Tag: Legal

No Fixed Costs until October 2023

Joanne ChaseLeave a comment

The introduction of Fixed Costs in most cases with a value up to £100,000, which was originally expected in April 2023 has now been pushed back to October. Speaking to the Civil Justice Council on 18 November 2022 Lord Bellamy said:-

We’re very conscious of how important it is to get this right… a little more time… will give the sector more time to adjust

Lord Bellamy – Civil Justice council, 18 November 2022

Fixed costs are controversial amongst some in the legal sector. Lord Bellamy accepted that fixed costs required a “complex set of rules” and it “hasn’t been easy”. Many practitioners remain skeptical that fixed costs as currently proposed are workable. In particular, some have pointed out continuing satellite litigation in relation to the existing Fixed Costs regimes in RTA and EL/PL claims as evidence that Fixed Costs do not reduce the volume of litigation.

Whilst some may breathe a sigh of relief, this is only a delay. Lawyers should use this time to prepare and test their business models to ensure that they are robust. There should be particular emphasis on reviewing client contracts and retainers to reflect the changing market and the Belsner judgment.

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com

Client not bound to consider solicitor’s interests under a CFA when settling – Candey -v- Bosheh

Joanne ChaseLeave a comment

In Candey Limited -v- Bosheh & Salfiti [2022] EWCA Civ 1103 the Court of Appeal held that a client is not bound to consider their solicitor’s interests when settling a claim.

Background

In summary, Bosheh (the client, “C”) entered into a CFA with Candey Limited (the solicitor, “Sol”). The relevant term of the CFA was “…if… we obtain an order or agreement that our hourly rate costs… be paid by your opponent then we shall be entitled to recover those costs from your opponent, and you are always liable to pay these costs to us to the extent that we recover them from your Opponent. You will always seek to recover costs by order or agreement”. During the course of the primary litigation Sol received an offer from their opponent by which C would receive up to £1m, and that neither party would pay the other’s costs.

Sol advised C that any money paid to C under the terms of that settlement would go to Sol in payment of its legal fees. C did not accept that this was a correct interpretation of the CFA terms. The claim was ultimately settled on a drop hands basis.

Following settlement, Sol terminated its retainer with C and commenced proceedings alleging inter alia breach of its duty of good faith in failing to seek a settlement on terms that Sol would be paid.

Judgment

Finding for C, the High Court found that a retainer between a solicitor and client is not subject to a duty of good faith (para 84). This finding was upheld by the Court of Appeal which added “There is no authority that supports the proposition that, when retaining a solicitor to act for him or her, the client owed that solicitor a duty of good faith. The absence of authority is perhaps unsurprising: it is a startling concept. Many would say that, if a duty of good faith was applicable at all, it would arise the other way round and be owed by the solicitor to the client” The Court continued at paragraphs 53 – 54 that:–

  1. First, Mr Bompas’ answers demonstrate the potential conflict of interest that can arise under a CFA between the client and the solicitor where the terms are drafted in such a way that the solicitor’s costs recovery is itself dependent on the client recovering something – anything – from the proceedings… Such conflicts cannot be resolved by an implied duty owed by the client to consider the solicitor’s financial interests rather than his own; it is for the solicitor to ensure that such conflicts do not arise in the first place.
  1. Secondly, it is self-evident that, irrespective of any duty of good faith, the client cannot be in breach because he or she chooses a settlement which they perceive to be as good as or better for them than the one that obviously suits the solicitor. Any other conclusion would fundamentally alter the solicitor/client relationship. In the present case, the Boshehs were quite entitled to conclude that a ‘drop hands’ settlement was certainly not a substantially less advantageous (and arguably a better) deal than the earlier proposal made by the Sheikh.”

Summary

The judgment highlights the risks to solicitors acting under a CFA. Solicitors should check their client retainers to ensure that they minimise the risk that a client may settle the proceedings on terms that prevent them being paid. Whilst it is difficult to imagine wording which would provide complete protection, a clause within the CFA to the effect that if the claim is settled on terms where there is no specific provision for costs, the solicitor will be entitled to be paid their costs capped at a percentage of the settlement sum agreed.

