Tag: Clarion Costs Team

Part 36 offers, the basis of assessment, and knowing your expert

Joanne ChaseLeave a comment

It is well known within the costs profession that there is some tension in the provisions of CPR 36.17, which deals with the costs consequences following judgment.

When a Claimant beats their own Part 36 offer, CPR 36.17 (4) provides that the Claimant is entitled to: interest not exceeding 10% above base rate from the date of expiry of the offer on the whole or part of any sum of money awarded, their costs on the indemnity basis from the date of expiry of their offer, interest on those costs, again, at a rate not exceeding 10% above base rate, and a prescribed percentage uplift limited to a maximum of £75,000 (10% on awards less than £500,000, and for awards more than £500,000, 10% on the first £500,000 and 5% of any amount above that figure thereafter).

However, for the Defendant, the rules are not quite so generous. CPR 36.17 (3) provides that the Defendant is entitled to costs from the date on which the relevant period expired, and interest on those costs. There’s no mention of indemnity basis costs, and no mention of any enhanced interest.

The recent costs decision in the case The Governors and Company of the Bank of Ireland (1) and Bank of Ireland (UK) PLC (2) v Watts Group PLC [2017] looked at this point closely, with the Defendant trying to persuade the Hon. Mr Justice Coulson that they should be awarded their costs on the indemnity basis following expiry of their first Part 36 offer, which they beat at trial, and which expired on 23 October 2015 (the parties had previously agreed that the Defendant should recover interest at 2% above base rate for the relevant period).

The Defendant relied on three main arguments; that the claim was hopeless and should never have been brought, that the Defendant had beaten their own Part 36 offer, and that the Claimant’s expert was heavily criticised by the trial judge.

The Hon. Mr Justice Coulson considered the principles that he had set out in Elvanite Full Circle Limited v Amec Earth and Environmental (UK) Limited [2013] EWHC 1643 (TCC), and summarised that “indemnity costs are appropriate only where the conduct of a paying party is unreasonable “to a high degree”. ‘Unreasonable’ in this context does not mean merely wrong or misguided in hindsight”. He went on to say that “The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable”

In this case, he did not regard the case as being hopeless from the start, and he stated that the claim was, at least in part, supported by expert evidence and detailed witness statements.

He recognised that if the Claimant had beaten their own Part 36 offer then, in accordance with CPR 36.17(4)(b), they would have automatically been entitled to indemnity basis costs, however, he stated that whilst the rules were misaligned and considered unjustified by some, it remained the law that the same rules did not apply to successful Defendants.

He did, however, allow costs on the indemnity basis in relation to one discrete aspect of the case – the expert’s conduct, and he relied on the decisions of Balmoral v Borealis [2006] and Williams v Jervis [2009] in doing so. He considered that the expert’s conduct should be reflected in the costs order, but he did not consider that an order for indemnity basis costs in their entirety was appropriate. He recognised that the expert’s inadequacies had already been a factor in the Claimant losing at trial, and therefore “to order indemnity costs as well would be penalising the Bank twice over for the conduct of their independent expert”. He ordered that costs of the Defendant expert should be assessed on the indemnity basis, as well as costs of and occasioned by the oral evidence given by the Claimant’s expert at trial.

The Claimant paid a heavy price for relying on an expert who had never given oral evidence at a trial. However, the conduct of the expert did not persuade the Court to allow indemnity basis costs throughout. Nor did the fact that the Defendant had beaten their own Part 36 offer. And whilst the Claimant bank accepted that they lost the litigation “badly”, they denied that the claim was unreasonably brought and they warned about the dangers of applying hindsight to such decisions.

It, therefore, seems that there is a high bar to clear in persuading the judge to award indemnity basis costs in a claim where the Defendant has successfully beaten their own Part 36 offer. Like in this case, a paying party would need to consider and rely upon the factors listed in CPR 44.2 (4), in order to formulate a case that would persuade a judge to make such an award in the circumstances.

If you have any questions or queries in relation this blog or legal costs in general please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 246 0622.

The practical effect of the Harrison budgeting decision

Joanne Chase1 Comment

In the eagerly awaited decision in Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] WECA Civ 792 (see article, page 8), the key findings of the Court of Appeal were that (1) budgeted costs will not be departed from in the absence of a ‘good reason’; (2) incurred costs do not form part of the budgeted costs; and (3) the good reason test does not apply to those incurred costs. So, what does this decision mean in practice, and what further observations can we make?

