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McNally: will keep regulation of funders under close review
The government yesterday rejected Labour calls to delay implementation of the civil justice reforms by six months.
It also refused to move on demands that the 25% cap on the success fee that can be taken from a personal injury claimant’s damages is calculated on the basis of all heads of loss, rather than just past loss.
It came during a relatively short, and scarcely attended, grand committee debate in the House of Lords on the motion to approve the draft Conditional Fee Agreements Order 2013 and Damages-based Agreements Regulations 2013. Having been approved, they will also have to go through the House of Commons.
Labour spokesman and solicitor Lord Beecham – who complained about how little time practitioners would have to prepare for the changes in the draft legislation – said that with all that is happening with civil justice reform, including the uncertainty over portal extension, “one might have thought that it would be sensible to bring all the changes together and to do it at a time which allows the parties and the professions to prepare adequately”.
He added: “I hope that the minister will look again at the timetabling with a view to deferring implementation of whatever regulations finally emerge for six months until October of this year.”
However, justice minister Lord McNally replied: “We are not persuaded that the timescales we have set are unreasonable, and we will not be deferred from the course that we have set… These orders will go through to take account of the fact that LASPO comes into effect on 1 April 2013.”
Both Lord Beecham and Liberal Democrat solicitor peer Lord Phillips of Sudbury cited Lord Justice Jackson’s change of heart over including future loss in the success fee/contingency fee calculation, when he said last year that he could “see the sense” of allowing it “in appropriate cases”.
But Lord McNally said the case for the cap did not rest on it being the judge’s original recommendation. “A sharp-eyed lawyer would say that the noble Lord’s quote about Lord Justice Jackson did not endorse the counterview but simply said that it had merit, which is not the same as advocating that the government change their policy.
“Even if it were, this is the government’s policy. It is the right policy because it protects the future earnings and the future cover for victims in these cases. It remains our policy on that merit, and we are willing to defend it on that basis.”
Lord Beecham raised a range of other questions and criticisms of what he described as “a pretty defective-looking set of regulations”.
Among them was a bid to exclude VAT on the success fee from the cap. But Lord McNally said including VAT “will provide further protection for the claimant’s damages and add certainty for the claimant as to the likely deduction from their damages”.
The Labour peer also focused on third-party litigation funding, and expressed concern about “a kind of hedge fund for legal claims” having control of cases. He said: “I understand that 25 funders are already established in the UK for damages-based agreements, of which only nine have signed up to their own self-regulated Association of Litigation Funders. They are not even joining their own association, let alone being responsible to any independent and impartial organisation to oversee their work.
“Again, I invite the minister to reconsider whether there should be such a system of regulation. There is apparently around £1bn already held by organisations in the UK to fund these arrangements. Some of them, interestingly, are apparently based offshore – a sort of Starbucks of the damages-based agreement world. One can only imagine where any profits will ultimately go.”
During the passage of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, the government rejected moves to introduce statutory regulation of litigation funders in favour of giving self-regulation a chance. Both Lord Beecham and Lord McNally yesterday mentioned that they had had meetings with the US Chamber of Commerce, which has lobbied hard in the UK for statutory regulation.
Lord McNally said: “What we have decided so far is to keep the matter under review. That phrase can often hide weasel words and weasel intent, but we want to see just how much this is going to become a factor in our legal system, while making sure that some of the warning signs that the noble Lord has quite legitimately raised are on the radar of ministers as well. We will keep this matter closely under review.”
The only other speaker was Liberal Democrat barrister Lord Marks of Henley-on-Thames, who asked whether DBAs would be available to defendants. While under the regulations they will not, Lord McNally saidhe would give the matter “further thought”.
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Neuberger: three-year stint as MR
The appointment today of Lord Neuberger of Abbotsbury, currently Master of the Rolls, as the next president of the Supreme Court leaves uncertainly as to who will drive judicial implementation of the Jackson reforms.
Lord Neuberger will succeed Lord Phillips of Worth Matravers, who steps down from the role as the most senior judge in the UK on 30 September 2012. The new president will be sworn in at a special ceremony at the court on 1 October 2012.
His replacement as Master of the Rolls – and with it chairman of both the Civil Justice Council and the Judicial Steering Group overseeing implementation of the Jackson reforms – has not yet been announced. There is speculation that Lord Dyson may step down from the Supreme Court to take the role.
The Judicial Steering Group’s other members are Lord Justice Moore-Bick, Lord Justice Maurice Kay and Mr Justice Ramsey, who is standing in for Lord Justice Jackson as he recovers from an operation for cancer.
Lord Neuberger, who has been Master of the Rolls since 2009, said: “It is a great honour to have been given the opportunity to serve as the president of the UK Supreme Court and to work with the eleven other distinguished members of the Court. The UK Supreme Court, like its predecessor, the Appellate Committee of the House of Lords, is rightly respected throughout the world.
“Together with the other members of the court, I will do my best to ensure that it continues to play its proper role in upholding the rule of law, and applying and developing the law in a coherent and principled and practical way, appropriate for today’s world.”
His appointment as President of the Supreme Court was made by The Queen on the advice of the Prime Minister and Lord Chancellor, following the recommendation of an independent selection commission chaired by Lord Phillips. The commission consulted across each of the Supreme Court’s three UK jurisdictions before making its recommendation.
Lord Phillips said: “Identifying a successor to lead the Supreme Court into the next phase of its life was inevitably a task I approached with mixed feelings – a degree of pride in preparing to hand over leadership of an organisation which has maintained a smooth and efficient service as the UK’s highest court following the significant changes brought about by the Constitutional Reform Act, but also an element of sadness in leaving that same organisation.
“But in Lord Neuberger I know we have an extremely talented new president, who brings not only a wealth of judicial experience but the ability to lead a collegiate court. I wish him all the very best and I only hope that he enjoys this very special honour as much as I have.”
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Lagerberg: third-party funding is area to watch
Companies are currently more likely to turn to before-the-event insurance rather than third-party funding to help with international arbitration cases, according to new research.
A study by PricewaterhouseCoopers (PwC) found that in contrast to the growing trend of third-party funding for litigation, that option remains “relatively uncommon” in international arbitration but is an area to watch.
Some 94% of those surveyed had not used external funding. The 6% who had opted for third-party funding did so because of a “lack of fluidity” to fund proceedings or because it was a more convenient and cost-effective way to sell on a claim or share the risk.
The report said: “It will be interesting to observe whether, and for what reasons, third-party funders will play a bigger role in arbitration proceedings in the future, either at the early stages of proceedings or at the enforcement stage.
The use of before-the-event insurance funding to finance proceedings was more prevalent – with 20% of respondents having used a policy to fund proceedings in the past five years.
The research quizzed more than 100 senior in-house counsel and arbitration practitioners. It concluded that the number of business hiring in-house specialist lawyers was set to rise after more than a third of respondents (35%) reported an increase in the number of international disputes.
The survey, conducted in partnership with Queen Mary, University of London, focused on the financial services, energy and construction sectors. It showed that twice as many in-house counsel opted for international arbitration to resolve their disputes than other forms such as litigation.
Currently companies tend to seek this specialist expertise from external law firms but under the current constraints of the economic climate and the rising cost of proceedings, many more are likely to start recruiting in-house.
Whilst 90% of respondents had a dedicated legal department, the survey revealed only half (49%) had a dedicated in-house disputes team.
The majority of companies were also looking to alternative fee structures to pay for arbitration, finding that increased pressure on internal legal budgets has made organisations “more cautious” before initiating arbitral proceedings.
Capped fees (61%) were the most popular alternative to the hourly rate, followed by discounted hourly rates and a success fee calculated as a percentage of the damages (27%) and discounted hourly rates plus a success fee calculated as a percentage of their external counsel’s hourly fee (22%).
One in ten used a pure contingency fee calculated as a percentage of damages awarded and 18% used “another” combination.
However, of those in-house counsel who thought arbitration wasn’t very well suited for their industry sector, the biggest proportion (22%) said it was because it was often more costly than alternatives such as litigation.
Gerry Lagerberg, PwC’s head of international arbitration, said: “Corporations are becoming more sophisticated in procuring international arbitration services. Concerns over costs and delays in proceedings persist and in-house counsel are increasingly focused on getting value from the arbitration process.
“The survey shows corporations are investing in in-house resources and demanding a variety of alternative fee arrangements to share both the workload and the risks of proceedings more with external law firms…
“The role that third-party funding plays will be another area to watch in the future as smaller firms may well need to secure financial back-up before commencing proceedings or at the enforcement stage.”
Overall 73% said arbitration was well suited to resolving transnational disputes, with preferences strongest in the construction and energy sectors.
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Court of Appeal: time to challenge a budget is at the CMC
A High Court ruling denying an order for security for costs even though the party involved refused to show that it could pay costs was “illogical and unacceptable”, the Court of Appeal has decided.