Should you have any questions, you can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Compulsory mediation could be extended to all claims in the County Court

Joanne ChaseLeave a comment

Under current government proposals mediation will be compulsory in all claims allocated to the small claims track. However, it is also considering whether to extend that requirement to all claims in the County Court. You can consider the proposal and have your say via the Consultation Paper. 

The Proposals

The proposals seek to tackle low levels of uptake of mediation and drive a culture shift in attitudes to litigation. The paper makes it clear that there will be no requirement to settle. Furthermore, as the current small claims mediation service (SCMS) is court sponsored and therefore costs neutral to the parties, it will not be an “onerous” obligation.

In reality, costs of mediation will be passed on to all court users through court fees. It will only be costs neutral if it succeeds in reducing the number of cases going to trial. 

The Role of Mediation in Settlement

Statistics show that mediation has a high success rate (up to 86%). But we should be wary of the assumption that mandatory referral to mediation will reduce the number of cases going to court by a similar amount. About 96% of civil cases in England settled outside court. However, 1.2 million claims were issued in the Civil Courts in 2020 but in the same year there were only 16,500 mediations (1.38%). This means that at least 94.62% of all of all claims settle other than by mediation.

It is questionable what benefit mandatory mediation will bring to the vast majority of cases which would have settled anyway. Particularly if court fees increase to fund it. And in those cases where agreement is not possible mandatory mediation will simply be a box ticking exercise.

The Report gives the mandatory mediation scheme in Ontario, Canada as an example of how mandatory mediation can be successful. But a 2001 report showed that mandatory mediation resulted in “full settlement of 40% of cases earlier in the process”. Overall, around 98% of cases settle before trial in Ontario.

Summary

Mediation is a useful tool for parties who want to settle. Indeed, it can force parties to review the weaknesses of their case and make settlement more likely. However, making it mandatory it is unlikely to make a significant difference to the number of cases proceeding to trial and any benefits will probably be outweighed by the costs.

You can have your say by visiting the Consultation, which closes on 4 October 2022.

Should you have any questions, you can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Multiple Claimants under New Fixed Costs rules

Joanne ChaseLeave a comment

The Fixed Recoverable Cost Consultation Paper published in 2019 proposed that in claims with multiple claimants “…where the cause of action is the same and the claim itself is either similar or subsidiary to the principle claim… we propose that the [Fixed Recoverable Costs] for each additional claimant should be set at 10% of that for the principal claimant”. At the time of writing we do not know what final form the Rules will take. However, they will need to be worded carefully to avoid injustice where there are multiple claimants who are separately represented, for example where there is contributory negligence.

Separate Representation

At a Judicial Panel hosted by Park Square Barristers on 12 July 2022 I asked how the court would approach multiple claimants who were separately represented. In particular I pointed out that the rule appeared to be predicated on the assumption that subsidiary claimants would benefit from sharing work from the primary claim and in reality additional claimants do not necessarily generate significantly more work. This is clearly not the case where parties are separately represented.

DDJ Rafferty and Recorder Richard Paige both agreed that in these circumstances the sensible approach would be that separately represented claimants would not be limited to 10% of the fixed costs.

Court’s Jurisdiction to remedy injustice

The court’s power to remedy any defect or injustice in the FRC rules may be limited. In Aldred -v- Cham [2019] EWCA Civ 1780 the claimant argued the court should allow a disbursement for an opinion obtained for approval of a settlement on behalf of a protected party under CPR 45.12(2)(c). CPR 45.12 sets out various disbursements the court may allow, and (2)(c) allows the court to award any disbursement incurred as a result of “…a particular feature of the dispute”.

In Aldred the Court of Appeal held that the claimant’s status as a protected party was a feature of the claimant, not a feature of the dispute, and that the court could not therefore allow the disbursement. In effect the court held that in the case of fixed costs the court is bound to applying the letter of the rules, and that deficiencies or injustice is a matter for the Rules Committee.

Conclusion

It will be important for practitioners to carefully consider the wording of the rules once they are published. Solicitors considering representing claimants in situations such as this should be careful to advise of the possibility of a limit on recovery of costs if the rules are unclear. Fixed costs rules are generally interpreted strictly, and lawyers should not assume that injustice may be remedied by appeal.

