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RCJ: from here the costs world can be your oyster

The appointment process for the new Senior Costs Judge is set to begin next month, with current incumbent Peter Hurst due to retire later this year.

The Judicial Appointments Commission (JAC) said the recruitment exercise is likely to start on 3 April for a role that pays £130,875.

Master Hurst has been a costs judge since 1981 and took up his present role in 1992. He will retire on 30 September.

The post is open to solicitors and barristers in England and Wales with five years’ post qualification experience (PQE) and expertise in costs law, as well as existing costs judges and deputy costs judges.

According to the JAC, the Lord Chancellor “expects that candidates for salaried posts will have sufficient directly relevant previous judicial experience. Only in exceptional cases and if the candidate in question has demonstrated the necessary skills in some other significant way should an exception be made”.

This means candidates should have been sitting as a judge in a salaried or fee-paid capacity; for fee-paid judges, this should be for a period of at least two years or 30 sitting days since appointment.

The Senior Costs Judge has the day-to-day management and leadership of the costs judges, deputy costs judges and the Senior Courts Cost Office (SCCO). The most complex and/or high-value cases are assigned to the Senior Costs Judge.

The job description says the Senior Costs Judge will also be required to provide costs advice to judges “often at short notice”, as well as providing support and advice to cost judges and deputy costs judges “to ensure accurate and timely delivery of decisions”.

Also among the duties are sitting as an assessor with the Court of Appeal, when requested, in complex cases and with High Court judges on appeal, and sitting with the designated civil judge on county court appeals, as well as hearing assessments in the Supreme Court and Privy Council.

The Senior Costs Judge will also be expected to play a significant role in helping to implement the changes following the Jackson reforms.

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RBS: application granted

RBS: application granted

The High Court has ordered a claimant to identify any ‘non-altruistic’ third-party funders backing his £700m claim against RBS, so that the bank can then apply to make them provide security for costs.

Mr Andrew Baker QC, sitting as a High Court judge, ruled that he had the “ancillary” power to make such an order.

With no evidence to the contrary, he drew the inference that Stuart Wall “must be litigating with the benefit of third-party funding”, given the scale of the case and his limited resources.

He was ruling in Wall v The Royal Bank of Scotland Plc [2016] EWHC 2460 (Comm), a case concerning the alleged mis-selling of an interest rate swap. RBS wanted to know the identity of any backers supporting the case in return for a share of the outcome, and, if they existed, then make a further application that they provide security for costs under CPR 25.14(2)(b).

Mr Baker QC concluded that he had the ancillary power to make the initial order as RBS could not seek security without knowing the identity of the funder(s) against whom any application should be made.

He continued: “Where the defendant does not know that identity, but the claimant does, ordering the claimant to reveal it to the defendant is doing no more than making an order that is necessary to make effective the primary power.”

The judge went on to dismiss that suggestion that such an order was an invasion of Mr Wall’s privacy under article 8 of the European Convention on Human Rights: “Article 8 is neither reason not to conclude that the ancillary power I have discussed above does indeed exist, nor reason not to exercise it if it would otherwise be proper to exercise it.”

He continued: “With the benefit of external funding, if RBS is correct that that is how matters presently appear, Mr Wall has embarked upon large, very high-value, public litigation, under a system of law that provides for the identity of third-party funders to become public, within that litigation, by virtue of section 51(1) of the 1981 [Supreme Court] Act and (if I am otherwise right about it) CPR 25.14.

“That to my mind means that the identity of Mr Wall’s funder(s) does not seem at all like an aspect of his private life as a person and UK citizen. Indeed, the suggestion that it does is very odd in circumstances where it is accepted that, were RBS in possession of a costs order today, the identity of Mr Wall’s funder(s) would be apt to come out for the purposes of section 51(1).”

Mr Baker QC said that so long as an application by RBS under CPR 25.14 – if it knew against whom to apply – would be pursued on proper grounds and have a serious prospect of success, “then it is a material prejudice to RBS to deprive it of the opportunity to make and pursue that application by allowing it to be kept out of knowing the identity of the proper respondent to it…

“This litigation is large and complex. It raises for investigation events spanning a period of at least six years. There will be expert evidence from up to five different expert disciplines. RBS estimates that to the conclusion of the trial its costs will exceed £9m (before VAT). On the evidence put before the court at this stage, Mr Wall appears to be an individual without the means to fund litigation of this magnitude, complexity or expense.

“With no evidence to the contrary to weigh in the balance, which is the position today, the inference I draw is that Mr Wall must be litigating with the benefit of third-party funding… There is no evidence from which to suppose that anyone would be willing to fund the litigation altruistically. The probability must be – absent, again, contrary evidence to put in the balance – that whoever is funding the litigation is doing so in return for a share in any proceeds.

“There is therefore good reason to suppose that the case does fall within CPR 25.14(2)(b) and an application thereunder by RBS would be made on proper grounds, subject to identifying the correct respondent(s).”

The claimant contended that his possible liability to RBS for costs was insured by after-the-event insurance cover, meaning there would be no question of any order for security under CPR 25.14

Making the order to identify any funders backing the case in return for a share of the damages, Mr Baker QC said there was “a serious argument” as to whether this was correct, meaning there was in turn “a serious basis for thinking that the court may order security for costs”.

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Clinical negligence: ATE not needed where hospital had apologised

Clinical negligence: ATE not needed where hospital had apologised

The NHS Litigation Authority (NHSLA) has reduced after-the-event (ATE) insurance premiums in 30% of cases in the past year, saving more than £6m, it has revealed.

The authority released the figures as it highlighted two recent circuit judge rulings that upheld reductions – one on the basis of the proportionality test, and the other because the insurance should not have been taken out in the first place.

The NHSLA said that during 2015/16, it faced ATE premium costs of £38.3 million in 2,849 cases. It challenged those costs in 1,437 cases (50.4%), resulting in cost reductions in 846 cases (59% of those challenged, 30% of the total).

The combined savings totalled just over £6 million, a saving of 16%.

An NHSLA spokesman said that it was anticipated that the cost of ATE insurance to the NHS would fall “significantly” following the LASPO reforms, which only retained premium recoverability for the cost of initial medical reports.

“However, over the last three years ATE premiums have fallen only marginally,” he said.

In Martin v Queen Victoria Hospital NHS Foundation Trust, The defendant had lost a biopsy sample which resulted in a claim for damages due to the delay in treatment. The case settled for £7,000. A medical report costing £3,591 had been obtained, the cost of which was reduced to £2,400 on provisional assessment.

District Judge Wildsmith also reduced the claimed £3,843 ATE premium to £2,500.

The claimant’s solicitors, Pryers, operated a block-rated scheme with Allianz. On appeal, Her Honour Judge Belcher in Leeds said that in the absence of expert evidence on the underwriting evidence and/or evidence of comparable block-rated policies, the defendant had merely asserted that the premium was unreasonable.

“Based on the authorities… I conclude that on the facts of this case, it is a case where something more is required from the defendant, before the claimant could be required to justify the premium as a reasonable [one], and before it could be properly concluded as a matter of law that the ATE premium for the block-rated policy in this case was unreasonable.”

However, she then went to look at whether the premium was proportionate, ruling that the test could apply to individual items and not just the overall total. “In my judgement, even if costs are proportionate overall, it could still be the case that an individual item of cost is disproportionate,” she said.

HHJ Belcher said the district judge found, in effect, that it was open to the claimant to use a cheaper policy. “That decision was made in the context of proportionality, not in the context of whether the premium charged was a reasonable amount for a block-rated policy.”

By contrast, she ruled, this did not require further evidence, and it meant that the district judge acted “well within the ambit of his reasonable discretion”.

The judge concluded: “I am conscious that the use of proportionality in this was could be said to undermine the principle that the use of block-rated policies cannot be said to be unreasonable. However, that is the result of the amended rules and the express difference between the issue as to whether a cost is reasonably or necessarily incurred, and the issue as to whether costs are proportionate…

“It is open to a claimant to choose a block-rated policy in the same way as it is open to a claimant to instruct leading counsel even if the case could perfectly well be done by a junior. The claimant has those choices, but that does not mean the costs associated with them are necessarily proportionate.”

Mewis v Burton Hospitals NHS Foundation Trust was a case involving an initial misdiagnosis of a condition that required surgery. After making a complaint, the defendant stated that the doctor apologised for the error.

A claim was started and the claimant took out ATE with LAMP with a premium of £2,120. In due course the matter settled for £1,500.

On assessment, District Judge Elias found that it was not reasonable to take out the insurance as the hospital had made an apology, and that the claimant’s solicitors themselves “clearly did not think that liability was an issue”.

On appeal, HHJ Thorp ruled that the district judge had not made a mistake in principle or stepped outside the “generous ambit that she is allowed on her discretion in this type of case”.

Though the letter from the hospital was not a formal admission of liability, the judge was “entitled to find that that letter was so clear that it was virtually impossible to see how the defendant could defend a case on the allegations that were later made”. Similarly there was no issue on causation raised before the judge.

HHJ Thorpe emphasised that he was ruling “very much” on the facts of the case and he did not intend it to have any wide-ranging effect.