The lower court had found this to be a litigation tactic, but Lord Justice Sales said it was reasonable to believe that a party could not pay the other side’s costs if it deliberately refused to show that it could.
The court was ruling in Sarpd Oil International Ltd v Addax Energy SA & Anor [2016] EWCA Civ 120, in which Addax appealed against Mr Justice Andrew Smith’s decision last August not to make an order for security of costs in a £1m claim that a delivery of gas oil did not meet the contractual specifications.
Smith J said: “It can only strengthen Sarpd’s hand in any negotiations if it leaves Addax in doubt about whether it will recover its costs even if it defeats the claim… The uncertainty may be awkward for Addax, but there is no reason that Sarpd should volunteer information to alleviate its difficulty.
“More importantly, this obvious explanation for Sarpd’s reticence about its financial position means, in my judgment, that on the evidence it is no reason to believe that it will be unable to pay an order for costs.”
Giving the appeal court’s judgment, Sales LJ said: “We consider, with all due respect to the judge, that he was plainly wrong. If a company is given every opportunity to show that it can pay a defendant’s costs and deliberately refuses to do so there is, in our view, every reason to believe that, if and when it is required to pay a defendant’s costs, it will be unable to do so.
“The judge said that the obvious explanation of the refusal was that Sarpd wanted, for the purposes of settlement negotiations, to leave Addax in doubt about whether it would recover its costs, even if it defeated the claim. But the thinking behind that is that it is permissible for Sarpd to give Addax reason to believe it will be unable to recover it costs but at the same time assert that there is no reason for the court so to believe. That is illogical and unacceptable.
“[Sarpd’s counsel’s] alternative explanation in oral argument was that Sarpd might just want to keep its financial position confidential for business reasons. But as Sales LJ pointed out, arrangements can always be made by the court if a litigant has legitimate business reasons for keeping something confidential. No application was made for the court to sit in private or to avoid referring in public to relevant financial amounts.”
Addax had told Smith J that the practice in the Commercial Court was to order security for costs in circumstances such as these: where a claim was brought by a company that has not filed accounts that were publicly available, which has no discernible assets and which declined to reveal its financial position.
The judge responded: “I suspect that [counsel] might be right about that, but if such a practice has developed, I cannot think it justified and I decline to follow it.”
But Sales LJ said the judge had been wrong. Such a practice, if it had developed in the Commercial Court, was “sound”. Lord Justice Lewison had granted permission to appeal on the basis that this was an important point of practice which should either be upheld or rejected at appellate level. “We would uphold it,” said Sales LJ.
In addition, Smith J indicated that, had he ordered security, he would have done so with reference to Addax’s approved costs budget. Sarpd argued that in such a situation the judge should go behind the budget to examine for himself whether certain sums were reasonable and proportionate.
But on this point the Court of Appeal agreed with the judge, on the basis that Sarpd had had its chance to challenge the budget at the case management conference.
Sales LJ said: “It would be contrary to the overriding objective to allow Sarpd to try to re-open costs issues which it had already had a fair opportunity to address. It would not be just to permit it to do that and it would add disproportionate cost in dealing with the case if a court had to go behind the settled costs budgets in a case like this.”
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Stock exchange: plan to sell first announced last summer
The owner of a 50% stake in third-party funder Therium Capital Management has announced that it has reached agreement with an as-yet unnamed buyer to sell its interest.
AIM-listed City of London Group plc (COLG) first revealed its intention to divest itself of Therium last summer and told the stock market yesterday that its interest will be sold for a total consideration of £3.4m, of which £1.7m is payable in cash on completion with the balance being deferred.
The deferred consideration will be repaid two years from completion or earlier from performance fees or incremental management fees and it will be guaranteed by Therium’s new partner. A further contingent payment will be earned if performance fees exceed a certain level.
COLG said it will use the cash proceeds to repay debt.
“Completion of the sale is expected to follow shortly when certain conditions to completion have been satisfied. A further announcement will be made at that time,” it added.
COLG has one remaining direct investment of £412,000 in a litigation case. But it reported that following a “material adverse change in the merits of this case”, a decision has been taken not to pursue it further, “and on this basis the company will provide in full for its investment”.
COLG retains investments of around £200,000 in LLPs which provide exposure to portfolios of litigation cases managed by Therium.
In December, COLG reported that Therium generated a return of double the investment on cases closed in the first six months of its financial year.
In the six months to 30 September 2014 Therium has had four cases resolved, winning three and settling one with a partial loss. Therium’s investors put £4.5m into these cases, which generated a return of £8.8m.
Therium’s profit before tax for the period was £304,000 – as against a loss of £240,000 in the first half of 2013/14.
Further, in August 2014, Therium was appointed as litigation advisor to a newly established fund of €7m.
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We are pleased to announce that version 4.2.40 of CostsMaster is now available to download from our web site. This version has several important bug fixes plus a couple of minor improvements.
Version 4.2.40 is a free upgrade for current subscribers and we would recommend that you update your copies to this version.
CCMS Update
The Bulk Upload pilot has been progressing well with very few problems being experienced. The LAA have now implemented the facility to view the pricing of the claim automatically after uploading the file and thus no longer have to implement the manual workaround.
They are now looking to make the bulk upload facility available to more CCMS users on a slow but steady basis. If you work for a firm of solicitors who are on CCMS and would like to bill using CostsMaster, or if you are a draftsman who has solicitor clients on CCMS, please get in touch with us and we will put your names forward to the LAA for possible inclusion.
The bulk upload facility is made available to specific users so as well as details for your solicitor client (if necessary) we will also need to pass on the names of the CCMS users who will perform the uploads. Once accepted we will add you to our CCMS email list where you will receive notice of any updates and you will have the facility to raise any problems you are experiencing.
If you have any questions about using CostsMaster with CCMS please email Frankie Little at frankie@costsmaster.co.uk
New and improved CostsMaster website launched
We are pleased to launch the new and improved CostsMaster website fresh for 2015 – you can find it here. The new website has been designed to provide a much more intuitive and user-friendly experience with improved navigation and functionality throughout. It allows visitors to easily access detailed product information and the latest downloadable versions of the CostsMaster software.
The new home page features a menu tool bar with quick links to all areas of the site including downloads, training and support. A welcome new addition to the site is the live CostsMaster Twitter feed which appears along the bottom of all web pages along with the CostsMaster live news feed meaning there is always current relevant industry information close to hand.
Also new to the site is the Testimonials page featuring the latest CostsMaster product reviews given by current users of the product.
We are confident the new website will improve the online experience for all visitors and are keen to gather feedback to keep in mind for future site updates so do feel free to let us know what you think.
Contact us
Follow us on Twitter @CostsMaster for the very latest news on our software updates and releases as well as relevant industry comment and news.
Please don’t just follow us, talk to us too! If you have a question or a genius idea that would make a difference to how you use CostsMaster then we want to hear about it so feel free to tweet us. Your feedback is really important and helps guide our work on future updates and versions.
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From left to right; Caroline Acton, Marie Walsh, Laura Clapton and Sally Clark
Niche law firm, Consilia Legal, has implemented the Proclaim Practice Management Software Solution from Eclipse Legal Systems, the Law Society’s sole endorsed provider.
A new startup in November 2014, Consilia provides Mediation, Family and Employment services to a rapidly expanding clientbase. The firm’s ethos is based around a pragmatic fixed fee approach, eschewing the traditional ‘billable hour’ direction taken by the majority of practices.
The Proclaim Case Management Software system is utilised firm-wide across the practice, with a bespoke Mediation solution complemented by Proclaim’s out-of-the-box Employment and Family systems. The team has access to Proclaim’s centralised productivity-enhancing workflow and task management tools, while Proclaim’s integrated practice accounting solution ensures that Consilia has instant access to live financial performance data.
Sally Clark, partner at Consilia, comments:
“The core of our work is fixed fee and necessitates water-tight processes and workflow to ensure that efficiency and quality of service remains at optimal levels. Proclaim enables us to provide superb levels of accuracy, teamed with speed of case progression and an ability to handle increasing work volumes.”
Laura Clapton, partner at Consilia, adds:
“We simply could not carry out mediation work to this standard without using Proclaim – the system provides a core service delivery backbone, and is – in the words of a colleague – the secretary I’ve always wanted!”
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Budget failure: sanction need not be nil assessment
A claimant’s failure to update his budget in advance of an unplanned preliminary hearing has led a High Court judge to rule that “every assumption” would be made against him in assessing the costs.
Mr Justice Warby said ordering no costs would be disproportionate, and was in any case not a sanction prescribed by CPR 3.18 (relating to assessing costs where a costs management order has been made) or the practice direction.
Simpson v MGN Ltd & Anor [2015] EWHC 126 (QB) concerned the costs of a preliminary hearing on meaning and an application to strike out a plea of justification in a libel claim brought by Premier League footballer Danny Simpson against the Daily Mirror.
