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Jackson: fund could flourish

Jackson: fund could flourish

The legal profession should create a not-for-profit third-party litigation funder to back both regular litigation and “deserving” cases which would otherwise not be attractive because of the level of damages sought, Lord Justice Jackson said today.

Seed funding could come from the government, the National Lottery or ‘quasi-debentures’ bought by individual lawyers and/or institutions.

Returning to a funding option he first looked on favourably during his review of civil litigation costs – but which has never gained traction in the 40 years since it was first proposed – Sir Rupert said a contingent legal aid fund (CLAF) could finally “flourish” in a market where for-profit third-party funders were now established.

Speaking at IBC’s Solicitors Costs Conference this morning, he called on the Law Society, Bar Council and Chartered Institute of Legal Executives to work together to promote the establishment of a CLAF.

“Unlike other funders, the CLAF would not have owners or shareholders creaming off the profits,” he said. “Instead it would plough all profits back into building up reserves and future litigation funding. The CLAF would be an independent body established by the legal profession in the public interest. Its function would be to promote access to justice.”

Seed funding has always been an issue for a CLAF, but Sir Rupert said that “if the governments and professions in other jurisdictions have managed to find seed-corn funding, surely England and Wales can do the same?”.

Possible sources included the National Lottery or charitable foundations, the government, or capital raised by means of ‘fixed interest coupons’ or quasi-debentures.

He explained: “Quasi-debentures would offer a more than average return on a bond but would expose the bond-holder to the risks of the CLAF being unprofitable, thereby sharing both risk and reward on the seed capital. I understand that such an arrangement would not prejudice the not-for-profit status of the fund.”

As to who would invest in a CLAF, the judge identified two possibilities. “Individual barristers, solicitors or other professionals may be willing to buy bonds of, say, £10,000 if they have confidence in the management of the scheme.

“They would note that investors in certain third-party funders have done well and the CLAF does not have any shareholders clamouring for dividends. In this way, the lawyers would be contributing to a much-needed scheme, while receiving a reasonable return for only a modest risk.”

Second, he said a bank or similar institution might assemble a ‘partnership’ of institutional type investors, such as pension funds.

“Each would put in money, buying a bond with a fixed lifetime and decent percentage annual return, in the expectation that after, say, 10 years the original capital would be returned because the fund would then be in a position to do so. Thus £50m could be raised by persuading 10 investors each to put up £5m.”

As to how the CLAF would work, cases could be chosen by experienced lawyers employed by the fund – or even by revived committees of solicitors and barristers who used to determine applications for legal aid – and importantly there would be no entitlement to support as of right.

Jackson LJ said whether the CLAF should be liable for adverse costs, or protected like the Legal Aid Agency, was a policy decision for others.

He noted that liability for adverse costs on normal principles would be an additional incentive “for the CLAF to choose cases wisely” – although there would have to be an agreement between the CLAF and the claimant as to what costs risk each was accepting – while giving it protection would require consultation and probably legislation, delaying the creation of the CLAF.

To protect itself from an adverse costs risk, he continued, the CLAF might take out block or case-by-case after-the-event insurance; alternatively it could self-insure “up to a point”.

Sir Rupert said costs management would make it “much easier” for the CLAF to assess the adverse costs risk, as would the adoption of his proposal last week for fixed costs for all civil cases up to £250,000.

He concluded: “The time for setting up a CLAF has come and I invite the Bar Council, Law Society and CILEx to consider taking forward this proposal.”

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Haynes: LEI market is not working effectively for non-panel firms

Posted by David Haynes, head of underwriting and marketing at Litigation Futures sponsor ARAG

A survey carried out by the Employment Lawyers Association (ELA) in conjunction with the Law Society, Association of Personal Injury Lawyers and Motor Accident Solicitors Society has confirmed that non-panel firms suffer detriment when legal expenses insurers exercise their right to appoint panel firms to deal with claims.

This right is available to insurers until it becomes necessary to issue proceedings, and where (for example, when defending employment claims) the insurer is exposed to paying civil compensation, unless there is a conflict of interest. The survey was completed by nearly 700 people, 48% of whom were employment lawyers.

It is of obvious concern to members of the ELA that 90% of respondents had experienced problems when conducting claims under LEI;

Only 14% of respondents said that it was viable for a solicitor to issue proceedings and run a tribunal case at an hourly rate of £100 plus VAT, which according to the survey is the rate commonly paid under LEI policies. This reduced to 8% for associates, 7% for senior associates and to only 4% for partners.

Some 52% of respondents stated that they had (frequently or always) lost instructions from a prospective client in favour of a panel firm, while 42% of respondents said that the LEI policy terms frequently or always limited the rate payable to non-panel solicitors.

There is no evidence from this survey that ELA’s concerns translate into consumer detriment and the survey found that actual complaints to the Financial Ombudsman Service (FOS) were rare, with firms being deterred from complaining because of alleged delays by the ombudsman in resolving complaints.

