Sterling Costs

Good News for Defendants – Motto v Trafigura Ltd and another [2011] EWCA Civ 1150

Gregg — Wed, 16 May 2012 19:51:51 +0000

Good News for Defendants

Motto v Trafigura Ltd and another [2011] EWCA Civ 1150

The issues of costs in relation to funding and the application of a retrospective success fee were finally clarified in the recent appeal of Motto v Trafigura. The resulting position will not please solicitors for the receiving party but is likely to benefit the paying party in reducing recoverable costs.

The Claimant was one of thousands who suffered illness following the illegal fly-tipping of chemical waste by one of the Defendant’s local contractors. The claimants were represented by Greenpeace under a Group Litigation Order and each of them had to sign a Conditional Fee Agreement before they could be added to the proceedings.

Once the case had concluded, the Claimant submitted a Bill of Costs which went to Detailed Assessment, however following the judge’s ruling the Defendant was given leave to appeal on a number of points, which included issues in relation to the application of the success fee and the costs of funding.

In respect of the uplift, Lord Justice Kay held that, unless the wording of a CFA explicitly stated that the success fee was to be applied retrospectively, it could not be applied to work done prior to the CFA having been signed, stating:

“…any CFA which limits the client’s liability to work done after the CFA is entered into, cannot extend to work done before that date….The natural presumption in a contract by which a person engages a solicitor to act for him must be, in the absence of such a term, that he is agreeing to pay for work done in the future, not for work already done.”

Lord Justice Kay then went on to consider the matter of the costs incurred in relation to funding and held that these costs were not recoverable, saying:

“One would not expect a prospective contractual provider of services or goods to charge his client or customer for advising on the terms of the contact under which the goods or services are to be provided….” and

“It seems to me that the expenses of getting business, whether ……… discussing a possible instruction with a potential client, should not normally be treated as attributable to, and payable by, the ultimate client or clients. Rather, such expenses should generally be treated as part of a solicitor’s general overheads or expenses.”

Lord Justice Kay also held that the costs of discussing the progress of the litigation with the ATE provider were not recoverable from the Defendant as these discussions did not form part of the litigation itself, but were a cost of ensuring that the Claimant was not at risk on costs.

Application and assessment of alternative percentage increase where the fixed increase is 12.5% – Francis v McWilliam

Gregg — Wed, 25 Apr 2012 18:36:37 +0000

CPR 45.18(2)
Francis v McWilliam
The claimant made an application for an increased success fee as the claimant who was catastrophically injured recovered more than £750,000.00.
The accident occurred in 2004, the claimant was an infant passenger in a car driven by her uncle. Proceedings were issued and the claim was privately funded for three years. In January 2007, shortly before the Claimant’s 18th Birthday, a CFA was entered into. At this point, primary liability had been admitted, contributory negligence was agreed with a reduction of 15% and no Part 36 offers had been made.
The damages settlement was reached at £750,000.00 with further periodical payments. The claimant’s solicitor applied for an increased success fee under CPR 45.18(2) as the settlement was greater than £500,000.00. The claimant solicitors applied for a success fee of 25%. The risk assessment included factors such as the nature of the claimant’s injury, limitation, the lack of supporting evidence, contributory negligence, the value of the claim and Part 36 risks. The rules state that if the court assesses the success fee between 7.5% and 20% then the original success fee of 12.5% under CPR 45.16 must be allowed.
When the CFA was entered into primary liability had been admitted and no Part 36 offer had been made. The only issues outstanding were contributory negligence and quantum. The judge went through the factors. A statement would not have been helpful and limitation was not approaching as the claimant had yet to reach majority. Supporting witness evidence was not required and the value of the case did not increase the risks. There was no risk of not beating a Part 36 offer. The issue of capacity was raised but the judge found that this did not increase the risks. The appropriate success fee would have been 20% and in light of the rules this would be capped at 12.5%.