The claimant’s original budget had included a contingency for such a hearing – which the defendant contested – but Master Yoxall declined to direct a preliminary issue and so neither approved nor disapproved the figure. However, the defendant’s contingency was agreed.
The claimant then sought an order for the preliminary hearing and served an amended budget on the defendant, which failed to respond until two working days before the hearing; the claimant had not filed the amended budget with the court in the meantime.
The hearing was largely a success for the claimant but the defendant argued that his approved costs budget did not make provision for the hearing and there was no good reason to depart from it, meaning no costs should be allowed. The claimant described this as “rank opportunism”, especially given the late reply to the claimant solicitor’s letter on the amended budget.
Warby J said the application of rule 3.18(b) – not departing from a budget unless there is good reason to do so – was not straightforward here, given that the claimant had put forward a budget for this phase of the litigation which was not agreed, approved or disapproved, while the defendant’s budget had been agreed.
“I am inclined to think that the wording of CPR 3.18 was not aimed at such a situation, but rather at ensuring that once the court has reached a decision on what it is reasonable for a party to spend on a given phase that conclusion should be final in the absence of some good reason. However, that was not a point addressed in argument and I reach no conclusion on it.
“Assuming that I am wrong in this, it seems to me that on the facts of this case there is good reason to depart from the budget approved by Master Yoxall for this phase of the litigation, by allowing recovery of some costs by the claimant.”
Among the factors the judge took into account were that the claimant’s proposed budget for this phase had been known from before the overall budget was set, the revised budget that was sent through, and the defendant’s delayed response to it – “that is not a co-operative approach”, he said.
Further, “the claimant’s failure to comply has had only a modest impact on the efficient dispatch of this litigation, and no appreciable impact on the efficient conduct of litigation overall. It was never likely to have any substantial impact on either.”
Making every assumption against the claimant in assessing the hearing’s costs was a “just and proportionate” sanction that “in more general terms provides a sufficient incentive to parties to comply”.
The defendant also complained that while the claimant had filed its costs schedule for the hearing with the court, it had not been served on the defendant.
Again Warby J noted that this failure to comply with paragraph 9.5 of practice direction 44 did not prescribe a sanction of no costs being recovered.
However, he said the failure led to unnecessary delay in costs in resolving the assessment and he made a deduction from the costs claimed to reflect this.
Overall the claim for £24,096 was slashed to £10,500 (both including VAT), with the major reduction coming from only allowing the costs of one counsel when two had been instructed, which Warby J said was not necessary.
Jon Lord, a Council member of the Association of Costs Lawyers, commented: “This ruling shows how some of the kinks in the budgeting process still need to be smoothed out; otherwise they risk just introducing an unnecessary layer of costs into litigation.
“In keeping with the football theme of the case, the only goal scored was an own goal by Mr Simpson in failing to serve his team sheets (budget and statement of costs) on the opposition before the game. The penalty for that was sensibly proportionate in the form of the additional cost caused by his failure.”
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Birmingham: District judge disapproved of conduct
A district judge has decided to halve the costs awarded to claimant solicitors for unreasonable and improper conduct in concealing from the paying party the existence of a previous conditional fee agreement and before-the-event (BTE) insurance.
District Judge Griffith, sitting at Birmingham County Court, said: “The word ‘improper’ is not limited to situations where there would be a significant breach of professional conduct, but encompasses conduct which can be regarded as improper according to a consensus of professional or judicial opinion.
“Although I have not been referred to a professional code of conduct, I would be surprised if the conduct of the claimant’s solicitors which I have described, has not fallen foul of some provision of the rules which govern solicitors.
“Misrepresenting the position in a bill of costs intended for consideration by an opponent in litigation and use at a court hearing in order to gain practical advantage, can be regarded as improper conduct. It is, in any event, likely to be so regarded by a consensus of solicitors or judges, in my view.”
The claimant solicitors in the case were Rapid Solicitors, based in Hull, which was acquired by Neil Hudgell Solicitors in October last year.
Managing director Neil Hudgell told Litigation Futures: “The conduct that is the subject of this ruling predates our involvement in the case.
“As a result of this and other conduct by Rapid, the brand has been consigned to history.”
Delivering judgment in Kerins v Heart of England NHS Trust, DJ Griffith said the case involved a medical negligence claim which settled in September 2013.
The defendant argued that costs should be disallowed entirely because of abuse of process and misconduct under CPR 44.11.
DJ Griffith said the claimant, Ryan Kerins, entered into two conditional fee agreements with Rapid, one signed in April 2012 even though the BTE policy was known about at the time, and one in March 2013 when proceedings began and he was able to choose Rapid as his solicitors under the policy. The notice of funding, served in July 2013, only referred to the first CFA, however.
The claimants’ costs bill, as originally drafted, was for £127,885, but, following an “unofficial response” from the defendant, was reduced to £49,369.
Neither bill referred to the second CFA nor to the BTE cover, and they were only disclosed four days before the hearing.
Given the lack of a notice of change of CFA under CPR 44.15, the district judge said the success fee in the case was not recoverable, as the claimant had conceded.
DJ Griffith said he was “of the firm view” that the claimant could be criticised “with regard to the way that the existence of the second CFA and the available BTE funding was intentionally kept secret from the defendant. They had ample opportunity to put right the position they had misrepresented, but failed to do so”.
The judge said an inaccurate portrayal of the funding position could “serve to strengthen the claimant’s arguments” in justifying the success fee and weaken the defendant’s position.
DJ Griffith concluded that not only was Rapid’s conduct of the case improper under CPR 44.11, but it was also unreasonable.
“The court very much disapproves of conduct of this type in these days of openness between the parties. There is an obligation on legal representatives to assist the court and present the client’s case fairly and without misrepresentation.”
However, he said it would be disproportionate to disallow all of the costs, and so disallowed 50%.
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Refunds: Process underway
The government repaid £1.8m to employment tribunal claimants in the first two months of the scheme set up in the wake of the Supreme Court ruling tribunal fees unlawful, it has revealed.
Statistics released yesterday showed that, as at 18 December 2017, the Ministry of Justice (MoJ) had received 4,689 applications and processed 2,660 of them.
It had made 2,151 payments at that time with a monetary value of £1.8m.
In all, the MoJ expects to refund £33m to claimants, including interest, covering the period from 29 July 2013, when the fees were introduced, to the Supreme Court ruling on 26 July 2017.
In the first phase of the refund process, which lasted around four weeks to test it worked, the MoJ wrote to a group of around 1,000 people who had contacted the ministry after the Supreme Court judgment enquiring about a refund.
This was deemed a success and from 15 November, anyone who thought they may be eligible for a refund could apply via the gov.uk website.
The MoJ has also been working with trade unions that have supported large multiple claims potentially involving hundreds of claimants, and ahead of the full launch people were invited to pre-register their interest in applying.
Where people are unable to provide full details of the fees they paid, or the details they provided did not accord with the details held by HM Courts and Tribunals Services, their application will not be refused automatically, but the MoJ warned that it may take longer to process.
Where a person is claiming for fees that they reimbursed to their opponent pursuant to a tribunal order, they will be asked to provide a copy of the tribunal order, and proof of payment.
In cases where a person reimbursed their opponent under a private settlement, they will not be eligible for a refund, but the person who paid the fee to the tribunal will be.
All applicants have to sign a declaration of truth about the details they provide.
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Smith: hugely important judgment
Three pressure groups have claimed victory in their High Court battle against the new costs regime for cases involving the environment.
Mr Justice Dove ruled that rule 8(5) of the Civil Procedure (Amendment) Rules 2017/95, which allowed for default caps on legal costs to be varied at any point during the case, rather than remaining fixed throughout, must be amended.
He said the rules would benefit from further clarification in key ways but would remain in place.
Under the environmental costs protection regime introduced in 2013, costs for unsuccessful claimants were capped at £5,000 for individuals and £10,000 for organisations. Defendants’ liability for claimants’ costs were similarly capped, at £35,000.
But the new rules, introduced on 28 February, allow judges to vary the cost cap in a case. The judicial review brought by the Royal Society for the Protection of Birds, Friends of the Earth and ClientEarth argued that this weakened financial protection for claimants, who faced unspecified costs, contrary to the Aarhus Convention.
ClientEarth claimed they would make it “virtually impossible” to bring an environmental case in the public interest.
Dove J also ruled that the Ministry of Justice must change its rules to ensure that any hearing about costs protection limits takes place in private.
In a statement, the three groups said: “Today’s verdict is an important victory in the battle for better access to justice in England and Wales.
“People who bravely stand up for nature by going to court can now do so in the knowledge that, once the costs are fixed, they will not be blindsided by a crippling legal bill they were not expecting and hadn’t budgeted for.
“Another victory from the hearing is that claimants will no longer have to reveal their private financial details in open court.”