Of particular interest is how the courts will deal with ‘incurred costs’. During the Court of Appeal case, the court’s attention was drawn to incurred costs when the respondent presented what was described by Davis LJ as ‘an ingenious argument’ regarding incurred costs being potentially approved ‘through the back door’ at the budgeting stage. The respondent submitted that: ‘The incurred costs will have acquired a special status: in that, while not “approved” as such, they will have been taken into account by the court at the costs management hearing in managing the future estimated costs.’ Please click here to read the full article.

Joanne Chase is a Senior Associate at Clarion. You can contact her at joanne.chase@clarionsolicitors.com or on  0113 336 3327.

The importance of an accurate and correctly certified Bill of Costs…….

Andrew McAulay1 Comment

The case of Jago v Whitbread Group plc relates to the Defendant’s application for an order pursuant to CPR 44.11(1) & (2), which reads as follows:

“The Court may make an order under this rule where –

  • a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or
  • it appears to the Court that the conduct of a party or that party’s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper.”

The Defendant requested that the Court disallow all or part of the Claimant’s entitlement to costs on the grounds of her solicitors improper and/or unreasonable conduct during the detailed assessment proceedings.

The following is a brief summary of the substantive case and detailed assessment proceedings:

  1. The Claimant brought a personal injury claim against the Defendant, which settled for damages of circa £41,000, with costs to be subject to detailed assessment, if not agreed.
  2. The matter settled on 4 March 2015 and on 12 March 2015, the Claimant disclosed an informal statement of costs to the Defendant. The statement of costs was a two page document which totalled £101,677.21. The statement included a success fee of 20%, various disbursements in the total sum of £537.00 and two and half hours for preparing and checking the statement of costs. The statement was signed by a senior solicitor and partner at the Claimant’s firm.
  3. On receipt of the statement of costs, the Defendant’s solicitors responded requesting disclosure of the Claimant’s conditional fee agreement, with the Claimant’s solicitors responding on 18 June 2015, stating that the Claimant “……was not subject to a CFA in regards to this matter”.
  4. The Defendant’s solicitors responded querying why therefore a success fee of 20% had been claimed in the statement of costs when no CFA was in existence.
  5. On 19 November 2015, the Claimant served notice of commencement of detailed assessment, with the bill of costs totalling £91,474.41. This bill of costs was of course over £10,000 less than the sum claimed in the statement of costs. Disbursements had been reduced to £430.00 and profit costs had also been reduced. A success fee of 25% was claimed in the bill of costs, despite the correspondence on 18 June 2015 stating that the matter was not subject to a CFA.
  6. The bill of costs was certified by the supervising solicitor and partner. A claim of three and a half hours was included by a law costs draftsman and one hour by the supervising solicitor to check the bill of costs. The certification confirmed that the bill of costs was valid and accurate (and therefore no breach of the indemnity principle).
  7. In December 2015, the Defendants served points of dispute and shortly thereafter amended points of dispute raising a number of significant queries and challenges to the bill of costs.
  8. On 15 January 2016, the Claimant filed and served a fresh bill of costs. Instead of amending the existing bill of costs, the Claimant’s solicitors effectively started the detailed assessment proceedings again with a redrafted bill of costs. The redrafted bill totalled £56,719.00, which represented a reduction of circa. £35,000.00 from the total sum claimed in the bill of costs served in November 2015.
  9. In respect of the revised bill of costs, the success fee was removed. Disbursements were reduced further to £385.00 and the profit costs sought in the bill were significantly reduced. Again, a claim of three and half hours was included in the bill of costs for a law costs draftsman preparing the same, together with an hour for the supervising solicitor/partner checking and certifying the bill of costs.
  10. On receipt of the redrafted bill of costs, the Defendant’s solicitors wrote to the Claimant’s solicitors highlighting the procedural error in that they should have simply amended the existing bill of costs rather than creating a new bill of costs.
  11. In response to that correspondence, on 8 April 2016 the Claimant’s solicitors filed and served a further bill, this time an amended bill of costs. The total sum claimed in the bill was £55,393.19. Profit costs were reduced again together with a further reduction to disbursements. Again, the bill was signed and certified by the supervising solicitor and partner.


    Outcome

    Master Whalan found the Claimant’s solicitors’ actions to be “improper” and “unreasonable” and imposed the following penalty for the “improper” and “unreasonable” behaviour:

  • The Claimant’s entitlement to costs be disallowed to the extent of 50% of the assessed costs allowed on detailed assessment.
  • Specific deductions to the bill of costs (see paragraph 41 of the Judgment). These reductions included time in relation to other work done i.e. preparing, checking and certifying the bill of costs.

