Tag: costs lawyer leeds

Third Party Funders – Exposure to Legal Costs

Andrew McAulayLeave a comment

The Court of Appeal has recently handed down its Judgment in the case of Chapelgate Credit Opportunity Master Fund Limited -v- Money and Others [2019], which was an eagerly awaited decision for litigation funders. The outcome of the case is as follows:

The Arkin Cap should be considered when determining costs, but it is not binding on the Courts.

Paragraph 38:

“……..I do not consider that the Arkin approach represents a binding rule. Judges, as it seems to me, retain a discretion and, depending on the facts, may consider it appropriate to take into account matters other than the extent of the funder’s funding and not to limit the funder’s liability to the amount of that funding”

For those unfamiliar with litigation funding and the Arkin Cap, this arises out of the Court of Appeal decision in Arkin -v- Borchard Lines Limited 2005. In that case, a company which had provided third party funding for an unsuccessful claim was ordered to pay the costs of the winning party, but only to the extent of the funding provided. The Arkin Cap has been a principle which has been regularly applied by the Courts since. The decision in Chapelgate will cause uncertainty for litigation funders, in a world which has significantly evolved since 2005.

The Judgment increases the requirement for litigation funders to properly engage costs lawyers. Funders should be engaging costs lawyers to scrutinise a law firm’s legal budget when they are applying for funding. Costs lawyers should also be retained to monitor costs versus budget (including the opponent’s costs) and to advise on costs management orders.

Costs management orders provide more certainty on detailed assessment (unless the order for costs is made on the indemnity basis). Such measures will ensure that the funder has the maximum control possible on both the costs of the firm they are funding and the opponent’s legal costs; the latter being important in the event that an adverse order for costs is made.


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

Estimating your legal costs – Why?

Anna LockyerLeave a comment

Not only is it prudent and good practice, but it is essential that clients are regularly provided with estimates of their potential legal costs and are appraised in that regard.

The SRA require lawyers to provide their clients with the best possible information regarding the cost of the matter. This should be provided at the outset and reviewed and updated as and when necessary. Estimates of costs up to a particular stage are inadequate to meet the SRA requirements, an estimate of costs up to the conclusion of the claim is required.

The SRA requires lawyers at the outset to analyse whether pursuing the claim is commercially viable. Does the outcome justify the risk of having to pay someone else’s fees? So, an explanation needs to be given to the client of the likely costs of the claim, to include both party’s costs and whether the claim is worth pursuing in view of that. This should be reviewed throughout the lifetime of the claim and updated if appropriate. The reasoning is that the client should be able to make a fully informed decision when deciding to pursue litigation, a partial estimate does not allow this.

This is good practice in any event as it ensures that your client’s expectations are managed and will lead to no surprises. This transparency can lead to less disputes regarding the level of fees and the avoidance of any complaints in law firms which centre around fees.

The type or complexity of the claim will really depend on how sophisticated the estimate will need to be, however scoping the work properly will alleviate any scope creep.

Moreover, preparing an estimate of how much you consider that the claim will cost will assist regarding your approach, a more informed decision can be made regarding this. Providing this information does show confidence in pricing and in any event this more sophisticated pricing is being seen in the marketplace.

In the event of scope creep, a detailed estimate can assist and justify those further costs that are associated with the additional work. It is wise to keep your client informed if any of the out of scope work is not recoverable from the other side, failure to do so may put you at risk regarding those additional costs.

In addition to identifying out of scope work, it is sensible to monitor your estimate and advise the client if the estimate is subject to change. If a detailed estimate has been provided at the outset it will be much easier to explain why the estimate requires increasing.

The draconian sanctions and restrictions surrounding budgets do not apply to estimates, the estimates are used as a yardstick to measure reasonableness. It is not intended to be straight jacket, that said, they do need to be prepared with care because if the client can show reliance and the matter proceeds to solicitor and own client assessment then your costs are at risk of a reduction as a result of that reliance.

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

The latest Precedent H guidance notes

Anna LockyerLeave a comment

The precedent H guidance notes have never aligned with the precedent S guidance notes (Phases and Tasks Reference and Lookup table in Precedent S (bill of costs)) until the update to the precedent H guidance notes which was made last month, this update has addressed some of those discrepancies.