FOS data for the period April to December 2013 shows that 507 legal expenses insurance complaints were received, of which 40% were upheld in favour of the customer – around 270 complaints if we annualise the figures. Of these complaints we do not know how many are connected with freedom of choice but we suspect very few (if any), as in most cases disputes arise because of a disagreement over the operation of policy cover.

Our own position is that we adopt a flexible approach in negotiating suitable terms with non-panel firms where policyholders wish to exercise their right to choose their own solicitor; but the use of panel firms works well for our policyholders. In the main policyholders are happy to use the services of panel firms as they realise that the service standards that we demand of panel firms are beneficial and claimants remain fully protected from paying legal costs.

Policyholders can opt to pay the difference where a non-panel firm will not accept instructions at rates that we deem to be proportionate and reasonable given the nature of the claim.

We are confident (without conducting a survey!) that our panel firms would not report problems in conducting claims under our policies and the success rate of panel firms is significantly higher than non-panel firms.

Waiving our right to control the appointment of non-panel firms has a bearing on the fortunes of policyholders who make a claim. Moreover, a lack of capacity to control costs would also result in significant increases to legal expenses premiums across the board at a time when there is government support for legal expenses insurance for individuals and businesses as an affordable means by which to access justice.

What this survey makes clear is that the LEI market is not working effectively for non-panel firms because it does not deliver the rewards they seek. This is very different from a market that does not work effectively for consumers. We would question how the ELA has been able to come to the conclusion that the LEI market is not working well for consumers by conducting a survey which was not targeted at consumers but at its own members.

The ELA’s position seems somewhat delicate as it has exposed itself to debate about the true motive in conducting such a survey. Surely a survey which purports to be in the interest of consumers would not focus on the ELA’s own members?

The ELA is to publish the second part of the survey soon, which will include more detailed evidence of the problems experienced (by their members?) when conducting cases under LEI policies.

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Davis LJ: “global approach” should have been taken

A defendant was entitled to withdraw admission of liability in the face of a personal injury claim which rocketed in size from less than £25,000 to over £300,000, the Court of Appeal has ruled.

Lord Justice Davis warned that the trial judge’s “stark approach” to the issue, that the risk of an increase in quantum was inherent in any personal injury claim, would “discourage speedy admission to liability”.

Davis LJ said the case, involving injuries allegedly caused to a paraplegic by a malfunctioning wheelchair, was presented in 2010 as a “modest personal injury claim suitable for the fast-track”.

He said that even at this time the costs regime provided “every incentive on grounds of proportionality” for the defendants and insurers “speedily to settle such claims”, and the personal injury protocol was designed to facilitate this.

“The judge’s stark approach – that a risk of increase in quantum is inherent in any such claim – would in my view tend to discourage speedy admission of liability in small claims, admissions made having regard to considerations of saving costs and of proportionality.

“It would tend to discourage them for fear of a subsequent withdrawal of admission of liability being refused on the basis advocated by the judge, even where quantum has in the interim enormously and unexpectedly increased.”

Delivering judgment in Wood v Days Healthcare and others [2017] EWCA Civ 2097, Davis LJ said loss adjusters acting for Days conceded liability to Susan Wood in 2010, but two years later solicitors for the company indicated that they were contemplating withdrawal.

The application to withdraw the admission was made in 2013, and refused by Mrs Justice Elisabeth Laing in 2016.

Applying the test set out in CPR 14(1A) on permission for withdrawal of admissions, Davis LJ said “highly material new evidence had come to light”, both on the alleged injury and quantum, which rose from less than £25,000 in 2010 to over £300,000 in 2012.

Lord Justice Davis said that while an increase of “a few thousand pounds” may be an acceptable and reasonable foreseeable risk, a tenfold increase to over £300,000, was “surely another thing altogether”.

He referred to a statement by Hatchers, the claimant’s solicitors, in August 2012, that their client’s claim had changed entirely in character and amount, describing it as “not only fair” but “also accurate”.

Davis LJ said the trial judge herself found that Days would not have admitted liability if the loss adjusters, Garwyns, had seen a key report at the time, making it difficult to describe the defendants as taking a ‘calculated’ risk.

“At all events, in my opinion, the failure of the judge to have any real regard to this new evidence as to injury, causation and quantum, or to give any weight to it, of itself vitiates the exercise of her discretion.”

Davis said Laing J was “very concerned to seek to uphold the finality” of the admission, but the CPR required instead that a “global approach” should have been taken, “requiring evaluation of all the relevant circumstances in deciding whether it is just and fair to permit a party to withdraw a pre-action admission”.

He allowed the appeal, set aside the judge’s order and granted permission for the admission to be withdrawn. Lady Justice Sharp and Lord Justice David Richards agreed.

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Monique Passalaris, senior associate and regional manager of Just Costs’ London office

Monique Passalaris, Senior Associate and Regional Manager of Just Costs’ London office together with members of her highly experienced legal costs team: Darren Naisbitt, Matthew Bell, Olly Sufi, Jack Ridgway, Joe Bardoe, Wayne Spring, Chris Medhurst and Business Development Manager, Scott Jarrold have all signed up for what has purportedly become the largest annual gathering of lawyers and the judiciary in the world.