    In reaching his decision, Master Whalan stated that the breaches in the case were significant, repeated and either unexplained or unjustified (paragraph 40 of the Judgment).

    This is an excellent case which demonstrates the importance of preparing an accurate bill of costs and ensuring that a bill of costs does not breach the indemnity principle before certifying the same. What is clear from the Judgment is that Master Whalan would probably have been forgiving for the errors made in the first instance, but the failings the second time round and further failings thereafter were not capable of forgiveness and resulted in the severe penalty reduction of only 50% of assessed costs for the Claimant’s solicitors. So ensure statements of costs and bills of costs are prepared and checked properly!

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

The importance of the precedent H Costs Budget! Harrison on appeal – no second bite of the cherry.

Joanne ChaseLeave a comment

Jacqueline Dawn Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] WECA Civ 792 – the Court of Appeal has found that the budgeted costs will not be departed from in the absence of a “good reason”. Davis LJ further found that incurred costs do not form part of the budgeted costs and the good reason test does not apply to those incurred costs. Davis LJ confirmed that the proportionality test can be applied to the final claim for costs. This is despite the proportionality test having been applied when the costs budget was approved, this may result in claims for costs being subject to detailed assessment on the issue of proportionality alone.

Davis LJ summarised the Applicant’s submissions regarding what reliance should be placed on the budget at detailed assessment, as follows:

“The premise underpinning Mr Hutton’s argument thus was that CMOs in effect are but summary orders which at best give no more than a snapshot of the estimated range of reasonable and proportionate costs: often reached, as Mr Hutton would have it, on a broad brush or rough and ready judicial approach after a hearing which would have been limited in time, rushed in argument and incomplete in the information advanced”.

Davis LJ considered this to be a sceptical appraisal, commenting:

“that to sanction, at detailed assessment, a departure from the budget in the absence of good reason would overlook (among other things) that budgeted costs are already required to have regard both to reasonableness and to proportionality; that the aims of costs budgeting include a reduction in detailed assessments and of issues raised in points of dispute; and that the element of certainty to clients (in the form of knowing what costs they are likely to face, in terms of payment or recovery) would be removed.

Moreover, if approval of a costs budget by a CMO has the more limited status which the appellant would ascribe to it then that would have a potentially adverse impact on parties thereafter attempting to agree matters without requiring a detailed assessment.  Although Mr Hutton queried if that was one of the perceived prospective benefits of the costs budgeting scheme, it seems to me – as it did to the editors of Cook on Costs – wholly obvious that it was indeed designed to be one of the prospective benefits of cost budgeting that the need for, and scope of, detailed assessments would potentially be reduced.”

The court’s attention was then drawn to incurred costs. The respondent presented what was described by Davis LJ as an ingenious argument to the court regarding incurred costs being potentially, in essence, approved ‘through the back door’. The respondent submitted that:

“the incurred costs will have acquired a special status: in that, while not “approved” as such, they will have been taken into account by the court at the costs management hearing in managing the future estimated costs.”

Davis LJ disagreed and found that:

“With respect, this will not do.  Either incurred costs are within the ambit of CPR 3.18 (b) or they are not.  Since they are not approved budgeted costs, by the terms of paragraph 7.4 of PD 3E and of the Rules, they are not within that sub-rule.”

Davis LJ recognised that practical problems remained surrounding incurred costs and advised that the CPR committee’s intention was to amend the rules to decouple incurred costs from budgeted costs.

In summary, a good reason is required to depart from the budget, the proportionality test can be applied to budgeted costs, thus a reason to escape the restrictions of the budget; incurred costs should be considered in isolation to the budgeted costs and the rules still require amendments regarding incurred costs to ensure that costs management works.

It is therefore essential that an accurate budget is presented to the court, this Court of Appeal decision has ruled that a budget cannot be departed from unless there is a good reason to do so, this is a difficult test to overcome. There is no second bite of the cherry.

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 – the pilot scheme

Andrew McAulay2 Comments

Following on from my newsletter below, the Civil Procedure Rule Committee meeting notes have been published today. Last month I explained how Jackson LJ had suggested how ‘capped fixed costs’ would work. The meeting notes have now confirmed how the pilot scheme will work, explaining that costs for preaction would be capped at £10,000, for particulars of claim at £7,000 and for defence and counterclaims at £7,000.

