20e5b6ee-fa4f-43a8-a13b-749edfb545e3

The changing costs landscapeCosts budgeting, litigation strategies andcase management sanctions

Manchester in mindA full report on the ACL’s

Costs Conference

Black Horse risingThe past, present and

future of ATE insurance

Management mattersLegal practice

management for costslawyers explained

CostsLawyerJANUARY/FEBRUARY 2014 | ISSUE 1

www.associationofcostslawyers.co.uk

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The personal injury and cost drafting areas of the legal profession have undergone

responding to these changes positively, by growing our business and positioning

Senior Manager - Costs

In this role you will establish and drive the development of a new costs team and strategy within Minster Law. Using your industry knowledge and experience you will be responsible for developing processes and best practice for costs drafting and implementing them across the business. As a Senior Manager you will work with the Complex Claims department and wider operation to ensure a robust business plan is developed and constantly reviewed in line with our overall business strategy.

The team will focus on delivering costs for our Complex Claims department, covering multi track and Catastrophic Injury RTA, EL and PL. We have a strong culture of working together and a large part of this role will be to ensure relationships are built between the costs team and the wider operation. Following your appointment you will be integral to the selection and recruitment of the costs team ensuring the right balance of experience and technical knowledge.

You will have a proven track record of developing innovative and commercially minded strategies, and have the ability to communicate and present at all levels. Whilst experience in high value personal injury costs would be an advantage, this is not essential and we are open to applications from those with commercial costs experience. Ideally you will be a Member of the Association of Costs Lawyers and it is essential that you have previous experience managing and developing a costs team.

Minster Law offers a competitive salary, contributory pension scheme, 30 days’ holiday, life assurance,

To apply for one of these roles please visit our

or alternatively please email a copy of your CV to

Careers in

black and white...LONDON £55,000+COMMERCIAL COSTS LAWYER

An international law firm are looking to add to their in-house costs team in their Londonoffices. You will be a Costs Lawyer, or workingtowards this status and you’ll be dealing with a predominately defendant caseload consistingof complex commercial matters. An excellentopportunity offering a competitive salary, great benefits and the chance to work for a top law firm.

MANCHESTER £50,000+IN-HOUSE COSTS LAWYER

A well established solicitors practice inManchester are seeking a Costs Lawyer to jointheir in-house costs department. They arelooking for an experienced Costs Lawyer with at least 3 years’ experience to undertake aclaimant costs caseload. Your duties willinclude drafting schedules and costs budgets, negotiating settlement, draftingreplies to PODs and supervising juniormembers of staff.

LONDON £40,000+COSTS LAWYER

A leading costs firm in London are looking for a Costs Lawyer to add to their busy costs team.You will ideally have at least 5 years’ costsexperience, and claimant or defendantexperience is welcome. You will be undertakinga good quality caseload with an emphasis oncomplex, high value personal injury and clinicalnegligence matters.

MANCHESTER £40,000+ COSTS LAWYER

A successful costs company in Manchester arelooking for an additional member of their team.You will ideally be a Costs Lawyer or Solicitorwith at least 3 years’ experience. You will beundertaking a good quality claimant caseloadwith an emphasis on high value clinicalnegligence and commercial matters. They are a very forward thinking firm so they're looking for someone up to date withrecent changes in the law. Excellent salary onoffer and great development.

MERSEYSIDE/ LANCASHIRE £30,000+TRAINEE COSTS LAWYER

Our client, a busy and expanding costs firm, arelooking to recruit additional costs candidates toadd to their team in their Merseyside/ Lancashireoffices. They are a multi office firm looking forexperienced draftsman with particular experienceof dealing with personal injury, industrial diseaseand clinical negligence claims. An excellentopportunity to join a successful and growing firm with a competitive salary and friendly working environment.

SOMERSET £30,000+ COSTS LAWYER

Are you an experienced Costs Lawyer withexperience of legal aid billing? A reputable costsfirm in Somerset are looking to add to theirestablished team in Somerset.The ideal candidatewill have at least 4 years’ costs experience withparticular experience within publicly funded civiland family costs matters. There is also theopportunity for flexible working hours/working from home for the right candidate.

For further information on these and any other vacancies – or for general career or salary advice – please contact Claire Heshon on 0161 745 7517

Manchester Office

Armstrong House

1 Houston Park

Manchester M50 2RP

Telephone:

0161 745 7517

Out of Hours:

07824 661108

Email:

[email protected]

Website:

www.rbuklegal.com

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JANUARY/FEBRUARY 2014 | ISSUE 1

16 Management matters 24 Manchester in mind 32 Black Horse rising

03

Regulars

04 News

09 Opinion

17 Legal update

21 Regulatory

Features

08 Mitchell: costslawyers react

10 Regan’s wayProfessor Regan’s view on the Jackson reforms

14 Don’t miss out!ACL member benefits

16 GoodmanagementLegal practicemanagement for costslaywers explained

22 The costs wars continueCosts budgeting case law

24 ACL conference:in pictures

26 Costs budgetingSteven Green and SimonMurray provide comment

28 Policy watchIs the Criminal Bar under threat?

30 The evolution of educationCosts lawyer training:past, present and future

32 Black Horse risingA fresh look at ATEinsurance premiums

34 Costs on the agendaHow City lawyers – as wellas clients and judges – areadjusting to costs issues

Editor’s comment

Contents

CostsLawyerelcome to thefirst edition ofthe new-look

Costs Lawyer. Since ourlast edition, the magazinehas undergone anextensive redesign, aswell as seeing a change of editor and publisher.

I pay tribute to the work done by Neil Rose, who,over the last few years, has helped raise the profileof Costs Lawyer. Neil has consistently deliveredcutting-edge independent legal journalismthroughout his career, and I hope to emulate that legacy in my own small way.

The new magazine will feature expanded and enhanced coverage of a range of practical,managerial, regulatory and technical areas of interest to costs lawyers and their clients.

It will feature profiles of key personalities in andaround the costs community, and information ongathering trends and key business sectors relevantto that community.

It will offer summarised legal updates, as well asadvice and information on education and careersrelevant for trainee costs lawyers starting in theprofession, as well as practice development forestablished practitioners.

It will focus on the key regulatory and legislativechanges affecting costs lawyers and their clients, aswell as looking at new business opportunities incosts; particularly those affecting costs lawyersand what the ACL can do to assist them.

The redevelopment of an expanded bi-monthlymagazine is core to a programme of change thatthe ACL Council has approved to modernise and professionalise the organisation, alongsidethe new eBulletins and the Twitter account –follow us @CostsLawyers.

Members interested in submitting material for the magazine should contact me, Ben Rigby, [email protected]

Welcome, again, to the new Costs Lawyer, andwishing you a merry Christmas and a happy New Year for 2014.

Ben Rigby, Editor

Editor Ben [email protected]

ChairmanMurray HeiningVice ChairmanPhilip RobothamTreasurerStephen AverillSecretaryClaire Green

Council membersJames BarrettRobert ConnellySue Nash

Chief Executive OfficerMaurice Cheng

All other enquiries toDiane [email protected]

Closing date for March/April issuewill be 15th January 2014

Visit the ACL website atwww.associationofcostslawyers.co.uk

Costs Lawyer is edited and designed byArchant Dialogue, Prospect House,Rouen Road, Norwich, NR1 1RE. Tel: 01603 664 242Production Editor Louise HoffmanJunior Art Editor Deb MurrayAccount Director Catherine GoadCreative Director Nick PaulPublishing Director Zoë Francis-CoxManaging Director Mick Hurrell

Material submitted for publication is welcomed by the editor. He is,however, unable to guaranteepublication in any specific issue and reserves the right to amend or edit any article submitted. Alladvertisements and contributions areaccepted on the understanding that theauthors are responsible for opinionsexpressed and these do not necessarilyrepresent the views of the Associationof Costs Lawyers or Archant Dialogue,who do not accept any liability for anyerror, omission or misstatement by anycontributor in any material published.Material in this journal is the property ofthe Association of Costs Lawyers andcannot be copied without the writtenpermission of the editor.

W


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04

Lord Dyson sends ‘clearmessage’ by dismissingMitchell costs appeal

News

The Court of Appeal hasdismissed Andrew Mitchell MP’sappeal against orders made byMaster McCloud, following hisinitial late submission of a costsbudget, in a key test of thejudiciary’s approach to themanagement of litigation.

In delivering the judgment, LordDyson MR said the central questionwas “how strictly should the courtsnow enforce compliance withrules, practice directions and court orders?”

The judgmentA failure to comply with rules oncosts budgeting through lack ofawareness alone will not wash; asDyson said, “CPR 3.14 did not comeas a bolt out of the blue”.

Dyson added that “the purposeof costs management (includingcosts budgets) is to enable thecourt to manage the litigation andcosts to be incurred so as tofurther the overriding objective”.

He noted that, whilst the newapproach is not an extreme onewhere relief will only be granted inexceptional circumstances, itshould be granted “more sparinglythan previously”.

The courts, he held, should havegreater regard for “the need forlitigation to be conducted efficientlyand at proportionate cost”.

Reasons for reliefDyson was clear that “trivial non-compliance” would normally leadto relief from sanctions. If it is not

trivial, and “there is a good reasonfor it, the court will be likely todecide that relief should begranted”, he said, but added:“Merely overlooking a deadline… is unlikely to be a good reason.

“Well-intentioned incompetence,for which there is no good reason,should not usually attract relieffrom a sanction unless the default is trivial,” noted the judge.

“It was a robust decision,” heacknowledged, “[but] the defaultsby the claimant’s solicitors werenot minor or trivial and there wasno good excuse for them.”

“Although it seems harsh,” tohave granted relief would havemeant “the attempt to achieve achange in [litigation] culture wouldreceive a major setback”.

Commercialsilk criticisesthe LordChancellorIn his keynote address at the Bar Council’s annual conference,Lord Pannick QC critiqued plansfor legal aid reform and told hisaudience that Lord ChancellorChris Grayling should“acknowledge that the work oflawyers on criminal legal aid isdemanding… and that it is alreadypoorly paid”, adding: “The JusticeSecretary should not bepromoting the absurd myth thatlegal aid work is a pathway toriches,” and he “should not beparty to the peddling of the lazyfiction that seeks to demoniselegal aid lawyers as ‘cashing in’”.The MoJ maintains that, at around £2 billion a year, the UKgovernment has “one of the mostexpensive legal aid systems in theworld” and efficiencies areneeded for it to be sustainable.

The London Solicitors LitigationAssociation (LSLA) has released asurvey, conducted jointly with theNew Law Journal, illustratingconsiderable scepticism as to theextent of any positive changefollowing Lord Justice Jackson’srecent reforms, but alsoopportunities for costs lawyers.Ninety-three per cent ofrespondents, from mostly largerfirms, suggested that the reformswould decrease access to justice.

Fifty-five per cent of firms had

carried out internal training toprepare costs budgets inaccordance with the new rules,with 12 per cent recruitingadditional costs lawyers to dealwith potential budgeting issues.

Many firms admitted toenhancing IT provision as well as“burnishing [their] relationship withcosts lawyers”, saying that theywere “working more closely withcosts consultants in preparing FormH” and recruiting costs lawyers toadvise on a monthly retainer.

Research shows thatcosts concerns arecentral to London litigatorsA survey conducted by the LSLA suggestsscepticism over Lord Justice Jackson’s reforms Sixty-nine per cent of

respondents felt costs budgetingwould increase costs, in spite ofthe CPR’s express provisions tokeep the costs of budgeting tobetween one and two per cent of the budget sought.

Most litigators admitted to havingreviewed their strategy, with oneciting “a revised approach to riskassessment, and new IT systems to deal with costs budgeting”.

Client outcomes were alsofactored in, with firms “setting outthe new costs budgeting and thefact that they are now more likelyto have to pay a large shortfall

between costs incurred and thecosts budget approved by court”.

That, for others, meant “gettingthe client to accept the risk where [litigation] steps are costconstrained”, and “reviewingtactics in relation to opponents’budgeting”.

