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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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Medical reports: new qualifying criteria

Medical reports: new qualifying criteria

Some 134 ‘shell’ companies were yesterday removed from MedCo in the wake of the new rules announced last month by the Ministry of Justice.

Under the revised qualifying criteria for medical reporting organisations (MROs) unveiled last month, the definition of an MRO now precludes organisations set up purely as a shell “to gather instructions and forward them on to a related organisation”.

Many of the high-volume national MROs (ie, tier 1) set up tier 2 shell companies to increase their chances of appearing in the random selection of MROs put to claimants and their solicitors.

They argued that this was to allow solicitors to choose MROs with which they have existing relationships, rather than being forced to work with companies they do not have a relationship with.

However, in an announcement yesterday, MedCo emphasised that MROs which have been suspended from the system – but have already been instructed to produce a medical report – would be able to fulfil the instruction and have an ongoing obligation to upload their case data to the system.

Yesterday’s changes also introduced a new search offer that increases the chances of a tier 1 MRO being selected. The results will now throw up a choice of two tier 1 and 10 tier 2 MROs, replacing the previous choice of one tier 1 and six tier 2 companies. No changes have been made to the number of direct medical experts presented.

The MedCo statement said: “The revised qualifying criteria enable MedCo to ensure that MROs registered on the system, or applying to register, do not undermine the system’s random allocation model. MedCo applies the revised qualifying criteria to determine that MROs are properly constituted businesses with satisfactory systems and sufficient resources in place to operate to the minimum required standards.”

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Vernon: Significant sums saved

The Court of Appeal has found for NHS Resolution (NHSR) in three test cases over the reasonableness of solicitors switching clients from legal aid to conditional fee agreements (CFAs) ahead of the introduction of LASPO.

NHSR said the ruling to overturn the decision of Mr Justice Foskett saved it £270,000 in these three cases – all run by Irwin Mitchell – and potentially millions more in other cases where clients were switched.

The three cases – Kai Surrey, AH and Yesil – all involved medical negligence victims who were switched from legal aid to CFAs shortly before 1 April 2013, when LASPO restricted the right to recover success fees and after-the-event insurance premiums.

The Court of Appeal ruling in Simmons v Castle sought to counter the effect on damages with the 10% uplift.

At first instance, Irwin Mitchell lost the right to recover the success fees and insurance premiums because it was held that they failed to advise on the 10% uplift before switching clients from legal aid.

However, on appeal, Foskett J, sitting with the Senior Costs Judge Master Gordon-Saker as assessor, overturned these decisions.

He was clear that he wanted to avoid a return to the “bad old days” of the costs wars in the early 2000s, and ruled that in each case staying on legal aid and claiming the 10% would only have achieved a marginal gain.

Giving the unanimous ruling of the Court of Appeal, Lord Justice Lewison said “the real issue is not the advice as such, but the reasons why the receiving party made the choice that he did”.

He said: “The bottom line is that in each of the three cases the advice given to the client had exaggerated (and in two cases misrepresented) the disadvantages of remaining with legal aid funding; and had omitted entirely any mention of the certain disadvantage of entering into a CFA,” Lewison LJ said.

“Moreover, one of the advantages of entering into the CFA was Irwin Mitchell’s own prospective entitlement to a substantial success fee. In those circumstances I consider that DJ Besford [in Yesil] was correct in saying: ‘Where one of two or more options available to a client is more financially beneficial to the solicitor, the need for transparency becomes ever greater.’”

He agreed with Foskett J that the analogy all three costs judges made to the 2016 Supreme Court ruling over informed consent to medical treatment, Montgomery v Lanarkshire Health Board, was a “distraction”.

Foskett J criticised the weight the costs judges gave to the analogy. Lewison LJ said: “Even if that were a fair criticism (and I do not think that it is), it does not amount to saying either that the costs judges took into account an irrelevant consideration; nor that their decisions on the facts were outside the ambit of reasonable decisions open on the facts of the three cases.

“In questions involving the exercise of a discretion, questions of weight are questions for the primary decision maker: not for an appeal court… I do not consider that the judge applied the right test to his appellate role.”

Foskett J was not entitled to interfere with the evaluative judgment of the three costs judges, the court found.

NHSR said there were potentially millions of pounds of savings waiting the wings after this decision. Chief executive Helen Vernon said: “We welcome the Court of Appeal’s decision in this case which shows how important it is for claimants to be properly informed when it comes to their legal costs.

“Having detected this issue and taken the decision to challenge it through the higher courts, we were able to save significant sums for the NHS whilst ensuring that claimants receive the compensation they are entitled to.”

In a statement, Irwin Mitchell said: “Over five years ago, we advised a small proportion of our legally aided clients who had medical negligence claims to switch from legal aid to a [CFA] ahead of unprecedented law reforms…

“This allowed our clients to pursue their cases to a successful conclusion unfettered by any (existing or future) restrictions around legal aid and without having to make any contribution to legal costs (as the [CFAs] pre-dated the change in the law) and many have since recovered many millions of pounds in compensation to provide for their long term needs

“The Court of Appeal is critical of our advice in three individual cases but we remain of the view that the switch was reasonable and in the best interests of those clients as the High Court agreed back in 2016.

“We are considering our position on appeal.”

Lewison LJ found other faults in the High Court ruling. He said Foskett J was wrong to say that the 10% point was determinative in Yesil and so “because he mischaracterised those conclusions, he gave no reasons for disagreeing with them”.

Lewison LJ added: “In my judgment DJ Besford’s conclusions were fully justified on the evidence that he had; and I consider that the judge was wrong to reverse him.”

The 10% uplift was determinative in the other two cases, but the Court of Appeal said Foskett J got the appeal test wrong.

“The judge’s approach casts on the paying party the burden of showing that the decision would have been different. By contrast, the costs judges’ approach casts on the receiving party the burden of showing that the decision would have been the same.

“Since not only does the burden of proof rest on the receiving party, but also any doubt is to be resolved in favour of the paying party, I consider that the costs judges’ approach was right, and the judge’s was wrong.”

Foskett J was also wrong to compare the overall damages claim and the 10% uplift: “The right comparison was one between the amount of costs for which the individual claimant might have been liable on the facts of the particular case, balanced against the amount of the… uplift, as DJ Besford correctly held.

“If costs for which a claimant would be potentially liable (either because of a failure to beat a part 36 offer or because of the operation of the statutory charge) would have been absorbed by the Simmons v Castle uplift, then if the risk eventuates the client is no worse off. If it does not, then the client is obviously better off.

“But since the one is a risk and the other is a certainty, the comparison cannot fairly be made without assessing the seriousness of the risk on the facts of the particular case. The judge did not perform that exercise, even in a ‘broad way’.”

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Rowley: We provide an additional risk-based view

Posted by Steve Rowley, business development manager at Litigation Futures Associate Allianz Legal Protection

Two of the biggest frustrations for customers is receiving poor service post sale and not being understood. For a business, the hard work shouldn’t stop with securing the client but should continue to ensure that they see your business as a value add.

Regardless of which market you’re in, there’s always a great attention to detail in product development, driven through market insight and customer trends. Whilst the ‘tangible asset’ is of course extremely valuable to meeting client needs, often what is overlooked is the ongoing support and guidance that a client needs.

Products and services are designed by experts in a particular field who are already familiar and confident with their own business environment. For example, how many times have you been into a mobile phone shop only to be baffled by some of language and confusing tariffs available? They think they are being clear.

So how can you bridge the gap between being a trusted expert with technical competence but still deliver exceptional and valued customer service?

If you look at our product it isn’t tangible; it’s a piece of paper providing a promise that when needed can be used to cover some of the costs associated with bringing a legal action and that action subsequently failing.

What’s equally as important as the promise is the expertise of our people who are available to answer any questions or queries our business partners have.

Being able to listen to and respond with sound reasoning is a real skill which I think our customers need. As an insurer, we’re in business to recognise, understand and manage risk as well as provide financial protection.

For our solicitor partners, it’s important that we recognise each other’s strengths and what we each bring to the table, so we can positively utilise our respective skill sets for the good of our businesses and that of the customer.

We are not here to challenge or get into an intellectual debate around the legal merits of a case – our solicitor partners train for many years to be experts in their fields of law. What we bring is an additional risk-based view which may assist the lawyer in looking at a case in a different way.

Unfortunately, we’re not able to insure every enquiry that comes across our desks (where the authority to bind us to risk isn’t delegated), but what we do is listen to try and understand the case and explain clearly our rationale if we decide not insure the risk.

It’s impossible to be all things to all people, but at least our business partners have a clear route to finding an expert willing to listen, question and understand, even if the outcome isn’t always favourable.

