Author: Anna Lockyer

LFAs deemed DBAs: uncertain times ahead for Litigation Funders following significant Supreme Court ruling

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Last month, the handing down of the judgment in R (on the application of Paccar Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28 saw the Supreme Court allow an appeal, ruling that Litigation Funding Agreements (LFAs) are Damages-Based Agreements (DBAs) if they provide for a percentage return.

This decision overturned the Divisional Court’s well-established practice of LFAs not being DBAs; the repercussions are particularly significant to opt-out collective actions in the Competition Appeals Tribunal where DBAs are prohibited.

LFAs were previously found not to be DBAs because litigation funding did not amount to “claims management services”, to which the statutory DBA regime applies. The Supreme Court has now decided that “claims management services”, according to their natural meaning, includes litigation funding.

As a result of this decision, swathes of LFAs will be unenforceable, which is significant for the funding of disputes and the wider funding industry; a problem to be addressed by both litigation funders and claimant solicitor firms that rely on third party funding.

Many existing LFAs are now vulnerable to unenforceability challenges on the basis they are not compliant with the statutory regime for DBAs in s58AA of the Courts and Legal Services Act 1990 and the DBA Regulations 2013.

Compliant LFAs

In order to comply with the DBA regulations, an LFA needs to:

  • provide the reasons for setting the percentage return;
  • be limited to no more than 50%; and
  • involve giving credit for any costs paid or payable by the other side (i.e. a solicitor entering into a DBA gives credit for costs recovered and a litigation funder gives credit for costs paid or payable from the other side).

If an agreement has provision for payment of any other sums other than the percentage return, so for example it has a multiple – which means in the event of success the claimants will pay the funder whatever that multiple provides, then arguably that agreement is not a DBA, because the sum payable is not determined by the amount received.

It is common for LFAs to provide for the repayment of the investment plus a percentage return, which can be mathematically provided for in a formula. Similarly, there could be a multiple expressed as a percentage although that could be construed as an artificial way of saying that the payment is with reference to the amount received. In these circumstances there is scope for the agreement to be deemed a DBA, but there is a risk it could be challenged on grounds of non-compliance.

Put simply, LFAs that do not provide for a percentage return should not be caught by the outcome of this case.

Existing LFAs

In relation to existing cases, a re-drafting and re-negotiation of funding agreements seems to be the main way forward in view of this Appeal.

If an LFA contains a severance clause, it may be possible to sever out the percentage provision leaving just the multiple provision. Greater reliance may need to be placed on any severance provision in circumstances where the funded party will not agree to a renegotiated agreement, although in ongoing cases, the funded party is almost certainly going to want more funding for the continuation of the litigation, so it is in the interests of both parties that agreements are renegotiated.

Funders poised to enter into agreements, should ensure they either properly comply with the DBA regulations and section 58AA of the CLSA or alternatively, if preferred, they should make certain their agreement is clearly based solely on a multiple to avoid any scrutiny in a DBA context.

Careful consideration of Collective Proceedings Orders in the Competitions Appeals Tribunal will also now be required in light of this decision.

The Future

There is a very real risk of successful claimants seeking recovery of funds they have paid to their funder as consequence of this case.

In concluded matters, where successful claimants have paid a share to the funder based on a percentage and it now turns out that those agreements will have been unenforceable, there is a risk of those claimants seeking to recover sums paid to their funder. No doubt defences along the lines of limitation, change of position and unjust enrichment will be raised by funders.

These actions are an unfortunate ramification that would have been avoided altogether had the outcome of this case been different. There will likely be legislation to correct this somewhat ‘disruptive’ decision, but there has been no indication as to when or if it will be retrospective in effect. 

Anna Lockyer is a Senior Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Attendances on Case Manager, MDT and Deputy should materially progress matter to be included in Costs Budget

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In the case of Hadley v Przybylo [2023] EWHC 1392 (KB) it was ruled that fee earner time dealing with Case Managers, Multi-Disciplinary Teams and Court of Protection Deputies should not be included in the main costs budget phases if the work does not materially progress the case.