The NHSLA spokesman said: “District judges are increasingly willing to disallow or reduce excessive ATE premiums. It is encouraging to see circuit judges are upholding decisions that protect the interests of the NHS and taxpayers in a fair and balanced way.”

Litigation Futures asked if the NHSLA was landed with extra costs in the 591 unsuccessful challenges. In response the authority said it rarely challenged ATE premium costs on their own, and it was not possible to disaggregate the expenditure for one component of a challenge from another.

“The £6m does not include the much larger savings that result from challenging CFAs, therefore it would be misrepresentative to consider the costs incurred due to unsuccessful challenges in isolation,” the spokesman said.


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Commercial disputes: hearing costs in UK could rise substantially

Court fees for litigants in commercial money claims could rise from under £3,000 to more than £21,000 under plans by the Ministry of Justice (MoJ) for a percentage-based fee system.

Daily rates of £1,000 for hearings, trial of a preliminary issue, or substantive trial of the claim, would also be introduced, to offset the actual cost of court time.

In a consultation paper issued yesterday, the government said it was seeking a general power in the Anti-Social Behaviour, Crime and Policing Bill, currently before Parliament, to change public finance rules that say public bodies can only recover the cost of providing services but no more.

This will affect several different areas of litigation where the fee is now higher than the cost price, including divorce, and fast-track and multi-track hearings.

The MoJ argued that because of the benefit commercial litigants can obtain from litigating in the UK courts, they should pay more than in standard money claims: “We believe that it is reasonable and proportionate for those bringing these proceedings to make a greater contribution to the costs of maintaining the courts.”

It said its research showed that court fees were a secondary consideration in a decision to pursue commercial litigation. Amendments to the bill would include a duty to ensure that any enhanced fees do not damage the competitive position of the legal services market.

In relation to money claims in commercial proceedings at the Rolls Building in London, which the MoJ acknowledged was worth some £4bn a year in legal exports, it said the current regime of charging issue and hearing fees of £1,870 and £1,090 respectively in claims worth more than £300,000 was too generous.

Two proposals were made: Firstly, the fee for issuing proceedings for claims over £10,000 would be 5% of the value of the claim, subject to a maximum issue fee of £10,000.

In addition, £1,000 daily hearing fees would be payable, so to some extent costs would be based on the length of a trial. The MoJ estimated the cost of a day of court time in the Rolls Building at £1,067.

The second proposal was to apply a higher maximum fee. The ceiling on fees could be either £15,000 for a claim of £300,000, or £20,000 for a claim of £400,000.

Potentially, under option two, a one-day trial could cost £21,090 in fees, made up of an issue fee of £20,000 plus a hearing fee of £1,090. Under option one, the same trial would cost £11,000.

This compares with a combined total of fees for an equivalent trial under the current regime of £2,960.

The consultation paper stressed: “The government is keen to ensure that any steps we take to increase court fees do not discourage litigants from using our courts nor damage the competitive position of our legal services… The intention is to ensure that these cases make a fair, but not excessive, contribution to the efficient and effective system of justice in this country.

“We are confident that our proposals are unlikely to damage the international position of our legal services.”

Among the other changes proposed is an increase in the fees for cases involving money claims on a sliding scale, with a maximum fee of £1,870 – and considering moving in future to a system where the fee is calculated as a percentage of the amount under dispute in the court case. For non-money claims, the MoJ wants to introduce a standard fee of £270 instead of the current mixture of fees.

In addition to separate reforms to judicial review, the MoJ proposed more than doubling the current application fee for judicial review to £135, and more than trebling the fee for a hearing or an oral renewal to £680.

MoJ minister Shailesh Vara, who has responsibility for the courts, said: “We have the best court system in the world and we must make sure it is properly funded so we keep it that way.

“Hard-working taxpayers should not have to subsidise millionaires embroiled in long cases fighting over vast amounts of money, and we are redressing that balance.”

The consultation will run until 21 January 2014. The government expects to make changes to the fees, depending on the outcome of the consultation, in spring and summer 2014.

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House of Lords: clause sets law back to Victorian times, says APIL

Government proposals to amend health and safety law will “put the clock back to Victorian times” and make litigation “more protracted and expensive”, peers have been warned.

According to the Association of Personal Injury Lawyers (APIL), a government addition to the Enterprise and Regulatory Reform Bill – which is being debated in the House of Lords today – will abolish a worker’s right to HP2-N36 compensation for breach of health and safety regulations; instead they will have to prove that negligence has occurred.

In a briefing to peers, it said government figures indicated that around 70,000 cases a year are likely to be affected: “This is time consuming, costly and can be a very difficult situation in which to succeed because
HP2-T16 the guilty employer holds all the cards. The situation obviously becomes even more difficult if the claimant has been killed. These are the very reasons the law was changed in the first place, in Victorian times…

“The burden of proof will transfer to injured workers, who will find it harder to claim compensation as a result – more people will lose valid claims, leaving the state to look after them rather than the guilty party. Litigation will be more protracted and expensive.”

APIL said the proposals go much further than recommended in the Lofstedt review of health and safety, which called for a review of regulatory provisions that impose strict liability.

The Bar Council and Personal Injuries Bar Association have also called on peers to challenge the government on the change. Bar Council chairman Michael Todd QC said: “If the Government’s latest proposals are implemented, justice will be denied to many, including those no longer able to work, or whose family members have been killed at work. The cost of funding their care and support will instead fall to the state. That cannot be in the public interest.”

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hearing loss

CMR: “flagrant breach” of marketing rules

A claims management company which made nearly 6m nuisance calls in only seven months about claims for noise-induced hearing loss (NIHL) has been fined £850,000 by the Claims Management Regulator (CMR).

It is the biggest penalty imposed by the CMR since it gained the power to fine at the end of last year.

A spokesman for the CMR, based at the Ministry of Justice (MoJ), said the Lancashire-based National Advice Clinic, which also trades as the Industrial Hearing Clinic or the Central Compensation Office, made the calls between October 2014 and April 2015.

The spokesman said Ofcom had received 2,000 complaints about the CMC, and many of those called were registered with the Telephone Preference Service, making it clear they did not want to receive nuisance calls.

Kevin Rousell, head of the CMR, said: “This company’s cold-calling campaign was deliberate and sustained, and a flagrant breach of our marketing requirements.

“They showed an alarming disregard for the misery their tactics can cause, particularly to elderly and vulnerable people.

“The size of this penalty demonstrates how seriously we take this issue – nuisance calls will not be tolerated.”

The fine comes six weeks after the CMR fined Swansea-based Rock Law £570,000 for PPI nuisance calls.

Justice minister Lord Faulks said: “Nuisance calls are a real scourge to households, and people have simply had enough.

“I am pleased the regulator has imposed such a substantial fine for such blatant and shocking behaviour. This follows other large fines and the removal of over a thousand licenses from claims management companies since 2010.

“The government is committed to protecting the public from this nuisance, that at best wastes people’s time and at worst causes significant distress.”

The CMR fined The Hearing Clinic, based in Derby, £220,000 for making millions of NIHL nuisance calls in August this year.

The CMR’s fining power was introduced in December 2014, allowing it to fine companies which breach the rules up to 20% of their annual turnover, as well as having their license suspended or removed.

The MoJ asked the Civil Justice Council to investigate the number and cost of NIHL claims in July, and a report is expected early next year.

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Law Society: fixed costs will lead to less experienced fee-earners handling work

The Law Society has come out strongly against the introduction of fixed recoverable costs (FRCs) for mesothelioma claims and argued that while a dedicated pre-action protocol (PAP) could be a good idea, the one proposed by the Association of British Insurers and adopted by the government is not.

In a firm response to the government’s consultation on reforming mesothelioma claims, the society said that such cases require the attention of specialist, experienced solicitors on both sides of the claim.

“Introducing fixed recoverable costs is highly likely in practice to lower the grade of fee-earner conducting the work, leading to worse outcomes for the claimant. It is also likely to inhibit the future development of further practitioner specialism in this area.”

It pointed to research conducted by Professor Paul Fenn that concluded all disease cases were inappropriate for the EL/PL protocol and portal, including the fixed-fee regime, because of the wide variance of costs encountered in such cases.”

The society also noted that if the government was confident about the impact of costs management, there should be no need for FRCs in mesothelioma cases.

A better approach to encourage efficient claimant behaviour, it said, was a PAP that provided “substantial and carefully enforced sanctions for non-compliance”.

Chancery Lane said that while “some minor aspects” of the proposed mesothelioma PAP may assist in reducing delay and cost, it does little to address the limitations of the existing disease PAP, while removing key flexibilities in the latter for sufferers swiftly to issue proceedings and take advantage of practice direction 3D (the ‘show cause’ procedure).

The response – drafted by the civil justice committee – also rejected the proposed secure mesothelioma claims gateway, saying that it would be an “additional, unnecessary layer of bureaucracy” – while a portal has benefits in high-volume, low-value areas of litigation, this was not the case here.

There would also be “an enormous conflict of interest” if the gateway was owned and controlled by insurers. If one were to be established despite the society’s objections, it would need to be governed independently or at the very least by a balanced board of all interested parties.