Thirty-four per cent ofrespondents admitted towithdrawing from offering, orrestricting the use of, conditionalfee agreements; whilst 71 per centof respondents said they hadrejected the use of damages-based agreements since thereforms became law.

ISSUE 1 | JANUARY/FEBRUARY 2014

04-07 News:Layout 1 11/12/13 12:34 Page 4

New costs sanctions disapplied

Neuberger issues legal aid cuts warningLord Neuberger, the president ofthe UK Supreme Court, has warnedof the risks posed to access tojustice by government cuts to legalaid in a recent lecture.

In a wide-ranging speech at therecent JUSTICE Tom Sargantlecture on ‘Justice in an Age ofAusterity’, Lord Neubergerdiscussed the meaning of both therule of law, and the necessity ofaccess to justice within it.

On the latter point, he definedthe components to access tojustice, which he said included“accessible courts”, “effective legalprocess” and “affordable justice”as key principles.

On the last principle, LordNeuberger said reduced access to legal aid might be costly anddisadvantageous for all litigants –and taxpayers funding the courtssystem – whilst also challengingaccess to justice for all.

In a renewed warning as to theconsequences of cutting theMinistry of Justice’s legal aid

budget, Lord Neuberger said that the cuts “[deprived] the very people who most need theprotection of the courts of theability to get legal advice andrepresentation”.

He added: “That is true whetherone reduces the types of claim thatqualify for legal aid or increases thestringency of the requirements ofeligibility for legal aid. The recentchanges have done both.”

The first reported case involving costs sanctions in relation to Part 36 offers declines to take up the opportunity to apply them

The issue arose in the recent HighCourt case of Feltham v Bouskell[2013] EWHC 3086 (Ch). Thereceiving party (the claimant), inmaking a relevant Part 36 offer,accepted during the relevantperiod, is entitled to their costs atthe standard basis up to the dateof acceptance.

If they fail to accept the offer, or fail to receive an outcome interms ‘at least as advantageous’ as the offer – at least as good inmonetary terms – unless otherwiseconsidered unjust, the court canorder sanctions.

These include an order forindemnity costs, interest on both damages and costs (both

not exceeding 10 per cent abovethe base rate) from the expiry of the relevant period, and/or an uplift in damages of up to £75,000in damages.

In not making the award, thecourt had to consider the terms of the offer; the stage at which an offer was made, including thetiming of the detailed assessmenthearing; the information availableto the parties; and also theconduct of the parties in evaluatingthe offer made.

The court appears to have beenswayed by the late submission ofthe receiving party’s Part 36 offer,with Brick Court’s CharlesHollander QC, sitting as a deputy

High Court judge, making three key findings.

Firstly, the receiving party’s offerwas a last-minute one; the expiryof the relevant period very shortlybefore trial was, the judge felt, afactor rendering it unjust, asmentioned above.

Secondly, liability had onlybecome an issue in deliveringopening statements; and thirdly,the receiving party only disclosedimportant documents on the eveof the trial.

The decision suggests thatparties wishing to benefit from thenew sanction would do well tomake their offers sooner ratherthan later.

The Royal Courts of Justice

NEWS IN BRIEF

Client ignorance breedslegal pay woes New US research has shown legalprofessionals are seeing theirperformance and pay suffer due to clients not understanding whatit is they actually charge for.According to Professor HeatherVough of the Desautels Faculty of Management, many legalprofessionals are failing toeducate their clients on theservices they offer. “This leads to unrealistic expectations as to what a professional can offer a client, and according to ourresearch is resulting in anincreasing number ofprofessionals losing work,” hesaid, adding: “As well as clientsbeing willing to pay less, theperformance of professionals cansuffer. If a client isn’t aware how aprofessional carries out theirwork, their methods can confusethem, and they will hold backinformation as a result – oftenmaking the relationshipunmanageable.”

Manchester mandated HHJ Hodge QC, the circuit judgemember of the Civil JusticeCouncil costs committeeconducting the guideline hourlyrates review, told the recent ACLCosts Conference in Manchesterthat ACL members had until theend of November to submitresponses. “Practitioners have a chance to inform the process,”he told delegates, “but only bysubmitting their views, supportedby evidence.” There will also beoral sessions with selectedprofessional bodies, organisationsand firms in February 2014.

Ramsey to address IBC conference In a sign that the judiciary’scontinuing media outreach oncosts issues has not let up, ACLhonorary president Mr JusticeRamsey will give a special addressto IBC’s Solicitors’ CostsConference in January 2014.Ramsey J has, since April 2012,become involved in theimplementation of the reformsarising out of Sir Rupert Jackson’sFinal Report on the Review of CivilLitigation Costs.

05

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06

News

Lord Chief Justiceshines a light awayfrom LondonTwo speeches by the new Lord Chief Justicesuggest regional justice has a new champion – including in costs matters

Thomas counters Neuberger hourly rates comments

News

Proportionality – which was muchdiscussed in Lord Justice Jackson’sreport on civil litigation funding –has found in the new Lord ChiefJustice, Lord Thomas of Cwmgiedd,a regional champion for firms andsets outside London, it seems.

Lord Thomas delivered hiscomments in two recent lectures,where he emphasised that costsbudgeting and proportionalitywould place a greater emphasis on ensuring regional solicitors and barristers were instructed in cases, with London lawyers only being instructed wheregenuinely necessary.

Lord Thomas made the theme of improving access to justiceoutside London a central one in his Birkenhead lecture – veryappropriate given FE Smith KC,

later Lord Birkenhead, had madehis name both on circuit and inLondon in the late 19th and early20th century.

He said such a move would“provide access to justice withoutthe cost of parties coming toLondon”, adding that thecentralisation of lawyers in Londonwas a “serious impediment” toreducing the costs of litigation.

He added: “Of course a party is entitled to employ any firm itwishes in any city, but if the partydoes instruct a London firm forout-of-London work, it should doso in the knowledge that in theevent of success, it will benecessary to explain to the court at the costs budgeting stage or on any assessment why it wasreasonable to use a London firm

for such a dispute. The differencesin costs are now huge.”

Similar themes were expressedin support of the regional Bar in his address to the recent BarConference, in recognising itsworth “not only to the provision of justice in the towns and citiesoutside London but also to thestrength of [those] economies”.

Lord Thomas said: “It isessential… that you pay seriousattention to the imbalance which…continues to create a growingconcentration of specialistpractitioners in London,” adding:“The judiciary will strengthenaccess to justice in the great townsand cities,” including encouraging“the establishment and nurturingof specialist practitioners” based in the regions.

In his annual press conferencerecently, the new Lord ChiefJustice Lord Thomas declined tofollow Lord Neuberger’s recentscepticism on hourly rates.

The president of the SupremeCourt was notably critical, saying in his recent JUSTICE lecture that“the centrality of the hourly rateappears to me to be malign”.

Speaking to journalists, LordThomas said he felt “the piece-work principle was better”, and thatin his experience “an awful lot ofwork was done on a piece-worktime basis, rather than an hourlyrate basis, but that it has crept in.

NEWS IN BRIEF

Provisional assessment blues Delegates to the recent Lexis-Nexis costs conference heardfrom Master Haworth, whoacknowledged continuingconcern in relation to provisionalassessment claims. Findingssuggest that those seeking toavoid paper assessment underthe provisional assessment rulesfor claims under £75,000 arechallenging them on grounds ofmis-certification, or misconductissues. At the ACL’s recentManchester conference, barristerNathan Adams said that “theprocess was, for the most part,working as intended”, but that“overall, provisional assessmentsare being conducted with fewchallenges to oral hearings”. Thechallenges, however, may springless from the process and morefrom the risk of recovering the fullextent of costs under provisionalassessment – somethinghighlighted when the original pilotlimit of £25,000 was increased inspring 2013.

For regular news updates... visit the Association of CostsLawyers website or subscribe to the weekly email update [email protected]

“Most commercial clients woulduse hourly billing as a guide, butthen look back andsay, ‘Well, this iswhat the work isworth’,” he added.

Lord Thomas also said thatclients would assess “how long

it takes the competent andaverage practitioner to do

something; not the slow and inexperienced person”,

concluding: “Hourly rates havetheir place, but the difficulty is

that we have never reallythought how we could

substitute a system ofpiece-work for the hugevariety of civil work we do.

“In crime the great virtue of the

graduated fee

system is that it basically works on a piece-rate basis.”

In the same press conference,Lord Thomas also referred to theneed for greater flexibility in theuse of IT and court facilities, as wellas noting: “I have always taken theview that you cannot allow fees todrop to a level that does not attractpeople of sufficient ability” to the Bar.

There was a need, he said, toensure that those at the privatelyfunded Bar were able to supportpublicly funded colleagues, “for the whole of the profession;something that people forget”.

LordNeuberger

Lord Thomas


04-07 News:Layout 1 11/12/13 12:34 Page 6

7th February 2014Costs SeminarLondon

9-10th May 2014ACL Annual CostsConferencePark Plaza Riverbank Hotel,London

Keep an eye on the ACLwebsite for further detailsand booking forms.www.associationofcostslawyers.co.uk

Dates for your diary

Change of addressMike Fitsell, formerly of CrownCosts Consultants, is now withKnapp Richardson, 3rd FloorChancery Lane, 53-64 ChanceryLane, London, WC2A 1QU0207 831 [email protected]: 0029 CHANCERY LANE

07

News

ACL backs call to make costswork a reserved legal activityThe Association of Costs Lawyers(ACL) has strongly endorsed therecommendation of leadingacademic Professor StephenMayson (pictured right) that lawcosts work should only be carriedout by properly authorised andregulated specialists.

In his submission to the Ministryof Justice’s review of legalregulation, Professor Mayson urged a move to focus regulationon the type of work involved, rather than who does it, and saidthe list of reserved legal activities – which can only be carried out by regulated persons – shouldencompass those areas of workwhere there is either a public good or consumer protectionjustification for doing so.

Classifying law costs work within the category of ‘activitiesconnected to the administration of justice and due process’,

Professor Mayson wrote: “Giventhe reserved rights currentlyattaching to costs lawyers(including rights of audience andrights to conduct litigation inrelation to costs matters, as well asthe administration of oaths), whenshifting emphasis from regulationby title to regulation by activity,there could well be a publicinterest justification for extendingspecific reservation.”

ACL chairman Murray Heiningsaid: “Professor Mayson echoeswhat we have been saying for along time. The benefits of using a qualified and regulated costslawyer speak for themselves.

“The Legal Services Act 2007recognised costs lawyers as aspecialist arm of the legalprofession to ensure that costs aredealt with expertly. This is a vitalelement of the administration ofjustice, as is the protection for

clients that regulation brings,should things go wrong.

“We hope that the Ministry ofJustice and Legal Services Boardtake note of Professor Mayson’swell-reasoned blueprint forrefocusing the current regulatoryregime on what really matters toclients and the public interest.”

Student career confidence increasesThe University of Law’s annualsurvey of its students, inconjunction with The Times, hasshown them to be optimistic aboutcareer prospects.

More than nine in 10 lawstudents had confidence in theUK’s economic recovery, with 77 per cent believing that it willcontinue to recover slowly during2014, and 15 per cent asserting that the pace of that recovery will increase.

The University of Law (formerlyknown to ACL members as theCollege of Law) also reported thatmore than 60 per cent saideconomic uncertainty had had noimpact on their decision to apply tolaw school. Indeed, a further 14 percent said that it had in fact madethem more likely to study law.

Notwithstanding recentrecommendations as to legaleducation and training ondeveloping apprenticeships andnon-graduate pathways into law,64 per cent of students said theywould still prefer to study for adegree, even if they could startwork immediately post-school.

More than half of students (56 per cent), however, felt that the majority of law degrees weretoo academic, and should include

more vocational training. Thesurvey also revealed concernsabout work-life balance – somethingthe ACL is able to address.

Philip Robotham, chair of theACL’s Education Sub-committee,said the ACL was “proud of itsinclusive entry requirements for its Training Course, set against the criteria of the LETR report”,adding: “The course equipsstudents with the tools to engagein a productive way in the legalprofession from the outset.”