Please find below the amendments that have been made to the guidance notes:

Pre-action

The precedent H guidance notes states that settlement discussions, advising on settlement and Part 36 offers before proceedings were issued are to be included in the Preaction phase. However, in the Precedent S guidance these discussions are included in the ADR/Settlement phase (task “Other Settlement Matters”) . The precedent H guidance notes must be followed therefore any preaction settlement discussions should be included in the preaction phase. 

Issue/statements of case

The precedent H guidance notes have been amended to include “amendments to statements of case” in this phase, the previous guidance stated that these should be excluded from this phase. This amendment has resulted in alignment with the Precedent S guidance. 

CMC

The precedent H guidance notes have been amended to include any further CMCs that have been built into the proposed directions order whereas previously the notes stated that any additional CMCs were not to be included in this phase. The position remains regarding any estimated CMCs that have not been proposed in the directions order, these are to be included as a contingent cost. Any disclosure work, i.e. list of disclosure issues, EDQ  should be included in the disclosure phase.  

Budget

The costs in relation to this phase includes inconsistencies which present numerous difficulties. The Precedent H Guidance Notes includes “correspondence with opponent to agree directions and budgets, where possible”, and “preparation for, and attendance at, the CMC”. The same applies in relation to the PTR phase, which includes “preparation of updated costs budgets and reviewing opponent’s budget”, “correspondence with opponent to agree directions and costs budgets, if possible” and “preparation for and attendance at the PTR”. While the precedent H guidance note specifically excludes preparation of the costs budget for the first CMC, it doesn’t specifically exclude preparation of Precedent R. The Precedent S description of this task is “work on budgeting between the parties following initial completion of the first budget, including the monitoring of costs incurred against the budget and any applications for variation of the budget” –  it doesn’t mention the drafting of Precedent R and seems to relate to work post CMC.

Furthermore, in para 7.2 of PD3E the 2% cap relates to all recoverable costs of the budgeting and costs management process other than the recoverable costs of initially completing the Precedent H. If some costs budgeting items are included in the CMC and PTR phases (i.e. following the Precedent H Guidance Note), practically how is the 2% figure on the front page of Precedent H calculated? Should it include the budgeting items which appear in the CMC and PTR phases of Precedent H, or is it exclusive of them? And, what exactly is meant by “budget process” in relation to this 2% cap?

Unfortunately there is no guidance regarding the budget process or “associated material” that is referred to in the guidance notes – does this include composite summaries, breakdowns of costs?

One solution for this phase is to time record in line with the precedent S guidance notes and then when it comes to preparing the budget assess what aspects of the % cap belongs in the CCMC stage. If the time is recorded as CCMC it is a more onerous task to ascertain what element of the CCMC phase is relevant to the % cap.

Trial: The guidance note has been amended to now include counsel’s brief fee in the trial preparation phase rather than the trial phase. 

Settlement phase: The precedent H guidance note previously excluded mediation from this phase, this has now been amended to include mediation. 

Definition of budgeted and incurred costs – CPR 3.15 and PD 3E para 7.4 Incurred costs are now all costs incurred up to and including the date of the first costs management order, unless otherwise ordered. Budgeted costs are all costs to be incurred after the date of the first costs management order.

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

Interesting comments from the MXX v United Lincolnshire NHS Trust case

Andrew McAulayLeave a comment

I posted a blog at the end of June about the case of MXX v United Lincolnshire NHS Trust (2018) (please follow this link to read the blog https://clarionlegalcosts.com/2019/06/25/ensure-consistency-between-your-costs-budget-and-bill-of-costs/).

In the Judgment of Master Rowley, there are some interesting points which I felt were appropriate to cite and share through this separate blog. Those points are as follows:

Master Rowley found that the inflated incurred costs amounted to improper conduct and said the following at paragraphs 57 and 58:

“57.      The need to comply with the indemnity principle must be on page 1 of any introduction to the law of costs. It is fundamental throughout the issues regarding what sums can be claimed from one party by another. It is, or should be, engrained in everyone dealing with solicitor’s costs. Whether it is a detailed bill of costs that is being produced, a summary assessment schedule or even simply a breakdown in a letter being provided to the opponent, it is imperative that the costs set out as being payable by the opponent do not exceed the sums payable by the client to their solicitor. The case of Harold v Smith (1850) 5 H. & N. 381 is more than 150 years old but it remains correct that the sum claimed should not be a punishment to an opponent nor a bonus to the client (or solicitor) which is the effect of claiming more costs from the opponent than are payable by the client.