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Elliott: Funders moving into under-served parts of the market

The top 20 UK independent litigation funders now hold assets of just over £1bn, a 42% increase in just 12 months, according to research by City law firm RPC.

It attributed the rise to continued investment from private equity firms and hedge funds in “this increasingly popular alternative asset class”.

That the returns are uncorrelated to the performance of mainstream assets such as shares, helping to diversify portfolio returns, has long been seen as a selling point for third-party funding, and the RPC research indicates that this is now being appreciated.

The firm said that while assets held on balance sheets were just one measurable component of litigation funders’ finances, “they are a good indicator of the growing impact litigation funding is having on the legal sector and the investment arena”.

RPC suggested that undrawn funding lines from these sources were actually “many times” the value of assets held on balance sheets.

For example, it said that Burford Capital, the world’s biggest funder, has stated that it in addition to direct investments that it holds on its balance sheet, it has also committed $1bn towards investments in litigation funding through investment funds that it manages over the last five years.

The result of this backing was that litigation funders “are stepping up their search for potential cases to back”, the research continued, with group actions a major area of focus, along with portfolio funding across specific practice areas; last month, London firm Memery Crystal agreed a deal with Woodsford Litigation Funding for its energy and mining litigation.

Geraldine Elliott, RPC’s head of commercial litigation, said: “Litigation funders want to deliver good risk-weighted returns and a meaningful deployment of funds. That means a balancing off between the pressure to invest funds and the need to do proper due diligence on cases.

“As the more obviously strong legal cases are getting multiple finance offers, the litigation funders are spreading their search into under-served parts of the market.

“They are also seeking more innovative origination strategies, such as securing a first look at cases from individual law firms.”

The research said other trends in the market were funding for major arbitration cases, particularly involving investment treaties – with Therium Capital and Calunius Capital among those identifying arbitration as a key activity – and including asset tracing within their remit.

It said: “Litigation funders appear to be increasingly prepared to fund the costs involved in enforcing court decisions, for instance to track down and recover money from overseas. For example, Burford Capital has a global asset tracing team.”

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Burcher JenningsFour years since the Jackson reforms came into force, and with no respite for law firms from the significant challenges posed by ongoing changes in the rules and procedures for costs, Burcher Jennings has today launched a fully updated Costs Masterclass for 2017.

Richard Allen, Senior Costs Lawyer at Burcher Jennings, who leads the Masterclass, drawing on his over 30 years of industry experience, said:

“Across the changing legal landscape in which our industry operates, costs remain one of the most significant challenges today. Balancing the tension between access to justice, client expectations and the need for law firms to turn a reasonable profit will be critical to the prospects of many firms. Our Costs Masterclass is designed to bring clarity, insight and practical guidance for those feeling overwhelmed and underprepared for ongoing upheavals in the costs regime.”

Burcher Jennings is a costs market leader. This expertise, combined with prominent expertise in pricing, as well as law firm and litigation funding, gives the firm a uniquely insightful position from which to deliver such support. The Masterclass is led by Richard Allen, who has more than 30 years’ industry experience, was one of the first professionals to be awarded Costs Lawyer status and is one of only a small number of Costs Lawyers who also made partner in private practice.

The Costs Masterclass is structured either as an intensive two-hour session or a half a day of knowhow and interactive discussion. It will cover an extensive range of topics, from Indemnity Principle and retainers, to Part 36 offers and maximising costs. Practical knowhow is combined with strategic insight and solutions tailored to the firm of the individual participant.

Richard Allen added:

“We are responding to a need for support when it comes to managing the current and future costs challenges. This Masterclass not only focuses on the basic principles but also looks at technical costs and case management issues. Designed to turn costs around for firms that are struggling and allow others to manage costs with strategic and insightful ease, our course is unique in its depth of support and expertise.”

Martyn Jennings, Chief Executive of Burcher Jennings, said:

“This Costs Masterclass is a part of the thought leadership Burcher Jennings is able to deliver thanks to exceptional depth of expertise and experience at the firm. We look forward to being able to support firms through the most recent challenges and make costs management a business asset, rather than an obstacle to be faced.”

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Clarke: not dismayed by non-lawyer Lord Chancellor

The government has around three months to sort the detail on personal injury reform if it wants to hit the April 2013 target, the president of the Forum of Insurance Lawyers (FOIL) has warned.

The prediction by Don Clarke came as family law solicitor Helen Grant – newly appointed as a junior minister at the Ministry of Justice (MoJ) – was given the brief of seeing the Jackson reforms through to implementation.

Writing on his firm Keoghs’ website, Mr Clarke said the Court of Appeal’s decision to reopen its ruling in Simmons v Castle – on the 10% increase in damages – “cannot bode well for the broader roll out of the Jackson reforms where Sir Vivian [Mr Justice] Ramsey has already been talking of various ‘anomalies’ which will doubtless impact on a smooth transition to a reformed claims process.

“FOIL believes that claimants and compensators alike need and deserve clarity on the reforms in order to prepare for change. Compensators in particular need this clarity in good time so as to be able to ready themselves operationally and to inform them on key and sensitive issues such as pricing.”

He said that with seven months to go to implementation, “we still await some considerable detail from the MoJ on various aspects of the Jackson reforms”, such as part 36, qualified one-way costs shifting and the scope and level of fixed costs.

Mr Clarke argued that the level of legal costs “drives all the behaviours within the current dysfunctional system” and urged the government to start work on re-populating the “Jackson Table B” matrix of fixed costs for fast-track personal injury cases pre- and post-issue.

He concluded: “We have probably three months to sort the detail on personal injury reform. Let us hope that a new MoJ team will revitalise and re-energise the debate and drive the work on to a successful conclusion.”

The portfolios for the new MoJ team were announced on Friday, and Ms Grant’s include civil law and justice, courts and tribunals, and legal services and claims management regulation. She largely inherits the areas previously covered by Jonathan Djanogly, except for legal aid, which has moved to Liberal Democrat Lord McNally, who piloted the Legal Aid, Sentencing and Punishment of Offenders Act 2012 through the House of Lords.

Mr Clarke said he does not share the dismay of others that the new Lord Chancellor, Chris Grayling, is not a lawyers – “I hope that he brings a common sense approach to the issues that face him and without the ‘baggage’ of a former practising solicitor or barrister”.

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Express Solicitors buys Lavin Copitch

Doing the deal: Daniel Slade and James Maxey (at the back) with Robin Pavey (front right) from Express Solicitors and Tom Lavin from Lavin Copitch

A consortium of personal injury practices formed to encourage law firm acquisitions has helped Manchester-based Express Solicitors do its first deal.

Express is part of the Pi Gateway consortium, together with Bott & Co, Hilary Meredith and Ralli Solicitors, launched last autumn.

The firm said the acquisition of Lavin Copitch Solicitors was “made possible due to a £4.1m refinancing package from RBS Corporate” following the firm’s conversion to ABS status early last month.

James Maxey, managing partner of Express, said:  “We were introduced to Lavin Copitch Solicitors through Pi Gateway and were able to make our first acquisition, which is part of our ambitious growth strategy.”

Express said the cost of acquiring the two-partner firm, based in Altrincham and Gorton, was £250,000. The purchase included several hundred personal injury files.

Mr Maxey went on:  “While there are many firms wishing to exit the market there are also plenty of acquiring firms, like Express Solicitors, who want to strengthen their balance sheet and grow turnover.

“Pi Gateway has the flexibility to co-opt other members to join the group for larger transactions.  The consortium is open to no obligation talks at any time to firms looking to exit the market and make a clean break at a fair price.”

Pi Gateway is said to have completed a number of other transactions.

Established in 2000, Express Solicitors has 148 employees, including 13 partners and 47 fee earners.


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Chris Bogart

Bogart: “Very significant” growth expected in UK

The Jackson reforms are part of the reason for an increase of 89% in Burford Capital’s half-year profits, the global litigation funder’s chief executive said last week.

“The Jackson reforms have clearly raised the profile of litigation funding in the UK, resulting in increased volumes of investments and enquiries,” Christopher Bogart told Litigation Futures.

“We expect to see very significant continuing growth in the UK, US and other countries. Clients are looking to alternatives to paying hourly fees for litigation.”

Mr Bogart said that since it opened for business in 2009, Burford had made 65 litigation funding investments worth over £260m. He said these investments included both single cases and portfolios of cases.

In its financial results for the half-year ending on 30 June 2014, Burford reported an increase in profits from £6m to £11.2m.

Its income for the six months was £17m, a 40% increase on the previous half year, with 85% coming from “the litigation portfolio amid continuing increases in activity levels”.