At the budget discussion stage of this serious personal injury case, several costs management issues were narrowed, but there was no reconciliation between the parties as to whether case management and MDT meetings, and attendances on deputies for health, welfare and finance could be included in the budget.

The Claimant argued it was the practice of the Masters to include these costs and that:

“attendance by a fee earner at these case management meetings etc are reasonably necessary to progress the litigation because they assist in maintaining the Schedule of Loss as the claim goes along. It is [] something of a ‘live feed’ from the Claimant’s care and treatment at medical-professional level and the deputies, to the lawyers. What is claimed in the budget is about 1 hour each week with the Case Manager and 1 hour each week with each of the two Deputies, totalling 3 hours a week in the Issues and Statements of Case phase, as part of work on drafting and updating the Schedule of Loss on an ongoing basis.”

The Defendant argued the contrary submitting that:

“as a matter of principle such attendance charges ought to be ruled as inadmissible in a budget. They are not progressive of litigation any more than, say, having lawyers attend every medical treatment appointment would be. They are not properly included. In addition, whether or not in principle ever allowable in a budget, they do not fall within the guidance as to the categories of matter to be included in the Issues and Statements of Case phase in any event. Furthermore, their experience in contrast with that of the Claimants is that such charges are often rejected for inclusion in budgets.”

Master McCloud acknowledged this to be a grey area and appeared to make an example, albeit rife for challenge, in her decision to side with the Defendants.

Reference was made to Practice Direction 3D 10. (b) and the fact case manager attendance costs in this case formed a part of the maintenance of the Schedule of Loss. It was found that these specific types of costs did not materially progress the case, and therefore not budgetable or a recoverable head of costs in principle.

“In my judgment having a fee earner attending rehabilitation case management meetings is not progressive in the above sense and does not fall within the notion of ‘costs’. Likewise a fee earner attending on deputies so as to seek input into the ongoing drafting of the case in the form of the Schedule, when deputies do not properly play a part in such work, is not progressive.”

Master McCloud did indicate that these costs may be recoverable in damages but failed to elaborate, apart from to say it is for the Claimant to consider whether at trial those costs may be claimable as damages. 

The argument that attending on case managers and deputies was integral to producing the Schedule of Loss was described as “weak” by the Master.

The Master went on to clarify that information about case management or incurred expenses could be achieved by the occasional letter to the case manager or deputy or from obtaining documents for later disclosure. Furthermore, in their witness statements and that these costs could be included in the budget as they are “qualitatively” different things from attending meetings for input into a schedule of loss. It was decided that if they were allowable in the budget, then they are best placed in ‘contingency phases’.

Although this decision hinders budgeting time spent in case manager, MDT and deputy  meetings, Master McCloud allowed permission to appeal and invited the Rules Committee to provide guidance in the very same judgment. It seems then that the intention of this ruling is to ‘flush out’ some clarity. 

Anna Lockyer is a Senior Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Reforming Budgeting, Guideline Rates, Pre-action/Digitisation and Consequences of Extended FRC

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The Civil Justice Council have published their costs consultation responses and recommendations:

Click to access Civil-Justice-Council-Costs-Report-FINAL-May-2023.pdf

Although four key areas were considered, costs budgeting was the focus.

Costs Budgeting

The overarching finding was that budgeting is useful and should be retained, but ought to vary between different areas of civil justice.

Despite a wide range of responses, a clear outcome from the consultation was expressed in the following statement:

“Since costs budgeting was adopted, there is now evidence of real and sustained progress in the discipline and understanding around costs and this has consequently improved case management and the proportionality of costs”

Although a handful of respondents suggested the abolition of budgeting, most recognised that visibility of meaningful costs estimates is useful and should be retained, but  “a fresh, more nuanced approach” to budgeting was recommended.