  1. I do not accept that the statement of truth for Precedent H is intended to be a composite statement or one akin to signing an estimate. If that was so, in my Judgement, the Statement would simply say that the document was a fair and accurate estimate of the costs which it would be reasonable and proportionate for the client to incur in litigation. But that is not what it says. It specifically refers to incurred and estimated costs separately and it seems to me that a solicitor signing a Statement of Truth has to consider whether the incurred costs figure is fair and accurate separately from whether the figures for estimated costs are fair and accurate. There is absolutely no reason why the incurred costs figure should not be accurate. There are many reasons to understand that the estimated costs figure is no more than educated guesswork. The change in the hourly rates for future work identified by Irwin Mitchell is one of those reasons.”The importance of the indemnity principle (which I have blogged on previously and you can find here https://clarionlegalcosts.com/2019/02/12/the-indemnity-principle-what-is-it-is-it-important/) is clearly set out above at paragraph 57 of the Judgment.

    At paragraph 58, it is clear that the signature of a Precedent H should not be taken lightly, it is a statement of truth and is not akin to signing an estimate, the signature on the Precedent H is not intended to be a composite statement. Paragraph 58 also indicates that the courts do not expect the incurred costs to be calculated incorrectly because of the inclusion of any incorrect hourly rate/s. However, the courts would be open to the use of composite rates for estimated costs given that hourly rates could clearly change (both upwards and downwards) over time. If you consider this applies to any budget that you are preparing, then make this clear in the assumptions to your budget, this will provide you with protection on detailed assessment and ensure transparency with the court and your opponent.

In the Judgment, Master Rowley did not find that the significant difference between the costs claimed in the bill and those in the costs budget (144-147 hours) amounted to improper conduct. Master Rowley said the following:

“61.      Similarly, I do not think that the claimant’s approach to the amount of hours claimed in the budget and subsequently in the bill founds any significant criticism. My understanding of the limit of 1% of the total budget for the preparation of the precedent H was originally allowed for on the basis that clients would have been billed for the incurred costs by that point and so relatively little work would be needed to consider the incurred costs. If that is correct, it takes no account of matters dealt with under contingency arrangements such as a CFA when no bill will have been rendered by the time the Precedent H is prepared.

  1. It seems to me to be unrealistic to expect a party to vet the time recorded on a line by line basis in the manner suggested by the Defendant here. The bill of costs has taken nearly 100 hours to prepare and that involves a considerable greater sum than would be allowed by 1% of the budget. Whilst I accept Mr Bacon’s comment that the extent of the remuneration is not the touchstone for the effort that should be involved, it does seem to me to be a pointer as to the expectation of the time to be spent in preparing a budget. Most of the time will be spent in the estimation of future costs and much less will be spent in relation to incurred costs. Including items which are unlikely to be recoverable between the parties’ assessment runs a risk of the budgeting judge concluding that those costs are high and commenting about this in the CMO.
  2. I do not think that it can be said to be unreasonable for a solicitor to include in the budget, the time that the various fee earners have recorded on their system as being sums which the client is potentially liable to pay.
  3. Similarly, having considered that time to be vulnerable to challenge on a between the parties’ assessment, it can only be reasonable for the drafter of the bill of costs to exclude such time. Where, as here, the time is extensive, the incurred costs actually claimed between the parties will be significantly reduced. But that does not necessarily mean that something improper has occurred when the budget was prepared, in my view.”

Personally, whilst I cannot say that the discrepancy in time was improper, I struggle to accept the Master’s decision that there can be such a large discrepancy on detailed assessment (because the bill drafter excludes time when drafting the bill of costs). It is important that incurred costs are broadly correct in terms of time incurred and absolutely correct in terms of hourly rates. If not, it creates an incorrect starting point on detailed assessment and questions the signature of the costs budget. Furthermore, 1% can be a generous amount when preparing a high value costs budget (A £10 million budget would potentially allow a charge of £100,000 to prepare the costs budget).