Their solicitor, Rowan Smith of Leigh Day, added: “This is a hugely important judgment for anyone who cares about the environment. We have achieved major concessions to the government’s rules, which make it radically better for access to environmental justice and go a considerable way to allay legitimate concerns of a chilling effect on otherwise meritorious legal claims.
“Evidence before the court gave examples of successful legal challenges to protect birds, beavers and air quality, all which may not have been pursued under the new rules but for this landmark ruling.”
A Ministry of Justice spokesman said: “We are pleased that the High Court supports our approach to environmental costs protection, which ensures individuals are not expected to pay above their means.
“We will address the issue of private hearings and set out our position in due course.”
The groups, all charities, had their own costs capped at a total of £10,000 for the case, which was fast-tracked to a hearing.
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Holland: cash-hungry investing area with a long-term turnaround
Posted by Zoe Holland, managing director of Litigation Futures sponsor Zebra Legal Consulting
In response to the post 1 April 2013 world, the personal injury sector has seen a surge in the number of law firms looking to clinical negligence as a new area of work.
Since the beginning of the year, enquiries about setting up or expanding clinical negligence departments have seen a tenfold increase. From a survey we carried out via contacts in the market, this trend has also been noted by key industry stakeholders such as banks, medical agencies and insurers.
A specialised area of work
Firms need to understand the specialism required to manage this work, not only in terms of case management, but also in financial management.
Understanding the risk profile of clinical negligence is critical to cash flow and profitability. In the post Jackson era, managing and monitoring this work effectively will be critical to a law firm’s ability to generate cash and profit.
As this work can have a three-year lead in, the firm may not feel the real pain of its lack of expertise until year three or four. By this time WIP and disbursement write- offs can be significant. Having worked on two recent projects in firms where this has been a learning curve, other firms need to think carefully before embarking on setting up clinical negligence departments without fully assessing the resource, funding and staff requirements.
Risk assessment
Assessing risk from the start of a clinical negligence case is critical. This is where new entrants into the market may find that they have a skill gap. Risk assessing comes with experience in litigating these cases, and is not a skill that can easily be transferred.
The temptation of some firms is to consider placing their experienced personal injury solicitors into the role of clinical negligence risk assessor. Unless the assessor has significant experience in this field, or has a medical background, this scenario is set to fail.
Financial risk profiling
Given the nature of clinical negligence litigation, firms may carry caseloads with a very small percentage of admissions. Unlike personal injury work, this can make it difficult to assess ‘safe’ work in progress. It is critical therefore to risk profile the caseload as it progresses. This can involve having an overview or case prospects, case complexity and quantum.
For new firms entering the market, it will be critical for any financial modelling/forecasting, for the firm to understand the key indicators of case value and risk. Further, they will need to have a basic overview of a caseload settlement profile.
Seeing it through
If firms view clinical negligence as a way to generate cash quickly, then they are in for a financial shock.
It is a cash-hungry investing area with a long-term turnaround. They must be prepared to play the ‘waiting game’.
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Cutting costs: CJC urges patience
The proposed £500 fee for handling RTA portal work may be “unrealistic” and the government should wait until at least next year before setting new fixed recoverable costs (FRC), the Civil Justice Council (CJC) has told the government.
The CJC said that in the meantime fee levels should instead be uprated by inflation.
Its newly released response to the Ministry of Justice’s consultation, the CJC welcomed the Lord Chancellor’s decision to reconsider the implementation date of the extended portal, and recommended a “cautious approach” to the figures set out in the Jackson report.
It said: “In particular the CJC suggests that at the present time the most appropriate revision of those figures should be to update them in the light of any inflationary change since they were formulated.
“Given the nature and extent of the various civil justice reforms which have been and are in the process of being implemented, a full-scale revision of the figures should perhaps best take place when the reforms have had time to work. In that way a proper revision to the figures can take place in, for instance, 2014 which could be based on evidence derived from, and a properly researched impact assessment of, costs from actual work done under the reformed regime.
“Such a revision could then properly take account of the costs of both simple, straightforward cases as well as more complex cases and as a consequence be reflective of more realistic levels of fixed recoverable costs. Adopting this approach is in the CJC’s view more likely to avoid, as far as possible, the prospect of limiting effective access to justice for accident victims due to the introduction of limiting the amount recoverable to the presently proposed figures.”
The CJC argued that the FRC regime should reflect the varying nature of the costs of managing a personal injury claim, rather than the lowest possible cost. “The CJC is conscious that solicitors must comply with a number of regulatory guidelines when opening a file, and that it may be regarded as unrealistic to expect all the necessary work and negotiations to be carried out against a fixed fee limited to £500.”
On referral fees, it said that while the ban meant there was “potential” to reduce costs, “it does not automatically follow that a solicitors’ firm’s marketing costs will consequently be significantly reduced”.
The CJC continued: “In order to maintain their profile in the market place, which is becoming increasingly competitive not least due to the changes effected by the Legal Services Act 2007, firms are likely to have to increase their marketing costs. This is likely to have an impact on their cost base and ought properly to be reflected in the sums recoverable.”
Meanwhile, Post magazine reported yesterday that Steve Maddock, managing director of claims at Direct Line Group, told the All Party Parliamentary Group for Insurance and Financial Services that every day the extended portal is delayed will cost the insurance industry £1m.
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Dye: strong trading since April
Shareholders of third-party litigation funder Juridica voted overwhelmingly yesterday to keep the company going.
When Juridica was listed on AIM nearly six years ago, the directors undertook to convene a shareholders’ meeting within six years to debate a resolution that it be voluntarily wound up, and this was written into the articles of association.
The meeting was held yesterday and 98% of votes cast supported the board’s call for the company to continue.
The board had argued that “there continues to be significant opportunities for the company to invest in a diversified portfolio of new claims that will generate attractive returns for shareholders.
“If passed, the discontinuation resolution would prevent future investment, including future investment in existing claims that may require incremental capital to realise their maximum value.”
In the event the resolution was voted down, the board pledged to put it again to a meeting in another three years.
“The board was pleased to note that approximately 72.98% of Juridica’s outstanding shares voted at the EGM,” a notice issued after the meeting said.
As expected, Juridica has also served notice on Juridica Capital Management to terminate the existing investment management agreement with effect from 31 December. It will be replaced by Fields Capital Management, wholly owned by Richard Fields, who currently heads and is the key shareholder in Juridica Capital Management.
Meanwhile, in other funding news, third-quarter results from Allianz said that while the legal expenses market is “still finding its feet” after April’s reforms, “it is pleasing to report that Allianz Legal Protection has continued to trade strongly over the period”.
Allianz Insurance chief executive John Dye said: “There is evidence of a ‘flight to quality’ as our post-LASPO after-the-event proposition is attracting business partners and law firms with a clear strategy for the new legal environment.
“Our before-the-event legal services scheme has also made a good start, supporting our high net-worth business, Home and Legacy, and we are confident of further developments in this area.”
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Hammond: insurers round the table
The government will “progress urgently” with the consultation on changing the way the discount rate is set, according to a statement issued yesterday by Philip Hammond, the Chancellor of the Exchequer, and Association of British Insurers (ABI) director-general Huw Evans.
Lord Chancellor Liz Truss only announced on Monday that the meeting would happen, without indicating that it would be within 48 hours.
The insurance industry has reacted with fury to her decision to slash the rate from 2.5% to -0.75%, with Mr Evans dubbing it “crazy”.
The CEOs of AVIVA, Direct Line Group, Admiral Group, Zurich, AIG Europe, RSA Group, AXA, LV=, Allianz, Ageas, Esure, Markerstudy, Swiss Re and Hiscox, along with the CEO of the British Insurance Brokers Association all took part in the meeting with Mr Hammond and Simon Kirby, economic secretary to the Treasury.
Insurers have predicted that premiums for young drivers could rise by up to £1,000 a year, and that the change could cost the NHS around an extra £1bn a year in compensation bills.
There was no sign of claimants or their representatives at the meeting to explain the other side of the argument.
The joint statement said: “Claimants must get the money they’re entitled to following an injury in order to support their future needs. It is important that going forward, personal injury discount rates are set at a level that is fair to both claimants and consumers.
“The government will progress urgently with a consultation on the framework for setting future rates, and bring forward any necessary legislation at an early stage. The industry will contribute fully to the upcoming consultation, and the government will carefully consider all evidence and arguments submitted.”
Speaking ahead of the meeting, Mr Evans said: “It makes no sense to do something that will inevitably pile costs onto motorists, businesses and taxpayers at such a difficult time based on a broken formula.”
In an interview afterwards with insurance trade publication Post, he said the insurers had urged Mr Hammond to set a new rate within a year, adding: “The industry did ask for the rate to be stopped altogether, but we were given no comfort on that at all. The statutory instrument had already been laid in Parliament yesterday ahead of the meeting.”