Approximately half of the annualtrainee costs lawyer intake aregraduates. On qualification, costslawyers can expect to earn salarypackages equivalent to most NQsolicitors and barristers. A newtraining course is due to belaunched in September 2014.

NEWS IN BRIEF

Guideline hourly rates With the release of its survey intoguideline hourly rates (GHR),previously issued by the CivilJustice Council on 1st November2013, the ACL’s chairman MurrayHeining called on members to takepart so that any decisions arebased on firm evidence as to thecosts of litigation. He said: “It isimperative that costs lawyers andsolicitors ensure the committeehas all the information it needs.”

Law Society on the defensive Chancery Lane says it has got thebest deal possible for criminallegal aid lawyers, whilst raisingconcerns about fee levels in anumber of areas. In its response to the Government’s legal aidconsultation, Law Societypresident Nicholas Fluck said that “[it] has secured significantchanges to the original proposalshaving constructively engagedwith the MoJ since April”, despitebeing heavily criticised by criminallegal aid solicitors for allegedacquiescence to proposed cuts.


04-07 News:Layout 1 11/12/13 12:34 Page 7

08

The judgment in the Court of Appeal case of Mitchell v News Group Newspapershas excited considerable comment from the costs community

Mitchell: costslawyers react

The decision to dismiss the claimant’sappeals in the case of Mitchell v NewsGroup Newspapers was given by the Court of Appeal on 27th November, with Lord Dyson, the Master of the Rolls, delivering judgment.

The appeal arose in the ‘Plebgate’ libellitigation, in which action the claimant’sformer solicitors had failed to submit a costs budget on time.

Master McCloud imposed a sanction of treating the claimant’s budget as if itcomprised court fees only, effectivelydepriving the claimant of future costs, andthen subsequently refused relief fromsanctions under the new post-Jackson CPR 3.9 regime, leading to the appeal.

Dyson MR comprehensively dismissed the appeal, which set narrow boundaries for avoiding sanctions for non-compliancewith rules, practice directions and orders.

Murray Heining, ACL chairman, said thecase could be regarded “as easily the mostimportant civil litigation judgment of the year”.

Acknowledging tensions between theinterests of parties involved in individuallitigation on the one hand, and the widerinterests of justice and other court users onthe other, Heining said the judgment “willprovoke much discussion, and rightly so”.

However, the fact that “lawyers have firmguidance as to how courts should approachbreaches of orders and rules is surelywelcome”, he added.

Heining cited Dyson’s warning that “well-intentioned incompetence for which there is no good reason should not usually attractrelief from sanctions.

“Those lawyers working with a team ofexperts, including costs lawyers, should sleep more comfortably,” he said, calling for civil litigators to review their practices

in order to ensure compliance. Sue Nash, MD of Litigation Costs Services,

said that the judgment would be “likely tomake solicitors more than a little twitchy”.

Nash pointed out Master McCloud’s ownreferences to the Master of the Rolls’recent lecture on implementation ofthe Jackson reforms, in which Dysonhighlighted “the need to further theproper administration of justice wherethat goes beyond the interests of theimmediate parties”.

Costs Lawyer Simon Murray of Neo Lawcalled the decision “unsurprising”, saying: “Todo otherwise would have contradicted notonly the costs management regime but alsothe spirit of the court’s case managementpowers in the post-Jackson era.

“It is a draconian brave new world we findourselves in,” he added, “and all litigators –costs or otherwise – will be well served bytightening up their processes to avoid default,thus alleviating the need to apply for relieffrom sanctions in the first place.”

Practico, the costs lawyers advising NGN’ssolicitors, Simons Muirhead & Burton, alsocommented, through managing director AndyEllis, that the decision “will have come as lessof a surprise to anyone who was in court forthe appeal hearing and was able to gauge themood music”.

Ellishighlighted theclaimant as not beinghelped “by the absence ofevidence as to any prejudice he may havesuffered as a result of refusal to grant relief”.

He added that “mere inadvertence orpressure of work (unkindly described by some as ‘the dog ate my homework’ form ofexcuse) will not get you home when seekingrelief from sanctions”.

Ellis also said that the new culture was “notzero tolerance: the court was clear that it isnot concerned with trivial breaches. But thewriggle room is now extremely narrow whendelay will result, and especially if the court isinconvenienced”.

Those who assume the courts’commitment to budgeting might be waning,said Ellis, “were shown by Mitchell that thiswas far from the case”. �

Those who assumethe courts’ commitmentto budgeting might bewaning were shown byMitchell that this was farfrom the case

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08 Mitchell:Layout 1 11/12/13 12:41 Page 8

With many key industry developments set to be revealed over the next few months,2014 is shaping up to be an interesting year,says ACL chairman Murray Heining

Next year will see thestart of a new course fortrainee costs lawyers,starting in September

“ “Tippingpoints

As we move into 2014, Association of CostsLawyers (ACL) members will no doubt beacutely aware of the number of costs-related topics of mutual, not to say public,interest that the organisation has beeninvolved in during the past year.

Guideline hourly ratesI am sure you will have heard about the recentCivil Justice Council’s (CJC) survey intoguideline hourly rates (GHR), issued on 1st November 2013; and I hope that as manymembers as possible took part in the survey.

As I have said previously, any decisions takenby the CJC must be based on firm evidence asto the costs of litigation. This is something thatcosts lawyers are uniquely placed to supply, so I hope you have all completed a questionnaire,and encouraged your professional clients to dothe same.

With a seat on the committee overseeing thesurvey, we will continue to be actively engaged.As HHJ Hodge said at our recent Manchesterconference, there will be further calls forevidence from bodies like the ACL, togetherwith oral hearings in the New Year, before areport goes to Lord Dyson as Master of the Rolls in March 2014.

Plebgate and afterwardsAt the time of writing we do not yet know theresults of the appeal in Andrew Mitchell MP vNews Group Newspapers [2013] 2355 (QB),otherwise known as the ‘Plebgate’ libel action.Costs lawyers will look forward to this result,

which should strengthen the importance ofcosts budgeting and push the parties to engagein the budgeting process.

The case has been chosen as the first underwhich the Court of Appeal will consider the ‘new’ approach to relief from sanctions and thecourts’ new, harder line on non-compliance withthe CPR generally.

Mitchell – and similar costs budgeting cases – suggests that the role costs lawyers play inworking with firms will be better appreciated byclients and businesses. We are being instructedearlier, and more regularly.

On media and PR, I hope that you enjoy thisedition of Costs Lawyer. The magazine is nowbeing produced on a bi-monthly basis by a neweditor, Ben Rigby, who has succeeded Neil Rose,and it has been relaunched with a new design byArchant Dialogue, our new publisher.

The magazine will be distributed alongsideregular eBulletins, sent by email to ACLmembers. If you have comments or suggestionsabout Costs Lawyer, do contact Ben, DianePattenden or Sue Nash – you can find contactdetails on page 3.

Our Law Reform Committee has certainlybeen busy reacting to the Government’sresponse to various consultations, includingregulation, where we have made a strong casefor the regulation of all costs professionals – one that I hope the Lord Chancellor will take seriously.

On education, next year will see the start of anew course for trainee costs lawyers, starting inSeptember 2014. This follows the decision torevise the previous course and ensure it reflectsthe best contemporary outcomes, forming thebasis of a successful career as a Costs Lawyer. I congratulate Philip Robotham and hiscommittee for their hard work.

Each of the committees enables you, themembers, to be well represented, and I urge you to assist them in their work during the next12 months, as indeed you have for the last.

2013 has been a busy year for costs lawyers.I wish members both old and new, and theirfamilies, a very happy Christmas and asuccessful 2014. �

09


Opinion

As we heard at our recent Manchesterconference, our own standing before the courtsis increasing; so, too, should our value to thoselaw firms using our services.

Both of these factors will not change,regardless of what Mitchell decides, but greaterrecognition is a step in the right direction.

Regulation and educationIn my last column, I reminded members that theCouncil had formed committees for education,PR/media and law reform.

09 Opinion:Layout 1 9/12/13 08:55 Page 9

ACL conference review


10

Professor Dominic Regan spoke at the recent ACLconference on the subject of ‘The Jackson Reforms –Whatever Next?’ Here Costs Lawyer presents anabridged version of his speech, delivered before therecent decision in Mitchell v News Group Newspapers

Regan’s way

n his speech at the ACL conference inManchester in October, Professor Reganhighlighted a number of key areas that will

likely be of interest to Costs Lawyer readers.

First was the rise of the fixed costs regime.Professor Regan referred to Sir RupertJackson’s belief that “an important brick ismissing from the edifice” of the reforms heproposed – namely, a universal fixed costsregime for all fast-track work.

He said that whilst there is a new scheme forpersonal injury work, it is his belief, on accountof proportionality, “that all cases should be dealtwith in the same way, using a costs matrix”.

He did, however, note that there areexceptions: the new fixed costs rules foraccidents occurring from 31st July 2013 will not apply where a claimant makes a good Part 36 offer; but unfixed indemnity costs will be recoverable.

The introduction of fixed costs in personalinjury and employers’ liability claims will,predicted Regan, ultimately be extended across the fast-track spectrum.

This protocol applies to employers’ liabilityand public liability claims valued between£1,000 and £25,000 on or after 31st July 2013,and to employers’ liability disease claims priorto 31st July 2013.

Hourly rates under questionRegan also said the introduction of fixed costsmeans that the courts are likely to move awayfrom the hourly rates model, noting LordNeuberger’s previous statement to the ACL last

year, that “hourly rates reward inefficiency”.“Long term, the hourly rate is doomed,” said

Regan, noting that the fixed costs mentionedabove are not calculated by reference to time –and nor indeed is the contingency fee allowedby the new Damages Based AssessmentRegulations (DBA).

Regan explained that he believes the DBARegulations will be amended after massivelobbying by firms – including those in the Magic Circle.

The DBA Regulations are being reformed, with a view to making them workable by April2014, and Regan outlined the steps that arebeing taken to ensure that clients will besatisfied with them.

For some inexplicable reason, he said, ahybrid agreement whereby one charges theclient as one goes is not permitted – hence thereforms. “It must be a pure DBA, which meansthe client has no financial involvement… [and]that is ridiculous,” he stated.

He also made the point that clients would need to show a degree of commitment to any agreement, which the DBA changes would effect.

Small claims limitThere has been much chatter about the injurysmall claims limit, Regan noted, which has notmoved from £1,000 since 1991.

Speaking before the Ministry of Justice’sdecision at the end of October 2013, he saidthat “the House of Commons Transport Select Committee report may have ridden to the rescue”.

I

ACL COSTS CONFERENCE:THE CHANGINGCOSTS LANDSCAPE

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ACL conference review11


The Committee unanimously accepted that whiplash is a legitimate condition and thatclaimants need legal advice and representationto recover their rightful damages.

Subsequent to the professor’s speech, in a widely unexpected move, the Governmentdecided that it would not increase the personalinjury small claims limit at this time.

Law Society chief executive DesmondHudson said, on 23rd October 2013, that thedecision “to heed the warnings of the TransportSelect Committee and maintain the smallclaims limit at its current level for personalinjuries is good news for accident victims and a victory for common sense”.

Part 36 issuesPart 36, “the nuclear weapon for claimants”, is likely to be tidied up next year, Regan said,stressing that the core elements will bepreserved. He outlined the importance of Part36 offers, from Jackson’s original vision, inaccentuating uplifts in both damages and costsfor those making successful offers to settleunder Part 36. These are here to stay, hesuggested, and the reward regime could yet be extended further.

Regan said practitioners should note that the2013 White Book commentary on Part 36 offerswas corrected in the July supplement. It nowcorrectly states that an offer is either good or

bad; in or out. See PHI Group Ltd v Robert WestConsulting Ltd (2012) EWCA Civ. 588 and F & CHoldings v Barthelemy (2012) EWCA Civ. 843.

The October 2013 White Book supplementhad confirmed that that the commentary onPart 36 offers in Volume 1 remained inaccurate,with Regan calling upon delegates to “exerciseextreme caution” in reading it.

