THIRD PARTY FUNDING – A VIABLE OPTION FOR 21ST CENTURY LITIGATION (Part 2)

This series of blog articles will address the increasing viability of third party funding as an alternative to traditional litigation funding methods. It will look at how the law has developed historically and how the Court now approaches third party funding and the potential liability of third party funders.

The second part of this series will explore the Court’s first acceptance of third party funding in the matter of Factortame Ltd v Secretary of State for Transport, Local Government and the Regions No.8 [2002].

Background

This matter related to a challenge brought by Spanish fisherman who sought to claim damages against the Secretary of State for the unlawful prohibition of fishing in UK territorial waters. A firm of accountants agreed with the Claimants to prepare and submit claims for loss or damage as a result of any losses suffered. The Accountants agreed to act in return for 8% of any damages recovered.

The Claimant’s succeeded in their challenge and were awarded damages and costs. On a preliminary issue the agreement was held to be not champertous and could be enforced against the Secretary of State.

The Defendant’s Challenge

The Defendant claimed that such an agreement was champertous and unlawful. It was argued that for an expert to act on a contingency fee basis would give the expert a significant financial interest in the case which is highly undesirable.

Decision

As stated in my previous blog, the tort of champerty had been abolished and the starting point for considering any arrangement was that it would be presumed enforceable unless there was a valid reason as a matter of public policy.

The Accountants had not acted as experts directly in this matter but had instead funded independent experts. Furthermore, by the time that they were instructed the issue of liability had already been decided.

Therefore, the Court held that such an agreement was not in the circumstances champertous or against public policy.

In the next part of the series…

The next blog will take a look at the liability of third party funders in litigation in the matter of Arkin v Borchard Lines Ltd (nos 2 and 3) [2005] 1 WLR 3055.


This blog was prepared by Kris Kilsby who is an Associate Costs Lawyer at Clarion and part of the Costs Litigation Funding Team.  Kris can be contacted at kris.kilsby@clarionsolicitors.com or on 0113 227 3628.

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Success Fees and ATE Premiums post-LASPO – HH Law v Herbert Law Limited – Court of Appeal decision

The case of HH Law Limited v Herbert [2019] EWCA Civ 527

Background

This is a matter that was subject to a further appeal following the original appeal heard in March 2018. My colleague, Andrew McAulay, has prepared a useful summary of the outcome of that appeal and the background to the dispute which I will not repeat here.

Costs proceedings

In the subsequent appeal, HH Law (HH) sought to appeal two main areas; the reduction in the success fee, and the finding that the ATE Premium was a disbursement.

The Success Fee

The first ground of appeal put forward by HH was that, in a solicitor/client assessment, costs would be considered reasonably incurred and reasonable in amount if there had been express or implied approval by the client (CPR 46.9(3)). HH were able to successfully show that the documents provided to the client provided a ‘clear and comprehensive account of her exposure to the success fee and HH’s fees generally’.

However, it was under CPR 46.9(4) whereby the Court held that a success fee of 100% on the circumstances was unusual in both nature and amount. The Court of Appeal stated that the approach to calculating a success fee was to base it upon the solicitor’s perception of litigation risk at the time the agreement was made.

HH contended, within a witness statement, that it was a fundamental part of their business model to set the success fee on all cases at 100% irrespective of the litigation risk, and that such a business model was prevalent across the industry following the changes introduced by the Legal Aid, Sentencing, and Punishment of Offenders Act 2013 (LASPO). The Court of Appeal dismissed this approach and stated that there had been insufficient information provided to the client to ensure that informed consent was achieved in respect of the basis of setting the success fee at 100% for all cases irrespective of risk. The success fee was, therefore, held at 15%.

Comment: This may be considered an alarming result in the grand scheme of things and could lead to an increase in solicitor/client challenges to the level of success fee deducted from damages.

However, there is a simple solution to these challenges. The judgment firmly establishes that success fees should be calculated based upon the litigation risk at the date the agreement was entered. It is therefore essential to carry out a risk assessment when entering into the CFA.