Strong demand for funding was reflected in the £38m of new capital invested in the first half of this year, five times the amount invested in the first half of last year.

Mr Bogart said the biggest obstacle Burford faced in funding smaller cases in the UK was the cost of litigation. He revealed that Burford’s smallest investment in the UK was less than £200,000, but this did not involve covering all the fees and expenses.

Instead it was a question of “helping lawyers and clients bridge a gap that had opened”, whether that meant paying for counsel, funding experts’ fees or helping a previously self-financing client.

Burford said its after-the-event insurance business remained steady, contributing £4.6m of the profit. It said that “while still small compared to historical levels, we are seeing increasing demand for coverage as 2014 develops”.

The financial report continued: “It remains too early to tell what even the medium -term future holds, and we will continue to watch, wait and write sensible business. We are declining to follow some of our competitors, who in their attempt to retain volume are reducing prices and writing new policies at premium levels we consider inevitably loss-making.”

Burford Capital announced in July that it had raised almost £90m from a bond issue, pushing the third-party funder’s asset base beyond the half-billion US dollar mark. It raised the money by issuing bonds on the main market of the London Stock Exchange.

Meanwhile, litigation funder Vannin has announced the appointment of former High Court judge Sir Stephen Silber as chairman of its investment committee.

Sir Stephen, who retired earlier this year after 15 years as a High Court judge, said: “The portfolio of funded cases is already impressive, and I look forward to working together with the team to build a further pipeline of successful cases.”

He is joined by international arbitration expert Bernard Hanotiau, professor at the law school of Louvain University, Belgium. Paul Morris, consultant senior counsel at offshore legal services provider Appleby, has been appointed to the group’s board as non-executive director.

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Nicholls: European appetite is beginning to shift in favour of litigation funding

A guest post by Ross Nicholls, director at multi-disciplinary professional services network IR Global

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.

Burford Capital, which has offices in New York, Chicago, London and Singapore, has more than $3bn of funding committed to the legal market and, two years ago, moved into Germany.

Burford provided US law firm Hausfeld with a war chest of €30m to open an office in Berlin and finance litigation in exchange for a share of the proceeds of any victory.

One good recent example of a high-profile class action-type case in Germany, is the claim pursued by consumer rights organisation MyRight against Volkswagen, using funding provided by Burford Capital.

The examples of Germany and Austria serve as good case studies for the rest of Europe with regard to the future development of litigation funding, since they are similar in their sophistication in this area.

Contingency fees or conditional fee arrangements with attorneys are usually not permitted under German or Austrian law.

However, conditional fee arrangements can be permitted if the client would otherwise be deterred from proceedings – effectively from access to justice – due to its financial situation. Contingency fee arrangements are possible in a minority of European countries, such as Lithuania.

By contrast, third-party funding is widely available in both Germany and Austria for litigation and arbitration proceedings, subject to certain provisos.

In Germany, the minimum amount in dispute must be at least €100,000, and leading litigation funders commonly require a 30% fee for an amount in dispute up to €500,000 and 20% for any amount exceeding that.

In Austria, funding agreements are usually designed to ensure that funders receive no payments until (and contingent upon) a successful litigation outcome.

The funder’s financial interest can be for a fixed amount or a percentage of the litigation’s value, with recourse limited to the value of the legal claim. Financing is usually made available in tranches, subject to progress or other developments.

The leading third-party funders in Germany and Austria are Foris, Legial (part of Ergo Insurance Group) and ROLAND ProzessFinanz (part of Omni Bridgeway). The current trend is for funding complex, high-value cases with significant returns, such as insurance, consumer and cartel litigation. However, the barrier to acceptance is high, with only 10% of German requests for funding successful.

An interesting litigation funding trend in Germany is the growth of legal tech start-ups providing access to litigation funding (and lawyers) via internet platforms.

This first started with claims regarding delayed flights and other flight-related damages and the model is growing quickly, particularly with regard to generic low-value claims.

Funders active in Europe will assess the litigation case like any other investment, only taking on cases they believe have a high probability of success.

They may hire a credit rating agency to look into the financial background of the opponent, ensuring there are sufficient funds available to cover the claim should it be successful.

However, as everywhere else, the key considerations for funders will be whether the case has merit and sufficient evidence, and whether the decision will be enforceable.

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Wheeler: system dumbed dow

Wheeler: system dumbed down

The new president of the Association of Personal Injury Lawyers has laid into the new ‘fundamentally dishonest’ test that came into force earlier this month, asking why defendants do not face the same sanction of having their case thrown out.

In his inaugural speech at the association’s annual conference, Jonathan Wheeler also cast aspersions on the prospect of online dispute resolution.

He said it was “anyone’s guess” what ‘fundamentally dishonest’ actually meant.

Mr Wheeler, head of the child abuse claims team at Bolt Burdon Kemp, continued: “Note, of course, that ‘fundamentally dishonest’ only applies to claimants. What about defendants who pursue ‘fundamentally dishonest’ defences? Who say they haven’t got crucial documents to disclose when they have? Who defend a claim for child abuse against a priest by claiming that at the age of 15, my client consented to being raped by a 61-year-old man of the cloth.

“Is this an honest defence? How can it be? Not least because the Catholic Church insists that all its priests are celibate. Taking instructions from my client (now aged 20) on such a pleading – signed by a senior official of the church into which he was born – was almost unbearable. I truly wonder whether people outside this room, the people who are making this stuff up in court documents for the defence, have any idea what this sort of thing does to someone?

“How about the defendant who purposefully sets out to delay a settlement brought on behalf of a terminally ill claimant, because it would be cheaper to pay out on the claim when they are dead, rather than alive. What about a litigation authority that spends vast sums on defending the undefendable, costing the taxpayer thousands, when it should have apologised and put in place a meaningful rehabilitation programme to help a claimant’s recovery?

“Isn’t that dishonest? Why aren’t such defendant practices also caught by legislation?”

Mr Wheeler added that the recent attempt by defendants to have noise-induced hearing loss classified as an accident rather than a disease, so as to reduce the level of costs they would have to pay, was “downright dishonest”.

In a wide-ranging attack on government reforms that also took in the curtailment of judicial review, he said the increase in court fees ran counter to the principle of reducing the cost of litigation that was used to justify the LASPO reforms.

“How ironic then that in this year, this government is misusing its power to bring about changes to our civil justice system which will be of direct, financial benefit to itself, whilst the rule of law is ignored.”

Mr Wheeler called for efforts to make more consumers, parliamentarians and opinion-formers care about what is happening to the justice system – “a system that is being dumbed-down, sidelined and in some cases, dismantled completely”.

He cited plans in Northern Ireland to close 40% of the courts, and a year-long pilot from October to replace judges with ‘legal assistants’ to make judicial decisions at the Salford Business Centre.

“If Richard Susskind and his friends get their way we will have artificial intelligence deciding damages and disputes – who would have thought that Lord Justice Dyson could be replaced by a clever vacuum cleaner?

“And online dispute resolution taking its inspiration from E-bay? You might as well outsource justice to Ladbrokes.”

Mr Wheeler said that among the priorities for his year in office was “championing the idea of compulsory public liability insurance”.

He explained: “Claimants denied redress because a defendant has gone bust without insurance is a real issue, and we can call upon a body of clients who will speak of this injustice. Some rogue business owners liquidate their companies to avoid paying out, and then set up a new business and carry on trading with impunity. This is morally unacceptable and should be tackled head-on.

“Compulsory PL insurance would have the added benefit of driving up safety standards among public-facing businesses. This needs serious consideration at the highest levels. APIL has the power, the reach, and the influence to start the debate and I intend to make sure we’ll be listened to.”

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Thomas: sustainable infrastructure for the future

The government has announced an investment of up to £375m to modernise HM Courts & Tribunals Service over the second half of the decade.

It is central to a “programme of reform” that will deliver savings in excess of £100m per year by 2019/20.

Acknowledging that “the system is currently configured in a way that perpetuates delays and costs as staff time is wasted on manual data entry and paper-based processes”, the Treasury has agreed a one-off package of investment averaging up to £75m per annum over the five years from 2015/16.

The current range of “outdated” computer systems will be replaced with a single integrated system which will allow electronic case management, while there will be an online self-service system, which will allow legal professionals and other users to complete court and tribunal forms and make payments digitally for court fees or to initiate claims for debt repayment, personal injury or housing disputes.

There will also be an increased use of videolinks, digital presentation of documentation in court and WiFi for legal practitioners.

The announcement said the estate of 500 court and tribunal buildings would be modernised to improve facilities and reduce costs, for example by enabling hearings from different jurisdictions to occur in the same building.