The Law Society rejected the suggestion that the government had done enough to activate the provisions of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 that would end recoverability for mesothelioma claims. The Act requires the a review of the likely effect of doing so and the society said this required “comprehensive analysis of the role and prevalence of success fees in mesothelioma claims, detailed consideration on the levels of risk associated with bringing such claims, and forecasting of how this is likely to change over time”.

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Jackson: An unglamorous task

Many of the causes of excessive costs have been eliminated but litigation is still too expensive, Sir Rupert Jackson has claimed on the eve of his retirement from the Court of Appeal.

In a speech that signalled the judge’s hurt and exasperation at the criticism that has come his way over the past decade, he nonetheless argued that it was “all worth it”.

Speaking to the Cambridge law faculty yesterday ahead of his retirement tomorrow, when he reaches the age of 70, Sir Rupert said he still thought costs were too high, but that “many of the causes of excessive costs have been eliminated and significant improvements have been made in the litigation process”.

He continued: “As things stood 10 years ago, someone had to do something about costs (especially the absurd CFA/ATE regime). Whoever received that poisoned chalice was bound to make themselves extremely unpopular – unless they ducked every controversial issue.

“Despite all the criticisms which [I have] received over the last ten years, the blunt and inescapable fact is that the Jackson reforms have achieved significant reductions in the costs of litigation…

“Most of the reforms have worked well, but a few have not. Those reforms which work well have also promoted access to justice.

“[So] was it all worth it? That is for listeners and readers to judge. But it is submitted that the answer is yes.”

Reflecting on his work since being appointed in 2008 to review the costs of litigation, the judge observed: “To spend 10 years reforming the rules of procedure in an effort to reduce litigation costs is about as unglamorous as it gets.

“Lawyers generally don’t like change and they particularly dislike anyone meddling with costs. Therefore, the task allotted to me was bound to, and did, generate quite a few irate letters to newspapers and numerous onslaughts in the legal journals.

“Almost everyone perceives the public interest as residing in a state of affairs which coincides with their own commercial interests. That is not dishonesty or disingenuousness. It is just human nature.”

He bemoaned the failure by a university or similar body to systematically monitor the effectiveness of the reforms: “Instead there has been a stream of journal articles, usually written by people who dislike this or that aspect of the reforms. For obvious reasons, no-one who is content would dream of writing an article to say that…

“When a reform works well, no-one remembers where it comes from. But when people dislike a reform, the author comes under heavy gunfire.”

Going through the reforms, Lord Justice Jackson argued that most of them have been successful.

Speaking about recoverability, for example, he said: “Recoverable success fees distorted incentives and drove up costs massively. [Their] abolition… has substantially reduced litigation costs.

“When combined with several counterweight measures (including increased damages, enhanced rewards for claimant part 36 offers, restriction of success fees deductible from personal injury damages), this package of reforms has controlled costs without inhibiting access to justice. There is no evidence that the reforms have led to a drop off in claims, quite the reverse.”

Damages-based agreements (DBAs), however, have not been a success, which Sir Rupert put down to the failure to implement his recommendation to abolish the indemnity principle, the unsatisfactory nature of the DBA rules and the fact that the regulations do not permit ‘hybrid’ DBAs, “thereby inhibiting access to justice for no remotely sensible reason”.

He said: “There is a pressing need for work here by the Ministry of Justice and the rule committee.”

Jackson LJ also recognised that the profession was becoming “impatient” for guidance on the proportionality test from the Court of Appeal.

“The remedy lies in their own hands. The Court of Appeal can only decide the cases which come before it.”

Sir Rupert also identified the control of costs incurred before the costs management process as an area still needing reform.

In his supplemental report last year, Sir Rupert put forward a solution, but this required primary legislation.

“Once that legislation is in place, the rule committee can draw up a grid of acceptable pre-action/pre-case and costs management conference costs for different categories of case, coupled with a procedure for pre-action applications for permission to exceed the specified limits.”

A key element of his first report was that there should be no more cuts to legal aid. “On the very day when the reforms were introduced, there were swingeing cutbacks in civil legal aid. I regret and deplore those cutbacks.

“Likewise, my plea for restraint in setting court fees has fallen on deaf ears.”

As to whether his recommendations last year for fixed recoverable costs will come to fruition, Sir Rupert said: “Obviously, this paragraph is speculation. Delays are inevitable following the ministerial re-shuffle in January 2018. Based on past experience, however, it seems likely that the government will accept most of the proposals.

“The recommendations are backed up by evidence and supported by reasonably full argument. Also, they follow wide consultation.”

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Compliance: MRO kicked out for refusing to follow the rules

Compliance: MRO kicked out for refusing to follow the rules

MedCo has started to show its teeth, suspending medical reporting organisations (MROs) for failing to provide proof of the required financial bond, and warning law firms for breaches of its user agreement, Legal Futures can reveal.

Meanwhile, decisions on whether registered MROs meet the criteria to be in either tier 1 – for large, national operators – or tier 2 for smaller businesses are to be made this month.

MedCo requires that tier 2 MROs have to provide a financial bond or other financial instrument of at least £20,000 to demonstrate that the MRO has sufficient funds available to remunerate medical experts from whom it has commissioned medical reports in the case of its failure. Tier 1 MROs need a bond of £100,000.

A MedCo spokeswoman said that 21 tier 2 MROs were suspended for not providing the bond, but the majority have since done so and been reinstated onto the system.

Further, three tier 2 MROs, three firms of solicitors and one medical expert were issued with warning notices that they were in breach of the MedCo user agreement. All but one of the MROs have agreed to change its behaviour accordingly, and that business has now been thrown out of the MedCo system.

On audits, the spokesman said: “MedCo has physically audited all tier 1 MROs and the audit committee is drafting the resulting reports and recommendations for the MedCo board. All operational tier 2s have also been requested to provide evidence that they meet six key criteria.”

The committee’s recommendations will be presented to the MedCo board this month for consideration.

The registration of multiple tier 2 MROs by some of the tier 1 providers – which they say they have done to redress the imbalance in the system against them – is the subject of particular controversy.

In July, the Ministry of Justice brought forward its planned six-month review of MedCo in response to the problems that have been encountered so far, having told MedCo that multiple tier 2 MROs should not be allowed.

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Credit hire: Judge was wrong on claimant’s impecuniosity

A circuit judge was wrong to deny a claimant recovery of £20,000 in credit hire charges because she had been assured that she would never have to pay any outstanding sums herself, the High Court has ruled.

Mr Justice Turner said he had been told that the issue was at stake in “a number of outstanding cases”.

In Irving v Morgan Sindall Plc [2018] EWHC 1147 (QB), the claimant’s Ford Ka, worth £775, was written off after an accident caused by the defendant.

The claimant hired a replacement vehicle on credit whilst awaiting a cheque from the defendant’s insurer; this took over four months, by which time the hire charges were £20,100. General damages were just £700.

The hire agreement deferred the time when the claimant would have to pay the charges until her claim concluded. However, she remained liable personally to pay off the debt regardless of the outcome.

But in cross-examination before His Honour Judge Saffman in Leeds, the claimant said she had been led to believe that she would not have to pay the charges whatever happened.

HHJ Saffman ruled: “In order for these hire charges to be recoverable from the defendant I have to be satisfied that the claimant is obliged to pay them. But her evidence, her evidence I emphasise, is that she is not and that is the only evidence I have on this issue… As a result I am satisfied that this credit hire charge falls at the first hurdle.”

On appeal, Turner J observed that “the learned judge did not identify the jurisprudential basis upon which he had concluded that the evidence of the claimant had impacted on the terms of the written contract which it appeared to contradict”, but in any case he proceeded on the basis that the claimant’s liability to pay was contingent upon recovering the hire costs.

He found that the case law did not require there to be a personal obligation to repay the costs.

Going back to the “landmark” ruling on credit hire in Giles v Thompson 25 years ago, he cited the then Master of the Rolls, Sir Thomas Bingham, in the Court of Appeal saying that the defendant was not relieved of liability if the claimant’s liability to pay charges to a third party was contingent on his recovery against the defendant.

Turner J said: “It follows that I am satisfied that the judge was wrong to conclude that the assurances given to the claimant, even taken at their highest, were such as to compromise her claim for credit hire charges against the defendant and so the appeal on this ground is allowed.

“I ought, however, to note in passing that the judge at first instance was giving an ex tempore judgment and those appearing before him had not thought fit to burden him with reference to any authority on the point.”

The question also arose whether the claimant was impecunious so as to entitle her to claim in respect of credit hire, rather than the basic hire rate which would have required payment up front.

HHJ Saffman held that the claimant was not impecunious and so the credit hire rate was not recoverable.

She earned a basic £472 per month which could rise to £700 with overtime. She had an ISA savings account containing about £250 and a graduate bank account that was £700 overdrawn at the time. She had a credit card with a limit of £500.

The judge concluded that the claimant could have raised about £900 by depleting those of her accounts which were in credit and spending up to her credit card limit. Thus she would be able to buy a replacement car of the value of that written off.