The decision of the Master also troubles me for the following reasons:

  1. It is possible to prepare a budget as a bill of costs i.e. prepare a bill of costs which can be converted into a costs budget for the CCMC. Whilst this incurs greater cost, it effectively means that the costs are front-loaded so that the costs for drafting the bill at the conclusion of the matter are much lower.
  2. Lawyers have historically struggled with recording their time (and continue to struggle) in a way that reduces the time required to draft a bill of costs, not to mention time recording by using the phase, task and activity codes. It therefore surprises me that the Master seemed to accept an approach of calculating incurred costs by simply ‘lifting’ time from a time recording ledger. To my mind, time needs to be vetted correctly and incurred costs should not change significantly between those stated in the costs budget and those stated in the bill of costs.
  3. Where a costs management order has been made and the matter proceeds to a JSM or mediation, it can be possible for the parties to agree costs at the JSM or mediation based on the costs management order (Claimant providing some very basic updated figures). If the budget was not based on the accuracy expected within a bill of costs, then any breach of the indemnity principle would not be identified and there is a real risk that costs irrecoverable inter partes would potentially be recovered from the paying party.
  4. Furthermore, the Master’s approach is in real contradiction to the requirements of a document that contains a statement of truth, of which the budget is one of those documents.It is therefore imperative that the incurred costs figure is not only calculated correctly in terms of the hourly rate but is calculated correctly (with no significant errors) in relation to inter partes incurred costs. When litigating, each party should be able to proceed on the basis that the incurred costs included in the budget are correct and can be relied upon. Whilst the Claimant substantially reduced the incurred costs in the MXX case (which was to the benefit of the Defendant), it does raise a real question over the costs management process if a party can change their incurred costs figure, which in this instance was by nearly 150 hours.

The aim of this blog was to share some of the wider points which arise from the Judgment of Master Rowley. I would be interested to hear any other people’s views and opinions which can be shared through this blog.

Please note that the case was the subject of an Appeal and I will blog separately (and shortly) in relation to the outcome of the Appeal. The outcome does not impact the points raised in this blog.

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

THIRD PARTY FUNDING – A VIABLE OPTION FOR 21ST CENTURY LITIGATION (Part 3)

Joanne ChaseLeave a comment

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 third part of this series will explore the liability of third party funders in the matter of Arkin v Borchard Lines Ltd (Nos 2 and 3) [2005] 1 WLR 3055.

Background

This matter related to an unsuccessful action in respect of anti-competitive practices which resulted in the collapse of the Claimant’s company, and which severely affected his finances. The Claimant entered into an agreement with a professional litigation funding company (MPC) to provide funding for the expert evidence and litigation support services for the expert. MPC did not agree to pay any of the Defendants’ costs or to provide finances for an ATE premium due to the significant amount of the premiums available.

The claim was unsuccessful at Trial and the Claimant was ordered to pay the Defendants’ costs. The Defendants’ then sought a non-party cost order against MPC for the entirety of the Defendants’ entitlement to costs. However, this was refused at first instance.

The Defendants subsequently appealed the decision.

Decision

The Court of Appeal considered the balance that needed to be struck between the access to justice provided by third party funding and the general rule that costs should follow the event. It was considered that a funder who purchased a stake in an action should then be protected from all liability of the opposing party’s costs in the event the claim fails.

The Court of Appeal commended the following approach:

‘a professional funder, who finances part of a Claimant’s costs of litigation, should be potentially liable for the costs of the opposing party to the extent of the funding provided’

This has become known as the Arkin cap. This approach has provided clarity and transparency to funders as they can now quantify their liability should the matter fail.

Whilst the cap has been readily adopted by the funding industry, it has also not been without criticism. The main criticism being that the cap creates an uneven playing field in favour of the third party funder as they will only ever be liable for the amount of their investment, whilst the opposing party would be liable for all of the costs of the funded party.

In the next part of the series…

The next blog in this series will take a look at the recent decision which has built upon the ‘Arkin cap’ in the matter of Davey v Money [2019] EWHC 997 (Ch).


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.

Ensure consistency between your Costs Budget and Bill of Costs

Andrew McAulay1 Comment

Consistency and a true connection between Costs Management and Detailed Assessment is essential for the successful recovery of costs on Detailed Assessment.

If a costs budget is prepared incorrectly, which creates a disconnection between the costs budget and bill of costs, then you can expect a costs law obstacle course and a heavy migraine on detailed assessment.

