The cases of Sutherland v Khan and Summers v Bundy look at the way fixed costs interacts with the CPR 36 regime.Read More »
Tag: Andrew McAulay
FIXED COSTS – THE PROS AND THE CONS
I recently held a seminar at my offices on the issue of fixed costs. The seminar was in conjunction with the Leeds Law Society and Kings Chambers. The format of the seminar was a question and answer session and it was interesting to hear views from Leeds based litigators (claimant and defendant) on the issue of fixed costs.
Who needs Fixed Costs!
The case of BNM and MGN Limited is one of the first cases to really demonstrate the power of CPR 44.3 (2) (‘Jackson test of proportionality’), which states:
Where the amount of costs is to be assessed on the standard basis, the court will –
(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and
(b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.
CFA Squabbles…………
The case of Evans -v- Enterprise Group Holdings is an interesting and useful case to read in the context of ‘Bailey’ and costs claimed under a CFA post 1 November 2015.
Be warned it is a long Judgment! The key part to read is paragraph 53 a-f, where it sets out the procedure that should be adopted by Judge’s when faced with retainer validity questions.
If anyone has any recent experiences of the procedure adopted by the Court’s following retainer validity disputes, then please feel free to share them through this blog.
Andrew McAulay is a Costs Lawyer and Partner at Clarion. He is the Head of the Costs and Litigation Funding team. He can be contacted on 0113 336 3334 or at andrew.mcaulay@clarionsolicitors.com
Allowance of a Retrospective Success Fee
The case of Ghising v Secretary of State for the Home Department 2015 (Click here for the Judgment) is an interesting case to read in relation to retrospective success fees.Read More »
DEFAULT COSTS CERTIFICATES
A receiving party can apply for a Default Cost Certificate (DCC) under CPR 47.11. DCC in my experience are uncommon as paying parties usually ensure that Points of Dispute are served in time given the severe financial penalty if they are not (full payment of the Bill of Costs plus fixed costs for the DCC Application).
Clarion Costs January 2016 Newsletter
Clarion have launched their first newsletter for January 2016, following the success of their Christmas Newsletter and the “12 Tweets of Christmas”. Please click on the link below.
Clarion Costs January 2016 Newsletter
Fixed fees – is LJ Jackson moving too quickly?
On 28 January 2016 LJ Jackson is due to speak on the issue of fixed fees within the legal profession. It is widely predicted that he will recommend an extension of fixed fees for ‘low end’ multi track disputes.
In my opinion, LJ Jackson is of the view that legal costs disputes should be preserved for high value claims, so that the cost of a legal dispute and the cost of detailed assessment proceedings are always proportionate to the cost of the claim. Furthermore, it is fair to say that costs management has not been embraced by the profession and this is probably another reason why LJ Jackson is likely to recommend further fixed fees.
Whilst everyone in the profession has found costs management challenging, any new rule change or procedure will always create difficulties. Costs management has officially now been with us since 1 April 2013, and I think that more time should be provided to smooth out some of the problems. I say this because I am starting to see the benefit of costs management in some of the claims for costs that I have dealt with recently. For example, we were recently instructed on a clinical negligence matter and prepared a Bill of Costs. We prepared the Bill of Costs in phases and provided precedent Q when detailed assessment proceedings were commenced. The Bill of Costs came in under budget or on budget for each phase. We received a telephone call within 14 days of service of the bill where an offer equating to 95% of the Bill of Costs was made. That offer was accepted the same day and our client received payment within 14 days. This is a perfect example of how costs management can bring significant benefits to a successful Claimant/Receiving Party.
Another example is on a high value personal injury claim where the Claimant/Receiving Party came in within budget for each phase, save for one phase. Points of Dispute were prepared and at the same time the Paying Party served a strong Part 36 offer. I responded with a counter offer and the matter settled shortly thereafter. The costs of the detailed assessment proceedings were minimal.
In both of these examples, the paying parties received the bills of costs and knew that if they proceeded to detailed assessment they would struggle to reduce the bills by any sensible sum and therefore made very strong opening offers. Strong opening offers from paying parties in the past were unheard of but now we might start to see a new culture from paying parties. If the bill is largely in line with the budget then settlement should in theory become quite easily achievable and the costs of detailed assessment proceedings will largely be avoided.
In both examples, the Paying Parties made very strong opening offers of settlement because the costs claimed were broadly in line with the costs management orders. The Paying Parties had been advised what they were likely to pay (the costs management orders) and given that both bills of costs were broadly in line with the costs management orders it resulted in swift settlements. This is evidence that costs management can work!
it may be that maybe costs management is starting to settle down and the benefits are starting to show. If costs management is starting to work then, the costs of detailed assessment proceedings will begin to decrease significantly.
