Tag: costs lawyer

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

Kris KilsbyLeave 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.

 

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Costs Capping Pilot Scheme

Sue FoxLeave 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.

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

jochaseLeave 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.

Changes in relation to CPR Practice Direction 21

andrewmcaulayLeave a comment

From 6 April 2019, Practice Direction 21 of the CPR will be amended to make it compulsory for a bill of costs or a “informal breakdown in the form of a schedule” to be prepared and filed with any application for the approval of payment of expenses from the damages of a protected party or minor.

Many cases now settle by way of a JSM or Mediation. We recommend preparing a Bill of Costs for the JSM or Mediation in order to:

  1. Try and reach settlement of costs at the ADR meeting (to avoid the time and expense of detailed assessment);
  2. If a settlement on costs cannot be achieved, then to obtain a healthy payment on account; and
  3. Proceed swiftly post settlement with any application under CPR 21 (where applicable)The bill or schedule should make a clear distinction between inter partes and solicitor/own client costs. In terms of a schedule, we recommend preparing a statement of costs for summary assessment (Form N260 or N260B) which can be adapted, where appropriate.The bill or schedule will enable the Judge at the approval hearing to properly determine the appropriate amount to be deducted from damages, which may include (in terms of a Solicitor) a success fee, ATE insurance premium and any inter partes costs shortfall (if claimed).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 andrew.mcaulay@clarionsolcitors.com or on 0113 336 3334.

 

Hourly Rates – How far can you depart from the Guideline Hourly Rates?

Kris KilsbyLeave a comment

The case of Sir Philip Green & Ors v Telegraph Media Group Limited [2019] EWHC 96 (QB)

Background

This matter revolved around the Claimant and two companies seeking an injunction against the Defendant to restrain them from publishing information about the Claimant. The information related to the alleged misconduct of the Claimants which had been subject to non-disclosure agreements.

A number of pre-trial applications were addressed by Warby J, including the issue of costs budgeting . Given the time-sensitive nature of proceedings, the issue of costs budgeting could only be addressed two weeks before trial.

The hourly rates claimed by the Claimant’s City of London-based solicitors ranged from £190 (for a Grade D trainee) to £690 (for a Grade A lawyer – a Partner). Other Partners’ rates claimed by the Claimants were between £510 and £635 per hour. Warby J noted that all these figures were well in excess of the guideline rates, which are £126 for Grade D and £409 for Grade A (emphasis added).

Warby J recognised that, due to the late stage of costs budgeting, the majority of costs were incurred, and as such he was restricted from budgeting incurred costs due to CPR PD 3E 7.4, and was limited to only making comments.

Warby J said he did not consider that hourly rates of more than £550 could be justified, and proportionate reductions should also be made to the lower Partners’ rates.

The Judge added: ‘Of course, fees in excess of the guidelines can be and often are allowed, and in this case the defendants (who themselves claim up to £450 per hour) and I both accept that fees above those rates are justified. But not to the extent of the differences here.’

Comment

The outcome of this hearing raises two interesting topics for discussion: the level of hourly rates in general, and, the approach the Court can take in respect of hourly rates in costs management.

Hourly rates in general

As a starting point, and as referenced by Warby J indirectly, it is well accepted that Guideline Hourly Rates are just that, a guideline. They are suitable for carrying out a summary assessment and can be a starting position for detailed assessment. Following this , the Court will take into account both CPR 44.3(5), and the 8 ‘pillars of wisdom’ contained within CPR 44.4(3), when considering whether costs are proportionate and reasonable in amount (when assessing on the standard basis). These factors can be used to support an enhancement, for instance, given the complexity of the matter, or the conduct of parties.

The Court has recently commented further on a case which claimed very high hourly rates, far in excess of the Guideline Hourly Rates. In the matter of Dana Gas PJSC v Dana Gas Sukuk Ltd & Ors [2018] EWHC 332 (Comm), the Court found that hourly rates in excess of £900 were unreasonable, even in a matter which was factually/legally complex, had an international element and was of significant value. The Court considered that hourly rates of half that amount (hence being very similar to the rates referred to as reasonable by Warby J in the case of Sir Philip Green & Ors v Telegraph Media Group Limited [2019] EWHC 96 (QB)), were considered more reasonable to obtain competent representation in such a case.