Costs budgetingThe gaping hole in budgeting has beenrecognised by Ramsey J, noted Regan, referringto the problem in relation to pre-litigationexpenses, which is that CPR 3 .12 (2) talks of thesteps to be taken and

It seems morelikely than not thatcosts budgeting willbe extended

“ “

Continued overleaf... �



12

the costs to be incurred. Scrutiny of expenditurepre-budgeting is being addressed, he said.

Satellite litigation to determine precisely whatproportionality means is inevitable, warnedRegan; paying parties will have the irresistibletemptation to take the point, which meant“expect war for two years”.

In an aside, he said that whilst the courtsremain unsure of what proportionality means inthis context, it is important that costs lawyersread up on it; saying that it is likely to be case-sensitive, and developed, through satellitelitigation, on a case-by-case basis.

He referred to Lord Neuberger’s recentcomments that it was to be hoped that“concepts of proportionality prevailed overreasonableness” in the courts’ judgment.

There was also, Regan said, “a real sense that proportionality should be extended [as perLord Neuberger’s speech], and that the currentexemptions as to larger claims [those beingplaced outside the costs budgeting regime]should be kept in the costs management system.

“It seems more likely than not that costsbudgeting will be extended and there will be noareas where the jurisdiction will be exempt fromthe budgeting process,” he added.

The overall directionRegan suggested that there would be tests ofthe Jackson review early on as there were withthe Woolf reforms; but recent speeches by bothLord Dyson and Lord Neuberger indicated thatthey felt the nature of litigation had changed.

It should not be forgotten, he said, that theJackson reforms were approved by the judiciary,and he does not see a future Court of Appealundermining or betraying the reforms. Thiswould mean that the appeal in Mitchell wouldmake it one of the most important cases of the year.

All of the signs have been that High Courtjudges have taken an equally firm line in thedirection of strict case management, in lookingto ensure cases are proceeding justly and atproportionate cost.

This reflects some of the lessons Jacksonhad absorbed in looking at Singapore’smanagement of costs issues, said Regan. Those hoping that the Court of Appeal mighttake a different view would be disappointed, he suggested.

Lord Dyson’s recent speech to the JudicialCollege sent out a defiant note that the courtswill aim to adhere to that interpretation of theoverriding objective, in showing “the centrality

of dealing with cases at proportionate cost andthe fact that the overriding objective requiresthe court to place a greater weight than it mighthave done previously on enforcing compliance”.

Speaking to Costs Lawyer after the event,Regan commented that Lord Justice Jacksonwas aware of the scale of the challenges costslawyers faced, but he encouraged everyone to read his introduction to the White Booksupplement, which explains his aims, and wasalso admirably frank in acknowledging theproblems ahead.

Mediation and costsRegan said Compulsory ADR is back on theagenda. Ward LJ who sat in Halsey v MiltonKeynes NHS Trust (2004) EWCA Civ. 576ruefully repented in Wright v Wright (2013)EWCA Civ. 234; and in Faidi v Elliott Corporation(2012) EWCA Civ. 287 said at para 40 that “giveand take is often better than all or nothing”.

Might the Mitchell approach drive lawyers tomediate, wondered Regan, given the strictnesswith which adherence to the rules might beapplied, as was seen in that case?

Likewise, the revised overriding objective,coupled with the new Rules of Evidence withinCPR 32 and 35, may well see much tighterregulation of evidence from now on.

This would mean that costs lawyers shouldanticipate and, indeed, raise challenges, as thecase may be over the number of witnesses,experts, the length of their reports, the contentof their statements and so on. In the JulyLadbrokes decision, Lord Justice Jacksondeducted 20 per cent in costs where thedefendant had introduced into witnessstatements points that were never taken at the hearing.

There is a primary duty to be realistic andexact, said Regan, which the audience shouldbear in mind.

Equally, he said, the cost of producingphysical paperwork would need to beaddressed, as Jackson “firmly believes thatpaper should be expelled from litigation”.Electronic filing of statements, disclosure andbundles is the way forward, noted Regan, withclear implications for clients as to costs andinfrastructure as a result.

So, with no paper, fixed costs, costsbudgeting and management throughout, and anend to the system that places the role of costslawyers at the end, rather than the beginning, ofthe process, Regan’s brief summary of theissues suggests interesting times ahead. �

The introduction offixed costs in personalinjury and employers’liability claims will,predicted Regan,ultimately be extendedacross the fast-trackspectrum

“

“



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You will monitor the performance of each team member and will support, encourage and motivate them in order to ensure that individual and collective targets are being met.

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14

Did you know that ACL members have access to a wide range of exclusive benefits and services? If not, this summary will help you to make the most of your membership

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ENTICEACL members can gain free access to the Entice Rewards website, which provides thousands of offers and discounts from big names in travel, high street shopping, entertainment and leisure.For example: savings of up to 17 per cent off travel brochure prices with more than 750 touroperators are available, with all members of the travelling party able to benefit; you can purchasevouchers and reloadable gift cards for more than 40 leading high street retailers at below facevalue; and cinema ticket discounts of up to 30 per cent can be used at venues nationwide. Justcontact the ACL Admin office to request your unique access code.

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CENTRAL LAW TRAININGCentral Law Training (CLT) is a leading provider of post-qualification training for legal professionals, and ACL members can receive an impressive50 per cent discount on most of its seminars, conferences and webinars.Further information and course details can be obtained from the CLTwebsite at www.clt.co.uk, but places should be booked via the ACL Admin office.

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15


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16

Good management

Of equal importance to the production ofPrecedent H are the monitoring and controllingof costs budgets during the lifetime of a matter;managing budgets as projects; and projectmanagement skills.

His Honour Judge Simon Brown QC recentlywrote in the New Law Journal: “Budgeting is just one facet of the skill of legal projectmanagement (LPM) that all civil litigation lawyers now need to have… CPD LPM trainingneeds to be mandatory for those conductingmulti-track civil litigation.”

Legal project managementLPM refers to project management methodsand techniques that can be best adapted forlegal industry needs, when developing andpromoting a project-based mindset whiledelivering legal services.

There is no single detailed LPM scheme thatfits each and every legal services organisation,however some core project managementprinciples and methods can be applied in orderto increase the likelihood of completing matterswithin initial estimated costs and deliveringvalue to the client.

Challenges and opportunities One immediate challenge for costs lawyers is to understand better how law firms are trying tomanage litigation in light of the costs budgetingregime and other commercial pressures thatthey are faced with.

Practically every law firm seems to have beenengaged in some form of process improvementinitiative recently, aiming to reduce or eliminate‘waste’. Costs lawyers need to understand howthese process improvement projects typicallywork, what law firms look to achieve from themand, most importantly, the position that costslawyers are now most commonly perceived tooccupy in the ‘value chain’.

It follows on from this that costs lawyers – like anyone else involved in the delivery chain – need to be able to demonstrate that they canclearly add value. How might this be achieved?

LPM training

Alongside the preparation of Precedent H as one aspect of costs budgeting,changes to the costs management regime have meant that new skills arenow required, as Antony Smith and Sue Nash explain

One route might be through helping with theproject management of litigation, for exampleby supplementing solicitors’ projectmanagement skills with the costs-based skills of costs lawyers.

Arguably, as bare essentials, costs lawyersneed to acquire greater understanding ofproject-based techniques for:� scoping and estimating matters;� managing cases as ongoing projects;� communicating project progress clearly with

all concerned;� being part of effective litigation teams; and� leading litigation teams (where appropriate).

Legal project management trainingCosts lawyers (and, indeed, barristers andsolicitors) have very limited exposure to formalproject management methods and techniquesduring their training. There is, however, anobvious benefit to be gained by doing so afterqualification, and for members to supplementtheir innate legal management practiceexperience by acquiring project management

skills and then learning to apply them. The ACL believes this is something that needs

to be rectified, thus we are investigating the ideaof offering legal project management training tocosts lawyers. As a starting point, we plan tooffer a half-day ‘taster’ session some time earlyin the first quarter of 2014.

The primary purpose of the session will be to update costs lawyers about processimprovement initiatives within law firms and provide an introduction to legal projectmanagement. The secondary purpose will be to gather feedback from attendees about howlegal costs project management training may be refined and developed further. �

If you are interested in attending this half-daysession, please contact Diane Pattenden [email protected]

Sue Nash is ACL Committee chair for media/PRand an ACL Council member, and Antony Smithis director of Legal Project Management Ltdwww.legalprojectmanagement.co.uk

16 LPM:Layout 1 9/12/13 09:02 Page 16

Legal update17


Summaries are from Lawtel unless otherwise stated. For the full judgments,members should try Bailii (www.bailii.org), a free resource, Lawtel or otherlaw reporting services. Members are reminded that decisions of lowercourts are only included where an issue is determined that is novel or ofparticular interest. Such cases should be cited with care. The judgments in such cases can be persuasive but are not binding on higher courts

Legal update

VITOL BAHRAIN EC v (1) NASDEC GENERALTRADING LLC (2) FAL OIL COMPANY LTD(DUBAI) (3) FAL OIL COMPANY LTD(SHARJAH) (4) STANDARD CHARTEREDBANK (COSTS) (2013) (Males J)

The Commercial Court emphasised that it would not assess costs in such a grosslydisproportionate amount as had been incurredby both sides in the instant case betweenforeign parties. Although many cases involvingjurisdiction could incur substantial costs at astage when it was unknown where they would be litigated, the rules were clear that costsrecoverable were limited to those that werereasonable and proportionate.

The court summarily assessed the costs of the second and third defendants (F) afterrefusing to continue an anti-suit injunction that had been granted without notice to theclaimant (V) who had sought to join F toproceedings in the UAE.

The hearing lasted one day, and involveddocumentation typical of such a matter in theCommercial Court. F had been entitled to theircosts on the standard basis. Since the initialhearing granting the injunction there had been a further short hearing to consider how topreserve the parties’ positions until a fullhearing, and there had been extensiveprocedural skirmishing in correspondence forwhich each side attempted to blame the other.

V’s statement of costs sought a total of£242,700, including the costs of the withoutnotice application as well as those of the returndate hearing. It did not provide a full breakdownas between those hearings, but £142,400 wasfor work done by V’s solicitors; £72,800 forcounsel’s fees; £20,000 for UAE lawyers; andthe balance for miscellaneous items. F’sstatement was for £165,400: £70,600 for theirsolicitors; £43,100 for counsel’s fees; £50,400for UAE lawyers; and a few miscellaneous items.

HELD: It was to be expected that V’s costs would be greater than F’s, as they had incurredthose of the without notice hearing andbecause they had the responsibility ofpreparing the documents for the hearing.Nevertheless, the figures on both sides

represented charging on an epic scale. Lawyerswere free to agree fees with clients according towhat the competitive legal market would bear,and clients would presumably have been toldwhat to expect. The substantive issues in thecase concerned who had title to oil cargoespurchased for some US$119 million, so it was a high-value claim.

However, the hearing was not about oil, but about whether an injunction should begranted restraining F from joining V to existingproceedings in the UAE, and althoughsometimes the place of trial was critical tosuccess, that was not so in the instant case. V had not suggested that justice could not bedone in the UAE, and had argued that the UAEclaim would be bound to fail. V’s desire to litigatein the UK appeared to be only a preference, andF did not suggest that the issue of title could not be litigated in the UK. Essentially, the partieshad spent over £400,000 to determine whichof two courts should decide the title issue, when both accepted that either court coulddecide it justly.

The rules made clear that costs recoverableby the successful party from the losing partywere limited to what was reasonable andproportionate. Although there was a need forspecialist solicitors and counsel, including UAE lawyers, the costs claimed were grosslydisproportionate. The Commercial Court


17-20 Legal update:Layout 1 9/12/13 09:04 Page 17

would not assess such levels of costs summarilymerely because those on each side werebroadly comparable; the assessment for each side was for £75,000.

However, even if the new rules on costsbudgeting had been applied in the CommercialCourt, it would not have prevented the highlevels of costs incurred in the instant case. Many commercial cases such as the instant one involved jurisdiction issues, and anti-suitinjunctions could require substantial costs at astage when it was unknown whether the instantcourt had, or would exercise, jurisdiction overforeign defendants, and to require parties tosubmit costs budgets at that stage would beimpracticable.