The ATE Premium

HH had incurred the costs of the ATE premium and deducted it directly from the firm’s client account. Ms Herbert had contended that the premium was a disbursement and, therefore, could be challenged under a solicitor/client assessment. The Court carefully considered the definitions of what a solicitors’ disbursement was

‘a disbursement qualifies as a solicitors’ disbursement if either (1) it is a payment which the solicitor is, as such, obliged to make whether or not put in funds by the client, such as court fees, counsel’s fees, and witnesses’ expenses, or (2) there is a custom of the profession that the particular disbursement is properly treated as included in the bill as a solicitors’ disbursement’.

The Court came to the conclusion that an ATE premium did not fall within either definition, and that HH had been acting as an agent of the client when paying the ATE premium.

Comment: It was noted that the consequence of this finding would significantly reduce a client’s ability to challenge the amount of ATE premiums in future, and obiter, it was suggested that steps could be taken to bring ATE premiums within the definition of disbursements in future.

We still have places available at our next Costs and Litigation Funding Masterclass on 16 May 2019. https://lnkd.in/d33uy9e

This blog was prepared by Kris Kilsby who is an Associate Costs Lawyer at Clarion and part of the Costs Litigation Funding Team.  Kris can be contacted at kris.kilsby@clarionsolicitors.com or on 0113 227 3628.

 

Tips for Recoverability

All COP Lawyers know that the SCCO Guideline Hourly Rates can be frustrating when trying to recover all of your costs as opposed to other areas of law in which higher rates can be charged. As a result, some believe it to be unreasonable that a Costs Officer ca reduce the costs down even further on assessment. Here are some things that we have seen helps improve the recoverability of your fees.

Using 3 minutes to arrange and make payments. I know you’re told this on every assessment you’ve had back from the SCCO but ignoring it isn’t going to make your recoverability any better. The Costs Officer isn’t going to change their mind. Arranging payments are viewed as an office overhead so its best practice for you to delegate this work to a Grade D fee earner and limit the time spent and charged for to 3 minutes. The Costs Officer is going to see the effort being made and as a result, this will help with your reputation with the Court and will improve your Bill assessment outcomes.

You, like all other COP Lawyers dislike the low guideline rates that you’re restricted to. If there are any matters of complicated work, outline this to us or your other Costs Draftsperson and request enhanced rates on that particular issue. We have found that there is a higher chance of success for an enhanced rate when it is applied specifically to a complex and difficult issue than when it is applied to the whole bill. Doing this allows the Costs Officer to see specifically what was difficult and justifies why you are requesting the additional fees. We are often proactive in applying these for you when a complex matter arises, such as jurisdictional differences, the requirement of language interpretations, abusive Clients etc.

The Costs Officer will reduce or remove a second fee earner attendance at a meeting in accordance with the decisions made within the Matter of Garylee Grimsley (December 1998). Therefore, it is incredibly important for your recovery that the dual attendance is explained and justified in your attendance note. Just a line to outline why the second person was required will do, were they the main fee earner alongside the Deputy? Did the Client or Client’s family request they be present? Was the Client abusive or dangerous? It may be allowed at a reduced rate however it is

As simple as this one may sound, keep your file in chronological order and easy to get through. The last thing you want to do is make the Costs Officers life difficult when they’re assessing your costs.

Furthermore, ensure that you accurately time record your work. We appreciate that different firms have differing levels of technology available, but this need not be the most complex and time consuming system. If you do have the option to tag your time entries, this will help all parties involved when it comes to the costing of the work. Bulk time recording will cause difficulties so avoid this as much as possible. Also, ensure that the time spent is reasonable from the outset and delegate where appropriate. However, please don’t self-edit your time because if this is later reduced on assessment you will have doubly been reduced where not necessary.

Additionally, including details of the Client’s financial position assists the Costs Officer in ensuring the work undertaken is in proportion to the level of assets held and increases the chances of your time being recovered, especially in circumstances where the Client’s assets are significant and various financial schedules and reviews are required. See https://clarionlegalcosts.com/2015/06/09/how-valuable-is-the-protected-partys-estate/ for further information on this point.

I hope this helps and if you have any further suggestions or questions I would be happy to hear and discuss them further at bridie.sanderson@clarionsolicitors.com

Costs Capping Pilot Scheme

Sir Rupert Jackson’s proposal regarding costs capping is now a reality, with the launch of the voluntary capped costs pilot scheme on 14 January in London, Manchester and Leeds Business and Property Courts.