Update on Jackson proposals

Gregg — Tue, 20 Mar 2012 10:10:24 +0000

Last week the House of Lords inflicted two defeats on the government over part 2 of the Legal Aid, Sentencing and Punishment of Offenders Bill, but the main elements of the Jackson reforms remained intact.
Peers voted to exclude asbestos claims and then all industrial disease cases from the end of recoverability. However, a vote to put the 10% damages uplift and qualified one-way costs-shifting (QOCS) on the face of the bill failed. Lord McNally said that the judiciary believed the 10% uplift should be done by the courts, while putting QOCS in the legislation, rather than leaving it to the rule committee, would make it far less flexible.
Lord McNally was unable to confirm that controversial amendment 135A, which some thought meant that the end of recoverability would have retrospective effect, would not do that, but said he would confirm the matter shortly.
Labour amendments on making the payment of referral fees a criminal offence and halving the fees payable under the RTA portal will be addressed on the next day of report later this week.

To win or not to win? That is the question.

Gregg — Tue, 06 Mar 2012 15:45:08 +0000

An appeal in the case of Fortune v Roe [2011] All ER (D) 91 against a reduction in the success fee was dismissed at the High Court. This was a case where, in December 2001, the Claimant had been involved in a serious road traffic accident resulting in multiple fractures including to the spine. Her claim was initially funded by BTE insurance but, when the limit of the indemnity was reached, she entered into a CFA on 3rd February 2006, liability having been admitted in March 2003.

A costs judge had previously held that the Claimant had “won” her case prior to entering into the CFA and the success fee should therefore be 20% instead of the 100% claimed. Liability had already been admitted but damages had not been agreed. The Claimant accepted a Part 36 offer in the sum of £600,000 18 days before trial.

It was held that the Claimant had only won her case after the acceptance of the offer, however there had been no risk to the Claimant’s costs until the Part 36 offer was made. The only risk was if the Part 36 offer was made, rejected and not beaten but the majority of the costs would still be recoverable up until the offer had expired. The court agreed with the costs judge that a reasonable success fee was 20%.

It follows, therefore, that a win only occurs following acceptance of an offer. It is not sufficient that a Claimant is entitled to recover damages following an admission of liability – the amount of damages has to be specified and accepted.

A greater appreciation for the Pre-Action Protocol

Gregg — Wed, 08 Feb 2012 11:41:15 +0000

The recent case of Javed v British Telecommunications plc [2011] EWHC 90212 (Costs) is an interesting example of claimant solicitors being penalised for issuing proceedings unnecessarily and prematurely.
The Master concluded:
“I am in no doubt that the Claimant was unreasonable in commencing proceedings when she did. By issuing the proceedings when she did, the Claimant was in breach of the pre-action protocols. It is clear from the correspondence that at the time proceedings were issued a settlement was still being actively explored by the Defendant. It is no answer for the Claimants to state that the lack of positive response to the Claimant’s Part 36 offer was a justification for issuing proceedings. No responsible advisors acting for the Defendant could have recommended any proper consideration of the Part 36 offer without the full disclosure of all the relevant medical evidence.
…This was a fairly standard, small road traffic accident claim. The only slight complication was the Claimant’s previous accident. Had the Claimant disclosed all the relevant medical evidence with her Part 36 offer, in accordance with the Pre-Accident Protocols, I have little doubt that this claim would have settled without the necessity for the issue of proceedings. Therefore my decision on the first issue is that the Claimant acted unreasonably in issuing proceedings.”
The Defendant argued that costs should be assessed by reference to the sums that would have been allowed had the proceedings not been issued. This is despite the claim settling by way of Part 36 and the existence of a Sealed Consent Order providing for costs on a standard basis.
The Master concurred with this line of argument:
“In my judgement, the Court can limit the costs to fixed recoverable costs, and in this case the court should limit the Claimant’s costs to fixed recoverable costs and the court is not necessarily obliged to carry out a line by line assessment of the Claimant’s bill of costs.”

Jackson reforms postponed until 2013

Gregg — Tue, 31 Jan 2012 15:23:07 +0000

The government is to defer implementation of its civil litigation reforms until April 2013, the Ministry of Justice confirmed yesterday.

Part two of the Legal Aid, Sentencing and Punishment of Offenders Bill, which incorporates the changes proposed in the landmark Jackson recommendations on ‘no win, no fee’ arrangements, were expected to be implemented this October. The 2013 implementation date was confirmed by Lib-Dem peer Lord Wallace of Tankerness in a House of Lords debate on part two.