Turner J said: “What the judge failed to appreciate, however, was that his calculations were based on the assumption that the claimant could be expected to have bought a replacement car immediately after the accident.”

Such an assumption was “untenable” given that the car was only written off a fortnight after the accident and the claimant would have needed a further fortnight to buy a replacement.

“Over this period of four weeks, the claimant would have been entitled, even if pecunious, to have hired a car at the basic hire rate. Such evidence as was before the court revealed that the cost of hiring a replacement vehicle on this basis would have been about £700 over this period.

“Accordingly, when the hire charges and the capital cost of a replacement vehicle are added together, the sum which the claimant would have needed to raise was far in excess of that upon which the judge based his calculations.”

Turner J said he could also not ignore the fact “that by reducing her capital to the bare minimum and increasing her debt, the claimant would have been exposing herself to the risk of a serious financial challenge in the event that even a modest but unexpected financial reverse might have afflicted her before her claim was satisfied. Impecuniosity need not amount to penury”.

He was therefore satisfied that HHJ Saffman, “experienced as he is, was wrong”.

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Pipkin: time to end the political rhetoric

Posted by David Pipkin, director of Litigation Futures Associate Temple Legal Protection

National Audit Office (NAO) claims that imply excessive legal costs are the cause of rising NHS Resolution expenditure are unhelpful at best, disingenuous at worst and either way do not provide any answers to NHS problems or support genuine access to justice.

The recent NAO comments on the subject contradict themselves by stating first that no evidence has been found relating poorer patient safety to a rise in negligence costs; and then follow on by disclosing that declining performance against waiting time standards is a factor, due to delayed diagnosis or treatment. A slight anomaly, or an unexplained paradox?

Presenting on the rising NHS negligence costs at the Westminster Health Forum seminar on earlier this month, NAO director Jenny George admitted: “The truth is we just don’t have the data to draw any definite conclusions.”

There is, however, much data in circulation to provide some context. Clinical negligence costs may have quadrupled over the past decade to £1.6bn, but this represents a little over 1% of the NHS total budget.

Let’s assume those costs were cut in half overnight. Is it realistic to suggest that patient standards would significantly increase due to the extra half a percent in the kitty, where the other 99% wasn’t enough? That’s assuming excessive legal fees are the real problem; in reality, claimant legal fees only contribute around 20% to the overall, with defence costs in the region of 10%.

I agree with Kimmo Boote, an associate at Dutton Gregory Solicitors and a clinical negligence specialist, who says: “Whilst the government’s stance in wanting to reduce the costs of expensive lawyers who use up valuable NHS resources may strike a chord with voters and taxpayers, the likely result will be that access to justice will be denied to many claimants who will have been injured by the very people that they had trusted to look after them in the first place.”

Perhaps one of the reasons claims are rising is patient dissatisfaction with how they are treated after the incident, with insufficient apologies and explanations of what and why things went wrong.

The UK has very poor risk statistics in many areas, such as birth injury. It is said only 4% of patients that could claim actually do. What if that doubles? It would be a disaster for the NHS but it wouldn’t be an increase in the current risk patients face.

There are many safeguards in place to protect the NHS from spurious claims as well: ATE insurers like us are gate keepers helping to filter out weak or speculative claims.

Perhaps it’s time for the NAO to end the political rhetoric and work together with all interested parties – the NHS, the government, victims of clinical negligence and the legal profession – to source the ‘missing data’ and establish the genuine cause of the rise in clinical negligence within the NHS.

This has to be better than focusing on the outcome of the negligence, which is, after all, that vulnerable victims are seeking support and stability for an uncertain future.

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Costs: budgeting needs new bill format

The new provisional assessment regime for cases with costs of up of £75,000 “just hasn’t happened”, a leading costs judge has said.

Master Peter Haworth, one of three Senior Court Costs Office masters to oppose the Jackson reforms, said it was “quite incredible” that the fate of sums of money as £75,000 should be decided on the papers.

“District judges and costs judges outside London are not asking to do this,” Master Howarth said. “I don’t know where the bills are going, but they haven’t come to the Costs Office. Having geared up for it, we’re able to relax and find other things to do.”

Provisional assessment, one of the recommendations of the Jackson report, allows judges, having decided cases on the papers, to award costs of no more than £1,500 to either side.

Early last year the Ministry of Justice unexpectedly decided to the triple the upper limit from the pilot level of £25,000.

Speaking at the Compass Law commercial litigation conference earlier this week, Master Haworth also said it was “very difficult” to have cost budgeting, which approached the issue in phases, without a new form of costs bill. He said existing bills listed items chronologically.

“The two don’t fit together at all,” he said. “Harmonisation could lead to a more seamless approach to civil costs”.

Master Howarth said a judicial sub-committee was looking at the question of harmonisation, but it “could take 18 months” to come up with a solution, because all the costs software would have to be changed.

Master Howarth said the important thing with costs budgeting was to get it right first time. “There is very limited scope for going back if you’ve made a mistake, especially post-Mitchell. What you put for assumptions and contingencies is one of the most important areas for judges. Assumptions must be clearly set out and costed.”

The master said lawyers would be in difficulties if they didn’t include an item in their budgets and something came up later, unless it was a “significant development”.

He gave, as an example, a personal injury case where half way through the defendants decided there had been exaggeration and they decided to go for surveillance. “It can be very expensive for the defendant and for the claimant who has to look at the evidence,” Master Howarth said.

He said that unless defendants had put surveillance in their costs budgets as a possibility, which was highly unlikely as it removed the element of surprise, then courts would not let them rely on it without “good reason”.

Master Howarth that the new proportionality test for costs would remain “difficult” until there was a ruling from the higher courts. “Uncertainty is the enemy of costs saving,” he observed.

Commenting on the Court of Appeal ruling in Denton, he said: “You may have seen the last of the word ‘trivial’. We’re now looking at the matter from the other end of the telescope and at what is significant in the circumstances.”

Master Howarth added that following the Jackson reforms, this country would no longer have the ‘Rolls Royce’ civil justice system that might have existed. “Perhaps it’s a bit more of a Ford Mondeo, but we’ll have to see.”

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ATE: offer removes clients’ 9L0-006 protection, argues Elite

After-the-event insurer Elite has reported motor insurer Sabre to the Financial Services Authority for trying to persuade solicitors and their clients to cancel ATE policies in return for a 10% increase in damages.

Elite chief executive Jason Smart told Litigation Futures that 70-541-VB the letters were “completely disgraceful” and he has also written to the Law Society to alert it to the practice.

A copy of the letter seen by Litigation Futures cites the Simmons v Castle decision to increase general damages by 10% after 1 April and tells the solicitor that – subject to liability being admitted – if their client elects to pursue the claim without a conditional fee agreement, “we are prepared to offer your client an increase of 10% in general damages, even if the case settles prior to 1 April 2013”.

It continues: “This offer is advanced on the condition that your client cancels any ATE policy that has been purchased, and that the claim is not funded through a CFA. Our offer will be made in a form that clearly demonstrates the additional money that your client will receive…

“For expediency, we have sent a copy of this letter directly to your client, as your client will have a 14-day cooling off period in which to cancel the ATE policy without charge.”

Mr Smart criticised Sabre for contacting the client directly when it knew a solicitor was instructed, and said the offer would weaken the position of claimants and their solicitors, who would have to negotiate with the insurer without any costs protection. This would make it hard to reject a low offer.

“I’m very annoyed – not because I expect a plethora of ATE policies will be cancelled but because it creates uncertainty for the claimant. I’ve never seen anything like this,” he explained.

Sabre claims director Trevor Webb described the allegations as “absolute nonsense”, although he said that for “operational reasons” the company is no longer copying the letter to clients.

He questioned what risk existed for which ATE was needed, saying he has never recovered any costs in portal cases. “Solicitors are in an absolutely fantastic position to advise their clients,” he argued. Mr Webb also asked whether solicitors are doing enough to explore whether they have before-the-event cover.

The insurer said the story had prompted phone calls from other insurers who said they would be following Sabre’s lead.


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On the up: could the small claims limit shoot up?

The Ministry of Justice has neither confirmed nor denied a press report last week that justice secretary Chris Grayling might raise the small claims limit for personal injury (PI) victims to £15,000.

The Daily Telegraph indicated that the move was being considered in response to the judicial review of the RTA portal fee cut brought by the Association of Personal Injury Lawyers and Motor Accident Solicitors Society.

The story – which was not sourced but seems unlikely to have come from anywhere other than the Ministry of Justice – is being seen as a warning shot to lawyers that worse is to come should they resist the government’s current proposals.

The Telegraph said that as a result of the legal action, Mr Grayling “is understood to be reassessing whether more drastic changes should be brought in”.

It said: “The revised plans could see the limit on cases being made in the small claims court, where claimants typically represent themselves, increasing from £1,000 for personal injuries and £5,000 for other cases to £15,000 for all claims. The move could cut insurers’ costs with the savings passed on to motorists, sources said.”

The small claims limit for non-PI cases rises to £10,000 from 1 April, with a view to increasing it to £15,000 in time. The government is currently consulting on whether to increase the small claims limit in PI to £5,000 in a bid to tackle fraudulent whiplash claims.