The aim of the pilot scheme

The aim of the scheme is to improve access to the Courts through:

  • streamlining the procedures of the Pilot Courts;
  • lowering the costs of litigation;
  • increasing the certainty of costs exposure; and
  • speeding up the resolution of claims.

The pilot will provide for a cap on recoverable costs for each stage of the case, and an overall cap on the total, rather than a fixed sum. The maximum a party will be ordered to pay will be £80,000.

The promise of a fixed recoverable costs scheme was first made two years ago by Sir Rupert Jackson in his IPA annual lecture “The Time Has Come”. His view was that “high litigation costs inhibit access to justice. They are a problem not only for individual litigants, but also for public justice generally. If people cannot afford to use the courts, they may go elsewhere with possibly dubious results. If costs prevent access to justice, this undermines the rule of law”. He predicted, or perhaps rather hoped, that the fixed recoverable costs project could be accomplished during the course of that year.

However, the flurry of chatter and speculation regarding the fixed recoverable costs scheme was left behind in 2016 and, as we moved into 2017, it was replaced with Sir Rupert’s proposals regarding costs capping, which he advised would follow the model used in the Intellectual Property Enterprise Court.

About the pilot scheme

This newly launched pilot scheme will last for two years. For those cases with a monetary value that are less than £250,000, and where the trial is two days or less, the voluntary pilot scheme is available. It cannot be adopted, however, for any cases where there are allegations of fraud and dishonesty; where extensive disclosure, witness evidence or expert evidence is likely; or where the claim will involve numerous issues and numerous parties.

Agreement of both parties is essential if the pilot’s shortened litigation process is to be pursued. The claim will exit the pilot if there is any dispute by any party in that regard. This shortened process is expected to be less costly, with the initial statements of case being limited in length and accompanied by the documents upon which the party proposes to rely.

Further, witness statements will also be limited in length, with the general rule being reliance on oral evidence of two witnesses. There are restrictions placed on expert evidence, which will only be permitted if the court is satisfied that it’s necessary, and it is likely to be on a single joint basis.

The trial judge will take a hands-on approach, to ensure that the trial estimate is adhered to, and has the power to strictly control cross-examination. When the several imposed time limits for filing the documents are considered collectively, the whole process – from the issue of the claim to the hearing of the trial – should not exceed 11 months.

The costs for each phase of the litigation is restricted to the cap and an assessment of costs is still required. Costs budgeting and detailed assessment are not applicable, with summary assessment being the favoured choice of the rule makers. The normal practice of filing the statement of costs prior to the hearing and the assessment of those costs then taking place at the trial will be avoided. Instead, the parties shall file and exchange schedules of their costs incurred in the proceedings not more than 21 days after the conclusion of the trial.

The schedules shall contain details regarding each applicable stage in the Capped Costs Table. The maximum cap of £80,000 for recoverable costs does not include court fees, VAT, enforcement costs and wasted costs, which are claimed additionally.

For those instances where Part 36 offers have been made the cap is increased to £100,000, and so Part 36 offers continue to play a central role.

With claims now able to be issued and pursued to trial in less than 12 months, and with costs not exceeding £80,000, will more parties engage in litigation? Or, conversely, will this restriction on the amount of costs that can be recovered be off putting? Only time will tell.

Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.

When a simple theory becomes a complex reality; the interplay between costs management and detailed assessment

The Jackson reforms envisaged a world where legal costs would be dealt with through the click of a button. LJ Jackson introduced costs budgeting in a bid to control the level of costs spent, he revamped the concept of proportionality to limit costs for claims where costs incurred considerably exceeded the sums in issue, and he created the electronic bill of costs in a bid to remove the pain staking process of multi day detailed assessment hearings.

However, theories do not always play out well in practice. The plethora of costs case law relating to costs management, proportionality, and bills of costs since the reforms means that it is crucial, now more than ever, that a litigator approaches costs correctly if they are to reap the full reward of their labour.

Regardless of how a case evolves, if a litigator is fortunate to be on the favourable side of an inter partes costs order then, providing the Court orders that costs are to be assessed by way of detailed assessment (and not summary assessment), it is paramount that they present the costs claimed correctly if they are to limit their outlay on detailed assessment costs and maximise their profit recovery.