There will be “more effective use of courtrooms to ensure that all cases that are scheduled to be heard are not delayed when other hearings overrun”, an upgrade of facilities for victims and witnesses, and a refurbishment of advocates’ rooms.

“Once more services are made available online, users and the legal profession should only need to attend a court or tribunal when it is absolutely necessary,” it said.

Justice secretary Chris Grayling said: “Technology will be updated and replaced in courts and tribunals across the country, working practices will be speeded up and modernised, and the court and tribunal estate will be significantly refurbished, making better use of buildings, reducing the ongoing cost of maintenance and providing improved services for court and tribunal users, particularly vulnerable victims and witnesses. Justice will continue to be delivered locally, and access to justice maintained.”

In a joint statement, the Lord Chief Justice, Lord Thomas, and Senior President of Tribunals, Sir Jeremy Sullivan, said: “Individuals and businesses, domestically and internationally, rely upon our justice system to enforce their rights in a timely manner and to uphold the rule of law. This investment in our courts and tribunals administration, with a programme of reforms to IT, working practices and estates, will uphold this most fundamental function of the state and maintain the international reputation of our justice system.

“The reform programme will provide the administration of justice with a sustainable infrastructure for the future, meeting the needs of the public, legal profession and justice agencies.”

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Budget: Omnia automates costs management tasks

A “revolutionary” online tool aimed at enabling solicitors to comply with the requirements of costs management has been launched by a well-known costs lawyer.

Omnia – the brainchild of Sue Nash of High Wycombe-based Litigation Costs Services – is a web-based software solution for the production of costs budgets which also enables solicitors to produce their own bills of costs and costs schedules.

It enables law firms to monitor budgeted costs against actual work done and then produce costs budgeting form H/HB at the touch of a button.

The software, which will be fully launched in time for the start of costs management next April, integrates with existing practice and case management systems. This means that data only needs to be inputted once to generate bills of costs, schedules, costs budgets and internal reports to allow firms to monitor their actual budget ‘spend’.

Ms Nash said: “Over the past 25 years I have witnessed in granular detail the evolution of the organisation and funding of litigation. It is from this experience, coupled with the Jackson reforms – which have provided the impetus for change – that Omnia has been born.

“Whilst costs budgeting pilot schemes have been taking place for two years now, for many lawyers the new mandatory costs budgeting regime from April 2013 represents a wholesale shift away from what they know. Few individuals or businesses would disagree with Lord Justice Jackson’s objective to make litigation less costly and because of this prevailing attitude from the public and the judiciary, solicitors must prepare now to meet these challenges come April.”

Ms Nash added that Omnia can also help costs lawyers evolve their offering to solicitors. “The role of costs lawyers will become more crucial come April 2013, so costs lawyers need to prepare just as much as solicitors for the change. Omnia enables data from solicitors’ files to be imported direct from their practice and case management systems, thus speeding up the production of bills and schedules.

“Costs lawyers can then focus their attention on analysis of the work done as well as the negotiation and advocacy elements of their roles, all of which will become more important under the new regime where judges will be keeping a sharp eye on escalating costs.”


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McLaren MP4: damaged in accident

McLaren MP4: damaged in accident

A claimant who drove a top-of-the-range Mercedes while his McLaren supercar was being repaired has recovered the cost of the credit hire, despite owning other high-spec vehicles, including two Aston Martins.

The court found that “need was to be assessed not in some objective utilitarian sense”, his barrister reported.

According to Guy Vickers from Exchange Chambers, Charles Gow owned a McLaren MP4 which he had bought for £190,000 just weeks before it was involved in an accident. The party-at-fault – a tractor – had struck a pothole and lurched sideways, causing scratches to Mr Gow’s car.

Following the accident, Mr Gow told the tractor driver’s insurer, NFU Mutual, that he would accept a replacement Ferrari while the McLaren was repaired. This did not happen and after two months he hired a Mercedes SLS AMG coupe instead, also a very luxurious “supercar”, although less valuable than his McLaren.

The insurance company was not prepared to pay for the cost of hiring the Mercedes, contending that the damage was just a few scratches and Mr Gow clearly had alternative, very nice, cars available to him including two Aston Martins (which were seven and nine years old), a BMW 5 Series and a Range Rover.

Mr Gow argued that none of these were close to being on a par in terms of prestige with the McLaren, although he had driven one of the Aston Martins while waiting for the Ferrari he was initially promised.

Mr Vickers said that the judge ruled in Mr Gow’s favour, accepting the argument that the McLaren was a particularly special car and Mr Gow did not have a like-for-like replacement he could have driven instead.

The judge noted that although the Mercedes was one of the better models on the market, it fell short of the “status and prestige” of the McLaren. In the result Mr Gow recovered the hire charges in full and also general damages for the two months before he hired the Mercedes during which, although he drove his Aston, he was nevertheless deprived of the enjoyment and use of his McLaren.

Mr Vickers said: “Mr Gow successfully argued that, in this context, need was to be assessed not in some objective utilitarian sense but by considering what type of vehicle the claimant had the use of before the accident and whether any of the other cars he already owned could replace that use.

“So although he had other cars, some of them objectively highly desirable, none of them was a supercar like his McLaren and the defendant, having to take his victim as he found him, was obliged to recompense him the cost of hiring an equivalent to his own.”

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Wallis: challenging landscape

Work to adapt the RTA portal for extension both vertically and horizontally has begun, the company that runs the technology revealed yesterday – but it said there are “no guarantees” that they will be completed in time for April 2013.

RTA Portal Co has instructed CRIF Decision Solutions Ltd as its technology partner to increase the capacity of the electronic claims system to deal with RTA claims worth up to £25,000, from the current £10,000.

CRIF will also assist with the development of the electronic claims gateway that will support the employers’ liability (EL) and public liability (PL) claims protocols that are currently out for consultation.

The company has always been clear that it needs the rules – that is, the protocols – before it can build the systems to implement them. In a statement, it said that while the protocols are being finalised, RTA Portal Co and CRIF are working on the necessary changes.

Tim Wallis, chairman of RTA Portal Co, said: “We expect the landscape ahead to be challenging. We continue to work closely with the Ministry of Justice and await the finalised detail of the protocols. We will continually assess the system requirements as more detail emerges over the coming weeks and months.

“We know that our user community is anxious about the timetable and ensuring they can develop their systems in time to support these changes. In the meantime we are going as far as we can to develop the system as part of the intention to implement this by April 2013 but there are no guarantees.”

Last week, one of the claimant representatives on the board of RTA Portal Co, David Bott, laid out the challenges of having the EL/PL portal ready in time for April.

As things stand, however, the government remains committed to April for implementation of both extensions of the portal.


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Doyle: IPT increase could be costly

Doyle: IPT increase could be costly

Solicitors need to understand the impact of the imminent increase in insurance premium tax (IPT) on after-the-event (ATE) insurance if they want to avoid being held pursued for any shortfall, a leading broker has warned.

IPT goes up from 6% to 9.5% on 1 November and Martin Doyle, a director of Amberis, warned that failing to deduct and pay the correct amount of IPT thereafter is likely to result in insurers coming back to the solicitor for the balance.

“On large multi-track cases this could be a significant amount in light of the 3.5% increase but if handled incorrectly on volume business the effect could be equally costly.”

Clients taking out ATE also need to be made aware of how will affect what is taken from their damages, he added.

Mr Doyle explained that ATE insurers use of one of two different accounting methods and IPT collection is treated differently in each case.

The first is the cash receipt method, which means that any premium received after 1 November attracts IPT at the increased rate of 9.5% irrespective of the inception date of the policy.

The second is the special accounting method, which means that premiums attract IPT at the prevailing rate when the policy was issued, so anything prior to 1 November is payable at a rate of 6%. However, this only applies until 1 March 2016, after which the rate of 9.5% applies.

Mr Doyle said: “If you have premiums that have been collected from defendants and/or claimants but have not been paid over to insurers and the cash receipt method applies, these should be paid prior to 1 November to avoid additional costs.

“If you pay premiums monthly in arrears as part of a delegated authority arrangement, it is important that every premium collected prior to 1 November is paid to insurers in November to ensure that the lower rate applies. The trigger point for the payment of the increased IPT is the date the premium is deducted from the policyholder’s damages. So before 1 November, 6% applies; after it’s 9.5%.”

He said that whichever applies, “it is highly unlikely that any insurer will want to stomach the bill from HMRC in respect of underpaid IPT, especially post-LASPO where premium income has been reduced considerably”. Insurers and/or intermediaries should be telling solicitors how they intend to deal with the change.