I do hope that LJ Jackson stumbles across my blog and takes my thoughts into consideration, but maybe I am being slightly optimistic!
This blog was written by Andrew McAulay, who is a Costs Lawyer and Partner in the Costs and Litigation funding team at Clarion. Andrew can be contacted on 0113 336 3334 or at andrew.mcaulay@clarionsolicitors.com.
Legal Costs just got even more complicated…
On 1 October 2015 there was a change to CPR 47.6, which introduced Precedent Q.
What is Precedent Q?
Precedent Q is a document which will provide details of costs incurred before a Costs Management Order (CMO) was made, together with actual versus budgeted costs in relation to costs incurred after the CMO. The document also confirms any differences between actual and budgeted costs incurred after the CMO.
The change means that for detailed assessment proceedings commenced on or after 1 October 2015, the Receiving Party must serve a breakdown of the costs claimed for each phase of the proceedings (where a CMO has been made). Precedent Q is the CPR precedent to use in order to provide this information. Here is a link to Precedent Q.
Precedent Q is a temporary measure until the new format bill of costs is introduced, which the ‘Hutton committee’ say will create all the necessary links between a costs budget and a bill of costs so that a bill of costs can be properly compared/analysed against a costs budget.
Benefits to Paying Parties
Until this change there has been no interplay between a bill of costs and a costs budget. Some Receiving Parties used common sense and prepared bills in a ‘phased format’ and some Courts ordered ‘phase’ breakdowns of bills ahead of a detailed assessment hearing. Some Receiving Parties have continued to prepare bills in a traditional format due to routine or to hide overspends. Where a bill of costs was prepared in a traditional format then a paying party was left with the difficult task of trying to forensically dissect the bill of costs in order to work out actual cost (per phase) versus budgeted cost (per phase). The effect has been that paying parties have not been able to easily identify overspends and CMO’s have had little impact on Receiving Parties in terms of recovering costs on detailed assessment. However, this has now changed and paying parties will be rubbing their hands at the rule amendment as overspends will now jump off the page. Overspends will no longer be hidden away.
CPR 3.18(b) states that, where costs are to be assessed on the standard basis, unless there is good reason to depart from an agreed costs budget, then an overspend on a phase in a costs budget will not be recoverable. I expect many Receiving Parties to now start to encounter recoverability issues on detailed assessment, as overspends will be identified when the bill of costs is prepared, but there will be no good reason/s for the overspends. The common reasons will be failure to apply for a revision to the budget (due to a clear change in assumptions or case direction) and failure to record time in phases and monitor the budget.
Since costs management was introduced most lawyers have been able to prepare their costs budgets, deal with the costs management conference and then file the costs budget in their pleadings file with little reference to it going forward. Precedent Q completely changes this as it creates an interplay between the budget and bill, and in black and white, explains any overspends to a paying party when the bill is served. It is therefore now more important than ever that lawyers prepare accurate budgets (with detailed assumptions), and that they revise their budgets where appropriate. Revision needs to be done in combination with monitoring the budget and recording time in phases (or, even better, the J Codes). This will mean no hidden surprises when the bill is prepared.
Some firms will be sitting on a ticking time bomb at the moment, and that bomb will explode when the bill of costs is prepared and they realise that they could lose thousands or even hundreds of thousands of pounds in costs because of overspends on the costs budget. In privately fee paying work this creates a real professional negligence issue.
Potential Problems with Precedent Q
What is worth mentioning about Precedent Q is that it was created by the Senior Costs judge. The form is based on how costs management should work i.e. a judge at a Costs Management Hearing can not alter the incurred costs, they can only comment on them and take them into account in terms of proportionality when determining the overall amount to be allowed for the costs budget. The task of the judge is to set a reasonable amount for each phase for estimated costs. Precedent Q follows this logic:
- Column 1 is the incurred cost figure before the CMO.
- Column 2 is the actual cost incurred after the CMO for each phase
- Column 3 is the budget allowed for estimated costs/future costs for each phase.
- Column 4 is the difference between columns 2 and 3.
Precedent Q is therefore compatible with a costs budget where the judge correctly sets an amount for estimated costs for each phase. However, many judges around the country incorrectly allow a set sum for each phase of the budget and that sum also includes the incurred costs. In this scenario Precedent Q begins to become problematic as the Court will have simply set a figure per phase rather than a figure per phase for the estimated costs.
