been dealt with under the Provisional Assessment scheme. This would have saved substantial time and cost for each party and the Court.
  6. There were also costs included in the Bill of Costs which were not recoverable inter-partes.
  7. The Paying party applied to strike out the remainder of the Bill of Costs, pursuant to CPR 44.11.
  8. The Court struck out the remainder of the Bill of Costs; the Receiving Party was entitled to nothing.
  9. The Receiving Party was ordered to pay the costs of the detailed assessment and re-pay the payments on account received.

In Gempride the penalty reduction was 50%. In this case the penalty reduction was a full strike out of the remainder of the costs (circa. £66,000.00 – £69,000.00).

It is fundamentally important to ensure a Bill of Costs has been prepared correctly before you certify it. Mis-certification of a Bill of Costs is a serious issue.

Mistakes happen and the Court will look more favourably on innocent mistakes which are rectified quickly. In this case, the Receiving Party pursued the matter to detailed assessment and maintained retainers that were clearly not enforceable.  

In my Vlog in May, I provided 5 tips to help ensure that you avoid any mis-certification issues. Please view the Vlog to help you check a Bill of Costs (or a costs budget or statement of costs for summary assessment) correctly and to stay clear of any mis-certification arguments and costs penalties. You might want to use my 5 tips to create an internal check-list.

This blog was written by Andrew McAulay. Andrew is a Partner at Clarion and the Head of the Costs and Litigation Funding Team. Andrew can be contacted on 0113 336 3334 or at andrew.mcaulay@clarionsolicitors.com

Open Meeting of the Civil Procedure Rules Committee – Costs Update

Andrew McAulay1 Comment

The Civil Procedure Rules Committee held their annual open meeting on 15th May 2020. Given the present circumstances, the meeting was successfully held via Skype.

The previous two meetings covered several costs issues including the establishment of a sub-committee to make recommendations in respect of guideline hourly rates which have not been updated in the last 10 years. The committee is due to make recommendations by the end of this year with an update to the rates to take place thereafter.

The April minutes, which have just been released, confirm a that a sub-committee has also been established to consider costs rates other than guideline hourly rates.

The following costs matters were discussed at the open meeting in May, minutes of which will likely be published in June:

Vulnerable Parties – The sub-committee sought guidance on four points; an amendment to the over-riding objective to cover vulnerable parties, an accompanying PD, an addition to CPR44.3(5) regarding proportionality to specifically include vulnerable parties, and whether to approach the MOJ in respect of amending fixed, scale and capped costs for cases involving vulnerable parties. The committee broadly agreed with the proposals with some caution regarding the overriding objective.

CPR 45.18 – The committee agreed that the deletion of the upper limit of £25,000.00 from tables 6 and 6A would be recommended.

Qader v Esure– Issues had been raised following the amendments to CPR 45 Section IIIA concerning the effect on parties’ settlement tactics in matters likely to be  allocated to the multitrack due to the difference in the level of costs recoverable pre and post allocation. The committee discussed the matter and concluded that no action should be taken.    

QOCS  / Ho v Adelekun – The issue of off-setting Defendant’s costs against Claimant’s costs where damages are insufficient has been referred to the costs sub-committee. The committee will keep a watching brief on the appeal in Ho and consider revision to CPR 44.14 thereafter.

Part 36 acceptance in pre-action matters – Where a Part 36 offer is accepted pre-action there is no deemed costs order (CPR  44.9(2)).  The costs sub-committee will consider whether there is a need to amend CPR 46.14 regarding costs only proceedings to be explicit in respect of Part 36 acceptance on pre-action matters.

Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.

The Importance of Correct Certification of Court Documents

Andrew McAulayLeave a comment

In Gempride -v- Bambrah [2018] EWCA Civ 1367 the Court found that a solicitor had mis-certified a bill of costs. As a result of that finding, the firm was required to self-report to the SRA.

The SRA has now published its findings from that investigation. Here, Andrew McAulay looks at 5 Key Points for certification of a bill.

Andrew McAulay is a Costs Lawyer, a Partner at Clarion, and head of the Costs and Litigation Funding Department.