It has been proposed:

  • Front sheets replace full budgets for Defendants where QOCs apply, but the courts will still have the power to order a full budget at its discretion. It is unclear how this will be of benefit given the fact a full budget is still required in order to produce a front sheet.
  • A ‘costs budgeting light’ scheme is introduced applying to claims valued between £100k and £1m. A separate ‘light touch’ approach to claims of £1m+ in the Business & Property Courts is adopted. These ‘light’ schemes are yet to be defined.
  • A staged process between directions and costs management is introduced where directions are contentious. Some costs information would however still need to be filed before directions. It is not yet clear what this information would consist of.
  • Mesothelioma and Media and Communications claims (and perhaps other specialist proceedings) are to adopt more bespoke practice arrangements for conducting budgeting.
  • Timescales for exchanging budget discussion reports are extended to allow for meaningful negotiation. It is hoped this will reduce the amount of budgeting hearings.
  • The budget variation process (Precedent T) is simplified. Details of a more straightforward process have not been provided.
  • There should be penalties for those who default on aspects of the budget timetable leading to a wasted court resource.
  • Hourly rates and incurred costs in the budgeting process are reviewed further.

Guideline Hourly Rates

The general consensus of respondents took the view the GHRs had a useful role in that they were a starting point for assessment and broadly reflect market rates.

In the short term, recommendations are:

  • A new band for complex, high value, commercial work is introduced, whether in London or elsewhere.
  • Hourly rates are subject to yearly reviews linked to SPPI on the 1 January each year. A retrospective uplift to the 2021 figures is to be applied and a detailed review should take place every 5 years. 
  • Counsel’s fees should be capable of being assessed by reference to GHRs, separately to solicitor GHRs.
  • A clearer test is introduced to allow for departure from GHR. No details of this proposed test are provided.

Costs under pre-action protocols/portals and the digital justice system

The aim of pre action processes, digital or otherwise, to settle claims without the need for litigation  or to narrow the issues where possible, should be encouraged and any reform should further this aim. 

Key proposals are:

  • Changes to pre-action costs; specifically the extent of recovery for new digital pre-action protocols. These should not impact recovery of pre-action costs post-issue.
  • A review of the Solicitors Act 1974 in view of the digitisation of dispute resolution.

Consequences of the extension of Fixed Recoverable Costs

As the extension of FRC regime is already underway, the general implications were not addressed in any depth. The only recommendation of note is:

  • The introduction of a costs cap of £500k into the Shorter Trials Scheme for patent cases.

Next steps…

The CJC will now consider how these recommendations are taken forward.

Look out for further commentary from the Clarion Costs Team.

Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

High Court resists approving budgets at CCMC; agreed figures neither reasonable nor proportionate

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In the case of Lemos and Ors -v- Church Bay Trust Company Ltd and Ors [2023] EWHC 157 (Ch) Judge Jones did not accept that budgets were reasonable and proportionate, despite being largely agreed by the parties. Instead of holding a further hearing to consider submissions on the agreed figures, the Judge highlighted disapproval on the Costs Management Order by specifying that “budgets remain unjustified in terms of reasonableness and proportionality”.

Background

The sum in issue in this Section 423 Insolvency Act matter is £8m.

Ahead of the CCMC, Ds’ budget was agreed by Cs at c.£1.2m (estimated costs at c.£850k) but Ds raised some issues with Cs’ budget drawn at c.£1.9m.

The CCMC

Judge Jones referred to his general experience of insolvency proceedings and said he expected budgets to be in the region of £350k – £600k. He emphasised that this was only an initial impression which could be proved incorrect if the parties were able to point to the relevant factors at CPR 44.3(5) and 44.4(3) to justify higher budgets for the purpose of costs management.