However, the Ministry of Justice consulted on the methodology behind the discount rate in 2013 as part of the lengthy process that culminated in Monday’s announcement. It is not clear what has changed, except unhappiness with the outcome from paying parties.
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Established legal costs and pricing specialist Burcher Jennings is to use an innovative new range of growth and related funding services to drive a renewed focus on boosting law firm profitability.
The extended offering is supported by a rapid national expansion programme with new talent and further regional offices added to the firm’s existing resources. It comes at a time when many law firms, often led by exceptional lawyers, are struggling to succeed in the face of unprecedented pressures on funding in the justice system.
The fresh raft of options for financial support create new opportunities for law firms, enabling better access to funding for growth and litigation funding services. Via Burcher Jennings, firms can now bypass often-uncompetitive funding providers to maximise profitability alongside growth.
Funding services are a natural addition to the market-leading costs and pricing offering that has driven the growth and reputation of Burcher Jennings over course of the last 25 years. Combining these three critical elements in one place creates opportunities for firms to boost profitability and thrive in cost and price sensitive times.
Low cost, bespoke funding options designed specifically with the legal sector in mind are combined with cost and price intelligence that is already renowned as the best in the industry. The firm says the result is a new kind of consultancy, delivering a truly competitive edge.
Martyn Jennings, chief executive of Burcher Jennings, says: “Exceptional lawyers don’t always make excellent business leaders. Many top-class lawyers we come across are struggling to make a success of their businesses. In today’s highly competitive and ever-changing legal market, with extreme pressure from government to cut the cost of the legal system, the first casualty is all too often law firm profitability.
“But, if you are consistently mispricing your services or paying over the odds for growth funding, then a little time focusing on the health of the business could restore profitability and improve the service you offer to clients”.
Research from the Legal Services Board earlier this year found 71% of law firms had either held or cut prices to consumers over the last year.
Martyn Jennings adds: “In this tight operating environment, a professional approach to costs recovery, pricing confidence and competitive funding can make the difference between a firm that struggles to survive, and one that has the capacity to grow and thrive.
“Our growing nationwide network of offices and unrivalled team of talented costs, pricing and funding specialists gives us the capacity to help many more talented lawyers ensure their business performance does justice to their talents”.
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Darren Gower, Marketing Director, Eclipse Legal Systems.
Eclipse Legal Systems, the only Law Society Endorsed provider of legal software solutions, has today announced the release of its next generation client self-service platform.
TouchPoint+ builds upon Eclipse’s TouchPoint system – a device-independent and interactive experience for legal service providers, their business partners and clients, which uses real-time data from Eclipse’s core Proclaim Case and Practice Management solution.
With TouchPoint+, service providers can now deliver a complete portal experience, seamlessly utilising their own branding and visual identity, encompassing the core suite of Eclipse’s online communication tools.
Providing access to a huge range of live information, TouchPoint+ is an ‘always on, always visible’ self-service solution which can be configured to provide as much or as little data and interaction as desired.
TouchPoint+ includes the following communication and self-service features:
- Brandable environment allowing service providers to control imagery and overall visual experience
- ‘FileView Interactive’ online matter tracking solution, providing real-time and secure access to relevant data
- ‘SecureDocs’ online document delivery and acceptance tool
- Targeted news feeds, social media links, and cross-selling opportunities
- Configurable, visual KPI and charting data
Eclipse’s Marketing Director, Darren Gower, explains:
“TouchPoint+ builds upon our market-leading TouchPoint platform to provide an even more powerful self-service portal. The ability to brand the TouchPoint+ experience in line with your firm’s identity, plus the ready-to-go integration of Eclipse’s core online tools, provides a market-leading self-service experience for today’s increasingly demanding clients and customers.”
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Market-leading legal software solutions provider, Eclipse Legal Systems, has announced the latest iteration of its Proclaim productivity and management solution.
Proclaim is used in over 700 organisations by 20,000 individuals, for an increasingly broad range of requirements including case, matter, practice and process management. This latest Proclaim iteration – v3.3.1 of the solution – will be provided free of charge to all Eclipse clients, under the firm’s standard maintenance agreements. New clients will also benefit from the solution, be it as a new implementation or as a seamless transition from the current Proclaim version.
Proclaim v3.3.1 carries a brand new look and feel – sporting ‘flat design’ to provide an enhanced user experience. Users will benefit from even clearer signposting of ‘next actions’, in addition to a cleaner working space and even the choice of a range of colour schemes. The feature-rich nature of Proclaim has been further enhanced, with new functionalities including:
- ‘Infinite additions’; enabling system designers to easily create additional data fields ‘on the fly’, resulting in rapid bespoke screen building across the Proclaim desktop
- Multi-user access; empowering legal teams to work on the same matter at the same time
- ‘Paragraphs’; a document building tool that provides fee earners with the option to pick context sensitive paragraphs from a pre-defined library of text, when creating bespoke or complicated documents (for example, commercial contracts)
- Enhanced desktop billing; including the ability to electronically draft bills, all within a user-friendly and intuitive ‘bills guide’ interface
Steve Ough, chief software architect at Eclipse, comments:
“This latest version of Proclaim represents a significant step forward in our product roadmap, providing the kind of fluidity and accessibility that our clients – and the market in general – has come to expect from Eclipse.”
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Case centred on company director’s remuneration
A senior tax judge has become one of the first to go through the Denton principles on relief from sanction, in finding that an 11-day delay in serving a statement of case was not significant.
In his ruling in the Tax Chamber of the First Tier Tribunal, Judge Jonathan Cannan outlined how the approach set out in Denton could be applied by other non-specialist courts.
Judge Cannan said the first stage of the Denton test was to focus “not on whether the breach has been trivial, but on whether it has been serious or significant”.
He went on: “Whether a breach imperils future hearing dates or otherwise disrupts the conduct of the litigation may well be a useful measure of whether it has been serious or significant.”
Judge Cannan said the first stage of the test did “involve consideration of unrelated failures”, which were better dealt with at the third stage.
He said that when, during the second stage of the test, courts considered why the default occurred, they could find “good and bad reasons” in the Mitchell ruling. “Plainly pressure of work will rarely be a good reason.”
The judge went on: “The third stage involves consideration of all the circumstances of the case. The need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with rules are of particular importance in the third stage and should be given particular weight.”
Judge Cannan was ruling in Elder v HMRC [2014] UKFTT 728 (TC), a case in which HMRC failed to serve its statement of case as directed; 11 days after the deadline, the time for service was extended by a tribunal judge. The applicable rule does not contain a sanction, but the claimant sought to have HMRC disbarred from taking part in the proceedings and Judge Cannan said the Denton guidance was directly relevant, and that – as the Court of Appeal said in its ruling – it was not necessary to cite pre-Denton rulings.
Referring to Lord Dyson’s comment in Denton that courts should always “have regard to all the circumstances of the case”, Judge Cannan said the 11-day delay was not “serious or significant”. “That is not a significant delay in the context of appeals generally, or in the context of the first and second appeals in the present case.
“That is not to say that such delays are to be in any way encouraged. However it did not imperil a future hearing date. Nor should it have disrupted the conduct of these appeals or other appeals.”
Judge Cannan accepted that there was “no good reason” for HMRC not to have sought extension of time for service of the documents, and noted its failure to engage with the appellant to agree directions and that the statement of case did not “deal adequately with quantum”.
However, “apart from these aspects”, the judge said he was not satisfied that any other breaches were significant. He dismissed the application.
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ECJ: tough steer
The financial means of people bringing environmental legal proceedings should not be the sole criterion when deciding whether the litigation is prohibitively expensive within the meaning of international law, the European Court of Justice (ECJ) ruled last week.
Campaigners have hailed the decision as helping to ensure that people can challenge decisions without facing huge costs.
Both EU law and the Aarhus Convention oblige member states and contracting parties respectively to ensure that environmental legal proceedings are “not prohibitively expensive”.
Asked by the UK Supreme Court on how to interpret this either when assessing costs against an unsuccessful claimant or considering a costs cap, the ECJ said the national court “cannot act solely on the basis of that claimant’s financial situation but must also carry out an objective analysis of the amount of the costs”.
It continued: “It may also take into account the situation of the parties concerned, whether the claimant has a reasonable prospect of success, the importance of what is at stake for the claimant and for the protection of the environment, the complexity of the relevant law and procedure, the potentially frivolous nature of the claim at its various stages, and the existence of a national legal aid scheme or a costs protection regime.
“By contrast, the fact that a claimant has not been deterred, in practice, from asserting his claim is not of itself sufficient to establish that the proceedings are not prohibitively expensive for him.”
The case – R (on the application of David Edwards and Lilian Pallikaropoulos) v (1) The Environment Agency (2) the First Secretary of State (3) the Secretary of State for the Environment, Food & Rural Affairs (Case C-260/11) – concerned an unsuccessful challenge to the decision of the Environment Agency to approve the operation of a cement works, including waste incineration, in Rugby.