(1) KATHERINE LUMSDON (2) RUFUS TAYLOR(3) DAVID HOWKER (4) CHRISTOPHERHEWERTSON (Claimants) v LEGAL SERVICESBOARD (Defendant) and (1) GENERALCOUNCIL OF THE BAR (acting as BARSTANDARDS BOARD) (2) SOLICITORSREGULATION AUTHORITY (3) ILEXPROFESSIONAL STANDARDS (4) LAWSOCIETY OF ENGLAND AND WALES(Interested Parties) (2013)

[2013] EWHC 3289 (ADMIN) (Bean J)30/10/2013

The High Court refused to vary the costs cap in a protective costs order granted to fourbarristers, backed by the Criminal BarAssociation, who had brought a judicial reviewclaim against the Legal Services Board over theQuality Assurance Scheme for Advocates.

The applicants (L) applied to vary aprotective costs order granted in judicial reviewproceedings against the respondent (LSB).

L were four members of the Criminal BarAssociation (CBA). L had sought a declarationthat the Quality Assurance Scheme forAdvocates approved by the LSB was unlawful.The joint application for the approval of thescheme was made by the Bar Standards Board,the first interested party, and by the SolicitorsRegulation Authority and ILEX ProfessionalStandards, the second and third interestedparties. The claim included an application for a protective costs order (PCO) with a cap of£15,000. The LSB suggested that their costs of defending the claim might come close to£400,000. The judge concluded that whilst a cap of £15,000 would be a fair limit if just L were the claimants, the CBA stood behind

them, and its ability to raise funds from itsmembership as a whole was relevant. Heconcluded that a per capita contribution of £100 from at least 1,500 of the CBA’smembers would not be unreasonable and he accordingly imposed a cap of £150,000. L applied to vary the order by substituting alower figure of £75,000 and to require the LSB and BSB to file costs budgets within seven days.

L submitted that, since the variation wasmade by them as claimants, they should have a “little more latitude” than would apply if theapplication were being made by the defendant.L argued that there had been three materialchanges since the order was granted, namelythat (i) the circuits had combined with the CBA to guarantee payment of costs up to thefull amount of the £150,000 cap; (ii) by an

application, the Law Society was granted leaveto intervene in the proceedings and made itclear that their submissions would be in supportof L’s case: L could therefore be viewed asrepresenting the whole profession; and (iii) theLSB appeared to have reduced drastically thetentative costs estimate to £240,000.

HELD: (1) A claimant who was applying for a PCO on the basis that if it was refused the claimwould be withdrawn was in an analogousposition to when he was applying forpermission. The unfavourable decision onpaper would bring the claim to an end subject tothe claimant’s right to request reconsiderationin an oral hearing. That was to be contrastedwith the instant application for a PCO where allof the parties had been given an opportunity toput their points dealing with the matter on

Legal update


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paper and the judge had granted permission,fixed a particular figure and given detailedreasons for doing so.

In such a case, whether it was the claimant orthe defendant who was seeking a variation ofthe PCO, there had to be a compelling reason toalter the order made, namely a material changeof circumstance, which would be likely to leadthe first judge to reach a different decision, R. (Compton) v Wiltshire Primary Care Trust[2008] EWCA Civ. 749, [2009] 1 W.L.R. 1436followed (see paras 10-11 of judgment).

(2) It was not accepted that the fact that Lwere now indemnified for the full amount of£150,000 was a reason to reduce that figure

as set by the judge. It was right and proper that the four individual claimants should not be exposed to personal liability for costsand that the CBA and circuits should standbehind them. Otherwise, as their witnessstatements made clear, they would notcontinue with the claim. But the fact that L now had an indemnity was no reason to reducethe order. In considering the issue of a PCO, the Law Society’s intervention, like the supportof the circuits, was not a reason for reducingthe £150,000 figure.

The Law Society had far more members thanthe CBA; if L had included one or more solicitoradvocates, with the financial backing of the Law

Society it was possible that the judge would not have granted a PCO at all. The decision did not attach importance to the figure of£400,000 referred to in the LSB’s submissions(paras 13-14).

(3) The alternative application to require theLSB and BSB to submit costs budgets was alsorefused. It would be inappropriate to order thesubmission of costs budgets by parties whoserecoverable costs were already the subject of aPCO. Moreover, an important purpose of a costsbudget was to impose pressure on parties tolitigate more economically, and in the case ofthe LSB the application for a PCO had alreadyhad that effect (para 16).

PGF II SA v OMFS CO 1 Ltd [2013] EWCA Civ. 1288

(Maurice Kay LJ, Beatson LJ, Briggs LJ)

The Court of Appeal extended the guidelinesset out in Halsey v Milton Keynes General NHSTrust [2004] EWCA Civ. 576, [2004] 1 W.L.R.3002 regarding whether a refusal to engage in alternative dispute resolution amounted tounreasonable conduct that should attract acosts penalty. As a general rule, silence in theface of an invitation to participate in ADR wasitself unreasonable, regardless of whether there was a good reason for a refusal to engagein ADR.

The appellant (P) appealed against adecision ([2012] 3 Costs L.O. 404) that it couldnot recover some of its costs following the lateacceptance of its Part 36 offer by therespondent (C) because it had failed torespond to C’s invitation to mediate.

C had brought proceedings against P foralleged breaches of tenants’ repairing covenantsin a lease of a commercial building. C claimedapproximately £1.9 million. C made two Part 36offers, of £1.125 million and £1.25 million, whichwere not accepted by P. It then sent P a detailedinvitation to participate in mediation. P did not respond, even though the invitation wasrepeated a few months later. Instead, P made aPart 36 offer of £700,000, which C eventuallyaccepted shortly before trial. Ordinarily, uponacceptance of the offer, C would have beenobliged to pay P’s costs. However, the judgeconsidered Halsey and concluded that P hadunreasonably refused to participate inmediation. He therefore deprived P of its costsfor the relevant period under the CPR r.36.10,

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Legal update

but did not order P to pay C’s costs. P appealed,and C cross-appealed against the judge’srefusal to award costs to it.

P submitted that (1) it had not actedunreasonably; (2) its silence did not amount to a refusal to engage in mediation; (3) mediationstood no reasonable prospect of success in anyevent because of the distance between theparties’ Part 36 offers; and (4) the judge’s costssanction was too harsh as he had not weighedC’s responsibility for failing to accept P’s Part 36offer earlier.

HELD: (1) The time had come for the court tofirmly endorse the advice given in the ADRHandbook that, as a general rule, silence in theface of an invitation to participate in ADR wasitself unreasonable. This was regardless ofwhether a refusal to engage in ADR might havebeen justified. It was possible, however, thatthere might be rare cases where ADR was soobviously inappropriate that to characterisesilence as unreasonable would be pureformalism, or where the failure to respond was a result of a mistake, in which case the onuswould be on the recipient of the invitation tomake that explanation good.

There were sound practical and policyreasons for such a modest extension to theguidelines set out in Halsey; first, because aninvestigation of the reasons for refusing tomediate, advanced for the first time at a costshearing perhaps months or years later, posedforensic difficulties for the court concerningwhether those reasons were genuine.

Second, a failure to provide reasons for arefusal was destructive to the objective ofencouraging parties to consider and discussADR. Any difficulties or reasonable objection toa particular ADR proposal should be discussed,so that the parties could narrow theirdifferences. That occurred routinely in relationto expert issues; there was no reason why thesame should not apply to ADR.

Third, it would also serve the policy ofproportionality. Accordingly, P’s silence in theface of two requests to mediate was itselfunreasonable conduct sufficient to warrant acosts sanction (see paras 34-40 of judgment).

(2) It would be perverse not to regard silencein the face of repeated requests for mediationas anything other than a refusal. That was all themore so because C’s first request was couchedin such detailed and sensible terms that it couldnot reasonably have been regarded as a meretactic (para 42).

(3) Part 36 offers did not necessarily

represent the parties’ respective “bottom line”.Accordingly, there was no unbridgeable gulfbetween C and P’s respective Part 36 offers,which could not in any circumstances havebeen overcome in mediation. The dispute waseminently suited to mediation, and it had had areasonable prospect of success when offeredby C (paras 46-48).

(4) A finding of unreasonable conduct by a refusal to mediate did not produce anautomatic result in terms of a costs penalty. The judge was plainly conscious that he wasexercising a broad discretion. To deprive P ofthe whole of its costs during the relevant periodwas within the range of proper responses to its

seriously unreasonable conduct. The judge’slack of an express balancing exercise did notdemonstrate that he did not in fact carry it out in his mind (paras 51, 54-56).

(5) There was no recognition in Halseythat the court might go further and order the otherwise successful party to pay all or part of the unsuccessful party’s costs. While in principle the court had that power, a sanction that draconian should be reserved for only the most serious and flagrant failures to engage with ADR, for example where the court encouraged the parties to do so, and its encouragement was ignored (paras 51-52). �


Lynn Plumbley, chief executive of the CostsLawyer Standards Board (CLSB), provides around-up of regulatory developments

Regulatoryupdate

Costs lawyer practising certificate fee 2014The Legal Services Board (LSB) has approved thefee for a 2014 costs lawyer practising certificateat the sum of £250. Through continued soundfinancial management, the Costs LawyerStandards Board (CLSB) has been able to keepits fee the same for the third consecutive year.

A costs lawyer practising certificate identifiesthe holder to costs judges, clients and legalpractitioners as being a qualified and regulatedlegal professional who adheres to a professionalcode of conduct, undertakes continuedprofessional development and has bothinsurance and a complaints procedure in place.Further, it affords the Costs Lawyer the rights toconduct the following reserved legal activitiesunder the Legal Services Act 2007:� The exercise of a right of audience� The conduct of litigation� The administration of oathsThe name of a Costs Lawyer with a practisingcertificate will appear on the public domainregister of regulated costs lawyers, a copy ofwhich will be sent by the CLSB to all costs judgesat the beginning of 2014 for their referenceduring the year. Further, LawCare cover willremain in place during 2014 (see below).

Tax relief on costs lawyer practisingcertificate feeTax relief is now available on a costs lawyerpractising certificate fee, under StatutoryInstrument 1126/2013 (the Income Tax(Professional Fees) Order 2013), which adds“fees payable to the Costs Lawyer Standards

Board on applying for a costs lawyer practisingcertificate” to the table of those fees qualifyingfor relief under S.343 Income Tax (Earnings &Pensions) Act 2003.

LawCare cover with a costs lawyerpractising certificate LawCare is a charity that is supported by 14 professional bodies, including the CLSB, Law Society, Bar Council, CILEX, MOJ, Instituteof Paralegals and Institute of Barristers Clerks. The organisation offers health support andadvice for legal professionals, and its website –which contains information on alcohol, drugs,depression, eating disorders, panic attacks andassessing and addressing stress in professionaland personal lives – can be accessed atwww.lawcare.org.uk

LawCare can be contacted on 0800 2796888 in total confidence; not only in regard toyour own concerns, but also those you haveabout a colleague or family member.

The organisation also issues newsletters,which the CLSB has agreed to forward on to all costs lawyers with a current practisingcertificate. Costs lawyers are thereforerequested to ensure that the CLSB has their current email address.

Changes of residential address during 2013As the CLSB posts to residential addresses,costs lawyers who have changed their homeaddress during 2013 are asked to notify us inorder to ensure effective delivery of their 2014 practising certificate forms.

Legal Ombudsman CPD-accreditedcourses 2014Following a successful pilot course oncomplaints handling, the Legal Ombudsmanhas extended its CPD-accredited programmefor the legal profession. Dates for the next CPD sessions are:� Thursday 23rd January 2014, Legal

Ombudsman office, Birmingham (9:00-13:00)

� Tuesday 18th February 2014, NorthumbriaUniversity, Newcastle upon Tyne (13:00-17:00)

� Wednesday 19th March 2014, Cardiff City Hall(12:30-16:30)

� An additional date is planned for November2014 for Bristol

The course is suitable for those who would like to learn more about complaints handling or refresh existing knowledge. It aims to clarifythe process and principles that the LegalOmbudsman follows when it investigatescomplaints and considers implications for best practice and internal complaint handlingprocedures.