In response to the story, a Ministry of Justice spokesman said: “We have consulted on changes intended to ensure claims are handled quickly and efficiently and accident victims with genuine cases can be compensated as soon as possible.

“These changes, along with our wider reforms, are intended to bring more balance to the system, make lawyers’ costs proportionate and in turn create an environment where insurers can pass on savings to their customers through lower premiums. Following recent legal challenges the Justice Secretary is examining all options.”

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Edmonds: Not an ego trip

TV presenter Noel Edmonds has spoken of his relief at receiving the backing of a third-party litigation funder in his long-running dispute with Lloyds Banking Group – while also being clear that he is not on a crusade and is prepared to settle.

Mr Edmonds has been much in the news over his claim, which concerns losses he allegedly suffered as a result of the complex fraud carried out by six, now jailed, bankers at HBOS’s Reading branch and led to the collapse of his former business. Many other small businesses suffered similarly.

Therium Capital is fully funding the £60m claim – with a reported commitment of £1.5m – and also has after-the-event insurance cover.

In a telephone interview with a US website, Mr Edmonds said his solicitors – Keystone Law – told him about the possibility of third-party funding but he did not pursue it until a mediation failed.

“I found it difficult to call it mediation,” he said. “My understanding of mediation is that you have one or more parties who have different views and through the process of mediation you hopefully arrive at common ground.

“They didn’t come to the mediation with a proposal. They just came along to suss out my legal position.

“After 10 hours they had finally offered me £3.6m. That’s a significant amount of money but not when my claim has been independently verified at £60m…

“So I walked out of mediation after 10 hours because they were not there to arrive at a negotiated settlement.”

Mr Edmonds said five funders were interested in his case, but he chose Therium because it was “the fastest” and offered “the best deal”.

He said it was a great relief: “Banks have two tactics – they drag everything out and they have incredibly deep pockets.

“The securing of litigation funding gave me the comfort that they cannot wear me down on money – it is no idle boast that I am delighted with the terms we agreed.

“They know I’m going to win this so they are going to get a handsome return on their investment.”

The Deal or No Deal host said he was asked if he was on a “crusade” and wanted his day in court – “ie, is this an ego trip?”

He continued: “No, I don’t. It was important to Therium to know I’m not a performer in this saga, I’m just the victim of criminal bankers.

“I keep sending the message that if Lloyds Banking Group would like to sit down for a negotiation, fine, I’m happy. I have an open mind. Therium know that and are encouraging that.

“Police have confirmed that they are treating my case as a criminal investigation, so I think there’s a lot to be said for Lloyds coming to the negotiation table.”

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ARAGFrom Legal Futures’ Associate ARAG.

In our new video, ATE Account Manager, Paul Morgan, talks about our Recourse Complete product, the certainty it provides and the benefits of insuring all types of personal injury cases with ARAG.

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DAS has published a wide-ranging white paper on the likely outcomes of the MOJ’s proposed whiplash reforms.  The paper examines the consequences of the government reforms, which have been designed to address the amount of compensation being paid by the insurance industry for soft tissue injuries and the knock-on effect this could have for people who sustain injuries.

DAS experts are available to provide their views on issues such as; will the reforms reduce access to justice for legitimate injury claims; will claims be settled for less than is entitled; will the self-employed lose out; what up-front charges will injured parties need to pay when pursuing claims through small claims court, and will they be prohibitive?

Download: DAS White Paper – Reforming the soft tissue (whiplash) claims process

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Closed courts: Move to change culture

The Civil Procedure Rules Committee (CPRC) has backed rule changes to ensure that courts sit in public “irrespective of the parties’ consent” unless certain strict conditions are met.

The CPRC’s open justice subcommittee said there was no “right” to a private hearing, for example where personal finances were being discussed, and a “change of culture” was needed.

The subcommittee, chaired by Mr Justice Kerr, said members had “encountered quite frequently cases where the parties mistakenly believe they can agree that a hearing will be held in private” or that mutual consent would be a “sufficient reason”, without further consideration of the question.

The new rule 39.2 repeats the old general rule that a hearing is to be in public, but states that “a hearing may not be held in private, irrespective of the parties’ consent” unless certain conditions are met, such as a hearing involving matters relating to national security.

The subcommittee said that although the existing list of conditions was “sound”, the current wording might encourage the “mistaken view” that there was a “right” to a private hearing in certain circumstances, such as when personal finances were being discussed.

It made clear that meeting one of the conditions did not mean that the case was automatically heard in private, and privacy must be necessary to “secure the proper administration of justice”.

The new rule provides that where hearings are in public, courts must take “all reasonable steps” to ensure they are of an “open and public character”.

The subcommittee said it was also aware of a “disturbing increase” in parties communicating with the court, often by email, without copying the other party, and “without good reason” not to.

Members of the subcommittee were aware of “numerous cases” where parties had communicated with the court without alerting the other side.

Examples included cases being put back several hours or withdrawn from the list at the request of one party by telephone or email, orders being set aside “at the behest of one party”, and a witness order being granted to one party without the other, unrepresented party being informed.

To tackle this, a new rule 39.8 provides that communications between a party to proceedings and the court “must be disclosed to, and if in writing (whether in paper or electronic format), copied to, the other party or parties or their representatives”.

The new rule “applies to any communication in which any representation is made to the court on a matter of substance or procedure but does not apply to communications that are purely routine, uncontentious and administrative”.

A party is not required under the new rule to “disclose or copy a communication if there is (or are) a compelling reason (or reasons) for not doing so” provided the reason is clearly stated.

A written communication required to be copied to the other party or parties “must state on its face that it is being copied to that person or those persons, stating their identity and capacity”.

The subcommittee also added a new rule 39.9 on the recording and transcription of proceedings, which encourages judges to provide informal notes to litigants in person.

“At any hearing, whether in public or in private, the judge may give appropriate directions to assist a party, in particular one who is or has been or may become unrepresented, for the compilation and sharing of any note or other informal record of the proceedings made by another party or by the court.”

The subcommittee commented: “The quality of transcripts in recent years and the delays and expense involved in producing them have been such that an agreed and/or judicially approved note produced while the hearing is fresh in everyone’s mind, is likely to be of greater practical value to the parties (especially if unrepresented), the judge and an appellate court considering the matter soon after the hearing, than a costly perfected transcript which only becomes available months later.”

Introducing the paper at the CPRC’s December meeting – for which the papers have recently been published – Mr Justice Kerr said that he hoped the changes to part 39 and associated practice directions would go to consultation in the first half of this year.

The CPRC set up the subcommittee in June 2017 to review the rules so that they reflected “more properly” the principles of open justice, with the subcommittee issuing a preliminary paper last October.

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Dyson: CJC chairman

The government has not presented the evidence that the growth in whiplash cases is linked to an increase in fraudulent and/or exaggerated claims, the Civil Justice Council (CJC) has argued.

The advisory body – which is headed by the Master of the Rolls, Lord Dyson – also warned that the government is wrong to believe that raising the small claims limit for personal injury cases will make it easier for insurers to challenge them.

In its response to the whiplash consultation, the CJC said it was concerned that “significant reform is envisaged without the government coming to an evidence-based conclusion that the growth in whiplash claims is linked to an increase in fraudulent and/or exaggerated claims.

“It would therefore support further research being carried out before what might be unnecessary, and potentially costly, reform is embarked upon. There is a sense that there is a danger of the problem being overstated, that only a small minority of claims are exaggerated or fraudulent, and the way to tackle fraud is by a robust approach by defendants to civil actions where there is evidence to support such an allegation or, in appropriate cases, through criminal prosecution.”

The CJC argued that where it is alleged a claims is exaggerated or fraudulent, irrespective of its value, it is unlikely that it will be allocated to the small claims track. “Such allegations, which often involve more than one expert report and cross-examination of multiple witnesses, can only properly be dealt with on the fast- or multi-track.”

It said it was concerned that the government’s belief that raising the small claims limit would make it more economically viable to challenge cases “is based on a misconception”.

The council also thought that £5,000 was too high given the complexity of claims that would catch, and could encourage claimants to exaggerate their claims.

While opposing an increase just for whiplash on the basis of both “principle and practicality” – because there should not be a different approach for the same type of injury depending on how it occurred – the CJC said “it is not clear what, if any, evidence there is which would support a proposal to increase the small claims threshold” for all road traffic-related personal injury claims.

The CJC supported the establishment of independent medical panels so as to remove any doubts about the independence of the doctor providing the report. This should take the form of an accreditation scheme run by the General Medical Council and funded out of the report fees, it recommended.

The CJC also questioned the timing of the proposals “given the volume of civil justice reform taking place at present, and how the climate for claims will be changing”. These seem likely to have an impact on the number of claims being brought but they need to be given time, it said.

“It may be that further changes at this point will not be sensitive to the post-April environment, and would undoubtedly add to the pressures on parties, practitioners and judges adapting to it; and secondly, and crucially, carry out a detailed evidence-based assessment of the effects of those reforms.”