The judge felt that the parties’ budgets did not explain how the agreed costs were justified, in terms of anticipated days/hours and grades involved, but essentially excused this on the basis the parties had relied on their prior agreement and had only prepared to address specific issues of dispute.

To avoid further escalation of costs arguments, the judge decided not to adjourn the CCMC for further information to be provided and dealt only with the contentious costs of Cs’ budget. This resulted in a provisional estimated costs figure of c.£893k.

More information from the parties was subsequently requested to be made available afterwards so reasonableness and proportionality could be assessed.

The Judgment

Handed down some 3 months post-CCMC, once additional information had been considered relating to the agreed costs, the judgment dissected the disclosure phase in particular, asserting it remained unexplained how Cs started with 381,000 documents when only 4,000 documents reached the third stage.

In relation to witness statement costs the figures were found to be based very much on numbers and not substance, even though Cs’ key witness is based in Greece, is elderly and does not speak English as a first language. There were also criticisms of trial preparation phase hours, particularly in view of the fact leading and junior counsel were involved and in relation to the trial phase, there was criticism of 4 fee earners being factored in to attend the hearing.

In relation to Ds’ budget it was decided that they were taking a more reasonable approach but that the information provided was not enough to justify costs of over £1m being reasonable and proportionate.

A recording in a new order was consequently made which confirms that on the information currently available the court does not consider that the budgets are reasonable and proportionate and estimated costs are therefore not approved. Reference can be made to this judgment for the court’s comments upon the budgets in any subsequent assessment proceedings.

Summary

The approach taken in this case is worth bearing in mind when preparing for CCMC. If certainty of approved budgets will benefit you as either the prospective receiving party or paying party, having submissions to hand to justify the reasonableness and proportionality of costs for agreed phases may prove incredibly useful and avoid budgeted costs being examined later down the line.

Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

The Costs Management Practice Direction has changed!

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With effect from the 1 December 2022 ‘Practice Direction 3E – Costs Management’ has been renumbered to ‘3D’ as per the 152nd Update – Practice Direction Amendments.

The contents of PD3D, which supplements CPR 3, still includes:

-Production of costs budget;

-Documents to be lodged for costs budgeting purposes;

-Budget format;

-Assumptions;

-Budget discussion reports;

-Costs Management orders;

-Oppressive behaviour; and

-Annexes.

Other amendments consequential to the 152nd Practice Direction Update, as made by the Master of the Rolls, are:

-‘Practice Direction 3F – Costs Capping’ being renumbered ‘3E’;

-‘Practice Direction 3G – Requests for the Appointment of an Advocate to the Court’ being renumbered ‘3F’; and

-‘Practice Direction 51Z – County Court Officers Pilot Scheme’ being inserted after Practice Direction 51Y, providing for a pilot scheme to run from 1 December 2022 to 30 November 2024 to allow authorised court officers to make standard form case management directions on paper in certain circumstances in the County Court.

Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

A win, but hardly a windfall

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The Belsner v Cam Legal Services Limited [2022] EWCA Civ 1387 appeal has been allowed in favour of the Solicitors.

Background

Solicitors, CAM Legal Services, originally brought a personal injury claim on behalf of Claimant Darya Belsner. The case settled in the RTA Portal at Stage 2 for £1,917 in damages plus £500 fixed costs plus disbursements. CAM Legal Services deducted a success fee of £321 from the damages (capped at 25%) as a contribution towards costs to supplement the £500 fixed costs recovered from the Defendant.

Checkmylegalfees.com

The Claimant later instructed ‘checkmylegalfees.com’ to query the Solicitors’ charging and issued a Part 8 application for a final statute bill. The Solicitors’ Bill came to £4,306, which was £2,523 higher than the settled costs amount.

High Court Appeal

On appeal by the Claimant to the High Court, Mr Justice Lavender found that informed consent had not been provided as it should be for contentious matters, applying section 74(3) of the Solicitors Act 1974 and CPR 46.9(2).