The course costs £100 + VAT per person, and carries four CPD points. Enquiries should be submitted to Janet Edwards [email protected] �

21

Update

Costs Lawyer Standards Board (CLSB)Centurion House, 129 Deansgate,Manchester M3 3WR Tel: 0161 214 7904Email: [email protected]


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t the ACL CostsConference, MargaretMcDonald of Kenworthy’s

Chambers reviewed the case of Henry v News GroupNewspapers [2013] EWCA 19.

The case arose out of the pilotcosts management scheme that had been introduced fordefamation proceedings.

Paragraph 5.6 of PracticeDirection 51D provided that, whenassessing costs on the standardbasis, “the court would have regardto the receiving party’s lastapproved budget” and would “not depart from such approvedbudget unless there was goodreason to do so”.

In Henry, the claimant’s budget had been approved atapproximately £380,000, but circa£650,000 costs were claimed.Was there good reason to departfrom the approved budget?

The senior costs judge MasterHurst found that a vigorous andlengthy defence had beenmounted, in which theamendments to and changingnature of the defence were notminor inconveniences.

However, the senior costs judge

held the claimant had failed tocomply with the provisions ofPractice Direction 51D – therequirements to have the budgetapproved – and there was no goodreason to depart from theapproved budget.

Simon Murray of Neo Law, in hissubsequent talk on the case, saidthe claimants argued that theincreases in budget could not havebeen predicted, and had told thedefendant of the costs figurebefore settlement.

The costs judge held that therewas no good reason to depart fromthe budget as the claimant had notkept the court or the defendantfully informed of the increases incosts. The claimant had not

therefore complied with the PD51,which is mandatory, so despitebeing likely to show that costs wererecoverable on direct assessment,they should be disallowed.

Moore-Bick speaks outOn appeal, the Court of Appealsaid Master Hurst had interpreted“good reason” too narrowly.Compliance with PD51 is notessential before a party can ask thecourt to depart from the budget;rather, it is one factor to be takeninto account, as “budgeting is notintended to act as a cap”.

The failure to comply with PD51,McDonald pointed out, did not lead to an inequality of arms ordisproportionate costs, nor

had “the essential object of thescheme been frustrated”.

The decision, McDonald added,was arguably fact-specific, pointingto Lord Justice Moore-Bick’s obiterdicta in saying the extent ofrecovery in excess of the budget“would depend principally on theextent to which the costs… werereasonable and proportionate to what was at stake… and to which they could have beenproperly reduced” if PD51 hadbeen followed.

The Court of Appealacknowledged that the new costs rules imposed “greaterresponsibility on the court for the management of costsproceedings… and on the parties for keeping budgets under review as proceedingsprogress”, with greater emphasison the approved budget inproviding a limit on costs.

It held that “the primary functionof the budget is to ensure that the costs incurred are not onlyreasonable but proportionate to what is at stake in theproceedings”. The Court of Appeal overturned the firstinstance ruling and allowed theclaimant to recover their costs.


A

[The Henry decision]creates the erroneousimpression that a partywhich outspends thedefendant can stillrecover full costs

“ “

SimonMurray

The costs warscontinueDelegates at the ACL’s recent Costs Conference in Manchester heard a variety of views on the thorny issue of costs budgeting case law, prior to the announcement of the Mitchell decision, as Ben Rigby reports

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Breaking ranks Simon Murray, quoting ProfessorDominic Regan, said that the Henry decision was “dangerouslydeceptive”, explaining that “itcreates the erroneous impressionthat a party which outspends thedefendant can still recover fullcosts. If only!”

Murray cited (but distinguished)two cases – Troy Foods v Manton,[2013] EWCA Civ. 615 andSafetynet Security v Coppage– that might suggest a looserinterpretation of the budgetingprocess. In the former, in givingleave to appeal, Moore-Bick LJsaid: “Costs judges should [not]treat the court’s approval of abudget as demonstrating… that the costs incurred by thereceiving party are reasonable or proportionate, simply becausethey fall within the scope [of thatbudget].” So, just because costsare within budget does not meanthey are either reasonable orproportionate, although the case settled before the appealhearing itself.

In Safetynet, the need fordetailed assessment was waivedby HHJ Simon Browne. The case,said Murray, could be distinguished

on its facts by the judge concerned– who had run the costs pilot – andso was case-specific and unlikelyto be the norm. That, however, wasbefore ‘Plebgate’...

Plebgate Signature Law’s Graham Huntley,speaking to Costs Lawyer in March,said: “We can expect vigorousargument as to whether the newrules coming into effect in April2013 are so materially differentfrom those in the pilot scheme as to justify future courts beingless lenient.”

One such opportunity hasarisen. In Andrew Mitchell MP vNews Group Newspapers [2013]EWHC 2355, the claimant’ssolicitors failed to file a budget on time. The claimant asked forrelief from sanctions, but MasterMcCloud refused that applicationand reduced costs to court fees.

In Mitchell, however, the casemanagement conference, listed atshort notice, had been adjournedwith costs. The judge had chasedthe claimant for costs budgets,which were filed the day before the hearing, but not seven daysbefore as CPR 3.13 required, andthe explanations given by the

claimant’s firm (e.g. pressure of work, small firm, dealing withunexpected delays with counsel)“were not unusual and carried even less weight post-Jackson”,said McCloud.

The defendant, using costslawyers, had dealt with the matterpromptly so that time was not tooshort, nor unfairly so. Nor wouldMitchell be prejudiced, she noted.Murray, in his talk, pointed out that as a general rule, either thesolicitors’ professional indemnityinsurance – or his costs lawyers’ – would probably apply in casesinvolving the missing of time limitsor mistakes in budgets.

McDonald said that whatdistinguished Mitchell from Henry was that new CPR 3.9applied, with a full argument fromexperienced costs counsel and thebenefit of witness evidence. Thesubsequent appeal was heard on7th November by Lord Dyson MR.

Speaking at the conference,Professor Dominic Regansuggested that McCloud was right to identify the case asimportant, as a test case of theJackson reforms implementingcost budgeting reforms that hadbeen approved by the judiciary.


Explanationsgiven by theclaimant’s firm…‘were not unusualand carried evenless weight post-Jackson’

“

“

MargaretMcDonald

He also did not see a future Court of Appeal undermining those reforms.

Meanwhile, enter WillisMitchell is not the only case inwhich budgeting has been an issue.Murray cited Willis v MRJ Rundell, aprofessional negligence claimworth £1.6 million in which bothsides were heavily criticised forbudgets of nearly £900,000 and£700,000 respectively.

Mr Justice Coulson refused toapprove either side’s budgets,saying they were disproportionateand unreasonable. “It will costsignificantly more to fight this case than either side will everrecover,” he noted.

However, “just because anestimate of £900,000 at this stage of the case… appearsdisproportion ate andunreasonable…” he added, “does not mean that a finalrecovery of £450,000… would not be appropriate”.

Pending Mitchell, Murray saidthat Justice Coulson’s judgmentshave been “very robust and veryJacksonian in tenor”. Whilst somemight see them as yet another‘green light’ to avoid making costsmanagement orders, the fact thathe has given a level of directionmakes it “an important judgment”,he added.

Against that, Regan’s words on the judiciary’s wider approachare still worth bearing in mind. Henoted a recent speech given byLord Dyson to the Judicial College,in which he suggested the courtswould emphasise “the centrality of dealing with cases at pro -portionate cost, and the fact thatthe overriding objective requiresthe court to place a greater weightthan it might have done previouslyon enforcing compliance”.

The issue, therefore, for howproportionality might be defined – in costs budgets in particular –remains a live one. Regan himselftold his audience to “expect war for two years”. �



24

Steven Greenand Simon Murray

Exhibitors fromKings Chambers

His Honour Judge David Hodge QCDominic

Regan

Dr MarkFriston

MargaretMcDonald

Nathan Adams of Dere Street Barristers

ACL Training EducationOfficer Jenny James

Exhibitorfrom New

SquareBarristers

Exhibitors from Kerry London

At this year’s ACL Costs Conference, delegates enjoyedthe opportunity to increase their understanding of recent and ongoing developments in the professionthrough a variety of seminars, as pictured here

ACL conference:in pictures

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Exhibitors fromClayton Legal

Simon Murray of Neo Law

His Honour Judge David Hodge QC

Members of the ACL Council

RobertMarven of 4 NewSquare

Exhibitorfrom BooteEdgarEsterkin

Exhibitor from Boote Edgar Esterkin

District JudgeIan Besford,

ACL honoraryvice president

Exhibitors from RBUK

24-25 Manchester photos:Layout 1 9/12/13 09:13 Page 25


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From the outset� Consider when the budget

should be filed: either by thedate specified in the notice ofproposed allocation (r.26.3 (1));or seven days before the CaseManagement Conference.

Completing Precedent H� From the outset, when

completing Precedent H,consider the relevant hourlyrates, both for each fee-earnerinvolved and any future hourlyrates if they are likely to change.

� Anticipate changes to feeearners who may be promoted inthat period – i.e. from Grade B toGrade A – so that their additionalcosts can be recovered.

Pre-action costs� In accordance with the protocol

in investigating the merits andadvising the client, pre-actioncosts should be apportionedproperly between the variousphases of the claim. Thatincludes any early meetings todiscuss liability and quantumissues.

Pleadings� The issue of proceedings, such

as draft pleadings, should beapportioned properly (i.e. understatements of case rather thanthe pre-action stage).

Case management conferences� Anticipate the costs of one or

more CMCs, their preparationand attendance, and thecontingency of other CMCs. This should factor-in: preparingthe case summary; the costs ofany witness evidence; updatingthe budget; the hearing itself; and using counsel.

Witnesses� Consider how many witness

statements are needed, thecosts of attendance, travel, andpreparation of statements andupdates. Other factors mightinclude: travel time; travelexpenses; advising the client;letters; and telephone calls.

� Similarly, with experts’ evidence, consider: how many will be needed; the costs of their instructions; how long it will take to considertheir report; and the costs of any amendments, updatesand questions.

Disclosure and settlement� What disclosure is relevant

to the case? Include not just the correspondence received,but also consider time spentreviewing any documentsreceived and the costs ofpreparing the relevant bundles, as well as the cost of considering any opponents’disclosure, plus preparing thelist of documents and anysurveillance, should it berequired.

� The costs of settlement need to be factored-in, as wellas preparing (and making) any Part 36 offers; analysingquantum; joint settlementmeetings; and the costs of ADR, including mediation, as a contingency, plus relevantCRU correspondence.

Trial: before, during and after� The costs of pre-trial review

should be properly factored-in;these can be quite large whenadded up, so include all relevant costs, includingcounsel. Similarly, with trial itself, the summonses forwitnesses and the preparationof bundles should beanticipated, as should the briefto, and any relevant pre-trialconference with, counselthemselves.

� How many days are anticipatedfor the trial? And who shouldattend? Add these factors in, as well as the costs of draftingFinal Orders.

� Counsel’s fees themselvesshould be calculated correctly – their hourly rates will be undermuch closer scrutiny. Likewise,the costs of experts attendingshould be estimatedappropriately, as well as anypost-trial written submissions.

Overall: when submitting the budget� The assumptions made

in stating the budget areimportant, whether includedseparately or in the form; as is explaining any workings, orexplaining a summary of thecase so that the assumptionsare given a proper narrativecontext. �


At the ACL’s recent Manchester conference, StevenGreen of Irwin Mitchell gave delegates a ready reckoneras to how to get the best out of the costs budgetingprocess, as this summary of his talk demonstrates

Top tip:Budgets should take the worstcase scenario; that way anycosts consequences could beanticipated, as well as covering the nuts and bolts of casepreparation.

Top tip:The possibility of ADR shouldbe included; particularly if thereis a reasonable prospect thatone or either side is mandatedto make it.