The claimant’s solicitor, Richard Buxton of the eponymous specialist Cambridge firm, said: “This is a tough steer from the European court that people must be able to take environmental claims without fear of having to being deterred by costs claims from wealthy opponents. The judgment emphasises the basic right for citizens to effective remedies and wide access to justice.”
Mrs Pallikaropoulis added: “I hope this means I won’t have to pay the exorbitant costs claimed by the government simply for standing up for the environment in Rugby.”
Carol Day, solicitor at WWF and the coordinator of the Coalition for Access to Justice for the Environment (CAJE) said: “For far too long, legal action to protect the environment has been confined to either the very rich or the very poor, with the vast majority of concerned citizens powerless to challenge the decisions of public bodies. The judgment confirms that the government must ensure the public at large can exercise their democratic right to go to court.”
Jake White, legal adviser at Friends of the Earth, another member of CAJE, added: “The judgment marks a significant step forward in the campaign to ensure that people are not prevented from obtaining justice in environmental cases purely on the grounds of cost. Whilst that campaign is not yet won, this judgment nonetheless sends a message to governments across the EU that costs may not prevent people gaining access to the courts in these cases.”
The ability of people to bring environmental cases because of the costs has been a long-running issue. CAJE argued that recent improvements to the costs rules for environmental cases which came into force on 1 April do not go far enough. Cost caps that individuals and environmental groups would have to pay to public bodies if they lose judicial reviews are too high, it said, and a cross-cap – which limits the amount that successful claimants are able to recover – will make it very difficult for individuals and civil society groups to find lawyers to represent them in environmental cases.
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Carter: independent, proactive and granular analysis
A legal finance business that backed Pure Legal’s £13m acquisition of York firm Pryers has formally launched into the UK market today with plans to lend at least £50m to personal injury law firms during 2016, with similar funding planned in years to come.
SpectraLegal is the brainchild of the principals of Canadian company BridgePoint Financial Group, which has provided litigation financing and ‘risk management solutions’ to more than 750 Canadian law firms since 2005.
Since opening its books in the UK in October, SpectraLegal has already approved in excess of £10m of loans to a handful of firms. A further £30m of lending is in the pipeline.
It will initially target personal injury firms operating on conditional-fee and damages-based agreements. The Costs Advance product enables law firms to draw down against expected costs awards in completed cases, so they can release cash without having to compromise on their costs claims. It was through this scheme that funding for the Pryers acquisition and backing for Pure’s expansion plans have been put in place.
SpectraLegal’s WIP & Disbursements product aims to help firms monetise their work in progress and disbursements to progress their cases, subject to a minimum of £200,000 for each facility.
COO Steve Carter, former head of professional practices (north) at accountants Baker Tilly, said: “The combination of our secure position and market insight has really struck a chord with firms, with new applications coming in all the time.
“Law firms like the fact that our business is based on growing those with whom we do business. Unlike traditional investors, such as banks, we spend just as much time looking at the market as we do the firm’s books. We delve deeper, make plans, organise and advise.
“Alongside this we’ve invested in a bespoke online platform that allows us to look at a wide range of factors, including how fee-earners and suppliers are performing. The result is a level of independent, proactive and granular analysis that firms may not have had access to previously.”
SpectraLegal’s entry comes after years of the options for personal injury law firms in England and Wales to fund their practices having shrunk.
BridgePoint co-founder John Rossos is chairman and CEO of SpectraLegal, which is headquartered in Ireland. He said: “The legal market in England and Wales represents a huge opportunity for our business because of the similar legal structure and our proprietary expertise. We bring a deep understanding and appreciation of the market and far greater insight than other providers of capital. Our credibility is enhanced by the success of our clients in Canada and we expect to make the same impact on the British market that we have done in Canada.”
The company – which is supported by major institutions, including Royal Bank of Scotland – said it expected its range of products and services to expand to meet market demand in PI and other areas of practice, and has the resources to continue lending at the 2016 level in the years to come.
There are strong similarities between the Canadian litigation system and that in England and Wales, with the damages-based agreements regime introduced by the Jackson reforms in 2013 copied directly from the one operated in Ontario, which created similar financial pressures for Canadian law firms.
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Lord Mance: “principled solution” must be found
Insurers liable to pay compensation to mesothelioma victims have rights to pro rata contributions from other insurers and/or employers covering some of the time of exposure, the Supreme Court has ruled.
Lord Mance, who led the majority, decided that a “broad equitable approach” should be taken and contributions from insurers should take into account differing lengths of exposure to asbestos.
“The court is faced with an unprecedented situation, arising from its own decisions affecting both tort and insurance law,” Lord Mance said. “A principled solution must be found, even if it involves striking new ground.”
Three justices agreed with his arguments – Lords Clarke, Carnwath and Hodge. Lord Sumption came to a similar conclusion, but by a different route – one that was preferred by Lords Neuberger and Reed.
The court heard in Zurich Insurance plc v International Energy Group [2015] UKSC 33 that the case arose from the situation in Guernsey, which has no equivalent of the Compensation Act 2006. Under the Act employers are liable in full.
A worker on the island, exposed to asbestos dust from 1961 to 1988, sued his former employer after he contracted mesothelioma. IEG was successor in title to the employer. Among the employer’s liability insurers was Midland Assurance, from 1982 to 1988.
As successor to Midland’s liabilities, Zurich argued that it was only liable to meet just over 22% of IEG’s loss, based on the fact that Midland was insurer for that proportion of the overall exposure time.
However, Zurich was ordered to pay 100% of both the compensation and defence costs by the Court of Appeal. Zurich appealed to the Supreme Court.
The justices agreed that, because the 2006 Act does not apply in Guernsey, Zurich was not required to cover the full loss but only the period that Midland was liability insurer.
However, they did not restrict themselves to the case before them, and went on to rule on what the outcome would have been the same on the mainland, where the Act did apply.
Lord Mance argued that a “broad equitable approach” should be taken and contribution between insurers covering liability on the basis of exposure “should take account of differing lengths of insured exposure”.
He went on: “In my opinion, therefore, Zurich is entitled to look to IEG to make a contribution based on the proportionate part of the overall risk in respect of which it did not place insurance with Zurich, and in respect of which Zurich does not recover contribution from any other insurer.”
Lord Mance ruled that Zurich was also entitled to a contribution from another liability insurer, Excess.
However, he dismissed Zurich’s appeal on defence costs, where no equitable right to contributions existed.
David Pugh, a partner at Keoghs, acted for the Association of British Insurers, which intervened and agreed with Zurich’s arguments.
Mr Pugh described the Supreme Court decision as “very positive for insurers” who could “continue to seek contributions from solvent policyholders in mesothelioma claims”.
He went on: “There will be minimal disruption to insurers’ existing claims handling practice – including the principle of pay and be paid.
“The preservation of claimant compensation heads off any need for parliamentary intervention, which is always uncertain of outcome.”
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Cranston J: “dismissive attitude” to disclosure obligations
A High Court judge has upheld a decision refusing relief from sanctions because the solicitors involved were “serial offenders” in breaking the rules during the case.
Mr Justice Cranston said the lawyers, from MartynsRose in London, had a “dismissive attitude to their disclosure obligations” and their case was pleaded in an “unsatisfactory way”.
Cranston J said that “significantly” their failure to contact the defendants to prepare a bundle for the hearing “culminated in the loss of the first day”.
Delivering judgment in Fouda v London Borough of Southwark [2015] EWHC 1128 (QB), he said: “Addressing all the circumstances of the case, including past and current breaches of the rules, which is required at stage three of the Denton v TH White approach, the judge would have been perfectly entitled to refuse relief from sanctions.”
The court heard that Mr Fouda sued the council for over £90,000 in a dispute over the confiscation of his car, which he said was essential for his business as a taxi driver.
Mr Fouda did not deny he was behind with his council tax but argued that the car was exempt from seizure. The council replied that as soon as he had provided evidence of its use for private hire, it had given instructions for its release.
A court order required all witness statements to be filed by 16 December 2013. Both sides missed the deadline. The council served its statement on 20 December, and Mr Fouda served his on the council on 13 January 2014.
Cranston J said the trial judge himself raised the point that the witness statements had been served out of time, in breach of CPR 32.10. The defendants said they were content for their witness statements not to be admitted, but opposed the admission of the appellant’s.
Cranston J said: “The judge rejected the appellant’s application for relief from sanctions. He said that there had been no explanation as to why an application to extend time had not been made before the expiry of the time provided for the exchange of witness statements.
“The medical evidence about the appellant’s health was at the least equivocal and it was not clear to him that the appellant’s condition in December necessarily prevented the preparation of a witness statement.”
Counsel for Mr Fouda argued that, at the time of the trial at Central London County Court, Denton had not been decided by the Court of Appeal, and the judge had not assessed the factors it identified.
However, Cranston J said that even if the judge had worked through the majority ruling in Denton, he would have reached the same conclusion.