For pre-LASPO cases, with the defendant paying the premium, “it is imperative that the correct policy certificate is sent when costs are submitted on successful cases”, Mr Doyle added.

“This will either mean requesting a new certificate from insurers or obtaining a letter from them detailing the impact of the increase on the premium due.”

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Medical reports: MROA rates on own do mean fee is reasonable

The debate over the level of recoverable fee for a medical agency not signed up to the Medical Reporting Organisation Agreement (MROA) is set to rumble on after contradictory county court rulings.

Though in Liverpool recently a £350 fee was reduced to £200 in line with the MROA, a judge in Macclesfield has allowed £300 for a report.

The defendant insurer in Kavanagh v Powell was NFU Mutual and the court was told that other insurers have similar cases in the pipeline.

In Kavanagh, the claimant argued that the MROA fee was not relevant and mere reference to MROA rates does not render the fee claimed as unreasonable.

According to Paul Turner-Mitchell of costs drafting firm E&N Services, who acted for the claimant in the part 8 proceedings on behalf of Thorneycroft Solicitors, among the other arguments were that the defendant chose not to object to the instruction of the medical expert in question and did not produce any evidence of comparable fees for GPs and/or medical agencies not a party to MROA.

Further, he said that the British Medical Association recommended fee for a written report without an examination, based upon 30 minutes work, is £124.50. This case involved a consultation and examination as well, so it was reasonable to double that fee to take that in account. That would leave approximately £50 for the agency work.

Taylor Rose Solicitors, for the defendant, argued that there was no justification for a higher fee than that under the MROA and that allowing “such high rates will wholly undermine the MROA and its purpose. It will leave the medical agency signatories to the MROA with little commercial choice but to decline to sign up to the MROA in future cases”.

The district judge allowed the medical report fee as claimed, at £300 plus VAT.

Mr Turner-Mitchell said: “It is far too a simplistic approach to infer MROA rates on their own demonstrate a reasonable fee for non-particapting medical agencies, an approach which is flawed in law.

“For a paying party to be successful they must demonstrate that the fee is unreasonable by producing evidence of comparable agency charges who are similarly not a signatory. In Kavanagh, the claimant demonstrated the fee was reasonable by reference to BMA rates without providing a breakdown.”

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Supreme Court: rule only applies to new appeals

Pro bono costs orders have finally reached the Supreme Court after new provisions came into force last week that close a hole in the Legal Services Act 2007.

As of 1 October, section 61 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) enables the Supreme Court to make an order for costs, in cases from England and Wales, in favour of the Access to Justice Foundation which funds pro bono representation across the country.

The new arrangements will apply to appeals against court orders made after 1 October 2012, and so will not affect any pending cases.

The move brings the Supreme Court in line with other courts dealing with civil matters in England and Wales, covered by section 194 of the Legal Services Act 2007. An amendment to that Act was tabled by Lord Pannick QC during debate over LASPO, and supported by all sides of the House of Lords at report stage.

Speaking to his amendment at the time, Lord Pannick QC explained: “When [a] pro bono lawyer succeeds for the claimant or the defendant, the unsuccessful other party cannot be ordered to pay the costs of the proceedings because the successful litigant has no costs, or limited costs, having received pro bono assistance. The losing side would gain an unfair benefit and indeed an unfair advantage in the litigation.

“Section 194 of the Legal Services Act 2007 has one small defect; it applies to the county courts, the High Court and the Court of Appeal but it does not apply to the Supreme Court. There is no sensible reason for not conferring this valuable power on the Supreme Court to make orders for payments to the prescribed charity in appropriate cases. Indeed, many cases in which lawyers act pro bono are heard by the Supreme Court.

“Justices of the Supreme Court and the Supreme Court users’ group have expressed the view that section 194 should apply to the Supreme Court as it does to other courts.”

Sheriff Principal James Taylor is currently exploring the position regarding pro bono costs in Scotland as part of his review of expenses and funding of civil litigation.


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Files: Fear of satellite litigation

The Senior Courts Costs Office has refused separate attempts to obtain copies of law firms’ client files by another firm that describes itself as the country’s “leading experts in fighting unfair compensation deductions”.

Both costs judges observed the large and increasing number of these types of claims over the past year as a result of law firms now deducting costs from clients’ damages.

In Green & Ors v SGI Legal LLP [2017] EWHC B27 (Costs), before Master Leonard, and Hanley v JC & A Solicitors Ltd [2017] EWHC B28 (Costs), before Master James, the claims were made by Leeds firm JG Solicitors, whose website says: “If you’ve already received compensation for an accident but didn’t get paid the full amount, we can help you get your money back.”

The status quo, said Master James, was that such applications almost invariably led to an order for the production of the documents that belonged to the former client upon payment of a fee, but not an order for documents that did not belong to them.

There was no binding decided case in which solicitors have been ordered to hand over papers over which they have proprietorial rights, she continued.

Dismissing the application, Master James said: “I am concerned… by the floodgates that would likely be opened by a ruling that solicitors can be ordered to hand over their complete file in circumstances such as these; such a move would foreseeably instil considerable satellite litigation and I am not persuaded that this would be a positive step.”

Master Leonard addressed the issues “in some detail in the hope that doing so may help to reduce the scope of future disputes”.

He said it was for the claimants to show that they were entitled, as of right, “to receive copies of another person’s property, even on agreeing to pay the proper cost of supplying it”.

He continued: “If one person writes a letter to another, keeping a copy, it is not self-evident that the recipient can require another copy on demand, even on agreeing to pay for it.

“The mere fact that the defendants were formerly the claimants’ solicitors does not seem to me to change that. Nor does the fact that such letters are, by definition, not confidential as between the parties…

“The question is to my mind not whether there is authority to the effect that the claimants are not entitled to receive copies of the defendant’s property, but whether there is authority to the effect that they are.”

While the claimants said they limited their application to three categories of documents which they said were created for their benefit – funding documents, all correspondence sent to the claimants, and all invoices – Master Leonard said the purpose of creating documents for the client’s benefit was fulfilled when those documents are given to the client.

Supplying extra copies was another matter. “A client who wishes to challenge a solicitor’s charges, but who has nonetheless lost or destroyed the key documents upon which that challenge is based, will obviously be at a disadvantage. It does not follow that the solicitor has any obligation to compensate for that.

“Nor will a client’s inability to supply the required documents with an application for detailed assessment in itself invalidate the application.”

The master also suggested that the claimants’ claim to a freestanding right to obtain copies of the defendant’s property attempted to bypass the pre-action disclosure provisions at CPR 31.16.

“Finally, bearing in mind that the application has been narrowed down to incorporate only copies of documents which in the normal course of dealings will already have been supplied to the claimants, I do have concerns about the fact that I have seen no evidence that any consideration has been given as to the extent to which those documents are already in the claimants’ possession…

“It does not seem to me to be appropriate that the parties should incur substantial costs on a demand for documents where that need has not been properly considered and clearly established.”

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Post: absence of independent advice requirement is not good news for solicitors

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The bar for challenging a costs order is high

Our monthly summary of key costs-related court decisions is provided by CaseCheck

Webb Resolutions Ltd v E-Surv Ltd [2014] EWHC 49 (QB)

Appeal against grant of an out-of-time application to appeal an order for costs.

Appeal allowed. Held: Although the power of the court to revisit a permission decision of a single judge made in the absence of one of the parties following a renewed application should be exercised sparingly (per Jolly v Jay [2002] EWCA Civ 277), under CPR 52.3(5) a defaulting party seeking an extension of time for a renewed application for permission to appeal must satisfy the same tests applied in Mitchell.

In the present case, the judge had granted permission on the mistaken impression that there was a causal connection between the delay in receiving notice that permission had been refused and the applicant’s default of CPR 52.3(5), when the default was in fact blatant and avoidable.

Full ruling here.

Blankley v Central Manchester and Manchester Children’s University Hospitals NHS Trust [2014] EWHC 168 (QB)

Costs appeal raising the issue of whether supervening incapacity automatically terminates a solicitor’s contract of retainer.

Held: Although an agent’s authority terminates automatically upon the mental incapacity of their principal (subject to ostensible authority or liability for breach of warranty), loss of capacity does not, in itself, have the legal effect of frustrating or otherwise terminating an underlying contract of retainer. Findley v Barrington Jones [2009] EWHC 90130 (Costs) based on a misreading of Yonge v Toynbee [1909] 1 KB 215 and without regard to the doctrine of frustration.

Appeal allowed. The loss of capacity did not frustrate the conditional fee agreement. Defendant’s application to strike out the claimant’s bill of costs dismissed.