Many thanks to John Hyde of the Law Society Gazette who has reported that “Parties can claim up to £6,000 for a reply and defence to the counterclaims, £6,000 for the case management conference, £6,000 for disclosure and £8,000 for witness statements. Expert reports are capped at £10,000, with the trial and judgment costs limited to £20,000.

The working group dedicated to the pilot scheme proposes an overall cap of £80,000 rather than setting an actual fixed amount at this stage.

The proposal, backed in principle by the committee, is to run the pilot in certain specialist civil courts: the London Mercantile Court and three courts in each of the Manchester District Registry and Leeds District Registry. Any cases where the trial will go beyond two days, or where the value is more than £250,000, are excluded“.

Clarion May 2017 Newsletter: Fixed Recoverable Costs. A taster of how the pilot scheme may work.

The judiciary have released an outline regarding how the fixed recoverable costs regime may work. Jackson LJ attended a costs seminar in Birmingham back in March 2017, which focused on mercantile and business litigation. At that seminar both Jackson LJ and HHJ Waksman outlined their proposals for the fixed costs pilot scheme, those proposals being subject to the approval of the Civil Procedure Rules Committee. The details of their proposals were as follows:

The pilot scheme will run in the London Mercantile court, and Manchester and Leeds specialist courts.

  • It is likely that the pilot will commence in October 2017 and will last for two years.
  • The pilot scheme is optional.
  • There will be a separate fixed costs list.
  • The pilot can be joined at certain stages:
    • The pre-action stage
    • No later than 14 days after service of the defence
    • At the case management conference (CMC)
    • Claimants can commence proceedings in the fixed costs list.

The Defendant has an absolute right to object to this, and if so then the proceedings would be removed from the fixed cost list.

  • The CMC will be the last opportunity to join the pilot.
  • Parties will not be able to withdraw from the pilot, apart from the Defendant if the Claimant issues in the pilot scheme (see above).
  • There will be a shortened process with strict case management .

The pilot is currently a ‘work in progress’, however it is envisaged that these proposals will be making their way to the Civil Procedure Rules Committee in June 2017, so these could be public by July 2017. It is currently predicted that:

  • Parties will be required to file their “core documents” (the documents that are relevant to the issues in the claim) with their statements of case, i.e. the particulars of claim, defence, reply and defence to counterclaim.
  • There will be no need for further disclosure, unless parties can justify this at the CMC.
  • If further disclosure is required, parties will need to apply for the same before the CMC. If the parties cannot agree, an order will be made.
  • At the CMC, the judge will suggest Alternative Dispute Resolution (ADR), including Early Neutral Evaluation (ENE).
  • The CMC will be the only interim hearing, this will include setting the trial timetable.
  • Consideration is being given to limiting the number of witnesses, the thoughts are that there will be one factual witness on each side.
  • Costs budgeting will not be required and there will be no pre-trial review.
  • The trial length will be up to two days (excluding judicial reading).
  •  Cross-examination will be “very strictly controlled”.
  • An early hearing date will be guaranteed.
  • Judgments will be produced within a short period of time.
  • Pilot participants can expect “active and proactive” case management.
  • Costs will be summarily assessed at the end of trial.

The above proposals were made in March 2017, however since then there have been further proposals, as follows:

  • The pilot will only relate to claims that are less than £250,000.
  • The pilot will only relate to claims where the trial is no more than 2 days.
  • The pilot will only relate to non-complex matters.
  • The maximum costs that will be allowed will be £80,000. The pilot scheme will be similar to the IPEC costs regime. There will be caps for phases of litigation and those phases will be the same as the phases used in costs budgets.
  • Parties can only leave the scheme under exceptional circumstances, examples of those circumstances are; allegations of fraud, if the matter subsequently is listed for a 3 day trial.
  • Judgment will be handed down within 6 weeks.
  • The proposed ‘grid’ is not yet available and it is likely that this will not be available until the practice directions are published, so it may make its way into any July update to the rules. The main benefits of the pilot scheme are that claims will be resolved speedily and parties will be more aware of their potential costs exposure.
  • We will continue to provide updates regarding fixed costs, as well as all costs related law.

