Fixed Recoverable Costs – the pilot scheme

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Sue Fox who is a Senior Associate and Head of Costs Budgeting at Clarion, can be contacted on 0113 336 3389 or on sue.fox@clarionsolicitors.com

 

 

 

 

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PROPORTIONALITY HITS FAMILY LAW

I have previously posted blogs on the topic of proportionality (Who needs fixed costs! and Proportionality continues to get tougher) and made the comment that it would be interesting to see how the area and application of proportionality develops.

Recently we have seen proportionality develop in the area of Family Law.  In the case of Kay v Kay [2016] EWHC 2002 (Fam) the successful party’s claim for costs was reduced on Summary Assessment from £33,813.00 to £3,737.50.  This was a reduction of approximately 89%.

The Summary Assessment was carried out by Mr Justice Macdonald and he felt that the claim for costs was unreasonable and excessive taking into account the circumstances of the case.  He said the following; “it is remarkable that such a significant sum of money has been spent by these two parents arguing over a single question the answer to which was indisputable from the outset.  The costs incurred in this case were disproportionate to the single issue at hand”.

During the Summary Assessment the Judge reduced items heavily such as hourly rates, attendances upon the client and work done on documents. Interestingly, no schedule (breakdown of time) was attached to the Statement of Costs in relation to the documents work. This no doubt contributed to the significant costs reduction.

The Judge conducted the Summary Assessment by assessing the claims within the statement of costs on a summary basis, which brought the figure of £3,737.50.  What he did not appear to do was assess the costs and then stand back and reduce the costs to what he thought was a proportionate amount.  Clearly, in this case the Judge must have felt comfortable with the ‘end’ amount or when he conducted the summary assessment he applied the tests of reasonableness and proportionality at the same time.  In the cases of Who needs fixed costs! and Proportionality continues to get tougher (both detailed assessments and not summary assessments) both Judges determined what was reasonable and then ‘sat back’ and reduced the claims for costs to what they deemed were proportionate amounts. This is the approach that LJ Jackson set out in his final report at Part 1, chapter 3, paragraph 5.13:

In other words, I propose that in an assessment of costs on the standard basis, proportionality should prevail over reasonableness and the proportionality test should be applied on a global basis. The court should first make an assessment of reasonable costs, having regard to the individual items in the bill, the time reasonably spent on those items and the other factors listed in CPR rule 44.5(3). The court should then stand back and consider whether the total figure is proportionate. If the total figure is not proportionate, the court should make an appropriate reduction. There is already a precedent for this approach in relation to the assessment of legal aid costs in criminal proceedings: see R v Supreme Court Taxing Office ex p John Singh and Co [1997] 1 Costs LR 49.

The case demonstrates that the new test of proportionality is not just limited to the areas of Civil and Commercial Litigation, but equally applies to the area of Family Law.  Effectively, regardless of the area of law, where legal costs are to be assessed pursuant to CPR 44.3(2) then the new test of proportionality (the ‘Jackson’ test) applies.

Finally, this is another example of the Courts tackling disproportionate legal costs and demonstrates that the Court has the tools already to deal with disproportionate claims for costs and that fixed costs are not required.

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

 

The Fate of the ‘Court Fee only Budget’ post April 2015

Lawyers live in fear of having their costs budget reduced to court fees.  If a budget is reduced to court fees, the only solution to minimise the impact of this is to obtain an indemnity basis costs order – approved costs budgets should not be relied upon at any indemnity basis assessment.  Costs Management only applies to standard basis assessments, therefore this is the only way that a somewhat hopeless situation could potentially be rectified.  At the moment, the Claimant has the advantage. The Claimant can secure an indemnity basis award by making a well-pitched Part 36 offer, the Defendant cannot. Either party can secure indemnity awards raising arguments such as conduct, however awards made on this basis are much more difficult to achieve.

The Rule Committee have identified this and have amended the rules, which will be implemented in April 2015, to address this disparity. Cases in which the offeror’s costs have been limited to court fees is now governed by CPR Part 36.23.

(1) This rule applies in any case where the offeror is treated as having filed a costs budget limited to applicable court fees, or is otherwise limited in their recovery of costs to such fees.

(Rule 3.14 provides that a litigant may be treated as having filed a budget limited to court fees for failure to file a budget.)

(2) “Costs” in rules 36.13(5)(b), 36.17(3)(a) and 36.17(4)(b) shall mean—

(a) in respect of those costs subject to any such limitation, 50% of the costs assessed without reference to the limitation; together with

(b) any other recoverable costs.

The intention of the Rule Committee is to ensure that Part 36 still works in such cases and continues to provide an incentive to make a Part 36 offer.  Equally it is important that the innocent party should not regard itself as having a blank cheque to litigate the case.  Sanctions must therefore be imposed for turning down a reasonable Part 36 offer.

If you have any questions or queries in relation to this blog please contact Sue Fox (sue.fox@clarionsolicitors.com and 0113 3363389) or the Clarion Costs Team on 0113 2460622.

Failure to Word Tomlin Order Correctly Can Result in Adverse Costs

We have often encountered difficulties when costs orders have not been termed correctly.  One example is where a party failed to include the provision for costs to be assessed in the final Tomlin Order, and simply provided for the losing party to pay the winning costs ‘subject to agreement’. There was no reference to detailed assessment.

In order to commence detailed assessment proceedings, it is necessary to have a ‘right to detailed assessment’ (CPR 47.7). Such a right can arise only as a result either of a court order which states that costs are to be assessed, or a deemed order (for example as a result of acceptance of a CPR 36 offer, or upon notice of discontinuance under CPR 38). Importantly, where an order does not mention costs the general rule is that no party is entitled to its costs (CPR 44.10(1)).

Therefore, in the absence of the inclusion of the terms ‘subject to detailed assessment’ the court held that there was no authority for the costs to be assessed and adjourned the Detailed Assessment hearing.

The costs implications couldn’t be clearer.  When concluding any claim it is vital that any Tomlin or Consent Order specifically makes reference to costs to be assessed.  Costs Lawyers can assist with the terms of costs orders ensuring that these are completely watertight, and therefore avoiding the possibility of adverse costs or expensive satellite litigation.

You can contact the Clarion Costs Team on 0113 2460622, or by emailing Andrew.McAulay@clarionsolicitors.com.

What if your Precedent H Costs Budget has been reduced to court fees?

Will a budget which has been reduced to court fees apply if indemnity basis costs have been awarded?

  • Where a budget is limited to court fees, it is advisable to attempt to secure an indemnity basis costs order – costs budgets only apply to standard basis assessments. The CPR is clear regarding this (CPR Part 3.18) and there is now supporting caselaw Kellie v Wheatley & Lloyd Architects Ltd [2014] EWHC 2866 (TCC).

If your budget has been reduced to court fees, can the budget be revised?

  • If your budget has been reduced to court fees, this does not exclude you from seeking the further costs which may be necessary as a result of any significant developments in the litigation.

If you have any questions or queries in relation to this blog please contact Sue Fox (sue.fox@clarionsolicitors.com and 0113 3363389) or the Clarion Costs Team on 0113 2460622.