Full ruling here and Litigation Futures story here.

Taylor v Burton & Anor [2014] EWCA Civ 21

Appeal against, inter alia, an overall costs order, which included amendment costs where the successful party had been granted the amendment and costs of an interim injunction.

Held: The general rule is that those who obtain permission to amend are ordered to pay the other parties’ costs of and occasioned by the amendment.

An order providing that a party will recover the costs of an interim application only if they satisfy a costs condition, such as success on an issue relating to that order, must be drafted with precise care. Where the language of the order is imprecise, it must be interpreted against the context of the particular dispute. Where the condition is not satisfied, the parties should be left to bear their own costs.

The hurdle for challenging a costs order is high. An appellate court will only be justified in interfering if there has been a misdirection in principle, a failure to take into account or disregard a factor, or the judgment falls outside the range of reasonable disagreement.

In the present case, the judge was innocently in error by including the amendment and interim application costs.

Successful party to bear the amendment costs. Parties left to bear their own costs of the interim application on the basis that the costs condition was not satified. With hesitation and relucatance, the court could not re-consider the overall costs order. The trial judge’s decision was not irrational and he correctly addressed himself to the relevant matters.

Full ruling here.

Rehill v Rider Holdings Ltd [2014] EWCA Civ 42

Appeal against refusal to apply the costs consequence of failing to beat part 36 offers in a settled personal injury claim.

Appeal allowed. Held: When deciding whether the costs consequences of failing to beat a part 36 offer should apply, the court must assess whether it was reasonable to reject the offer, having regard to the information available to the parties at the time the offer was made (per CPR 36.14(4)(c)).

In the present case, the Recorder overlooked agreed medical evidence and failed to evaluate whether an uncertain prognosis justified the financial value of the claim. Respondent ordered to pay costs from his rejection of an earlier offer. Appellant ordered to pay costs of any detailed assessment of the appeal due to a failure to file its costs schedule.

Full ruling here.

The Bank of Ireland & Anor v Philip Pank Partnership [2014] EWHC 284 (TCC)

The issue was whether a failure to include a full statement of truth in a costs budget breached CPR 3.13.

Held: There is nothing in the rules or practice directions which requires any and every failure to comply with the formal requirements for budgets as rendering the budget a nullity. Although the absence of a statement of true is not trivial, it is a failure of form rather than substance.

In the present case, the claimant had filed and exchanged a costs budget on time, which was subject to an irregularity subsequently rectified.

Full ruling here and Litigation Futures story here.

Bocacina Ltd v Boca Cafes Ltd & Ors [2014] EWHC 26 (IPEC)

Costs judgment following a finding of passing off in the Intellectual Property Enterprise Court (IPEC).

Held: In the IPEC, litigation only over costs is not to be encouraged. The court must strike a balance between providing a fair level of recovery for meritorious claimants while encouraging early resolution of proceedings without a trial. As such, significant account will be taken of reasonable admissible offers to settle when determining costs.

Where an offer omits an aspect of relief or costs that is insignificant, a claimant who successfully takes that issue to trial should not expect to recover the full costs of doing so.

Equally, if an offer has been made which does not provide for costs, following an indication that the claim is likely to succeed, it is more incumbent on a defendant to make a sensible offer which includes costs if they are to avoid payment of a substantial sum.

In the present case, the majority of costs were incurred after an offer was made. Claimant awarded 100% of costs incurred prior to the offer, 50% thereafter. None of the defendants’ costs were recoverable.

Relevant factors included: that the claim was meritorious; the defendants made a reasonable offer covering substantially all of the relief realistically obtainable at a relatively early stage; following the offer, the case largely became about costs; despite the offer, the defendants continued to deny liability; and that the claimant abandoned a challenge that changes made by the defendants were insufficient to avoid liability.

Full ruling here.


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High Court: revised budget overlooked

The High Court has rejected a bid to limit a winning party’s costs to a previously approved budget where a substantially revised one was seen by the court and other party but not dealt with at the pre-trial review (PTR).

While leaving the detail for the costs judge to sort out, Mr Justice Akenhead said he would have approved at least a doubling of the claimant’s £493,000 approved budget.

In National Museums and Galleries On Merseyside (Trustees of) v AEW Architects and Designers Ltd [2013] EWHC 3025 (TCC), involving the Technology and Construction Court costs management pilot, the claimant had won and the judge’s latest ruling dealt largely with costs issues.

The court made the costs management order in February 2012. By 3 January 2013, the claimant’s estimate had gone up to £1.1m.

It was contained in the then appropriate forms, lodged with the court for consideration at the PTR on 22 March 2013. The intention was to review them, but this did not happen.

Paragraph 6 of practice direction 51G – which governed the pilot – said that “a party whose cost budget is no longer accurate must file and serve a budget revision… The court may approve or disapprove such departures from the previous budget”.

Paragraph 8 said the court would not depart from the receiving party's last approved budget unless satisfied that there was good reason to do so.

Arguing about an interim costs payment, the paying party said that, applying paragraph 8, the costs judge could not depart from the last formally approved budget, pointing to Mr Justice Coulson’s recent ruling in Elvanite, where he rejected the successful party’s bid to nearly double its approved costs budget after the case had concluded.

Akenhead J said he agreed with the principles set down in Elvanite. However, he observed that paragraph 6 “suggests that no formal application needs to be issued by the parties seeking a revision and that the court may of its own motion approve or disapprove the revision, albeit doubtless giving the parties the opportunity to be heard”.

He continued: “There are, however, important differences between the Elvanite case and this, the most prominent being that here there was, simply, an oversight by both parties and, indeed, by the court at the PTR to get round to addressing the substantially increased costs budgets [of both parties].

“So far as I can recall, this was because there was a lot of business to get through on what was a busy Friday in the TCC. There has been no hint or suggestion that either was challenging or would have challenged the other's revised budget. Indeed, it is more probable than not that each would actually have agreed the other’s.”

The judge listed “some very obvious reasons” why the budgets had substantially increased and said that as the trial judge and at this late stage, “it would not be appropriate as such to revise [the claimant’s] only formally approved budget. This is, however, a very obvious case, based on my knowledge of the case and the case management, for a substantial upward departure from the approved budget.

“It is most appropriate, however, to leave the detail of this issue to the costs judge but, doubtless, he or she can take into account what I have said.

He said it is “more likely than not” that he would have approved a revised budget of at least £1m.

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Posted by Helen Smith, senior broker at Litigation Futures sponsor TheJudge

Bank job: serious failings in sale of interest rate swaps

The Financial Services Authority (FSA) recently confirmed that some of the largest banks in the country could be facing significant claims in relation to the latest mis-selling scandal to hit 650-663 the UK – interest rate swaps.

With banks already preparing to pay out more than £10bn as redress to victims of payment protection insurance mis-selling, they won’t be overjoyed to hear that the FSA believes a significant proportion of the 173 interest rate swap cases they have reviewed will result in more compensation payments. MB7-514

In the summer of 2012, the FSA discovered “serious failings” with regards to the selling of these types of financial instruments and speculation suggests that up to 40,000 interest rate swaps and similar products have been mis-sold to commercial customers over the past decade.

Included in the review were the sales of swaps by Barclays, HSBC, Lloyds and RBS together with the Clydesdale Bank, the Co-Operative Bank and Santander UK. The “big four” have apparently agreed to start reviewing cases internally with a view to providing customers with compensation. It is suggested that the cost of compensating these customers could be as high as £1.5bn.

With the backdrop of part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act, coming into force on 1 April, clients must be aware that in order to obtain after-the-event (ATE) insurance with a recoverable premium, their solicitors must act now. The ATE insurance market is starting to become inundated with applications for cover and this will only worsen as we approach the April deadline. Moreover, the appetite for insuring these types of cases is fairly small; solicitors need to know which markets have exeperience in this area before they embark upon a search of the market.

More generally, with many solicitors and their clients are hoping to benefit from the current recoverability rules, this has inevitably led to a surge in applications for ATE insurance in recent weeks. It will inevitably take more time than usual for clients to receive responses to their applications and to secure insurance policies.

We are already warning solicitors that this surge means there is a possibility of new applications for ATE insurance not being processed in time for implementation of the LASPO Act. Indeed, one insurer in particular has confirmed to us that from 1 March it will be turning away new applications for litigation insurance from firms with which they do not have existing relationships. We expect other ATE insurers to make similar announcements, even if they work tirelessly to try and process the backlog.