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

 

Interest on Costs

Andrew McAulay1 Comment

The case of MacInnes v Hans Thomas Gross [2017] is a very useful case to read as it covers a number of topics including indemnity basis costs awards, interest, proportionality, costs budgeting and payments on account. The focus of this article is the useful contents from the Judgment in relation to interest on legal costs. Pages 3, 4 and 5 are the relevant aspects of the Judgment to consider in this regard and I set out below the key points:

  • The court awarded pre-judgment interest at a rate of 4% above base rate and relied heavily on the Judgments in McPhilemy v Times Newspapers Limited [2002] and KR v Bryn Alyn Community (Holdings) Limited [2003] EWCA Civ 383 when making its decision.
  • In relation to post-judgment interest the court ruled that it should not start to accrue until 27 April 2017 (which was 3 months after the date of the Judgment). The reason for this was because the court awarded a very substantial payment on account and followed the logic of Leggatt J in the case of Involnert Management Inc v Aprilgrange Limited and Others [2015] which provided some very useful guidance in relation to post-judgement interest. The logic behind the deferral of 3 months was the fact that by that time Detailed Assessment Proceedings should have been commenced, and therefore the paying party would have had sight of the bill and could start to make a realistic assessment of the amount of their liability. Without sight of the Bill of Costs, it could not do that.
  • It is important to note that in relation to the post-judgement interest point, the deferral of interest for 3 months was primarily due to the fact that a Costs Management Order was in place and the court made an order for a substantial payment on account. If a Costs Management Order was in place, but a substantial payment on account was not made then one would expect the court not to make such an Order in relation to post-judgment interest i.e. interest would run in the traditional way (8% from the date of Judgment).
  • The position in relation to pre-judgment interest should be considered by any law firm acting for a client on a private fee paying retainer. When it comes to the issue of interest on costs, the court has a wide discretion as to when interest starts to run under CPR 44.2 (6) (g).

Therefore, where appropriate, law firms should be seeking interest from before the date of Judgment as it will be beneficial to the client given that the rate is likely to be 4% above base rate from when the law firm’s invoices were paid (invoices could date back a number of years).

This blog was prepared by Andrew McAulay who 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.

“Costs budgets are now working better.”

Andrew McAulayLeave a comment

At this years’ APIL conference it was said that “Costs budgets are now working better”.

Thanks to Gordon Exall and Rachel Rothwell for tweeting interesting and salient comments and quotes made at this years’ APIL conference. Those tweets included – “Harrison is coming any day”, “Merrix may largely be upheld with clarification of incurred costs”, “costs budgets are now working better”………  To read a few of those comments please click here.

Thanks again to Rachel and Gordon for their continued devotion to provide updates
on costs law.

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

Calling trumps: how the court has laid its cards on the table over costs management.The interaction between costs budgeting and costs assessment – Merrix v Heart of England NHS, the appeal of the first instance ruling.

Anna LockyerLeave a comment

The interaction between costs budgeting and costs assessment has been considered again in Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB) – the appeal of a first Merrix v Heart of England NHS instance ruling.

Mrs Justice Carr found that the court will have ‘regard to the receiving party’s last approved or agreed budget by respecting it or finding that there is a good reason to depart from it. So, the question to be answered is – will a receiving party’s costs
be allowed in full if they are less than the budget? Yes – for now! The Merrix decision confirms that any departure from the budget applies to both downward and upward revisions, hence parties have to show a good reason to depart from the budget.

Does Mrs Justice Carr’s finding in Merrix deny the paying parties an opportunity to challenge potentially unreasonable costs, despite it being their responsibility for the costs of challenging those costs? At the moment – yes.

Is it ‘just’ for the receiving party to request their costs in full simply because they have been incurred and fall within the parameters of the budget? What safety mechanism is in place to ensure that any receiving party does not include unreasonable and disproportionate costs in their claim for costs, simply justified on the basis that they ‘fall within budget’?

Mrs Justice Carr felt that the indemnity principle was sufficient, though perhaps it is not – unreasonable costs can be claimed from the client, hence the need for Solicitors Act assessments. Or alternatively, the client may have little regard to the constraints of the budget and request that ‘out of scope’ or disproportionate and unreasonable costs are incurred in any event.

How can restraints be imposed on a spendthrift client with deep pockets, and at the same time discourage a paying party from being overzealous in their requests for detailed assessment? Perhaps the introduction of the ‘one-fifth rule’ to costs budgeted cases could be the answer. This shares the burden of the costs consequences, rather than the traditional costs shifting rule. If the bill is reduced by more than 20%, then the receiving party is responsible for those costs rather than the paying party, but if the paying party secures less than a 20% reduction to the bill, then they become responsible for those costs.