“Most importantly, the non-compliance with CPR 32.10 was within a context where the appellant’s solicitors had been serial offenders”.
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Office dilapidation claims can raise “complex legal issues”
The number of dilapidation disputes will rise further as office leases covering 1.4bn square feet of office feet in London expire next year, Irwin Mitchell has predicted.
“We’ve seen a steady rise in the number of dilapidation disputes and I expect to see the numbers continue to go up as a number of long term leases come to an end,” Rob Thompson, partner and head of real estate at the firm, said.
“Some of these dilapidation claims can be significant, with complex legal issues to resolve for both landlords and tenants, and it is vital that businesses have made appropriate provisions in their accounts and that they are otherwise fully prepared to deal with the many issues, technical and legal, that can arise.”
A spokesman for the firm said an analysis of data from Estates Gazette suggested that the value of leases expiring in London in the first half of next year was £1.4bn, with one in 10 relating to long-term tenancies of 15 years or more.
The spokesman said that the amount of office space for which leases are due to expire is “significantly higher” than it was for the first six months of 2012, when their total value was £685.7m.
He said the trends identified in London are in line with the rest of the country, where 41% more office leases were expected to expire in the first six months of 2015 than 2012.
“The issue of dilapidations relates to the obligation that tenants face at the end of the lease to return the property to the landlord in a good state of repair, condition and decoration,” the spokesman said.
“On large premises, dilapidation claims can in some cases run into millions of pounds and can have a considerable impact financially, as the business will usually have taken on additional costs and responsibilities with new offices.”
The spokesman added that the office development boom 15-20 years ago, when a number of long-term leases were entered into, has resulted in an increased number of leases coming to an end.
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RCJ: from here the costs world can be your oyster
The appointment process for the new Senior Costs Judge is set to begin next month, with current incumbent Peter Hurst due to retire later this year.
The Judicial Appointments Commission (JAC) said the recruitment exercise is likely to start on 3 April for a role that pays £130,875.
Master Hurst has been a costs judge since 1981 and took up his present role in 1992. He will retire on 30 September.
The post is open to solicitors and barristers in England and Wales with five years’ post qualification experience (PQE) and expertise in costs law, as well as existing costs judges and deputy costs judges.
According to the JAC, the Lord Chancellor “expects that candidates for salaried posts will have sufficient directly relevant previous judicial experience. Only in exceptional cases and if the candidate in question has demonstrated the necessary skills in some other significant way should an exception be made”.
This means candidates should have been sitting as a judge in a salaried or fee-paid capacity; for fee-paid judges, this should be for a period of at least two years or 30 sitting days since appointment.
The Senior Costs Judge has the day-to-day management and leadership of the costs judges, deputy costs judges and the Senior Courts Cost Office (SCCO). The most complex and/or high-value cases are assigned to the Senior Costs Judge.
The job description says the Senior Costs Judge will also be required to provide costs advice to judges “often at short notice”, as well as providing support and advice to cost judges and deputy costs judges “to ensure accurate and timely delivery of decisions”.
Also among the duties are sitting as an assessor with the Court of Appeal, when requested, in complex cases and with High Court judges on appeal, and sitting with the designated civil judge on county court appeals, as well as hearing assessments in the Supreme Court and Privy Council.
The Senior Costs Judge will also be expected to play a significant role in helping to implement the changes following the Jackson reforms.
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Kenny: not discounting further action
Leading counsel has suggested that Lord Chancellor Liz Truss erred legally in both the process and substance of her decision to change the discount rate, a leading medical defence union revealed last week as it hinted it may yet challenge her over the move.
The news came ahead of today’s implementation of the new discount rate of -0.75%, which the insurance industry has been lobbying hard to reverse.
The Medical and Dental Defence Union of Scotland (MDDUS) – which operates across the UK and is calling for reform of GPs’ indemnity insurance costs – described the “astonishing” decision to change the discount rate as “a classic failure of joined-up government that looks set to make the problem worse, rather than better”.
The recent spring Budget said the new rate would cost the NHS an extra £6bn between now and 2022.
MDDUS chief executive Chris Kenny – the former chief executive of the Legal Services Board – said: “That will drive up the size and number of claims and associated legal bills, and mean more of them will be painfully fought over in court rather than resolved amicably.
“The promise of ‘appropriate funding’ to reduce the impact, although welcome, is as yet undefined. And how can it be remotely sensible to proceed with such a change when a review, with a promise of early legislation to alter the basis on which the rate has been set, is about to be launched?”
Mr Kenny challenged Ms Truss to show her reasoning in greater detail, “as advice from leading counsel suggests she has erred legally in both the process and substance of her decision-making. We do not discount further action once we have studied her response”.
Looking at the issue of GPs’ indemnity insurance more broadly, he said: ““Everybody agrees that we need to maximise the proportion of damages going to genuinely injured claimants, rather than to lawyers…
“The solutions are clear – tort reform, cost capping and clearer, more transparent and broadly based tests for setting the discount rate.”
Last week, during a Westminster Hall debate on GP indemnity costs called by Alex Chalk MP, junior health minister David Mowat said: “We… have an environment in which, for whatever reason, there has been an explosion in small claims against the NHS, which particularly affects GPs, and there is a legal environment in which even unsuccessful claims or claims without merit can sometimes be rewarded.
“All of that is made worse, as we have heard, by the change to the discount rate made by the Lord Chancellor…
“That will have a significant impact on all insurers in the private and public sectors. It particularly affects the health sector. The £59 billion reserve that the NHS has for central litigation costs will increase because of the change that has been made by something in excess of £5 billion or £6 billion. Those are significant and serious sums of money in the public purse.
“The government’s position is that doctors will not have to pay as a consequence of the technical change in discount rate. We are working through how that will work.”
Responding to the new rate coming into force, the Association of British Insurers said premiums would go up in waves over the next year in line with renewal trends.
It said: “Many insurers choose to reinsure against large risks, such as catastrophic personal injury claims, which means some of the impact of the recent change will so far have been absorbed by existing reinsurance contracts.
“But given the size of the discount rate cost impact, these companies will inevitably increase their premiums when that reinsurance is renewed, adding to insurer costs which will inevitably feed through to the premiums insurers have to charge customers.
“Most reinsurance renewals will take place in January 2018, meaning the third wave of increases could well be the largest if a new rate has not been set by then.”
Mr Kenny noted also that longstanding industry proposals to reform the Law Reform (Personal Injuries) Act 1948 were still awaiting a government response.
“In the meantime, awards continue to be calculated on the basis of the costs of private sector care, when all the evidence shows that those who receive damages, quite rightly, use excellent and readily accessible NHS services where they can do so. Legislation is needed… urgently.”
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Augusta Ventures – the UK’s leading litigation financier for the SME market – has this week launched its blog: Diary of a Litigation Funder – a sideways look at the world of litigation finance.
Weekly posts from the Augusta team will provide a fresh take on the funding market, you can view the blog here: http://diaryofalitigationfunder.tumblr.com/ and keep up to date with new posts by following the blog on Tumblr.
Managing director Louis Young says: “Financing for litigation is no longer a last resort option for many lawyers, nor is it seen as something that is only used by mid-bracket firms to prop up their workbook. Over the past 18 months financing demand among claimants has increased dramatically and there is a growing realisation among solicitors that those who are familiar with the ins and outs of financing will be much better positioned to secure appointments to run a matter. This blog is our way of providing firms with an insight into how a financier thinks – as by knowing what the other side is thinking you have a much better chance of getting what you want.”
Augusta is well on its way to achieving a half century of claims financed since it started operations in 2014. While other funders focus on a handful of multi-million pound investments in big cases, Augusta invests between £10,000 and £600,000 in a broad range of commercial litigation matters, making them the first choice for may law firms and claimants.
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Sumption: Claimant relied on his own assumption about service
A lack of representation may mean that litigants in person (LiPs) are afforded some latitude in case management decisions and in hearings, but it will “not usually justify” applying a lower standard of compliance with rules or court orders, the Supreme Court said today.
The comment by Lord Sumption – giving the majority ruling – came as the Supreme Court, by a majority of 3-2, found against the appellant LiP in a case where he was seeking retrospective validation of an unauthorised form of service under CPR 6.15.
Mark Barton’s claim form in purported negligence proceedings against Leamington Spa law firm Wright Hassall was sent by email “by way of service” on the last possible day to its solicitors, BLM. However, though there had previously been email correspondence, BLM had not provided specific written permission for email service.
BLM replied some days later, saying that email was not a permitted method of service, that the claim form had expired unserved and that the claim was statute-barred.
Lord Sumption said: “In current circumstances, any court will appreciate that litigating in person is not always a matter of choice. At a time when the availability of legal aid and conditional fee agreements have been restricted, some litigants may have little option but to represent themselves.