First and foremost, the litigator should be on the front foot. If the litigation is approaching a mediation or joint settlement meeting, it is wise for the litigator to know exactly where they stand in terms of costs. This is particularly important if there is a sense that the paying party may have an appetite to do a deal on both damages and costs. If the case has been subject to costs management, it is crucial that the costs incurred are carefully considered and calculated to show the extent to which the costs fall (or exceed, with reasons for such) within budget. This is the first question that any competent paying party representative is going to ask. If a precedent Q has been prepared, and the litigator is armed with sufficient information for reasons why any costs may fall outside scope (such that the Court did not provide for a mediation and therefore the costs of such fall outside the budget scope) then any negotiations are more likely to prove fruitful, whilst saving the paying party the additional cost of detailed assessment proceedings. This would not be possible without a phased breakdown of costs.

If, however, the parties are unable to reach an amicable agreement as to costs, it will likely be necessary for a full bill of costs to be prepared in order for detailed assessment proceedings to be commenced. This is where it is crucial that a costs lawyer who fully understands the intricacies of costs management orders and the inter play with the bill of costs should be utilised.

The SCCO’s decision from 29 October 2018 in the matter Vertannes v United Lincolnshire Hospitals NHS Trust shows just how crucial this understanding is. This matter had been subject to a costs management order. The Court then proceeded to order that revised budgets should be prepared to reflect a significant change in the litigation. The parties prepared but were unable to agree revised budgets, and the claim settled before the Court considered the revised budgets. The Claimant proceeded to file a bill of costs that failed to comply with CPR 47 PD 47.5.8(8) (“the bill must be divided into separate parts so as to distinguish between the costs claimed for each phase of the last approved or agreed budget”), the Claimant’s argument being that the Court never approved the revised budget. However, the Court found that at no time had the original costs management order been replaced, and that the bill should therefore have been split so as to reflect the position against the original costs management order. The Claimant was, therefore, ordered to re-draw the bill of costs.

The inter play between costs management and detailed assessment can be complex. The Court may make multiple costs management orders during the life of a claim, where by a previous order is “topped up”, which impacts the way in which a bill is drawn, or the Court may elect to only costs management certain phases of the case, which, again, has an impact on the bill. It is, therefore, crucial that the costs lawyer is aware of all the elements of the case that will impact the drafting of the bill so as to ensure compliance with CPR 47 and the accompanying practice direction, together with maximising recovery.

Joanne Chase is a Senior Associate Costs Lawyer in the Costs and Litigation Funding Department at Clarion Solicitors.

You can contact her at joanne.chase@clarionsolicitors.com and 0113 336 3327, or the Clarion Costs Team on 0113 246 0622.

The Senior Court Costs Office Guide – how to get paid for your work!

A recent publication of the Senior Courts Cost Office Guide was produced as a result of various changes in the way legal costs are being assessed. However, in respect of Court of Protection costs, not a great deal has changed since its inception. As a result, the 2018 guide brings the perfect opportunity to review the position on Court of Protection costs, getting paid for your work and the rules to follow.

Initially, Section 25 of the Mental Health Act 2005 created the weight of the Court of Protection, which protects the property and financial affairs of persons who lack the capacity to manage their own.

There are three methods for recovering your costs; Agreed costs, Fixed costs and Summary Detailed Assessment of costs.

Most Orders will contain a clause entitling the professional Deputy to be paid for the work undertaken. It will provide the option of taking fixed costs or having the costs assessed, subject to the terms of the Order.

Agreed Costs

As set out in the Guide, Agreed Costs are not generally available and would only be necessary in the circumstances that fixed costs do not cover the work undertaken and it would not be appropriate to undertake a costs assessment. For example, following the death of a Protected Party, they are often required to attempt to agree their costs to bring the matter to a smooth conclusion.

Fixed Costs

Practice Direction 19B supplementing Part 19 of the COP Rules 2017 sets out fixed costs that may be claimed by Solicitors and office holders in public authorities acting as Deputy for the Protected Party. However, the Court has the discretion to apply the rules to other professionals such as accountants and case managers acting as Deputy. The general rule is that the costs of the proceedings should be paid by the pp1 or their estate unless a Court Order provides for an alternative. Where a Court Order or direction provides for a detailed assessment, the Deputy can choose to take fixed costs in lieu.