The judge subsequently decided that a success fee of only £75 (15% of the fixed costs amount) was payable and a repayment back to the Claimant of the difference was ordered.

Court of Appeal Decision

On the basis this case was unreasonable satellite litigation over very small sums and without economic risk to the Claimant the Solicitors challenged the High Court decision.

The Court of Appeal has now reversed the High Court decision and reassessed the Bill from scratch on the basis that:

-claims brought through the RTA portal without proceedings being issued are non-contentious and section 74(3) of the Solicitors Act 1974 and CPR 46.9(2) do not apply to all claims brought through the RTA portal without county court proceedings actually being issued;

-the judge was wrong to say that the Solicitors owed the Client fiduciary duties in the negotiation of their retainer;

-although the Solicitors were not obliged to obtain the Client’s informed consent to the terms of the CFA on the grounds decided by the judge, the Solicitors did not comply with the SRA Code of Conduct for Solicitors in that they neither ensured that the Client received the best possible information about the likely overall cost of the case, nor did they ensure that the Client was in a position to make an informed decision about the case;

-the term in the Solicitors’ retainer allowing them to charge the Client more than the costs recoverable from the defendant was not unfair within the meaning of the CRA 2015; and

-the court can and should reconsider the assessment on the correct basis, which is under paragraph 3 of the Solicitors’ (Non-Contentious Business) Remuneration Order 2009, which requires the Solicitors’ costs to be “fair and reasonable having regard to all the circumstances of the case”.

Although the judgment acknowledges that the Client ought to have to have been told of the level of fixed costs she would recover if the case settled in the RTA portal, this does not necessarily mean the Bill was unfair. Consequently, the repayment made following the High Court decision is now repayable by the Claimant.

Sir Geoffrey Vos, Master of the Rolls, asserted in his judgment that: “the whole court process of assessment of solicitors’ bills in contentious and non-contentious business requires careful review and significant reform” and told solicitors not to “suggest CFA or other fee arrangements to their clients that allow for fees that they would not dream of actually charging”.

Judgment in Karatysz v SGI Legal LLP [2022] EWCA Civ 1388

Reinforcing the condemnation of checkmylegalfees.com for bringing trivial claims for the assessment of small bills to the High Court is the judgment in Karatysz v SGI Legal LLP. Similarly, this was an appeal against a decision in relation to the assessment of costs following a solicitor’s deduction of 25%, which has now been dismissed by the Court of Appeal.

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

Optimising Costs Management: Part 1

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You can listen to the blog here

2% Budget Process Provision

Once costs budgets are prepared, Precedent Rs and negotiations naturally follow.

Budget discussions can lead to agreement of budgets in full, allowing for the costs management hearing to be vacated altogether. However, very often only certain phases are agreed, narrowing the costs issues in contention at CMC. Whether agreed in full or in part, investing time in negotiations and strategy at this point will lead to a more beneficial outcome overall.

In addition to preparing an ordered schedule of incurred costs or a composite summary, the next step is to decide who should attend the CMC to ensure you are well positioned from a costs perspective going forward.

Precedent Rs, negotiations, breakdowns, summaries and attendance at CMC all have the potential to be captured in the 2% provision for budget process and be recovered from your opponent if successful.

The Costs Management Conference

When a great deal rests on the result of the CMC a meticulously prepared advocate should not be underestimated. A sound understanding of the case to date is also key when deciding who is best suited to make those all-important representations in respect of the budgets.

Our costs management team are well versed in CMCs the depth and breadth of the country and have extensive experience in obtaining the most advantageous scenario of approved budgets possible.  If costs specialist input is required, this is something we can provide. 

Monitoring Budgets and Avoiding Shortfall

Regular monitoring of budgeted costs not only highlights any requirement for budget revision but also provides opportunities for agreement to be reached with your clients in relation to overspend before it occurs. It is also worth noting that utilising phase, task and activity codes on your time recording system will improve efficiency in this task. It can also lead to effective legal project management of cases, which will be covered in another of these blogs.