This should encourage all parties to think seriously about committing to detailed assessment, rather than the onus being on the paying party. Not only does this tie in nicely with the rules for Solicitors Act assessments, but it is also in line with the rules surrounding provisional assessment relating to the recoverability of costs for an oral
hearing (see article, page 10). Further, it embraces Jackson’s intention to reduce the number of detailed assessments, and at the same time does not deprive parties the opportunity to challenge the costs. Just a thought.

Is this the end? Perhaps only for now. Mrs Justice Carr requested that if this decision were to be appealed, then it should be heard together with any existing listings covering the same point of principle.

In her decision, she referred to Harrison, which was soon to be heard in the Court of Appeal. The Harrison decision is listed for May, and so the paying party in Merrix may be running out of time to get this listed together with Harrison – but we await with interest.

Please click here to read the full article which was published in the April edition of the Litigation Funding magazine.

Anna Lockyer is an Associate at Clarion. You can contact her at anna.lockyer@clarionsolicitors.com or on 0113 288 5619.

Pre 1.4.13 CFA – Advocacy or Litigation services provided OR not?

Andrew McAulayLeave a comment

The recent case of Choudhury -v- Markerstudy could have serious repercussions for receiving parties in Detailed Assessments.  Here is a brief summary of the case:

  • Rohan Choudhury (a child) suffered an accident on 12 March 2013. Rohan was a minor and was therefore represented by her Mother, Mrs Choudhury.
  • An Infant Approval hearing took place in January 2015, where the Court approved a settlement figure of £1,050.00.
  • The Claimant was represented by Irwin Mitchell solicitors, who at the time of instruction, were acting under a Collective Conditional Fee Agreement (CCFA) with Aviva.
  • Following the accident Aviva wrote to the Claimant, and thereafter, Irwin Mitchell wrote to the Claimant explaining the terms in which they would be retained. Those letters were sent before 1 April 2013, but no other work was carried out.
  • Mrs Choudhury instructed Irwin Mitchell by signing a document on 1 April 2013 and returning it. The document that she signed was the pre 1 April 2013 CCFA.
  • The Defendant argued that the retainer was invalid because it was signed and entered into on 1 April 2013, but was based on a regime which on 1 April 2013, was no longer available to litigants (and therefore invalid).
  • The Claimant stated that this was incorrect because ‘Advocacy or litigation Services were provided to the Claimant under the agreement in connection with that matter before the commencement day’ (Section 44.6, 6b of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 – ‘LASPO’).
  • The Court ruled that ‘Advocacy or litigation services’ had not been provided and therefore the retainer was invalid. As a consequence, no costs were payable by the Defendant to the Claimant as there was no indemnity between the Claimant and the Claimants Solicitors.

The District Judge clearly adopted a strict interpretation of LASPO and what amounts to ‘Advocacy and litigation services’. The paying party did not dispute that if litigation services had been provided then the retainer would have been valid.

This Judgment will no doubt cause concern to receiving parties.  Whilst the Judgment is only at County Court level, it will encourage paying parties to raise such arguments. There will still be plenty of cases left in the system where the additional liabilities were entered into very close to 1 April 2013.  In fact, it was widely reported in many legal publications (at the time) that law firms had signed up clients to Conditional Fee Agreements, and in particular ATE insurance, very close to the deadline of 1 April 2013.

Many believe that a black and white approach should be adopted in relation to the inception i.e. if the additional liability was incepted pre 1 April 2013 then it is valid and the associated additional liability recoverable, however, if it is entered into post 1 April 2013 then the additional liability is not recoverable.  The issue over ‘Advocacy or litigation services’ will create some interesting arguments!

In my opinion, what law firms should have done is sent a “holding” Letter of Claim to the Opponent (or likely Opponent) prior to 1 April 2013.  Surely, this would have provided protection from the ‘Advocacy or litigation services’ point?

The key practical point from the Judgment is that the work which was done before 1 April 2013 was effectively ‘client care’ work. In reality, the case will only have an impact on clients who were signed up to CFA’s and/or ATE insurance premiums close to 1 April 2013.  For example, if a client was on a private fee paying retainer from say January 2013, but switched to a CFA retainer in late March 2013, then ‘Advocacy or litigation services’ would have most likely been provided by the time the CFA was entered. This scenario would therefore be safe from the argument.

It is widely reported that fixed costs for all fast track work and low level multi-track work will be introduced in October 2018. Those who draft the rules as to implementation need to do so carefully as otherwise arguments and satellite litigation will take place.

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