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Costs: both sides did not break budgeting rules

A circuit judge has overturned a ruling that both the claimant and defendant would be limited to recovering their court fees after both failed to submit budgets.

HHJ Worster, sitting in Birmingham, said the failure of a form N149C – a notice of proposed allocation to the multi-track, issued under rule 26.3 – to specify the exchange of budgets meant that the budgeting requirements in the CPR were not triggered.

The judge said there appeared to be more than one version of form N149C in circulation, one providing for a budget to be filed by a specific date and one – as in this case – that did not.

“That is most undesirable, particularly at a time when the profession and the courts are working out the effects of these new rules,” he said.

Porbanderwalla v Daybridge Ltd was an accident claim where liability and quantum remained disputed. It was quantified at around £42,000, mainly credit hire charges.

The form N149C made no reference to a budget and when the parties submitted their direction questionnaires as required, neither included a Precedent H, although the questionnaire said: “If your claim is likely to be allocated to the multi-track, form Precednet H must be filed in accordance with CPR 3.13.”

In their covering letter, the claimant’s solicitors said: “We are not enclosing Precedent H with this letter. It will be filed as/when directed by the court in advance of the case/costs management hearing.”

A district judge then made the order to limit their recoverable costs to the court fees because neither party had filed Precedent H.

HHJ Worster was persuaded to overturn this order through the construction of rules 3.13 and 26.3. He decided that absent a specific requirement for the exchange and filing of a budget in the rule 26.3(1) notice or a case management conference, the budgeting requirement “is not triggered”.

He added that even had he refused the appeal, he would have been minded to grant both parties relief from sanction.

“Each case will turn on its particular facts, but this was not a case where the parties were refusing to engage with the requirements for cost budgeting. Their approach to the requirements of the rule were understandable, they had otherwise complied with all the orders and directions of the court, the claimant had indicated that it would file a budget as and when directed to… and the appeal was brought promptly.

“The default would not have been a trivial one, but there was a good reason for it.”

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Houses of Parliament

Making interveners liable for costs would have “chilling effect”

The Bar Council, the Law Society and the Chartered Institute of Legal Executives (CILEx) have called on peers to oppose curbs on judicial review set out in part 4 of the Criminal Justice and Courts Bill.

Part 4 would, among other things, restrict the use of protective costs orders (PCOs) and impose tougher costs rules on interveners. It is due to be debated, as the bill goes through its report stage in the House of Lords, either today or on Monday next week.

The professional bodies said part 4 would have a “chilling effect” on individuals and organisations seeking justice.

In particular, they said it would stop judges from granting PCOs until permission was granted – “a stage which in itself requires intensive up-front work by lawyers”, which incurred costs.

Frances Edwards, president of CILEx, said this could mean judicial review would “only be available to risk takers with deep pockets”.

She went on: “Access to justice should be about the merits of your case, not the size of your wallet.

“The bill would also allow a government minister to decide what matters are in the ‘public interest’, rather than independent judges. This would enable future governments to keep certain challengers at arm’s length.”

Andrew Caplen, president of the Law Society, said making interveners in judicial reviews liable for costs would have a “chilling effect” on individuals and organisations seeking justice.

“Expert organisations, including charities and NGOs do not wade in to judicial reviews for fun,” Mr Caplen said. “The judge must first give them permission to make an intervention, and they do so because their expertise helps judges make more informed decisions.”

The professional bodies said the bill would also force judges to consider making costs orders against anyone who might be able to help the claimant financially, including friends, family and neighbours.

“Encouraging judges to force your friends and family to fork out when you challenge a public authority will be a massive disincentive to those seeking redress from government wrong-doing,” Nicholas Lavender QC, chairman of the Bar Council, said.

He called on peers to support amendments to part 4 of the bill tabled by Lords Pannick, Woolf, Carlile, and Beecham.

“These amendments will make sure that the legality of government decisions can be challenged by anyone with a legitimate case, that the fight will be fairly fought, and that it will be refereed by judges, not government ministers.”

The Joint Committee on Human Rights, made up of cross-party MPs and peers, reiterated its opposition to the costs changes earlier this week. The House of Lords constitution committee strongly criticised part 4 of the bill this summer.


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By Richard Burcher, Chairman of legal costs and pricing consultants Burcher Jennings

Like many other non-mechanically minded people, when I take the family car to the garage for a service or repair, I’m never sure what kind of bill I’m to be faced with. Fortunately, the hourly rate in the workshop is clearly stated, for customers and for competitors to see. In the highly unlikely scenario that I was to become the manager of a similar firm, I could set my rates to be competitive. Or I could undercut for price advantage or add a bit more for my more highly qualified technicians and the carpeted air conditioned lounge where my clients might wait…..

Petrol stations display their prices on digital display screens on the edge of the forecourt. It’s easy for the local Esso station to know what their BP rival is charging its customers. Supermarket chains on the other hand spend a fortune collecting comprehensive data about their rivals prices, in order to inform their own pricing strategies – to match, to differentiate, to mark up, to price-promote.  What about law firms?

I can hear the holler already. “Legal services aren’t like cans of baked beans or litres of petrol! They are highly personalised professional services, with each client interaction unique and priced individually.”

I agree. Law is different, but increasingly firms are facing a competitive market for their expertise. So how do you decide what to charge your clients? How do you set the hourly charge-out rate for your Partners or other types of fee earners? How do you avoid a reputation among your client audience for being the most expensive or, perhaps worse, price too low and win lots of work on ever-diminishing profit margins?

Most law firms price on instinct not from informed research.

Do you sneak into your local competitors office with a comedy moustache posing as a potential client to discover the hourly rate for a 5 year PQE employment specialist solicitor?  At least that would be real market insight.

Imagine that you had an up to date source of information on what other firms are charging, what their rates are for partners, for qualified solicitors, legal executives or other fee earners. Even more useful would be this data if it were split by geographic location and by area of law.  That’s the aim of Burcher Jennings new market pricing data survey.

Similar research has been available in New Zealand for the past five years and receives rave reviews from many firms who take part. The intelligence is only made available to law firms and accredited sole practitioners. The reports are never offered for sale to any other party or industry sector. Surveys are completed on-line and only take around 15 minutes to complete.

The first 500 England and Wales firms who agree to provide data (which will be carefully anonymised) will receive the first year’s reports free of charge.  Participating firms will be able to set fees based on accurate market intelligence, confidently explain and justify charges and price consistently with their firm’s wider strategies. You still will be able to choose whether you publish your hourly rates and whether to continue wearing the comedy moustache. But you will be confident that your pricing strategy is based on real market data.

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Mulheron: DBAs most novel aspect of civil justice reforms

Mulheron: DBAs most novel aspect of civil justice reforms

The Civil Justice Council (CJC) working party on damages-based agreements (DBAs) has fallen short of calling for hybrid agreements to be allowed, but told the government that if it wants to ban their use, “then it owes it to the legal marketplace to make that entirely plain”.

But in a report published today, it did recommend that recoverable costs should be excluded from DBA caps, making them potentially much more attractive for lawyers to use.

The working party, chaired by Professor Rachael Mulheron, was set up to advise the Ministry of Justice on both technical drafting issues to improve the 2013 DBA regulations and wider policy questions.

It made 45 recommendations in all, but most focus will be on the question of hybrid DBAs.

While ‘sequential’ hybrids are already allowed – meaning a solicitor could, for example, investigate a case under a normal retainer and then move onto a DBA – it is felt that the rules do not permit concurrent agreements.

This has meant virtually no take-up of this form of funding in civil litigation.

The report said: “The working group noted that this issue has assumed huge importance in the legal marketplace, in that without concurrent hybrid DBAs, lawyers may not see DBAs as being attractive enough to encourage them to take on claimant’s cases. This reluctance is heightened by the innate conservatism of the legal profession.

“In particular, the uncertainty as to whether or not concurrent hybrid DBAs are permissible has had an incredibly chilling effect on the take-up of DBAs. If the government wishes to ban their use, then it owes it to the legal marketplace to make that entirely plain, via its revised drafting of the 2015 DBA Regulations…. The present state of uncertainty cannot be allowed to continue.

“The working group also noted that concurrent hybrid DBAs may be better suited to some areas of legal practice than others, such as personal injury claims. Also, they may be quite suited to commercial cases which are litigated (at the considerable expense of both sides) over several years.”

The report acknowledged that there was insufficient evidence as to whether concurrent hybrid DBAs “would have a positive or a negative effect on access to justice/efficiency of litigation”.

But it was “certainly conceivable that there will be cases that are meritorious, but which are highly complex or costly to conduct, and which the claimant’s legal representative would be prepared to take on under a hybrid DBA, but not on a full ‘no win, no fee’ DBA (because of the level of risk), nor on a CFA (because the rewards are not sufficiently favourable).

“Accordingly, permitting hybrid DBAs may provide access to justice in these cases.”

But the group as a whole was divided on the question of allowing concurrent hybrid DBAs. “It concluded that it was a policy decision which was ultimately one for the government. However, the government should be encouraged to evaluate the arguments in favour of concurrent hybrid DBAs, even in the absence of any cadre of cases which have tested the arguments (given the nervousness of the legal marketplace on this issue).”