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Burcher JenningsPressure from the courts on parties in costs cases, in common with other matters, to use mediation to settle disputes – including a growing number of penalties for parties that decline mediation – lies behind today’s launch from leading costs, pricing and funding specialist Burcher Jennings of a new Costs Mediation Service. The service will help parties to resolve matters with reduced delay, expense and uncertainty – and to avoid the threat of penalties from the courts for declining to mediate.

Richard Allen, Senior Costs Lawyer and accredited mediator at Burcher Jennings, who will lead the new Costs Mediation Service, said:

“With growing pressure from the courts in the shape of penalties for not mediating, our Costs Mediation Service offers a speedy, cost effective solution for costs claims. A more efficient and effective approach to resolving costs matters is a key part of the changing legal landscape. Mediation is a proven way of settling cases earlier and minimising costs and risk.”

Martyn Jennings, Chief Executive of Burcher Jennings, said:

“Thanks to the exceptional costs and mediation experience and expertise at Burcher Jennings, we are able to offer the Costs Mediation Services with the confidence that cases will be settled in less time and with costs minimised. Lawyers are certain to see more and more pressure to mediate in costs cases – firms would be well-advised to act now to build experience of mediation and reap the rewards of this approach.”

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Mesothelioma: MPs welcome government 'pause'

Mesothelioma claims are to remain outside of the Jackson reforms once they are implemented next April, pending a review of their impact on sufferers, the government announced yesterday.

However, despite the surprise concession aimed at breaking the deadlock with the House of Lords over the Legal Aid, Sentencing and Punishment of Offenders Bill, the Commons again reversed the other two amendments to the bill passed by peers. The bill will now return to the Lords once more.

Justice minister Jonathan Djanogly told MPs: “On careful reflection about the special position of mesothelioma sufferers, I can now give the House the assurance that we will not commence the relevant provisions in clause 43, on success fees, and clause 45, on after-the-event insurance, in respect of mesothelioma claims in April next year.

“Rather, we will implement the clauses in respect of those claims at a later date, once we are satisfied on the way forward for those who are unable to trace their employer’s insurer.

“The amendment commits the Lord Chancellor to carrying out a review of the likely effect of the clauses in relation to mesothelioma proceedings and to publish a report before those clauses are implemented.”

Seven Coalition MPs defied the whip last week to support the Lords’ amendment, and members from across the House – including shadow Lord Chancellor Sadiq Khan – welcomed the concession.

Mr Khan said: “We welcome the pause, and we approach the amendment in good faith. For reasons that we appreciate, the details could not be fleshed out today, but we assume that there will be an independent assessment of the evidence gathered during the due diligence phase.”

Mr Djanogly also emphasised that the bill did not require solicitors to take a success fee out of their clients’ damages – and he said that in cases in which causation is not an issue, “there is in many respects no reason why solicitors should have a success fee for that type of work”.

In his one contribution to the debate, Lord Chancellor Ken Clarke echoed this: “Lawyers do not have to take 25% of the compensation. All the costs are recovered from the defendants in a case that has been won. It is only those costs that are irrecoverable from the defendants that can sometimes be recovered [from the client].

“In a straightforward case there is no reason for anything to be recovered over and above that, and lawyers should not automatically take 25% of the claim and say that it is for their costs.”

The government again resisted Lord Pannick’s amendment that would require the Lord Chancellor to ensure that people have access to legal services “that effectively meet their needs”. Mr Djanogly said this would remove “the uncontroversial, unambiguous duty the bill places on the Lord Chancellor to ensure that legal aid is made available according to part 1 of the Bill. This made a clear link between the duty and legal aid.

“In terms of a clear duty, it does not get much clearer than this. However, the amendment would not only remove that but would replace it with a duty that would bring ambiguity and uncertainty. It refers to ‘legal services’ rather than ‘legal aid’.”

The argument over legal aid for domestic violence has boiled down to whether evidence from more than two years ago is acceptable – the Lords say it should be six – and whether evidence from specialist domestic violence organisations will count as acceptable proof of abuse. Mr Djanogly said such detail should not be on the face of the bill.

In response to a question from Liberal Democrat Simon Hughes, Mr Djanogly also revealed that the Ministry of Justice will conduct a review of the impact of withdrawing legal aid in immigration appeals about a year after the reforms take effect.

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High Court: absence of “significant prejudice of any kind to anyone”

The High Court has overturned a cost judge’s refusal to grant relief from sanctions that prevented claimant lawyers from recovering their success fees, and instead accused the defendants of “unreasonable and opportunistic” conduct.

Master Rowley had admitted to “qualms” over the sanction he imposed earlier this year for failure to serve copies of conditional fee agreements and success fee details, but felt compelled to do so by the Mitchell ruling.

Mr Justice Barling said that, even without the subsequent ruling in Denton, he would have regarded the breach as “trivial and insignificant”, adding that there was an absence of “significant prejudice of any kind to anyone”.

Barling J went on: “It is clear, as the judge found, that there was no significant prejudice to the defendants, or to the efficient conduct of the assessment proceedings at proportionate cost, or to the court or to other litigants as a result of the breach itself.

“It is evident that in so far as there has been unnecessary cost, delay and use of the court’s finite resources in hearing the application for relief from sanctions and this appeal, this is the result of what in my view was the unreasonable, opportunistic and non-co-operative approach of the defendants to the claimant’s unfortunate oversight.”

Delivering judgment in Long v Value Properties and another [2014] EWHC 2981 (Ch), Mr Justice Barling said Master Rowley had not received “the assistance he should have done” with interpreting the meaning of triviality.

“His instinct was to hold that the breach was trivial but he appears to have fallen into the error by attaching insufficient weight to the circumstances surrounding the breach as well as to the absence of any significant prejudice of any kind to anyone.

“The judge also appears to have fallen into the error identified by the majority in Denton, in that having concluded the breach was not trivial, and that there was no good reason for it, he regarded the application for relief from sanctions as bound to fail.”

Barling J held that although overlooking the requirements of a practice direction was not a “good reason” for a breach, when all the relevant circumstances were considered, including the speed with which the claimant remedied the default and applied for relief, complete relief from the sanction should be granted.

He added: “Had the defendants taken a different course the matter could probably have been completely resolved within the overall period of the extension of time which they applied for and were granted by the claimant, or very soon thereafter.

“This would have saved the parties and the court the time and expense of a lengthy hearing before the judge and an even longer appeal hearing before me.”

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High Court: strong public policy grounds in favour of upholding assignment

A company that takes assignments of small consumer claims not worth pursuing on their own to build group actions does not fall foul of the rules against champerty and maintenance, the High Court has ruled.

Rather, access for customers to justice was being “enhanced”, said Stuart Isaacs QC, sitting as a deputy High Court judge.

The company, CaseHub, promises to “turn your complaint into cash”.

Its website explains: “Let’s say someone has done you harm. Maybe they’ve overcharged you, misled you in some way, or did something particularly unfair. You have a complaint against them, but you don’t have the time to get involved.

“Lawyers in this case are no good: they’re too expensive for you to try and claim a few hundred quid, or even a grand.

“Well, that sucks. We can try and fix it though. We do all we can to resolve your complaint (going as far as court action against the other side, if needed). You never have to go to court: we do everything.”

The defendant in Casehub Ltd v Wolf Cola Ltd [2017] EWHC 1169 (Ch) – decided in May but only just published – operates a software-as-a-service business and the claim relates to a problem in August 2016 which meant that new users did not receive log-in information to enable them to access the service and so terminated their agreements within the first month.

This led to a cancellation fee of £196, in accordance with its terms and conditions. Casehub has taken assignments from customers of their claims against the defendant to be refunded the cancellation fees.

Mr Isaacs said there were two forms of the claim purchase agreements: one provided the assignor receives 60% of the recovered money, with the assignment given a nominal value of 1p, while the other was a straight payment of £40 for the assignment, with CaseHub retaining all of the proceeds if it succeeded.

He found that it was not a bare cause of action: “The charges paid to the defendant by the customers which are the subject of the claim purchase agreements are not a debt owed by the defendant to the customer. However, they do consist of a liquidated sum which is the subject of a claim in restitution.

“In my judgment, under the claim purchase agreements the claimant acquired the right to the sum in question and the assignment of the right to bring a restitutionary claim to recover the sum is incidental and subsidiary to that right properly and is not a bare cause of action. The fact that liability to repay the sum is disputed does not affect its assignability.”

He went on to find no or insufficient public policy grounds to determine the assignment as invalid. “On the contrary, there are in my judgment strong public policy grounds in favour of upholding the assignment.”

These included that the individual claims were too small to be cost or time-effective for the consumers to bring claims directly, while it was “fallacious of the defendant to suggest that there are adequate alternative means of enabling customers to pursue their claims, for example by third party financing or with ‘no win, no fee’ arrangements”.