Should you have any questions, you can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Who can sign a Bill or Statement of Costs?

Joanne ChaseLeave a comment

A Bill or Statement of Costs must be signed. This requirement is contained at CPR 47 PD 5.21 in the case of a bill, or CPR 44 PD 9.5(3) for a statement. But one question which is often asked is who may sign a bill? The certificates on the precedents refer to a “Partner”, but is a partner in fact required to sign?

CPR 44 PD 1.1 states that“…in respect of any document which is required by Practice Directions 44 to 47 to be signed by a party or that party’s legal representative, the provisions of Practice Direction 22 relating to who may sign apply as if the document in question was a statement of truth. Statements of truth are not required in assessment proceedings unless a rule or Practice Direction so requires or the court so orders.”

Statements of Costs

CPR 22 PD 3.1 states “in a statement of case… the statement of truth must be signed by (1) the party or his litigation friend; or (2) the legal representative of the party…” A legal representative is defined at CPR 2.3 as “(a) a barrister; (b) solicitor; or (c) a solicitor’s employee”.

CPR 44 PD 9.5(3) states that “the statement of costs… must be signed by the party or the party’s legal representative”. This falls within CPR 44 PD 1.1 and CPR 22 PD 3.1 as above, and therefore a statement of costs may be signed by the party’s “legal representative” as defined above. A statement of costs therefore does not need to be signed by a Partner. Indeed, according to the Rules the statement of costs could in theory be a trainee or even a secretary.

Bills of Costs

The position is not so clear for a bill of costs: CPR 47 and the associated practice direction does not contain any rule that the bill of costs must be signed by the party or the party’s legal representative. Rather, CPR 47 PD 5.21 states that the bill must “…contain such of the certificates [annexed to the practice direction] as are appropriate”.

The certificates to be included can be found here and state “all certificates must be signed by the receiving party or by his solicitor”. However, it is not clear that a precedent document can, of itself, impose any obligation on a party as it is supplementary to but does not form a part of the rules.

In Bailey -v- IBC Vehicles [1998] EWCA Civ 566 it was held that “the signature on of the bill… is effectively the certificate by an officer of the Court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge…”

By analogy, CPR 3.13(5) states that a costs budget must be verified by a statement of truth “signed by a senior legal representative” of the party, and it was held in Americhem Europe Ltd -v- Rakem Ltd [2014] EWHC 1881 that a legal representative is someone who “is representing in a legal capacity” and that a costs draftsman, who simply prepares the bill, is not. This authority therefore suggests that the individual should be directly engaged in or at least have capacity to carry out a reserved activity (i.e. an activity which is reserved under the Legal Services Act 2007) rather than an activity ancillary to a reserved activity. In other words, the test is whether the individual is entitled to carry out the reserved activity to which the bill related, such as litigation.

Furthermore section 69(2A) of the Solicitors Act 1974 provides that a solicitor’s bill to his client must be signed “by the solicitor or on his behalf by an employee of the solicitor authorised by him to sign”. This raises the question as to whether a bill certificate may be signed by an employee of a solicitor but that the “buck stops” with the solicitor – i.e. any employee may sign but if it is wrong the solicitor is responsible. This was the finding in Gempride -v- Bambrah [2018] EWCA Civ 1367 in which the solicitor had signed a bill which was wrong. She subsequently argued that she had relied on the costs draftsman that it was accurate; the Court held that whilst it may have been drafted by others she was ultimately responsible for the content.

In the opinion of the author, a bill of costs does not need to be signed by a partner but must be signed by a solicitor and not a “legal representative”. It is possible that a Fellow of the Chartered Institute of Legal Executives (being entitled to carry out reserved activities) might also be entitled to sign.

Summary

There is no requirement that a bill or statement of costs must be signed by a partner. Whilst it is theoretically arguable that any employee of a solicitor may sign a statement or bill of costs (1) the solicitor will ultimately be liable even if the document is signed on their behalf, and (2) it would in almost all cases be needlessly risky to do so as it could give rise to significant argument about whether the document had been properly certified. Therefore in general, bills and statements should be signed by a solicitor.