There is technically no limit on the hourly rates which can be charged by a firm of solicitors, so long as the client agrees to pay them, but the Court is now taking a much tougher stance in respect of how much of that hourly rate can be recovered inter partes. This leaves the firm in an unenviable position: either write off those costs claimed, or, bill the client for the shortfall.

Perhaps this was a factor in Sir Philip deciding to abandon the claim?

Budgeting

It is well established that the Court must walk a tightrope when addressing hourly rates while setting a budget. The Court can have regard to the constituent elements of the budget, including hourly rates (CPR PD 3E 7.3), but the Court must not over step the mark and proceed to fix or approve hourly rates (CPR PD 3E 7.10). Warby J’s comments appear to strike the right balance between the two. Unfortunately, shortly after the hearing, the Claimants abandoned the claim, and we will therefore not see at detailed assessment stage how much weight is given to comments made at costs management stage.

The interplay between hourly rates, costs budgeting and detailed assessment is an interesting one, and a topic which will, no doubt, continue to develop as more and more budgeted cases proceed to detailed assessment.


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.

 

The new statement of costs goes live on 1 April 2019

Sue FoxLeave a comment

I have further updates regarding the new statement of costs following on from our January newsletter. The pilot scheme will operate from 1 April 2019 to 31 March 2021 and will apply to all claims in which costs are to be summarily assessed, whenever they were commenced. There will be two statements of costs which may be used whilst the scheme is in force; the N260A when the costs have been incurred up to an interim application and the N260B when the costs have been incurred up to trial. The N260 will be available in paper/pdf form and in electronic form. Parties are able to use the paper/pdf form only, however if they use the electronic spreadsheet form this must be filed and served in paper form and electronic means. The format has changed and the document schedule now requires the time entries to be dated. 

In cases which have been subject to a costs management order, any party filing the form N260B must also file and serve the precedent Q (which is a summary that details any overspend/underspend for each phase of the budget). Now that the court can identify overspends in the budget, will this additional layer of information result in more costs being summarily assessed and less detailed assessments? Will this assist with applications for payments on account? Will we see the N260B being used at trials that are listed for more than one day, to demonstrate that there hasn’t been any overspend in the budget and resultantly the budgeted costs being allowed in full? Possibly, but only if the incurred costs are identified separately to the estimated costs, please see my earlier blog for a more detailed analysis in that regard.

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.

 

A new year, a new statement of costs. But why stop at that? A few intended changes to Costs Management too

Sue FoxLeave a comment

The CPR committee have been hard at work again coming up with solutions to the problems that have been encountered by the legal profession since the Jackson reforms nearly 6 years ago.  Following the scratching of many heads, a few of those creases have been ironed out and the following proposals have been made:

Statements of costs

A voluntary 2 year pilot scheme for the new statement of costs will be implemented, starting from 1 April 2019.

The current proposals are for two new forms of costs statements, namely N260A and N260B which may be used for summary assessment. These new forms will  include a VAT declaration and the forms will now include the signature of a legal representative, which is in line with the rules, as opposed to a company partner. The Form N260A will cross refer to the document schedule in the summary. No model forms are available yet.

Master Howarth has suggested that the precedent Q, the document that identifies whether there has been an under or overspend in a phase of a budget, is incorporated into the statement of costs. This will create transparency at the summary assessment stage regarding the amount incurred in comparison to the approved budget – supporting the need for a well drafted budget.

The committee is to give consideration to lower value cases and the relevance of statements of costs for those cases where there will never be a summary assessment, as there was concern regarding the wasted costs incurred in those instances.

Costs management

The precedent H costs budget will remain the same, but there will be some adjustments to the guidance notes to align costs budgeting with the new electronic bill approach.

There has been many a debate regarding what date the incurred costs should be included up to in the budget and there is tension in the wording of the rules in that regard. The committee have recognised this and have debated the very same problem. They have understood that differing practices appear to be in place and that overall there is value in a consistent approach. It has been advised that this issue should be resolved as part of a future review of the practice direction.

There will be some adjustments to the precedent R, however that is the only guidance that has been provided at this stage, so the amendments remain unknown for the time being.

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.