The judge explained: “Assuming in the defendant’s favour that those means are available for the relatively small sums at stake in the present case, it does not follow that other alternative arrangements should be prevented.”

Further, access for customers to justice was being “enhanced”. Mr Isaacs said: “The courts recognise the need for innovative but responsible ways of increasing access to justice for the impecunious.”

He also found that, since the sums in dispute were quantified, “there is no risk of damages being inflated or the litigation process being abused in other ways; neither the ‘purity of justice’ nor the ‘interests of vulnerable litigants’ is threatened in the present case; there is no adverse impact on the administration of justice”.

Also, “the claimant has a legitimate and genuine commercial interest in being able to pursue the claims assigned to it in order to protect the liquidated sums it acquired under the claim purchase agreements”.

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Richard Allen - Med res

Costs Lawyer, Richard Allen

Pioneering costs, pricing and funding specialist Burcher Jennings today announces the addition of Senior Costs Lawyer Richard Allen to the firm.

Richard arrives with over 30 years of unique commercial experience, was one of the first professionals to achieve Costs Lawyer status, and is one of a small number of Costs Lawyers who have made partner in a solicitor’s practice. He is also one of the founding non-executive directors of the Costs Lawyer Standards Board.

Since starting out in 1983, Richard has worked his way through both fee earning and costs, dealing with commercial debt recovery, bankruptcy and insolvency, before specialising in personal injury litigation and developing costs expertise.

His exceptional work has seen him handling significant litigation and costs caseloads for major City of London, West End and national law firms. Richard achieved Costs Lawyer status in 2007.

Martyn Jennings, CEO of Burcher Jennings, said:

“Given his wealth of experience and forward thinking outlook, Richard is a natural fit for Burcher Jennings. He will play a pivotal role in driving the full service nature of the firm, working with clients to boost profitability through a focus on costs, pricing and funding.

“As Burcher Jennings continues to rise to the challenge of developing innovative and supportive solutions that can transform a firm’s approach to pricing and billing, new faces such as Richard Allen both strengthen the expertise of the team and ensure we remain innovative”.

Richard Allen said:

“I am delighted to be joining Burcher Jennings whose reputation and ground breaking work in pricing, funding and costs puts them ahead of the competition during these ever more challenging times”.

During his career, Richard’s expertise has seen him instrumental in establishing several costs departments and managing costs teams across multiple office locations, as well as having a central role managing a regional law firm as a partner.

He joins Burcher Jennings from top 100 firm Minster Law, where he headed their Costs Department.

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CFA: meeting was not an “excursion”

The Court of Appeal has dismissed a technical challenge to conditional fee agreements (CFAs) signed by members of a class action during a meeting organised for that purpose.

It was one of the steady trickle of cases challenging CFAs under the Cancellation of Contracts Made in a Consumer’s Home or Place of Work etc. Regulations 2008, and particularly the failure to provide a right to cancel the contract.

The underlying claim in Kupeli & Ors v Atlasjet Havacilik Anonim Sirketi [2017] EWCA Civ 1037 is a class action brought by large numbers of members of the Turkish Cypriot community in London against AtlasJet which, it is alleged, failed to honour airline tickets originally bought from Cyprus Turkish Airlines.

Judgment in default was entered against AtlasJet but that judgment was later set aside. AtlasJet was ordered to pay the costs but argued that the CFAs entered into with Goldsworth Solicitors did not comply with the regulations.

AtlasJet’s point succeeded before the Master Rowley in the Senior Courts Costs Office, but failed on appeal before Mrs Justice Slade, sitting with Senior Costs Judge Master Gordon-Saker as assessor.

The case turned on regulation 5(b), which provides that the regulations apply to contracts made “during an excursion organised by the trader away from his business premises”.

The class action is organised by a Turkish Cypriot charitable organisation called the UK (Alevi) Cultural Centre, known as the Cemevi, in East London.

Lord Justice Lewison recounted that, with many members complaining about AtlasJet’s failure to honour its alleged obligations, the Cemevi’s management committee sought legal advice from Goldsworth, which said there was some merit in pursuing the case.

The question of obtaining instructions arose and it was decided to hold a public meeting, organised by the Cemevi.

Master Rowley described the meeting as “chaotic” due to the number of people who attended. He found that some claimants signed their CFAs at the meeting, but before receiving the client-care letter. A second group of claimants signed a partially completed CFA at the meeting, and also received the client-care letter after the meeting.

A third group who had not been at the meeting attended Goldsworth’s offices, where they signed CFAs and were given the client-care letter and other relevant documents.

Those in the first two groups did not receive notice of their right to cancel the contract at the time of contracting and so, if the regulations applied, the CFAs would be unenforceable.

AtlasJet argued that the meeting was “an excursion organised by the trader away from his business premises”.

Lewison LJ said the ordinary meaning of “excursion” in English, French, Italian and Spanish – as the regulation came from an EU directive – featured “pleasure or study” in almost all dictionary definitions.

“Thus in all these various languages ‘excursion’ or its cognates has a meaning which is something more than merely a trip or journey…

“What is that something more? In my judgment it is that, at the very least, the trip or journey in question is not undertaken for the very purpose of entering into the consumer contract in question. That fits with the purpose of the directive as explained in the recitals.

“The recital emphasises that the mischief against which the consumer is to be protected is the element of surprise and unpreparedness which would be occasioned if on such a trip he were to be presented with a legally binding contract to sign.”

As a matter of ordinary language, therefore, a consumer’s visit to the community centre for the express purpose of meeting solicitors with a view to instructing them to take on his case was not an excursion, he held.

Further, the meeting was not “organised by the trader”. Lewison LJ said the contact with Goldsworth was initiated by the committee, following unsuccessful attempts to interest other lawyers. The idea for the meeting came from the committee, which arranged it, albeit at the request of Goldsworth.

“It is, in my judgment, quite unrealistic to view the committee as in some way acting as agents for Goldsworth. If the committee are to be viewed as acting on behalf of anyone, they were acting on behalf of their members and other members of the Turkish community.”

Dismissing the appeal, there was, he concluded, no element of surprise in the meeting and so “in those circumstances I do not consider that the meeting can be said to have been an ‘excursion organised by the trader’.”

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America: common-interest protection

A US Federal Court has ruled decisively in favour of litigation funders being able to see privileged material and so-called ‘attorney work product’ without those materials being disclosable to opposing parties.

Work product is the US term for materials created in the preparation of a case. In the unnamed case, which involved funding from AIM-listed Burford Capital, the court held: “It is quite evident that the subpoenas seek the production of documents that were prepared by counsel for [the claimant] in anticipation of and during litigation and are protected by the work product doctrine.

“Litigation strategy, matters concerning merits of claims and defences and damages would be revealed if the documents were produced. The matters directly involve the mental impressions of counsel and are protected from disclosure as work-product. Moreover, the production of the items subpoenaed would intrude upon attorney-client privilege under the ‘common-interest’ doctrine. The ‘common-interest’ doctrine protects communications between parties with a shared common interest in litigation strategy…

“Here, Burford and [claimant] now have a common interest in the successful outcome of the litigation which otherwise [claimant] may not have been able to pursue without the financial assistance of Burford.”

Chistopher Bogart, Burford’s chief executive, said: “This ruling is significant in ensuring that litigants can seek funding to even the litigation playing field without fear of exploitation by their opponents.”

Meanwhile, in Australia, funder International Litigation Partners has survived a challenge to the legality of its agreement after the High Court (the country’s highest court) ruled that the funder was providing its client with a credit facility rather than a financial service as defined by legislation, and so did not need an Australian financial services licence.

Had it been the latter, the client would have been able to rescind the contract because the funder did not hold a licence and walk away without having to pay an $A8m (£5.1m) early termination fee.

The decision comes on the heels of changes to Australian corporate law that seek to ensure that litigation funding is not treated as a managed investment scheme and therefore subject to detailed regulation.



Three’s a crowd – who pays?

Matthew Pascall 2

In September 2014 a UKIP MEP, Jane Collins, gave a speech at UKIP’s annual conference slandering three Labour MPs. The following month, a letter of claim on their behalf was sent to Ms Collins. It contained an offer of settlement under which Ms Collins would pay each £10,000 in damages, which they would then pay to charity. UKIP’s National Executive Committee discussed the letter of claim that month and referred Ms Collins to solicitors, RMPI, with whom UKIP had close ties. No settlement having been agreed, in November 2014 the three MPs issued claims against Ms Collins. Temple Legal Protection insured the MPs’ claims.

May 16th, 2018