This is likely to cause some confusion and more than likely mean Precedent Q becomes irrelevant on such cases. If this happens then (in my opinion) all that would be required would be a ‘phased’ bill (not broken down into parts for pre and post the CMO – as recommended in BP -v- Cardiff & Vale University Local Health Board [2015] EWHC B13 (Costs) ) or a simple breakdown confirming the actual cost for each phase versus budgeted cost for each phase (with no identification of costs incurred pre and post the CMO). Hopefully, more judicial training will be delivered on costs budgeting in due course in order to create more consistency and avoid potential problems like this.
For further information regarding ‘phased’ bills, the advantages, disadvantages, and how to prepare them, read The Changing Face of Costs.
Precedent Q and updating your costs budget
It has always been important to update your costs budget before a costs management hearing. For example, if the costs budget is prepared (or dated) on 1 October 2015 and the Costs Management Hearing is not until 1 December 2015, good practice and common sense dictates that the costs budget is updated prior to the Costs Management Hearing (to include costs incurred after 1 October 2015). This all sounds very simple, but in my experience there are many law firms who fail to update their costs budget ahead of the Costs Management Hearing. To date this has had little effect because of the inability for the paying party to properly compare a costs budget with a bill of costs and identify such costs. However, with the introduction of Precedent Q this changes. Such costs will be easily identifiable and are very likely to be irrecoverable as they would not have been properly included in the costs budget and therefore would not have formed part of the costs management order.
This point becomes even more important given that the time frame for service/filing of a costs budget is changing. Service/filing will change to an earlier stage in the Proceedings. See the following link for further details:
http://www.lawgazette.co.uk/news/new-timeframe-for-filing-costs-budgets/5052647.fullarticle
Summary
Receiving Parties should, therefore, now start to receive a lot more opposition to their claims for costs where there are overspends on the costs budget. Law firms who prepare accurate and detailed budgets, monitor and update them and record time in phases can easily avoid overspends but, more importantly, maintain or even enhance costs recovery.
Andrew McAulay is a Partner and head of the Costs and Litigation Funding department at Clarion Solicitors. You can contact him at andrew.mcaulay@clarionsolicitors.com, or the Clarion Costs Team on 0113 2460622.
An Early Christmas Present
The recent case of Engeham –v- London & Quadrant Housing Ltd & Academy of Plumbing Ltd[i] represents good news for Claimant lawyers conducting work under Conditional Fee Agreements (CFA’s). In this case the Claimant was successful but the party who the Claimant was successful against was not named in the CFA. The CFA simply named one Defendant. At first instance it was held that no costs were recoverable as the CFA did not cover a claim against the ‘paying’ Defendant.
On Appeal (HHJ Mitchell) the decision was reversed. The case thereafter proceeded to the Court of Appeal which upheld the decision of HHJ Mitchell. It was determined that the definition of win in relation to the CFA should not be restricted to ‘who pays’. The meaning of win should be widely construed. The Claimant had clearly won the case and the Defendant had agreed to pay the Claimant’s costs.
This is positive news as only early this year Deputy Master Friston in the case of Hailey v Assurance Mutuelle Des Motards (relating to the same issue detailed above) ruled that costs were not recoverable by virtue of the indemnity principle. There have been other cases in the past where the same outcome was reached. This was therefore a real tool in the armoury of Defendants when challenging costs conducted under a CFA.
This is a very sensible decision but does cause some tension with the indemnity principle. The indemnity principle is well established law. In Hailey there was no liability for the Claimant to pay his Solicitors’ costs, as success under the CFA was not achieved because the case was successful against a Defendant not named in the CFA. Although the decision is fair and sensible, it clearly conflicts with the indemnity principle.
Despite this Judgment when drafting CFAs Claimant Solicitors should refrain from naming the Defendant/s in the CFA. CFAs should be drafted stating that the agreement covers “your claim against the Defendant or Defendants”. Furthermore, it is always sensible for the definition of success not to be simply based on the recovery of damages, but should also include “or where you derive any benefit from pursuing the claim”.
So, an early Christmas present for Claimant Solicitors, and a lump of coal for Defendant Solicitors!
Andrew McAulay is a Partner and head of the Costs and Litigation Funding department at Clarion Solicitors. You can contact him at andrew.mcaulay@clarionsolicitors.com, or the Clarion Costs Team on 0113 2460622.
[i] Currently unreported and available only from subscription-based websites. We will endeavour to add a link as soon as it becomes publically available.