Top tip:Consider the need to includeinterlocutory applications (thosereasonably in the parties’contemplation), e.g. interimpayment applications. This mightbe in the initial phase, dependingon the assessment of liability, butthere might be others; split trials,any relevant inquests and ADR(see next ‘top tip’).

Costs budgeting:in practice


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Costs budgeting:the defendant’s viewSimon Murray of Neo Law gave a defendant’s-eye view of costs proceedings at the conference. The followingabridgment of his presentation outlines the way in whichdefendants should approach costs litigation strategy

Lord Justice Jackson, Simon Murray remindedhis audience, has made it clear that the key tokeeping costs proportionate is the courtmanaging spend throughout, moving argumentsover costs from the end of a case into thecentre of the litigation process.

The essential elements of costs managementare to enable the court not only to say to whatextent costs are approved, but also to managethe case within that approved budget and thenadjudicate on the retrieval of recoverable costsin accordance with the approved budget.

Under Part 3 of the CPR, rule 3.13, unlessordered otherwise, all parties – save for litigantsin person – must file and exchange budgets asdirected. Murray reminded his audience of thevarious costs pilots, which focused on managingcases in a proportionate manner, from the firstcase management conference onwards.

The pilots established that judges spent an average of 14 minutes approving budgets,suggesting that getting matters right first time isimportant. Having the relevant IT to hand to takejudges through the process would also assist.

The new normalMurray reminded the audience that judges havebeen trained to look at the right figures, not theminutiae of the costs budget. Therefore, theyshould take the judges through the individual

arguments in relation to the costs assumptionsas set out in Precedent H. Defendants shouldidentify any prospective points of dispute,preparing skeleton arguments as appropriate, totest those arguments against those assumptions,looking at the total costs for each phase ofproceedings, and whether they fall within therange of reasonable and proportionate costs.

The courts will only review the total figuresfor each phase of the proceedings (althoughthey may possibly look at the constituentelements of each total) in deciding whether a section falls in the range of reasonable andproportionate costs. They won’t, he said, “gothrough each item and pick them apart, but willlook at the proportionality of the phases andcosts as a whole”.

It is important to use budgeting tactically,whether in challenging the use of claimantexperts at certain stages in litigation;considering the impact of a high defendantcosts budget on a claimant’s potential strategy(“could it result in a collapse in the batting?” he questioned); or advancing the use of amodest defendant budget to act as a positivecomparator to claimants.

At the hearing Advocates should make focused argumentsand submissions. Advocacy is important, hesaid; many clients are instructing costs counsel

to represent them in hearings, as well as dealingwith directions. Costs specialists are needed torepresent the parties, and costs lawyers shouldpress home that fact.

How such hearings are conducted varies, he said, but there are certain tips to aid one’sadvocacy. For example, he encouraged costslawyers not to overplay minor items, “win thebattle not the war”, push judges to makedecisions on individual items, or encourage the court to reduce reasonable phase totals or budgets – the latter only encouraging avariation application.

Changing the billVariations are allowed; there is no limit to thenumber of times an amended budget can besought, so both sides should be prepared to goback to the court if it needs to be upwardly, ordownwardly, adjusted.

Managing the budget and going back to courtearly is important, he added, if claimants wantto raise their costs or defendants want toreduce them downwards.

If the case settles, pre-budget costs will beassessed in the normal way – which meansdefendants should beware of any claimantfront-loading.

In assessing costs on the standard basis, thecourt will look at the last approved or agreedbudget, and not depart from it unless there is a good reason to do so. �

The key to keepingcosts proportionate is thecourt managing spendthroughout

““

Costs pilots establishedthat judges spent anaverage of 14 minutesapproving budgets

““

Costs specialists are needed to representthe parties

““


Criminal Bar


28

In the first of a regular series on forthcoming changes to costs lawand policy, Alexandra Healy QC, the joint chair of the RemunerationCommittee for the Bar Council, tells Costs Lawyer why changes togovernment policy on legal aid could damage the Criminal Bar –and those working with them

Policy watch

he Government announced itsconsultation on ‘Transforming LegalAid: Delivering a More Credible and

Efficient System’ on 9th April 2013 – a littlemore than a week after the implementationof major changes to the legal aid systemunder the Legal Aid, Sentencing andPunishment of Offenders Act 2012.

Five months and more than 16,000 responseslater, the Government response launched afurther consultation, ‘Transforming Legal Aid:Next Steps’, to consider reworked proposals for criminal legal aid.

The key changes impacting the Criminal Barrelate to Very High Cost Cases (VHCCs) and theAdvocates’ Graduated Fee Scheme (AGFS).

VHCCsThe Government has ploughed ahead with itsproposal to cut VHCC rates by 30 per centdespite strong opposition from the Bar.Recently-laid Statutory Instruments impose the cut to work done pursuant to any Task Listagreed on or after 2nd December 2013.

The existing rates, however, are preserved for cases where a trial date has been set by thecourt before 2nd December 2013 and where the trial start date is on or before 31st March2014. Where the trial is adjourned or postponed,this must be disregarded, suggesting thatexisting rates will also be preserved for trialsfixed before 2nd December 2013 to take placebefore 31st March 2014, which are consequentlylisted to take place after 31st March 2014.

Under VHCC contracts, advocates have a contractual right to terminate whenamendments are made, but this right must be exercised before the amendment takeseffect. It is likely that many barristers willterminate their contracts, inevitably leading to huge wasted costs for the Government, asnew advocates will have to be paid to completework that the original team had already doneand been paid for.

At the time of writing, Lord Carlile of BerriewQC has tabled a prayer to have the CriminalDefence Service (Very High Cost Cases)(Funding) Order 2013 annulled. The Bar Councilhas made submissions to the House of LordsSecondary Legislation Scrutiny Committee andthe Joint Committee on Statutory Instruments.Only time will tell if these approaches bear fruit.

AGFS reformsThe ‘Next Steps’ consultation proposed twoalternative options for cutting fees for CrownCourt defence advocates. Each optionpurported to save £15 million.

Option 1 provided for the harmonisation ofBasic Fees for cracked trials and guilty pleas at arate lower than the current cracked trial fee, buthigher than the current guilty plea fee. Therewould also be an overall 20 per cent reductionof the trial Daily Attendance Fee (DAF), withtapering from trial day three to 41, when a floorbelow which rates would not drop would apply.The Basic Fees for trials would remainunchanged from current levels and the feeswould still vary by type of advocate and offence

T

Alexandra HealyQC is a criminallitigation silkpractising from 9-12 Bell Yard

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group. This would redistribute remunerationacross cracked trials and guilty pleas on a cost-neutral basis.

Option 2 was aligned more closely with the system used by the Crown ProsecutionService, where page count only determineswhether a standard or enhanced fee is payable.Option 2 also provided for the simplification ofrates in cases where a QC or multiple counselare instructed by harmonising rates paid forQCs, leading juniors and led juniors acrossoffence groups.

The Bar Council does not support the level of cuts proposed in either Option 1 or Option 2.The Government has failed to evaluate orconsider the cumulative effect of fee changes in AGFS from 2007 to 2013.

Lord Carter’s 2006 review of legal aidrecognised the erosion of the real value ofgraduated fee prices and the revision of AGFS in2007 went some way towards restoring the realvalue of prices to 1996 levels. However, this was

Sets of chambersreliant on publicly fundedwork have already begunto collapse under theweight of fee cuts

“ “

the last, and only, occasion since the inceptionof AGFS when consideration was given to theappropriate level of remuneration.

Since 2007, AGFS has been subject to a seriesof reductions. Rates have been eroded byinflation and actual reduction in cash terms.Research commissioned by the Bar Council andundertaken by Professor Martin Chalkley foundthat, as of 2013, AGFS prices have been reducedby 21 per cent in cash terms and 37 per cent inreal terms. If either Option 1 or 2 are followed,

the overall reduction in AGFS prices will be 26.4 per cent, or 41 per cent in real terms.

Looking aheadThe Bar’s formal response to both issues has been detailed in their response to theconsultations, and in previous news stories.What is clear to both the Bar and ACL membersis that the proposed changes will have adevastating impact on the Bar.

The work done in recent years to attractthose of talent from diverse backgrounds will inevitably be undermined if income frompublicly funded work cannot clear debtsincurred in pursuing a career at the Bar. Indeed,sets of chambers reliant on publicly fundedwork have already begun to collapse under theweight of fee cuts.

Real value for money depends on asustainable justice system. Sadly, it looks like itwill take the destruction of the current systemfor this inevitable lesson to be learned. �

Criminal Bar

The Government hasploughed ahead with itsproposal to cut VHCCrates despite strongopposition from the Bar

“ “

28-29 Bar:Layout 1 9/12/13 09:16 Page 29


30

Philip Robotham, chair of the ACL’s EducationSub-committee, highlights changes to thetraining of costs lawyers, past and present, and looks forward to the future

The evolution of education

rom its roots in 1977, the Association ofLaw Costs Draftsmen (ALCD, as it thenwas) has been engaged in the training

and development of its members.

Prior to 2001, the education of students wishingto become members of the ALCD consisted ofthe setting of exams with two levels – Associateand Fellow. Educational materials were providedto students based on template materials drawnfrom the ILEX Paralegal Training Course.

In 2001, a radical change occurred when theALCD set up a company in the name of ALCD(Training) Limited, in order to provide its own in-house structured training course with Fellowsas tutors. This development was promoted bythe then vice-chair of the ALCD Council andchair of the ALCD Education and Training Sub-committee, Bob Tanner.

In 2006, education underwent a furtherchange with the promotion of ALCD Councilmember Murray Heining to the role of educationdevelopment officer. For the next six years, onbehalf of the Council, Murray Heining single-handedly developed the education and trainingof students of the Association, including theintroduction of a modular training course.

That same tenure also spanned fundamentalchanges under the Legal Services Act 2007.With the change in name to the Association ofCosts Lawyers, the training company becameACL Training (the new trading name).

Born out of changes wrought by the 2007 Act,

F

Philip Robotham is a Costs Lawyerat national law firm Weightmans,and chair of theACL’s EducationSub-committee

The ACL Councildecision has been takenin the best interests of the future of costslawyers’ education

“ “

the Costs Lawyers Standards Board (CLSB)commenced the regulation of registered costslawyers from 31st October 2011. The first itemon the agenda of the CLSB’s regulatory work wasrecorded as: ‘The education and trainingrequirements that need to be met before atrainee Costs Lawyer can apply for a practisingcertificate as a Costs Lawyer’.

To ensure the CLSB’s education and traininggoals are met, the CLSB delegates the provisionof education and training to an approvedtraining provider. On 1st January 2012, the CLSBapproved ACL Training as that provider.

In the summer of 2012, the ACL Councilpassed Murray Heining’s role as education anddevelopment officer to Claire Green and myselfto establish the ACL Education Sub-committee(ESC). Michael Bacon, ACL president (nowretired), and Lynne Male were then invited to jointhe ESC, which first met on 22nd November 2012.

Training

30-31 Education:Layout 1 9/12/13 09:18 Page 30

31


In December 2012, the CLSB commissionedCarol Cook, solicitor and lecturer at BPP LawSchool, to carry out an audit of the ACL ModularTraining Course. ACL Training was given until 1st January 2014 to show meaningful progress inachieving the goals set by the CLSB in providinga new and improved course.

To accommodate this, as well as statutorychanges that were due to come into effect on 1st April 2013, a moratorium on the intake of newstudents was agreed until September 2014.

The work of the ESCThe ESC commissioned Dr Mark Friston ofKing’s Chambers, author of Civil Costs: Law andPractice, to oversee the updating of the currentcourse materials. Jenny James, a deputy costsjudge, was seconded as legal education

specialist (LES), and Matthew Smith, also ofKing’s Chambers and an ACL tutor, as theeducation business manager.

The decision of the ACL CouncilThe Council decision (see box, left) has beentaken in the best interests of the future of costslawyers’ education, rather than focusing onimmediate short-term financing needs. On thisbasis, following the work carried out by the ESCwith the CLSB, the second option – the newcompany – was chosen as the best way forward.