Currently, recoverable costs are included in calculating what is paid under a DBA – so that in a case where a claimant on a 25% DBA wins £100,000 in damages and £20,000 in recoverable costs, he will only have to pay £5,000 from the damages to his solicitor. But under the ‘success fee’ model advanced by the working group, he would have to pay £25,000.

At the very least, it said, the government should review its policy given the advantages to the success fee model, which the report listed as avoiding the consequences of the indemnity principle, enhancing access to justice in low-value cases, and being easier to explain to clients.

If this approach were to be adopted, however, the statutory caps may have to be reduced “to preclude an inordinately-large recovery by the legal representative”.

Among the technical recommendations were that the 25% DBA cap for defendants who successfully defend a personal injury action should be increased to 50%, and that lawyers and clients should be free to agree the ‘trigger point’ at which a DBA becomes payable, and the circumstances under which it can be terminated.

Further, the report said that counsel’s fees – when not working on a DBA themselves – should be treated as an expense outside of the cap, DBAs should be regulated when operating pre-commencement of litigation, and the indemnity principle should be abolished, at least insofar as it relates to DBAs.

“The application of the indemnity principle has the potential to wreak real injustice for claimants’ legal representative, in the context of DBAs,” it said.

The working party also saw no need to incorporate a requirement for independent legal advice before a party enters into a DBA – as Lord Justice Jackson had originally recommended – or that the fact of funding should be notified to the opposing party or the court.

The Master of the Rolls, Lord Dyson, said: “I welcome the government’s invitation to the CJC to address some of the issues relating to DBAs, and I now urge it consider further modifications to the regulations to help promote confidence in them as one of the funding arrangements available to those involved in a personal injury or commercial dispute… I hope that the changes recommended in this report will encourage the greater use of DBAs.”

Professor Mulheron said: “DBAs have been used very sparingly by the legal profession since the Jackson reforms took effect in 2013. This has been unfortunate, given that the use of DBAs in contentious litigation was, arguably, the most novel aspect of those 2013 reforms.”

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Grant: government does not wish to commit to a formal review

The government has no plans to assess the effect of next month’s changes to the RTA scheme before introducing further reform, justice minister Helen Grant has confirmed.

Meanwhile, the Law Society yesterday published its new model conditional fee agreement (CFA), although it is not yet clear when a model damages-based agreement (DBA) will be completed. 640-822 exam

Labour MP Meg Munn asked in Parliament whether there are plans to make an assessment of the changes being made in April 2013 to the RTA portal before introducing further reforms.

Ms Grant replied that there are no current plans. “The government is prepared to review and assess the effectiveness of the scheme should evidence be provided to demonstrate that this is necessary,” she added. “However, the government does not wish to commit to a formal review at this stage.”

Ms Munn also queried what steps have been taken to improve insurers’ use of the portal. Ms Grant said: “As part of the forthcoming extension of the RTA scheme, incentives have been provided for both insurers and claimants to keep claims within the scheme through to settlement.

“These include provisions in the pre-action protocols which will support the extended scheme, and the introduction of a revised and expanded scheme of fixed recoverable costs.”

The Law Society’s model CFA, accompanied by “interim” advice, came with a warning that it is “not a precedent for use with all clients and that it will need to be adapted/modified depending on the individual clients’ circumstances and solicitors’ business models”.

Asked at yesterday’s Law Society council meeting about the timing of publication so close to the start of the new CFA regime, chief executive Des Hudson blamed the delays in finalising the rules, but he accepted that the society could have done more to keep solicitors up to date on progress with the model CFA.

He said the society would consider doing this in relation to the work on the model DBA.

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Underwood: major impact of new rate

The Civil Procedure Rule Committee has decided against changing the financial threshold for costs budgeting in high-value personal injury cases, despite the prospect of the new discount rate taking a significant number of claims out of the regime.

A paper before the committee – drafted by member Andrew Underwood, a partner at defendant law firm Keoghs – argued that there was no practical difference between a case that was within the £10m costs management threshold before the discount rate change, and one that moved out of the regime after it.

However, the recently published minutes of the committee’s discussion at its June meeting recorded that “it would not be appropriate to react to this change, as there is an ongoing consultation on how the rate should be calculated, and that the outcome of the Jackson review should also be taken into account”.

Mr Underwood’s paper demonstrated the major impact of the new -0.75% rate.

He said that at least 70% of future losses in catastrophic injury cases reflected damages for lifetime care and case management.

This meant that in any cases where the capitalised value of this head of loss was more than £7m, “then the claim may be capable of being certified as having a value of more than £10m overall (when combined with past losses and all other heads of claim)”.

Under the new rate, a person with 24/7 care needs from a single carer might recover around £140,000 a year, and if they have a life expectancy of more than 50 years, they will be excluded from costs management.

“The arbitrary impact of the threshold is clear to see in my view. The number and type of issues to be resolved are precisely the same for a 140k a year regime in a clamant who might live 50 years as opposed to 20 years. It seems a little odd that one might be excluded from ‘default’ cost budgeting and the other would not be?

“The impact of the change has been to remove a significant proportion of 24/7 single carer cases out of default cost budgeting and to reduce generally the number of maximum severity cases generally from the rigor of default cost budgeting.”

He said the outcome would be the same for cases with lower care costs but with high annual earnings.

While acknowledging that the court has the power to order costs management in cases worth more than £10m, or in unspecified claims where the claimant certified that the claim would exceed the threshold, Mr Underwood said there were problems with this.

Listing the issues, he explained:

  • The certification of value (by the claimant alone) is done on the issue of proceedings and may not be agreed;
  • The certification ignores liability disputes etc and other factors that may bring the value down;
  • By the time the court issues its notice of allocation N149C, “the die is already cast as far as the claimant legal team are concerned and the case in their eyes may be exempted from [CPR] 3.12 and 3.13”;
  • This means that the directions questionnaire will be filed and lodged and the first time the court might address the issue is going to be at the time of the CMC itself; and
  • If the court then exercises its prerogative to require budgets to be exchanged and to then consider cost management, “material costs will have been incurred and case management directions given without regard to budgeting”.

Mr Underwood continued: “There is not a lot of difference in the extent of the work needed in a £5m claim as against a £15m or £20m claim.

“The range and type of issues will be broadly similar, and the features that inflate the value to more than £10m are principally issues of mathematics by virtue of the scale of multiplier that is in turn driven by the discount rate.

“I am not seeking to denigrate this hugely important work, but if an £8m file was capable of being budgeted in January of this year, then it is still capable of being budgeted in May even if the value has jumped to £24m.The issues are exactly the same, they just cost more.

“All these issues are grounds that might mean that the exemption was unjustified from the outset, but the current rules and practice direction may not allow the point to be dealt with till too late in the budgeting and case management process generally.”

Mr Underwood concluded that if the intention was to include the vast majority of personal injury cases within the budgeting regime, “the increase by a factor of two or three in the value of these cases may suggest that that intention is now under threat”.

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Two thirds of litigators would use DBAs if they could

Two-thirds of litigation lawyers say increased court fees have already deterred clients from commencing proceedings, a survey has found.

An even larger majority (87%) said increased fees would influence clients’ decision-making in the future.

The joint survey, by the London Solicitors Litigation Association (LSLA) and New Law Journal, also found that none of the 142 litigators involved had used a damages-based agreement (DBA), but 65% would if hybrid DBAs were allowed.

Looking to the future, 82% of litigators saw costs increasing in the next five years, while 80% said costs budgeting had driven up overall costs.

On funding, two-thirds of litigators said they had used third-party funding, 57% discounted conditional fee agreements (CFAs) and 48% normal CFAs.

A smaller proportion, 30%, said they had been able to secure “economic” after-the-event insurance cover for their clients.

Most lawyers (61%) welcomed summary assessment of costs by the trial judge. There was an almost even split on whether the courts’ approach to e-disclosure was working, with only 51% saying it was.

A large majority (81%) of lawyers anticipated “continued growth” in boutique litigation firms.

Ed Crosse, president of the LSLA, commented: “Front-loading of the increased court fees has delivered a heavy blow to commercial litigation, especially to smaller businesses which now feel deterred from pursuing legitimate claims.

“It’s also leading to more shopping around by larger businesses who are baulking at the increasing cost of litigating here.

“It would have been fairer to have sought to generate this increased income during different phases of the litigation thus better aligning fees with the status of the case.”

Mr Crosse added that the recent Pyrrho Investments ruling on predictive coding in e-disclosure was seen as a “progressive move.”

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Nash: unrivalled opportunity

The risk of costs lawyers being sued has increased since the Jackson reforms and they need to keep their level of insurance under active review, their regulator has said, with a formal change to the regulatory regime now approved by the Legal Services Board.

The move comes as the new chair of the Association of Costs Lawyers (ACL) said she expects her members to form an integral part of litigation teams in the next five years.

Costs lawyers need a minimum of £100,000 of professional indemnity insurance (PII) cover, and following the approval of the Legal Services Board, they are now required “on an ongoing basis, [to] assess all financial risk associated with work being undertaken by them and ensure that [PII] and loss of documents insurance is in place in excess of the minimum… at a level commensurate with that work”.