You can find out more about our services here or you can contact the Costs Team at CivilandCommercialCosts@clarionsolicitors.com

Legal costs: Procedural Errors and Delay

Andrew McAulayLeave a comment

Andrew McAulay and Dominic Regan consider some recent cases and issues which arise from procedural defects and delay. Cases discussed in this video are:

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

Persimmon Homes Ltd v Osborne Clark LLP – A warning to act promptly when revising costs budgets

Daniel MurrayLeave a comment

The High Court has delivered the most significant judgment since the implementation of the use Precedent T for budget revisions in October 2020, and the provisions of CPR 3.15A.

The case

In Persimmon Homes Ltd and Anor v Osborne Clarke LLP and Anor [2021] EWHC 831 (Ch), the developer Claimant’s brought an action for negligence arising from the drafting of agreements and ancillary advice relating to the development of land. The Defendants had issued a claim for unpaid fees against the Claimant and the matters were being heard together.

A Costs Management Order had been made in December 2019, with the Claimant’s budget approved in the sum of £1.445m and was proceeding to a third CCMC in January 2021. Prior to the third CMC, an application was made to vary the approved costs budget by the Claimant on 21st December 2020 to increase their costs by circa £1.339m. The Precedent T had initially been submitted to the Defendant on 3rd December 2020.

The application was made on the basis that there had been 3 significant developments in the litigation, which were not anticipated when the case was initially cost managed. The costs of preparing a Request for Further Information and considering responses, costs of two additional CMC’s and the biggest issue, in relation to disclosure was that the budgets were based on model A & B in the disclosure pilot scheme, with model C eventually being used.

The framework for an application to vary an approved costs budget is outlined within CPR 3.15 A as many practitioners may be aware. Within this framework is an obligation on the parties, using the form prescribed by PD 3 E (Precedent T) to:

  • Revise its budgeted costs upwards or downwards if significant developments in the litigation
  • submit any revised budget promptly to the other party for agreement.
  • Confine the particulars to the additional costs occasioned by the significant development.
  •  submit the particulars of variation promptly to the court, together with the last approved or agreed budget, and with an explanation of the points of difference if they have not been agreed.

The Court may then approve, vary or disallow the proposed variations, having regard to any significant developments, or may list a further costs management hearing. Where an order is made by the Court, it may vary the budget for costs related to that variation which have been incurred prior to the order for variation but after the costs management order.

Master Kaye identified that to successfully persuade the Court to approve any variation, the threshold of a variation arising from a ‘significant development’ and being submitted promptly must be satisfied before any discretion as to the scope of the variation itself can be considered. The application to vary therefore involves a two-stage process. 

In relation to the first alleged significant development, Master Kaye noted that the request for variation had been submitted ten months after the request was made and four months after all costs in relation to it had been incurred. The Claimant’s submissions that an application to vary can be made after all costs were incurred were rejected, and it determined that whilst “there may be some incurred costs at the point at which an application is made, in respect of which the court may be persuaded to exercise discretion.…. CPR 3.15A (6) was never intended to and is not open season to come back and vary a costs budget after the event.” The application was therefore deemed too late.

Similar observations were also made in relation to the sought variation in relation to the costs of additional CMC’s. With Master Kaye taking issues with the fact that whilst the further hearings were not contemplated at the time the initial hearing took place, the application to vary did not come until 4 months after the order fixing the hearing was made. It was commented that “the absence of promptness in making the applications not only affects whether the application to vary meets the threshold test but has consequences from a practical perspective…… it may have been possible, had an application been made earlier in the year, to identify in advance of incurring all the costs factors which might have persuaded the judge prospectively that they amounted to a significant development that warranted a revision to the last approved costs budget. Prospectively it may then have been possible to persuade a judge that there were additional to be incurred costs said to arise from the RFI/RRFI and CMCs before the costs were incurred thus enabling the court to prospectively manage and control the costs. The very purpose of the variation process.”