“Their lack of representation will often justify making allowances in making case management decisions and in conducting hearings. But it will not usually justify applying to litigants in person a lower standard of compliance with rules or orders of the court.
“The overriding objective requires the courts so far as practicable to enforce compliance with the rules: CPR rule 1.1(1)(f). The rules do not in any relevant respect distinguish between represented and unrepresented parties.”
The judge observed that any advantage enjoyed by a LiP imposed a corresponding disadvantage on the other side, “which may be significant if it affects the latter’s legal rights, under the Limitation Acts for example”.
“Unless the rules and practice directions are particularly inaccessible or obscure, it is reasonable to expect a litigant in person to familiarise himself with the rules which apply to any step which he is about to take.”
Lord Sumption did not accept that rule 6.3 and Practice Direction 6A were inaccessible and obscure. He said: “The salient facts in his case are that he was by June 2013 an experienced litigant [he had used Wright Hassall to sue his divorce solicitors]. He knew, as he accepts, about limitation. He knew that not all solicitors accepted service by email.
“Yet, apart from looking at the legal notices on [BLM’s] website (which said nothing about email service), he took no steps to check whether [BLM] did so, or to ascertain what the rules regarding service by email were, but simply relied on his own assumption.”
Lord Sumption concluded that Mr Barton had not helped himself by leaving it so late to serve the claim. “A person who courts disaster in this way can have only a very limited claim on the court’s indulgence in an application under CPR rule 6.15(2).
“By comparison, the prejudice to Wright Hassall is palpable. They will retrospectively be deprived of an accrued limitation defence if service is validated. If Mr Barton had been more diligent, or [BLM] had been in any way responsible for his difficulty, this might not have counted for much. As it is, there is no reason why Mr Barton should be absolved from his errors at Wright Hassall’s expense.”
In his dissenting judgment – with which Supreme Court president Lady Hale concurred – Lord Justice Briggs said Mr Barton’s attempt at service by email should be validated.
“He may fairly be criticised for having failed to read the relevant part of the rules, and making an incorrect assumption instead, but this does not on balance detract from the good reason constituted by his having, albeit in a modestly non-compliant way, achieved all that which the rules as to service by email are designed to achieve.”
Lord Briggs added that he was troubled that the meaning and effect of CPR 6.15 had been considered by the Supreme Court, “which does not lightly embark upon procedural questions”, twice in recent years and that, on this occasion, its meaning had divided the court.
“I hope that the rule committee might be able to find time to satisfy itself that this rule, and the provisions in the PD about service by email, still satisfy current requirements, in the context of giving effect to the overriding objective, and do so with sufficient clarity.”
Lord Sumption agreed with this, “if only because litigants in person are more likely to read the rules than the judgments of this court”.
Howard Elgot, the barrister at Parklane Plowden Chambers who acted for Mr Barton, said: “The narrow majority by which our client’s case was lost reflects the difficulty judges have in deciding when to apply the dispensing provision for invalid service and what ‘special’ treatment, if any, should be afforded to litigants in person.
“We are actively considering an application to the European Court of Human Rights on article 6 grounds, namely that an “excessive formalism” has caused the loss if Mr Barton’s claim.”
Andrew Twambley, a spokesman for the Access to Justice campaign group, said the decision had implications for the government’s plan to raise the small claims limit for personal injury cases.
“The Supreme Court [has confirmed] that ignorance of the law is no defence, making it more likely that, if the personal injury reforms become law, LiPs will have their cases struck out because they will not be able to access expert legal advice as is the case at the moment.
“The government’s determination to press ahead with the Civil Liability Bill will make a bad situation much worse…
“Now, the government will be required to make the current arcane process LiP-friendly, a herculean task given the number of different elements within a personal injury claim any new system will need to incorporate.”
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Green: inconsistent approaches to budgeting
Budgeting has extended to detailed assessments, it emerged last week as a costs judge explained how budgets can help both sides take a view on whether a case is worth fighting.
Master Haworth also predicted that litigation was moving towards an era of fixed costs for lawyers and experts.
Speaking at last week’s Expert Witness Institute annual conference in London, Peter Haworth, a judge at the Senior Court Costs Office, pointed out that he tended to come in at the end of cases rather than be involved in costs budgeting at the start of the case.
But he gave an example of a recent case, where millions were in dispute, in which he had required budgets from the parties – both hedge funds – before a detailed assessment took place.
“Both sides came in with budgets of half a million each just for the assessment, let alone the costs of several million pounds,” he said. But each was horrified when they saw the other’s budget, and within two weeks the costs judge received notice that they were going to settle.
“One of the features of having to budget is you can see where the other side are going to spend their money, so the lawyers can take a view ‘is this case worth fighting?’,” he observed.
District judges and costs judges were “getting to grips” with the Jackson reforms, Master Haworth said, predicting that the committee set up under Mr Justice Foskett to review the guideline hourly rates – due to report by March 2014 – would result in fixed costs.
“Hourly rates are likely to be fixed for solicitors within another 12 or 18 months… We are moving to an era, like it or not, of fixed costs for solicitors, probably for barristers in some respects and probably for experts.”
The one-time solicitor said this was a cyclical phenomenon. “I can remember fixed costs from 20 or 30 years ago… and now we’re moving back to fixed costs.”
Master Haworth advised experts to present their instructing solicitor with a variety of costs scenarios, because if the cost was greater than the initial estimate, the solicitor might find it impossible to vary the amount later. “It seems to me that you need to be factoring into your estimates… if the defendants pursue this line [or] that line it’s going to require me to do X,Y and Z and that is going to cost you an extra this or that…
“The reality is there is no point saying to the solicitor it’s going to cost a good deal less when in fact the solicitor will never ever recover the true cost at the end of the day… Anything other than a worst case scenario, I’m afraid, will come and bite you in the backside, or has the possibility to do that”
Master Haworth suggested that the experts assembled read the judgment by Mr Justice Coulson in Elvanite in the Technology and Construction Court, in which the High Court rejected a bid by a successful defendant to nearly double its approved £270,000 costs budget after the case had concluded.
Master Haworth said: “I think that that’s going to be followed by other judges with other budgets”. He continued: “We are in a new era and if the Jackson reforms are going to work there is going to be quite a lot of pain for a lot of lawyers, and of course they might want to transfer that pain, or some of it, on to their experts.”
Also speaking at the conference, Steven Green, head of costs at Irwin Mitchell, said the firm’s experience so far had been that judges had adopted inconsistent approaches to costs budgeting.
Of the seven cases that had been assessed since April, the judges had spent between half an hour and three and a half hours giving figures that would be allowed for each phase, he said.
“I think it’s fair to say it’s been a fairly bumpy ride for the first five months, with some inconsistent approaches… Over the next 12 to 18 months hopefully things will settle down and we’ll get a more consistent approach as to how these budgets should be applied.”
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Costs out of control: it’s like reform never happened, says judge
It is difficult for the court to stop parties litigating in a grossly disproportionate way if that is what they want to do, the Court of Appeal said yesterday in a case it described scathingly as “Dickensian” in the way costs were run up.
Gilks & Anor v Hodgson & Anor [2015] EWCA Civ 5 was a neighbour dispute over a boundary and a right of way.
Giving the lead judgment, Sir Stanley Burnton said “the costs so far approach half a million pounds, far more than the value of the rights involved. It is a dispute that could and should have been compromised on terms that both parties could live with. The trial took 10 days, and even then some issues… were left undecided”.
Lord Justice Christopher Clarke said the enmity between the parties had caused them to incur costs and to use up the time of the courts, to the detriment of other litigants, “to an extent grossly disproportionate to what was at stake”.
He continued: “If parties, or one of them, insist on litigating in this way, it is difficult for the court to cut short their wasteful endeavours, however much it may try to do so. I hope that the example of this litigation may encourage others who are concerned in like disputes (and, as importantly, those who advise them) to take every step that they can to avoid the absurd waste of effort, time and cost (for both parties) which this case has involved.”
Lord Justice Bean said: “I only add how dismayed I have been by this Dickensian litigation. The disputed strip of land and right of way do not constitute the sole means of access to anyone’s home. The award of damages to Mr & Mrs Gilks was £3,500.
“Yet, at a time when the courts are under great pressure, the battle between these two couples took up 10 days of court time – more than some murder trials – before Judge Armitage and a further three days in this court; and about half a million pounds has been spent in costs. It is almost as though Lord Woolf and other civil procedure reformers over the years have laboured in vain.”
Geldards acted for the claimants and Ralli for the defendants.
Blog
The increasing appetite for third-party funding in Europe
Although investors in common law jurisdictions have for sometime recognised litigation as an asset worth investing in, litigation funding remains less prominent in the civil law jurisdictions of mainland Europe. However, the European appetite is beginning to shift in favour of litigation funding, and many large dedicated funds active in common law jurisdictions such as the US, UK and Australia are starting to provide third-party capital to claimants with strong cases.
April 10th, 2018