Cuts to legal aid for most civil cases, included in part one, have already been put back until April 2013 to give the department more time to prepare for the change.

A spokesman for the MoJ said: ‘We are committed to reforming the “no win, no fee” system so that legal costs for reasonable compensation claims will be more proportionate, and avoidable claims will be deterred from going to court.

‘This will require changes to legal rules and regulations and we want to give sufficient time to get the complex details right. We are also conscious that legal businesses will need sufficient time to plan for the changes, alongside other forthcoming regulatory and funding changes to the industry.’

Costs Budgeting

Gregg — Fri, 27 Jan 2012 15:47:16 +0000

The correct choice and use of costs draftsman will undoubtedly become more important than ever in the new budgeting era. The changes have been with us since October 2011 following the successful pilot under Simon Brown QC in Birmingham.
They and you will need to have experience in not only predicting future costs and managing that budget but be able to liaise fully with you , your client ( who will be expected to take part fully in the process ) and the opposition throughout the process. The ability of being able to communicate effectively therefore is of paramount importance.
The court will be the final arbitrator of the costs and while you can vary the amounts at the CMOs the court will make that decision.
The advantage is that you have finality as to your costs, assessment is discouraged and you can advise the client more effectively.
However, the skill set required is different and the choice of draftsman will be of paramount importance.

More Bad News for Claimant Solicitors?

Gregg — Thu, 24 Nov 2011 14:13:29 +0000

The High Court in the conjoined cases of Germany v Flatman and Barchester Healthcare v Weddall [2011] EWHC 2945 (HC) has ordered a law firm to disclose the details of its funding arrangements with two clients so the successful defendants can work out whether the solicitors financially supported the cases and could be pursued for a third-party costs order.
Both cases were run by a Norwich based firm of solicitors under conditional fee agreements without after-the-event insurance. The defendants’ common insurer – which suspected that the claims were funded to some extent by the solicitors – successfully appealed a refusal to grant disclosure of documents outlining the funding arrangements.
The judge below, His Honour Judge Moloney QC, had said the impact of such orders “could be to undermine or perhaps even to destroy the workings of the CFA system”, but Mr Justice Eady ruled that the judge “overestimated the consequences of the defendants’ applications… These appeals turn largely upon the particular facts. Either GMS were the funders or they were not”.
The implications this Judgment may have on the ‘CFA system’ are yet unclear, however Mr Justice Eady continued and stated that it may be necessary to make an order for disclosure of documents to help a “vulnerable defendant, or for that matter his insurer” establish what exactly passed between the claimant and his solicitor. Whether, following disclosure, an application for a third-party costs order is made, “that is a matter for the future”.

Family Fixed Fees

Gregg — Mon, 14 Nov 2011 15:49:39 +0000

With the introduction of Fixed Fees into Family Proceedings and the recent reduction in Legal Aid rates it is essential for Solicitors to accurately record all time spent working on a file in order to maximise the prospects of escaping the fixed fees and recovering their costs in full. The type of things which are often under-recorded are the time spent preparing file notes and attendance notes, perusing lengthy reports and statements, preparation of long letters, considering Court Orders and noting amendments to public funding certificates.

As preparation for Court hearings is included in the Advocacy Fee, it is also important to differentiate between time spent preparing specifically for the hearing and time spent preparing the case.

It is also essential to ensure that the FAS Family Advocacy Attendance Forms are sealed by the Court; otherwise the LSC will only pay the Unit 1 Fee for a hearing not exceeding 1 hour resulting in potentially a substantial loss in the fees recovered.

The Interest and VAT Question

Gregg — Fri, 21 Oct 2011 15:06:40 +0000

Once more the question of interest on costs and that of VAT is one that is still a puzzle to many.

However the guidance is clear and while there may be an appeal on Motto for now the direction is clear enough.

Interest on costs whether funded by way of a CFA or not is still at the discretion of the Costs Officer on Assessment ( CPR 48.3) and thus it is still worth claiming the same. Interest can of course amount to a considerable sum.

VAT is an elective decision and thus again should you wish to charge VAT at 20% throughout on matters where a CFA has been used the decision is practice by practice and not determined by years where the VAT was actually at a different rate.

Both these items can have a considerable effect on recovery and should be recovered.