The third, and biggest limb of the proposed variation in relation to disclosure was also rejected by Master Kaye. Issue was taken again with the timing of the application in view of the fact the Claimants were aware of the changes in respect of disclosure at earlier CMC’s yet failed to react to the situation. The application was made over 12 months following the switch to model C and therefore was not prompt. Stressing again the need to act prospectively, not retrospectively, Master Kaye confirmed that “Cost budgeting is about setting prospective costs and CPR3.15A is to enable the court to approach the question of variations and amendments in a practical and purposive way not to oust the role of the costs judge”.

Conclusion

The case highlights the extent of the obligations on the parties brought about by CPR 3.15, to revise budgets upwards or downwards throughout the litigation. Throughout the judgement Master Kaye highlighted that the additional costs will be determined by the costs judge at assessment, however the success of such submissions considering this judgment will be interesting to see. To protect their position, parties must assess the content of their approved budgets, and in particular the assumptions which were provided with them at the time of costs management and ensure that any deviations result in the preparation of a Precedent T, at the same time work is being carried out to deal with such deviations. This is the best way to ensure you protect your costs position.

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

Part 36 – Important changes to Interest

Joanne ChaseLeave a comment

From 1 April 2021 a key change to Part 36 means that additional interest will not be payable where the Part 36 offer is accepted after the relevant period unless specified within the offer.

In accordance with CPR 36.5(4) a Part 36 offer is treated as inclusive of any interest to the expiry of the relevant period. From 1 April 2021 a new rule 36.5(5) provides as follows:-

A Part 36 offer to accept a sum of money may make provision for accrual of interest on such sum after the date specified in paragraph (4). If such an offer does not make any such provision, it shall be treated as inclusive of all interest up to the date of acceptance if it is later accepted.

This rule change is likely to affect only claimants’ offers. However, defendants should be aware of the rule and check the terms of any offers received carefully.

At this stage the meaning of the rule is somewhat ambiguous. It is not clear whether it means that an offer may provide that if accepted after the expiry of the relevant period there will be a liability to pay further interest, or whether it simply means that the offer may exclude further interest from the terms of the Part 36 offer (i.e. the offer will become an offer for part of the proceedings after it has expired). These questions, and the effect of an offer which excludes interest, are only likely to be clarified when they have been put before the Courts. As the rule applies only to offers made on and after 1 April 2021, this is unlikely to be for some time.

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

Avoiding Challenges to your Costs III: Talking about Money

Joanne Chase3 Comments

Discussing fees with a client is often one of the most stressful parts of a solicitor’s job. Social taboos around talking about money run deep; studies have consistently shown that personal finances rank high on the list of topics people find it hardest to talk about. Yet they have also shown links between reluctance to talk about money and the risk of falling into financial hardship. Getting these conversations right can protect you from challenges, and protects your client from falling into financial difficulty.

This is the third blog in a series covering various aspects of solicitor / own client relationships. You can find the other blogs here:-

Avoiding Challenges to your Costs I: Invoicing Clients

Avoiding Challenges to your Costs II: What is an Invoice

Avoiding Challenges to your Costs IV: Time Recording

When it comes to money, being proactive is key. Providing an early and accurate estimate of costs will enable your client to plan ahead and avoid difficult conversations later. You should also keep your client informed as the case progresses, and schedule regular updates to ensure that you are on track and the client is informed. If things change, update the client as soon as possible and explain what this means in relation to costs.

An accurate estimate helps your client understand what costs you are likely to incur and also allows them to plan the litigation. A client is far less likely to dispute your fees if they had a good idea of what it would cost in advance. And if they do dispute your fee, you can refer to the estimate and point out that they knew the cost when they authorised the work. If you have exceeded the estimate, you will be able to explain why the work done went beyond its scope.

Preparing an Estimate

Preparing an estimate can seem daunting, but following these simple rules will make estimates easy:-

  • Estimates should not be generic
  • Plan the case and how much time each element will take, e.g:-
Pre-Action
Review client documents4 hours£400
Letter of Claim2 hours£200
Advice and correspondence with client6 hours£600
  • Be realistic about the time you will spend. We tend to underestimate how long things will take. Bear that in mind.
  • Do not overthink it. Include anything you think is likely to happen, but do not try to estimate for every eventuality.
  • Factor in disbursements, such as court fees, counsel’s fees and experts’ fees

Communicating with the Client

One fear lawyers have is that they will “scare off” clients if the estimate is too high. However, most clients will appreciate transparency on fees. And if they are unwilling or unable to pay, it is better to know before you do the work. There is no benefit to you in obtaining work which is not profitable.