The new company will include on its boardClaire Green, ACL Council secretary, as ACLCouncil member and Lynne Male as CostsLawyer/tutor. The ESC now invites trainee costslawyers to put themselves forward forconsideration as board members. �

Training

THE OPTIONS EXPLORED BY THE ESC

1. OutsourcingWith Claire Green’s previous experience withthe ALCD Education Sub-committee (aswas), the ESC, since the summer of 2012, hasinvestigated the possibility of outsourcingthe delivery of education to existing legaleducation providers. Various institutionsmade representations to the ACL.

Without exception, the difficulty facedwith outsourcing was that much of theexpertise on legal costs, the practicalapplication of costs law and the experienceof working with solicitors’ files is the soledomain of costs lawyers. Any outsourcingprovider would rely on costs lawyers, paid orunpaid, to provide the expertise needed byway of materials and/or tutoring of students.

In a positive reflection on previousoutsourcing to CILEX, the ‘best fit’ of all thepotential providers was that provided by theILEX Tutorial College.

In any event, a careful division of the rolesof the ESC, seconded costs lawyers and theoutsourcing provider was envisaged so as toensure that each ‘played to their strengths’and that revenue streams from studentswere appropriately allocated. In connectionwith the latter, what was obvious was that the current charge to students of less than£1,000 would have to substantially increase.

2. New ACL Training company ALCD Training Limited, trading as ACLTraining, was largely, since inception, anentity run on a voluntary basis – save for sixyears when it was run on a part-time basis,with administrative support from ACL.

The ESC has already been working closelywith the CLSB to achieve the goals set by itsDecember 2012 audit, and the idea of a newcompany has the full support of the CLSB.

The company will now be run by a boardcomprising an education business manager(EBM); a legal education specialist (LES); anACL Council member; a Costs Lawyer/tutor;and a trainee Costs Lawyer, with ACLproviding administration and other support.The finances of the company will bemanaged by ACL and the board will beanswerable to the ACL Council.

ACL Training will be investing in online and e-learning functionality, which we see as important to the modernisation of thetraining courses and improvement of thetrainee experience.

30-31 Education:Layout 1 9/12/13 09:18 Page 31


32

Black Horse rising

ATE insurance has long been a bugbear forpaying parties, not least because of thejudiciary’s aversion to reducing the cost of such premiums. However, the recentdecision of Master Hurst in Kelly v BlackHorse is seen by some as the light at the end of a very long tunnel.

The introduction of recoverable ATE premiumsAs costs lawyers know, ATE insurance premiumsbecame recoverable as costs following theremoval of most civil litigation from the scope of legal aid. The effect was that the significantburden of funding unsuccessful claims wastransferred to liability insurers.

With so much money at stake, it isunsurprising that the courts were called upon to deal with questions regarding the cost of ATEpremiums at a relatively early stage. They didthis in the well-known case of Callery v Gray(2002) UKHL 28, which held that costs judgescannot regulate the ATE market.

Readers will recall that the defendant argued that the cost of an ATE premium wasunreasonably high, but having considered areport prepared by Master O’Hare, the Court of Appeal held that the £350 cost of thepremium was not “manifestly disproportionateto the risk” and the premium was allowed in full.

In the House of Lords, Lord Hoffmanexpressed concerns about the pricing of ATEpremiums. He concluded that market forces did not drive pricing, and that ATE insurerscompeted by offering the most profitablearrangements to solicitors.

However, he accepted that “the court should not arrogate to itself the functions of a financial regulator of the insuranceindustry… because the costs judge is whollyunequipped to perform that function”.

Rogers – and afterwardsFive years later, the Court of Appeal again

came to determine the reasonableness of anATE premium.

The case of Rogers v Merthyr Tydfil (2006)EWCA Civ. 1134 held that the status quo waspreserved; costs judges still lacked theexpertise to regulate the ATE market.

Rogers involved an appeal against theallowance of a £4,860 staged ATE premium.The defendant provided evidence of cheaperATE insurance from a magazine, and the HighCourt therefore concluded that cheaper ATEinsurance was available and reduced thepremium to £900.

With so much money at stake, it isunsurprising that thecourts were called uponto deal with the cost ofATE premiums at arelatively early stage

“

“provide expert evidence will invariably beemployed by ATE insurers and will therefore beunwilling to support an argument that the costof an ATE premium should be reduced.

Policy changes and driversSubsequently, the level and recoverability ofATE premiums received extensive attention inboth Lord Justice Jackson’s interim and finalreport, which ultimately recommended thattheir recoverability should be abolished, withthe premium to be paid by the claimant ratherthan the defendant.

Abolition of the defendant paying theclaimant’s success fee and ATE premium savesthe insurance industry a lot of money, but alsoraises the prospect (by claimants) that accessto justice may be harmed, as reported by CostsLawyer previously.

This was legislated for – and argued over – inlegislation and the subsequent regulations, andthe ATE market has changed as a result. Insurershave reviewed their pricing structures and thecover provided, with clients becomingconsiderably more discerning in their optionsfor insurance.

Cases on the level of premiums havetherefore become even more important. Themore clients know about their costs, the morethey can assess the worth of buying insurance,in giving them much greater transparency oftheir financial exposure to litigation. The same is true for the courts.

Clients will have a better understanding of the costs involved, which may mean betterand more competitive pricing. They may notbother with premiums, for example, if thedamages awarded are not likely to be largeenough to pay the ATE premium. But it also places considerable scrutiny on therelationship between premiums and the costs incurred themselves.

Case law in this area would also refine thelevel of premiums – as one recent case shows.

The Court of Appeal held that too muchweight had been placed on the defendant’sevidence. Lord Hoffman’s words regarding acosts judge’s inability to regulate the cost of ATEpremiums were approved and the premium wasreinstated in full.

Next came the case of Kris Motor Spares Ltd vFox Williams LLP (2010) EWHC 1008 (QB). Thiscase further developed the evidence requiredto challenge a premium, as the High Courtconcluded that “there is an evidential burden on the paying party to advance at least somematerial in support of the contention that thepremium is unreasonable”.

Such material is notoriously hard to come by, as those with the experience required to

Following Jackson, after-the-event (ATE) insurance has receivedfresh consideration by the costs judiciary. Alex Bagnall tracesATE’s long history – as well as its current prospects

ATE premiums

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33


ATE premiums

Insurers have reviewed their pricing structuresand the cover provided, with clients becomingconsiderably more discerning in their options for insurance

“ “

Kelly – a turning point?In Kelly v Black Horse (2013) EWHC B17 (Costs)the claimants were awarded damages of£6,000 and 75 per cent of their costs.

The claimants’ costs included an ATE policythat provided an indemnity for the defendant’scosts and the claimant’s disbursements. Theaggregate of these sums, and, thus, the insurer’smaximum exposure out, was £7,243.30; whilstthe cost of the ATE premium was £15,900.

The defendant challenged this premium using calculations based on a ‘burn premium’,which is determined by reference to theinsurer’s exposure and likelihood of having to meet such exposure.

The only evidence offered by the claimants in support of the premium was a copy of theirsolicitors’ risk assessment.

Master Hurst held that the premium was“wholly disproportionate” and that the riskassessment was “entirely meaningless”. Heconsidered that the premium should have beenpriced on the basis that the defendant’s likelycosts to trial would be no more than £7,000.

The principle of the defendant’s calculationswas accepted and the premium was reduced to £3,750.

The future of ATE challengesMaster Hurst, the senior costs judge, expressedhope that the judgment would assist in resolvingconstantly recurring disputes over the cost of ATE premiums.

The judgment indicates that expert evidence– or even evidence of cheaper alternative cover– may not be a condition precedent to raisingsuch a challenge.

If it can be demonstrated that a case was‘over insured’, then it may be possible toconvince a court to reduce ATE premiums. �

Alex Bagnall is technical director at nationalcosts firm John M Hayes. He acted for thedefendant in Kelly v Black Horse.

32-33 Alex Bagnall:Layout 1 9/12/13 09:20 Page 33

City34

Costs on the agendaCosts Lawyer attended a recent seminar at Herbert Smith Freehills, at which costsissues formed a significant part of the‘Disputes Agenda for In-House Counsel’.

The debate was conducted on Chatham Houserules, so only a summary of the event can begiven here, but it does illustrate how City lawyers– as well as clients and judges – are adjusting tocosts issues.

One theme was the extent to which thecourts should intervene in the costsmanagement of commercial claims betweensophisticated parties, with one speaker sayingthat the courts should be “careful about beingtoo paternalistic” in such cases.

Readers of Costs Lawyer will recall that allCommercial and Admiralty Court claims wereinitially exempted from the impact of LordJustice Jackson’s reforms on costs budgetingand case management, alongside claims worthover £2 million in the TCC and Mercantile Courts.

However, the exemptions were later included ina review by the Civil Procedure Rules Committee,following comments from Mr Justice Ramsey abouthis view that such exemptions ought not to exist.

That Committee was due to report in October,and the view from the seminar was that, giventhe level of rigorous costs management alreadydemanded by clients of their law firms, the needfor underlying case management by the courtsmight not be necessary. Indeed, this is alreadythe view of the City of London Law Society.

The point was made that if both parties arehappy to proceed without rigorous costsbudgeting, then surely the court’s discretionwould be best applied to those parties who doneed such costs protection, where the level ofcosts incurred might be disproportionate to the

litigation; rather than imposing it on those whocan, arguably, afford to live without it.

The meeting heard that judges were mostconcerned about cases where costs inequalitiespotentially have to be taken into account(something that litigants were also interested in),whilst in cases where the parties were inagreement, judges might defer to such wishes.

Changing expectationsFrom the law firm perspective, it was clearlyunderscored that a lack of costs budgeting does not, and did not, mean that clients wouldbe short-changed. “The world has changed,”said one senior lawyer; “changed in terms ofwhat clients expect – and there are all sorts ofways in which we deliver what they expect [interms of fees].”

Law firms, the lawyer said, “were taking theprocess of costs management seriously, andwere focusing on it”, but even the process ofconstructing ‘reasonable estimates’, saidanother, was not a straightforward one, andwhilst analogies could be drawn between casesto construct budgets, it could be a time-consuming exercise.

Against this, one senior in-house lawyer saidthat senior management might well be attractedto costs budgeting – and look at the issue quitehard – if only to avoid ‘game playing’ by opposinglitigants.

It was understood that overall judicialsentiment could be summed up in a pragmaticawareness that, whilst costs issues have nothistorically formed part of their experience in practice (the phrase “a very grey processinvolving costs draftsmen and taxing masters”was used), there is now a much strongerappreciation of such issues – and, by implication,

the part ACL members play in resolving them.One speaker said: “It has been a world that

[ judges] are not deeply familiar with, but [they]have got much more familiar with costs, startingwith summary assessments.”

The courts, the meeting heard, would assesscosts disputes on an ongoing basis, as part of aprocess of adjustment, and whilst, frankly, thatadjustment might be ‘rough and ready’ at first, itis expected that the judiciary’s “understandingof costs issues would build up”, pragmaticallyand incrementally.

A gradual processPerhaps the most tangible recollection of theseminar was the extent to which all partiesunderstood a changed mind-shift on costs,balancing the intention behind the new ruleswith the desire not to impose unnecessaryrigidity on the parties in such cases.

Assessing what might be necessary in abudget, two years in advance of a trial, is not an exact science and, the audience discussed,that calls for a step-by-step approach to largercases. The extent of judicial case management,it was felt, might go some way to stopping ‘gameplaying’ by parties, as would a much strongerunder standing by judges of how to managelarger cases firmly.

Case law will assist – both Mannion v Ginty[2012] EWCA Civ. 1667 and Mitchell v NewsGroup Newspapers [2013] EWHC 2179/2355(QB) offer examples of how this might work inpractice – and Costs Lawyer will, of course,follow the debate further. �

Guidance on high cost cases has since beengiven by Males J in the Vitol litigation. See the‘Legal Updates’ section for headnote.

A recent seminar at City lawfirm Herbert Smith Freehillsshowed that costs issues are high on the strategicconsciousness of MagicCircle lawyers – and theircorporate counsel clients


34 City story:Layout 1 11/12/13 12:53 Page 34

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