Budget monitoring is now mandatory pursuant to CPR 3.15A and is a service offered by Clarion. As long as the 2% budget and cost management caps have not been exceeded this work can also be recovered from your opponent if you are successful. In an era where solicitor-own client costs disputes are rising, it is more important than ever to keep track of expenditure in costs managed cases.

High Court swapped budgets for estimates

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In Collins and Others v Ticketmaster UK Ltd v Inbenta Technologies Ltd [2022] Costs LR 123 costs estimates were ordered in place of costs budgets consequential to an application made by the claimants and Part 20 defendant which sought costs management after budgeting had previously been dispensed with.

Decision at first case management conference

Even though the claim fell within the bracket for budgeting, the general consensus at the first case management conference had been that costs budgeting should be disapplied. At this point the parties submitted that costs management was neither necessary nor appropriate. A further order mirrored this stance when the Part 20 defendant was joined to the matter, keeping a consistent pattern between the claims.

Basis for application

A change of heart by the claimants and Part 20 defendant was brought about by the defendant incurring considerable costs with no control by way of costs budget. HHJ Pearce (sitting as a judge of the High Court) described how he was:

“drawn to an invoice dated 6 January 2020 from a law firm acting for the defendant to the defendant itself giving legal fees for that month discounted by 20% at a figure of just shy of $300,000, some way in excess of £200,000. As the applicants say, if that kind of cost is being run up regularly on a monthly basis, then the total costs for the defendant could easily be £5 million or, indeed, more.”

Defendant fees were quite clearly substantial.

Response of the Defendant

The defendant contended that the application was:

“in the manner of an abuse of process” and “whilst it is true that the Civil Procedure Rules give the court a wide power to vary orders, the authorities show that the parties are not at liberty simply to come back before the court to refight battles that have already been determined.”

The defendant also resisted the application on the basis that the litigation had been proceeding for quite some time now and even though a number of phases had still not commenced, considerable costs had been incurred, particularly in the disclosure phase, citing:

“the true purpose of costs management which is the court’s exercise of its powers to control costs that have yet to be incurred.”

Court’s scope to revisit decision and the overriding objective

Despite the application being unsuccessful the court partially agreed with the grounds for application insofar as there was no reason why it could not revisit its decision on whether or not to make a costs management order. HHJ Pearce elaborated further by stating:

“It would be different if there had been a contested hearing on that issue and the court had reached a reasoned conclusion as a result of submissions. It therefore follows that, as a matter of principle in my judgment, the applicants for this order do not need to show a change of circumstances in order to justify the court making an order.”

However, the court took account of the overriding objective, in particular the costs of complying with the costs management regime in circumstances where the benefits of a costs management order would be far less than if one had been sought earlier.

Decision

A compromise of costs estimates from all parties, which were ordered in respect of those phases that either had not yet begun or only had limited costs incurred so far, was deemed “sensible” by the judge who opined that the claimants and Part 20 defendant were entitled to know where the defendant was going in terms of likely costs.

The content and layout of the ordered estimates would essentially highlight the same costs as the estimated sections of a costs budget. HHJ Pearce concluded that the estimates would:

“give the court the power to express an opinion as to the reasonableness and/or proportionality of any costs that it was estimated were to be incurred in the future. That is not to encourage any party to invite such an expression of opinion but it is, it seems to me, an available power that I could, if necessary, exercise.”

Estimates replacing budgets going forward?

The way this case ran its course and the initial disapplication of costs management is fairly unusual which suggests that costs budgets are likely to remain the default position when the relevant criteria are met.

Arguably there are lessons to be learnt from this failed application; being too hasty to dispense with costs budgeting can come back to bite the parties eventually.

Capturing costs between budget and CCMC: practical guidance

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It is not unusual to incur substantial costs in the run up to CCMC after costs budgets have been submitted.  