Once you have provided the estimate to the client, make sure that you give regular fee updates. For example, using the example estimate above when you send the letter of claim to your client you might include a sentence saying “I confirm that our unbilled fees to date total £xxx” and either confirm that this is below your estimate, or explain why it is above your estimate. If your client later questions your fees you will be able to refer them to your letter where you told them the level of your fees.

Conclusion

By preparing an estimate and updating your client about fees you avoid difficult conversations about fees at the end of the matter. If your client later disputes your fees you are in a strong position to resist any reductions because you can argue that they continued to instruct you in full knowledge of what the fees were. An estimate is a powerful tool in ensuring recovery of your own fees, and also in enabling your client to manage their finances.

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

Pre-Trial Checklist: filing a costs estimate

Joanne ChaseLeave a comment

The note at the top of the Listing Questionnaire states “if no costs management order has been made you must attach estimates of costs incurred to date, and of your likely overall costs.” This can come as a nasty surprise, particularly to the lawyer under pressure with deadlines looming. So, what are the requirements for an LQ estimate?

The Old Rules (pre-April 2013)

Paragraph 6.4(1)(b) of the Costs Practice Direction said “when a party to a claim which is being dealt with on the fast [or] multi track files a pre-trial checklist (listing questionnaire) that party must also file an estimate of costs and serve a copy of it on every other party” and that the estimate should be “substantially in the form illustrated in Precedent H“. The costs practice direction (which used to be CPR PD 43 – 48) was completely omitted from 2013 onwards.

Current Rules (as at January 2021)

Under the rules as at January 2021 there is no requirement to file an estimate of costs with the LQ. Costs budgets are dealt with at CPR 3 and CPR PD 3E. The Practice Direction to the Fast Track states at CPR 28 PD 6.1 that “attention is drawn to the Costs Practice Direction, Section 6, which requires a costs estimate to be filed and served at the same time as the pre-trial checklist is filed”, but as stated above the Costs Practice Direction has not existed since 2013. There is no requirement at all within the Multi-Track Practice Direction at CPR 29 PD.

Under the current rules there appears to be no requirement at all to file costs estimates with the LQ. The CPR is fragmented and contains references to rules which no longer exist – it is very unclear what was even intended. It is arguable that Costs Management at CPR 3 and PD 3E was intended to do away with the old estimates regime altogether, and that the references in the CPR are simple drafting errors which were never removed. However, it is also possible to argue that the content of the LQ and the reference to estimates in CPR 28 indicate that where CPR 3 PD 3E does not apply, the “old” rules effectively remain in force.

What does this mean?

The rules clearly need amendment. It is certainly arguable that a Court Form does not or cannot impose additional requirements beyond those found in the CPR and that, absent a specific rule requirement, there is no requirement to do anything at all. However, the safest course of action is to simply file an estimate with the LQ.

There is no form requirement for an estimate at LQ stage and, given that there may not even be a requirement to file an estimate at all, it is understandable that legal representatives will want to minimise cost. You could use the old Precedent H (example here). However, a simple statement of the costs already incurred and what is expected to be incurred going forward would likely be sufficient to satisfy the requirements on the form (example here).

It is important to note that it is unclear what effect a costs estimate has if filed, or what the sanction might be if it is not. CPR PD 3E 3.2 states that if there is a difference of 20% or more between a costs budget filed by a party and the amount of any bill on detailed assessment that party must provide a statement of reasons. However, this applies only to costs budgets filed under CPR PD 3E and not to an estimate filed with an LQ. Ultimately, an assessing judge may take an estimate into account, they may not.

Summary

As of January 2021 the rules are very unclear about the requirements for filing an estimate of costs with the LQ, what form it should take, and what the consequences are of not filing or what the effect of a filed estimate is. Legal representatives should be aware of this potential issue and should consider how to approach it will in advance of the deadline for filing in order to decide the best course of action.

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com