The application from the Costs Lawyer Standards Board (CLSB) said that in the wake of the Jackson reforms, it “formed the view that financial risk has increased”, with subsequent case law such as Mitchell demonstrating the courts’ “strict application of costs budgeting and costs management rules”.

A CLSB analysis showed that 22% of costs lawyers are practising with the minimum £100,000 cover, while in its response to a CLSB consultation, the Senior Court Costs Office raised the question of “whether the minimum cover requirements of £100,000 is sufficient given the size of bills passing through the SCCO”.

Further, a leading broker of costs lawyers’ PII, Kerry London, advised of “a larger influx of claims and/or notifications for costs lawyers since last year”.

The CLSB said it took this approach to reform because an ‘across the board’ increase in the minimum level of cover would be neither proportionate nor targeted.

New ACL chair Sue Nash – who increased her own firm’s PII substantially following April 2013 – said “the level of indemnity insurance taken by firms should rise in proportion to their risks, over and above the current limit of £100,000. The ACL will, together with CLSB, continue to seek the best protection for clients of all kinds”.

Ms Nash succeeded Murray Heining and will hold the post for up to three years. She said costs lawyers have the skills to adapt to the changed role brought about by the Jackson reforms.

“Costs lawyers have an unrivalled opportunity to capitalise upon their expertise in legal project and legal practice management, costs auditing, WIP valuation and costs ADR, amongst other things, to ensure their future,” she said.

“The profession has developed greatly in recent times and costs lawyers will, I believe, become an integral part of litigation teams in the near future as solicitors, barristers and costs lawyers work together to progress proceedings in an efficient and proportionate manner.”

A practitioner for over 25 years, Ms Nash runs her own full-service costs firm, Litigation Costs Services, alongside costs software business Omnia Software.

Other plans include the creation of a student council to mirror the ACL council, the expansion of the association’s education programme to include more online training and CPD, and setting up regional costs groups to better represent members across the UK, along with the launch of a new website.

“My tenure will be all about guaranteeing a strong future for the costs profession,” she said. “The opportunities are great if the profession responds now. Our role will be to ensure that costs lawyers and those entering the profession have the tools to thrive.”


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Millard: immense benefit for claimant

The High Court has settled what is claimed to be the first case following yesterday’s change to the discount rate, awarding a 10-year-old girl an increase of over £5.5m on her capitalised settlement of £3.8m.

On 16 March 2017, the High Court approved the agreed quantum settlement in the case of LMS v East Lancashire Hospitals NHS Trust, a cerebral palsy case, on the basis that the claimant was to recover 50% of the full value of her claim calculated at the new minus -0.75% discount rate.

According to the lawyers acting for the claimant, at a joint settlement meeting in January 2017, it was agreed that she would receive a lump sum of £1,320,575, periodical payments of £50,000 per annum to age 19 and thereafter for life £73,500 per annum, subject to court approval. The new discount rate increased the lump sum to £2,122,398.

The capitalised value of the joint settlement agreement was £3,772,500 under the old discount rate. The capitalised value of the approved award at the new rate was £9,296,673.

Michael Redfern QC of St John’s Buildings, counsel for the claimant, said: “The new discount rate is particularly important in cases where liability is apportioned. The large increase in lump sum awards is offset by lack of return on lump sum low-risk investment and the ability to keep pace with inflation.

“Periodical payments remain a paramount consideration in every case as they remain tax free, index linked, guaranteed and certain. They last for the claimant’s life, which is more than can be said for a lump sum award with little if any safe, low risk investment returns available.

“We welcome the new discount rate, the first change in 17 years, which addresses the actual lack of meaningful return on safe lump sum investment opportunities.”

The claimant’s solicitor, Leonie Millard of Forbes Solicitors in Accrington, added: “The benefit for the claimant, who was only entitled to recover 50% of her damages, from the new discount rate, is immense.

“It vastly improves the long-term future financial ability to meet her needs for the rest of her life, which is expected to be long. Her parents are comforted to know that there is funding to ensure that her needs are properly met when they are no longer around.”

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Environmental claims: neither side will be able to challenge costs cap

A fixed recoverable costs regime is to be introduced for environmental judicial review claims, the Ministry of Justice (MoJ) has announced.

Individual claimants will have to pay no more than £5,000 in adverse costs, and organisations no more than £10,000; the liability of the defendant to pay the claimant’s costs will be capped at £35,000.

This was despite the majority of respondents to an MoJ consultation on costs protection in such cases opposing the £5,000 figure. The consultation closed in January but the MoJ only reported back on it this week, despite receiving just 22 responses.

The aim of the consultation was to codify protective costs orders to ensure the UK’s compliance with the Aarhus convention on access to justice in environmental matters and the requirement that court procedures should not be “prohibitively expensive”.

The MoJ said respondents broadly supported its proposals, with many saying that the prospect of high costs was a deterrent to bringing judicial reviews within the scope of Aarhus.

“Whilst they may not deliver everything that every respondent would like, and some respondents might prefer other approaches such as some form of one-way costs-shifting, most respondents also agreed that the consultation proposals would make a significant improvement to the status quo,” the consultation report said.

Though less than a third supported £5,000 as the claimant cap, there was no strong consensus on what the figure should be and the government argued that it is “a proportionate amount to ask individual claimants to pay”.

However, it did recognise that part of the concern around this was the proposal that there would be no costs protection until the permission stage; as a result it will instead apply costs protection from the time the claim is issued, so long as it is within the scope of the convention. Another key change is that neither side will be able to challenge the costs cap and seek a higher amount.

The MoJ is also to adopt for these cases the rule proposed by Lord Justice Jackson for appeals on cases that have been heard under a fixed-costs regime. This means that the judge considering whether to give permission to appeal will at the outset determine the appropriate costs limits, having had regard to the decisions in the lower courts.

The government will put proposals to the Civil Procedure Rule Committee “at the earliest opportunity” with the aim of including them in the body of rule amendments planned for making in December. The changes, including the cap levels, will then be reviewed on a regular basis.

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Insolvency litigation: exemption to end despite lobbying

Insolvency litigation: exemption to end despite lobbying

Insolvency litigation is to lose its exemption from the LASPO reforms, the government announced today as it revealed that the post-implementation review of the changes will not take place until around 2018.

Despite strong lobbying from insolvency and other business groups, civil justice minister Lord Faulks QC said that the exemption will come to an end from 1 April 2016.

The exemption had been due to end on 1 April 2015, but the government delayed it earlier this year.

In a statement issued to Parliament this morning, Lord Faulks said: “The government has made a priority of addressing the high costs of civil litigation in England and Wales.

“To that end, part 2 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 reforms the operation of ‘no win, no fee’ conditional fee agreements. Those reforms came into effect generally in April 2013 but were delayed in respect of insolvency proceedings.

“After further consideration, the government has decided that the ‘no win, no fee’ reforms should now be applied to insolvency proceedings. The provisions will come into force for these cases in April 2016.

“It has already been announced that there will be a post-implementation review of the LASPO Act part 2 reforms between April 2016 and April 2018. The review will take place towards the end of that period.

“The review under section 48 of the Act in relation to mesothelioma cases will also take place as part of the post-implementation review.”

R3 – the representative body for insolvency professionals – had been pushing hard to have the exemption made permanent, and had also enlisted the support of other groups, such as the Institute of Chartered Accountants in England and Wales, the Bar Council, the Insolvency Practitioners Association, and the Federation of Small Businesses.

Phillip Sykes, president of R3, said today : “We are deeply disappointed by the Ministry of Justice’s decision. It’s a decision that flies in the face of all available evidence. The government is potentially writing off hundreds of millions of pounds per year owed to not just HMRC, but to hundreds, if not thousands, of ordinary honest businesses as well.

“The only winners today are the rogue directors and others who refuse to repay money owed to creditors after an insolvency. We’re back to an uneven playing field, where rogue directors hold all the cards – and the cash.

“At no point has the government engaged with the arguments in favour of extending the exemption, nor has it carried out an impact assessment of what the end of the exemption would mean.

“The end of the exemption leaves a huge funding black hole for insolvency litigation. This is a blow to the wider business community and the insolvency profession.”

R3 has produced research claiming that the type of litigation currently enabled by the exemption helps retrieve approximately £480m owed to creditors per year – including £115m owed to HM Revenue & Customs.

However, in a recent speech, Lord Justice Jackson said the exemption should come to an end, describing recoverability as “an instrument of oppression, which is liable to crush defendants who have a good defence”.



A golden opportunity for the ATE market to innovate

Enrique Gomez Head of ATE DAS UK Group

With the key judgement in the BNM v MGN case not expected until the end of the year, and decisions in the fixed recoverable costs arena not due until 2019, the after-the-event (ATE) insurance sector – already burdened by ever-changing regulation – is playing something of a waiting game. But this could be a golden opportunity for the ATE sector – the chance to take advantage of what might otherwise be a relative lull in activity period to set in motion a time of self-analysis and transformation, to develop plans for what the future of ATE insurance will look like.

July 16th, 2018