Recovering these costs will be important to the receiving party, but often filing and service requirements of costs management documents can mean a bespoke approach is best adopted on a case-by-case basis, to ensure capture is maximised.

There are however some general steps that can be taken.

If a delay exists between budget and CCMC, either because the budget had to be advanced with the Directions Questionnaire or because the CCMC was adjourned post-filing and service, the budget may need to be brought up to date in respect of incurred costs. Updating the budget is particularly important if the incurred costs do not represent all costs up to and including the CCMC.

Alternatively, a schedule can be produced which sets out by phase the incurred costs since the budget and anticipated costs up to and including the CCMC. It should not be assumed that the anticipated costs relate solely to the CMC phase. Work relating to issue/statements of case, disclosure and ADR/settlement phases is very often being undertaken at this stage in the litigation.

On occasion, it may be appropriate to prepare both an updated budget and a schedule depending on the amount of costs in question, the length of any delay and any additional direction from the court.

In the absence of an order stating otherwise, the budget should be re-filed and re-served not later than 21 days before the first case management hearing. The schedule can be made available to the CCMC advocate to hand up to the Judge so that the costs are properly captured and reflected as accurately as possible on the approved version of the budget. The court can then be left to concentrate on setting the budget going forward. 

This approach not only accords with CPR 3.17 (3) (a) but also the case of Discovery Land Company, LLC & Ors v Axis Speciality Europe SE [2021], in which it was determined that work done but not yet billed, including disbursements, should be treated as incurred costs even if those costs cannot be quantified with precision. This decision provides for a degree of flexibility if the costs incurred immediately before the CCMC later turn out to be more or less than anticipated.

If the opponent attempts to challenge the level of incurred costs at this point in the litigation, reference to 3.17 (3) (a) should not only be made in relation to the fact the court may not approve costs up to and including the costs management hearing, but it may also be beneficial to refer to the fact that the Judge in the Discovery case said it was unhelpful for the court to comment on incurred costs at the CCMC stage. As the receiving party, avoiding recorded comment adverse to costs recovery later down the line is worth making the effort for.

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

Solicitor able to indemnify client?

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Can a solicitor acting for an impecunious client offer indemnity for adverse costs when ATE insurance is unobtainable? Master Rowley rejected the Defendant’s argument that such an agreement was champertous in Edwards v Slater & Gordon UK Limited [2021] SCCO (15/09/2021), but an appeal of this decision is being heard in the High Court this week, so some clarity of this important but ambiguous area of law should follow.

Whether a solicitor’s role extends to bearing the risk of liability for adverse costs is controversial in more ways than one.

If an ATE provider declines to insure a claim or if the premium is set too high, in the absence of indemnity from a solicitor, a claim may not proceed at all. This raises questions about how far ATE providers should be keepers to the gates of justice and no doubt is a common frustration of claimant solicitors.

An obvious consideration for the solicitor and their practice should be whether they would be able to afford adverse costs liabilities in the event of an unsuccessful claim. This issue came to the fore in the Edwards case as the Defendant alleged that the Claimant solicitors did not have adequate financial backing.

Most importantly, the legality of indemnifying a client must be at the very top of the checklist when deciding whether to offer indemnity, as supporting litigation for a share of the proceeds would ordinarily be considered champertous and contrary to public policy. Prior to the Courts and Legal Services Act 1990, contingent funding arrangements offered by solicitors were completely prohibited under the rules against maintenance and champerty, and although the Act sanctioned exceptions in certain circumstances, these are limited and strict conditions must be met to ensure enforceability.

Although the recent Court of Appeal case of Farrar v Candey Limited [2022] EWCA Civ 295 attempted to widen the scope for legitimate solicitor-client agreements, the case was dismissed.

Watch this space for the outcome of the Edwards v Slater & Gordon appeal…

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