Detailed Assessment

Professional Deputies should lodge a request for Detailed Assessment with the SCCO by way of N258b form. Accompanied by:

  1. the Bill of Costs
  2. the document giving right to Detailed Assessment
  3. copies of the Court Orders
  4. any fee notes of Counsel and/or expert as claimed within in the bill
  5. Written evidence of any other disbursement exceeding £500
  6. The relevant lodgement fee (currently £225.00 for detailed bills over £3,000, £115.00 for short form bills under £3,000)
  7. A copy of the OPG105 relating to the time period claimed within the Bill of Costs

In cases with costs exceeding £100,000.00, they are to be dealt with by a Master, and the relevant papers in support of the bill must only be lodged when requested.

It should be noted that, unlike litigation costs, a Court of Protection bill MUST NOT be filed electronically.

Once the assessment has taken place, you have 14 days from the date of receipt of the assessed bill to raise an appeal if dissatisfied. If following the review, you remain dissatisfied at the outcome, the SCCO will arrange a date for a oral hearing before a Master. In practice this is usually by telephone or letter.

After completion of the assessment, the Professional Deputy must complete the bill summary on the bill certifying the castings as correct, returning the original bill to the SCCO to enable them to issue the Final Costs Certificate, which is your authority to be paid.

Payments on account

Section 6 of the COP Practice Direction 19B states that Professional Deputies who elect for detailed assessment of the annual management charges can take payments on account for the first, second and third quarters of the year which are both proportionate and reasonable to the size of the estate. The interim bills must not exceed 25% of the estimated charges, so no more than 75% for the annum. The details of the interim bills received must be outlined within the Bill of Costs submitted to the SCCO.

If you require any further information, please contact bridie.sanderson@clarionsolicitors.com or call me on 0113 336 3350

THIRD PARTY FUNDING – A VIABLE OPTION FOR 21st CENTURY LITIGATION (Part 1)

This series of blog articles will address the increasing viability of third party funding as an alternative to traditional litigation funding methods. It will look at how the law has developed historically and how the Court now approaches third party funding and the potential liability of third party funders.

The first part of this series will explore how the Court’s attitude to third party funding has changed significantly from the 19th through to the 21st Century.

Champerty and Maintenance

The historic position taken by the Court in respect of third party funding was that it was illegal and tortious. Two offences had developed through the common law: champerty and maintenance.

Champerty referred to when a person who did not have a legal interest in the matter provided financial assistance to litigation in order to receive a share of the profits.

Maintenance was the procurement of direct or indirect financial assistance from another in order to carry on, or defend, proceedings without lawful justification (British Cash & Parcel Conveyors v Lamson Store Service Co [1908]).

Therefore, the default position was that such agreements, which would be considered third party funding arrangements today, would be considered illegal, tortious and unenforceable. However, even at the turn of the 20th Century, the courts were willing to find such arrangements enforceable as a matter of public policy. For instance, in insolvency proceedings, which by their very nature meant that one party would need financial assistance in order to carry on or defend proceedings (Seear v Lawson (1880)), the Court found that a third party funding agreement was enforceable.

Abolition

The default position changed with the enactment of the Criminal Law Act 1967 (CLA 1967). S.13 CLA 1967 abolished the offences and torts of champerty and maintenance. S.14 CLA 1967 changed the approach of the test, which now started from the presumption that such agreements were enforceable, unless there was a valid reason as a matter of public policy.

Comment

Statutory intervention was important to provide additional certainty and security to parties wishing to enter into third party funding arrangements. However, such an approach cannot be taken for granted outside of the jurisdiction of England and Wales.

Recently, the Supreme Court in Ireland, in the matter of Persona Digital Telephony Ltd v The Minister for Public Enterprise (2017), found a third party funding agreement to be unlawful. This is because the offences of Champerty and Maintenance have not been abolished by statute In Ireland. The Court felt that it is consequentially bound to find such agreements unlawful and that any change of approach was within the remit of the Legislator, not the Judiciary.

In the next part of the series…

The next blog will take a look at how the Court has begun to develop the law in respect of third party funding, with a look at the decision in Factortame Ltd v Secretary of State for Transport, Local Government and the Regions No.8 [2002].

This blog was prepared by Kris Kilsby who is an Associate Costs Lawyer at Clarion and part of the Costs Litigation Funding Team.  Kris can be contacted at kris.kilsby@clarionsolicitors.com or on 0113 227 3628.