The case of MXX -v- United Lincolnshire NHS Trust [2018] is a great example, which is summarised below:

Background, Retainer and Hourly Rates

The Claimant instructed her Solicitors in 2012 and the matter was funded by way of a Conditional Fee agreement with the rate for the conducting lawyer (Grade A) agreed at £335 per hour.

In August 2013 the rate for the conducting lawyer increased to £460 per hour (this was an error). In January 2015 the hourly rate was reduced to £350 (effective from May 2014). It was increased to £360 in 2015 and £365 in 2016.

The substantive proceedings related to a high value injury claim, with quantification being resolved in November 2016. The claim was subject to a Costs Management Order dated 2 March 2015.

Detailed Assessment Proceedings were commenced in March 2017 and the bill of costs totalled circa. £1.3 million.

Background to the Costs Management Order

At the CCMC, the District Judge dealt with estimated costs and correctly stated that the incurred costs were for detailed assessment. The hourly rate included in the costs budget for the conducting lawyer was £465 per hour.

In respect of the estimated costs, the Judge indicated a composite rate of £280 per hour, which the parties then used to agree the estimated costs for each phase.

Discrepancies between Budget and Bill

Following the commencement of detailed assessment proceedings, the Defendant compared the costs budget (Costs Management Order) with the bill of costs and noted the following discrepancies:

  • Substantial differences in relation to hourly rates.The hourly rate included in the costs budget for the conducting fee earner was £465.00 per hour, but in the bill of costs hourly rates of £335.00 and £350.00 were claimed; and
  • The bill of costs included roughly 144 to 147 hours less time for incurred costs than the costs budget.

The Defendant had legitimate concerns and made an Application for an Order pursuant to CPR 44.11, arising out of what the Defendant described as a mis-certification of the Claimant’s costs budget in the substantive proceedings.

Decision

It is well worthwhile reading the Judgment and the very articulate submissions advanced by both parties. This will help you to fully understand the decision, which was as follows:

  1. The Master did not find that the errors regarding the rates for the conducting fee earner (in respect of estimated costs) or the significant time discrepancies in relation to the time included in the costs budget and the bill of costs amounted to improper conduct.
  1. However, the Master did find that there was improper conduct in relation to the inflated rate/s claimed within the budget (as incurred costs).The Master had previously dealt with a case with some similar issues (Tucker v Griffiths & Hampshire Hospitals NHS Trust 2017) and decided to apply the same sanction in this case as he did in that case, which was to disallow the items claimed in the bill of costs which related to the Costs Management Order.The Defendant had submitted that the Claimant’s bill of costs should be reduced by 75% due to the errors, but the Master said:“Whilst those behind the Defendant in both cases may have considered the sanction in Tucker to be insufficient, it seemed to me to be the only appropriate sanction. There is nothing wrong with the Bill in terms of the indemnity principle. The problem lies with the budget. I consider it to be entirely appropriate to impose a sanction in respect of the work which caused the problem.That work is the non-phase time spent creating and maintaining the budget. It would be wrong in my view retrospectively to disallow some of the budget itself”.

    The decision in this case (and in the case of Tucker) are both cases which were before Master Rowley at the Senior Courts Costs Office. Another Court/Judge could reach a different conclusion and I certainly expect to see this issue again before the Courts for the following reasons:

Lawyers do not time record consistently within their respective departments and firms, which means that discrepancies between budgets and bills will continue to regularly occur and a different Judge/Master may well adopt a more stringent approach;

Costs Budgets are regularly being prepared by non-specialists and prepared very “late in the day”, which leads to errors; and

There is a misconception that the costs budget is a more flexible document than a bill of costs i.e. the statement of truth to a bill of costs carries more weight than a statement of truth to a bill of costs.It is very important that all lawyers (and law firms) approach Costs Management consistently and understand the importance it has on detailed assessment. If that is done, then it leads to a consistent bill of costs, less obstacles on detailed assessment and no migraine – but maybe a headache!

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 at mcaulay@clarionsolicitors.com or on 0113 336 3334

NB There are some other interesting points and views in the Judgment which I will cover in a further blog.

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

Joanne ChaseLeave a comment

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.

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

Joanne ChaseLeave a comment

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.

 

Costs Capping Pilot Scheme

Andrew McAulayLeave a comment

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.

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

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

Joanne ChaseLeave a comment

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.