Around 10,000 of the top members of the legal profession led by the Lord Chief Justice on 19 May will undertake a 10km walk starting at the Royal Courts of Justice.

Participants will be raising money for The London Legal Support Trust which funds Law Centres and pro bono agencies in and around London who do a fantastic job in preventing homelessness, resolving debt problems, gaining care for the elderly and disabled and fighting exploitation.

Click HERE for more details on the event and how to donate towards this worthy cause.

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Brookes: keep in touch

Posted by Sian Brookes, solicitor liaison officer at Litigation Futures Associate Allianz Legal Protection

I view getting out and meeting people as one of the most important aspects of my solicitor liaison role. Recently, following a very productive meeting, I started thinking about successful relationship building and, if asked for a top tip, what professional advice I would give to a law firm.

I’ve been visiting, on average, six different solicitors’ practices each month for almost 14 years now but surprisingly it didn’t take me long to settle on what I would say. Namely, “talk to your ATE provider, stay in touch”.

Now I’m well aware that most firms operate under a delegated authority scheme and perhaps more importantly these days, the time you spend in dialogue with us does not form part of your recoverable costs. So, why should you do it?

Firstly, it keeps the relationship on a good footing and will give your ATE insurer an enormous amount of comfort. After all, if you are with a reputable insurer, it’s likely your firm will have been carefully vetted at the outset when the scheme was established.

After that, there will be minimal contact on a day-to-day basis, so hearing from you allows us to be sure that we are truly in a partnership with you.

It’s our equivalent of ‘that client’ who is difficult to get instructions from – chances are that everything is fine but the not knowing makes you nervous!

It’s the same for us, magnified by potentially hundreds of thousands of pounds of indemnity we are on risk for. So my message to law firms would be to respond to any requests for information your ATE provider asks you for and feel free to ask why they need to know if it seems cumbersome or curious to you.

Secondly, if we know how you work and who to contact, it speeds up the time it takes us to make decisions or to process payments.

For instance, if we know your finance department deals with costs issues or that it takes 21 days to sign off claims, then we can adapt to fit your processes. We want to pay valid claims and make sure that you receive the best possible level of service from us, so the better we know your law firm, the better we can help you.

Finally, regular dialogue has the potential to lead to bigger and better things. We’ve picked up a thing or two after more than 30 years of experience in the market. We are more than happy to share our extensive knowledge and there’s a good chance we’ll have come across a similar scenario in the past so can point you in the right direction.

You may even be pleasantly surprised that these discussions can lead to the development of bespoke products, marketing support or simply a better way of dealing with reporting requirements.

So please do keep in touch, as now more than ever collaboration will be vital to keeping the market thriving.

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Brennan: portfolio continues to mature

Listed third-party litigation funder Juridica is to pay $16m (£10.6m) in dividends early next year after securing gross cash proceeds of $17.5m from one of its investments.

In a statement released yesterday to the London Stock Exchange, the AIM-listed company said the proceeds “represent a realised gain on the company’s investment and not a return of capital. The return generated is in line with the company’s expectations, as previously reflected in the unrealised profits of the company”.

Payment is due at the end of the year, and the dividend of 10p per share will be payable on 15 January 2014 to shareholders registered at 13 December 2013.

The statement said: “This latest successful investment return for Juridica continues the company’s strong record of investment selection and brings the lifetime gross proceeds achieved by the company to $105m. After payment of the dividend… Juridica will have returned $64m (or approximately £42m) to shareholders in the form of $54m in dividends and $10m as a result of the September 2010 share buy-back scheme. Juridica has so far raised £115m ($210m) of capital in two tranches.”

Lord Brennan QC, Juridica’s chairman, said: “We are pleased that the portfolio continues to mature and deliver cash proceeds. The board anticipates making dividend payments to shareholders over the next 12 months if the portfolio develops as expected; and will continue to pursue the company’s objectives of dividend income and NAV [net asset value] growth.”

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Hickinbottom: Costs were main driver of proceedings

An appeal court judge has expressed his “dismay” after estimating that legal costs “not far shy of £2m” had been spent in a case involving over 800 claims for flight-related compensation each worth only a few hundred pounds.

Lord Justice Hickinbottom also cautioned that “who pays the cheque” is not necessarily the right guide as to who has won in litigation.

The Court of Appeal heard in Sirketi v Kupeli and others [2018] EWCA Civ 1264, that Atlasjet agreed with the government of Northern Cyprus to provide replacement flights after Cyprus Turkish Airlines, the second defendant, lost its air operator’s licence and ceased trading.

None of the claimants received their replacement flight and had to purchase new tickets with other carriers or did not travel.

The proceedings were never formally incorporated into a group litigation order, but the claims were joined and managed together by one firm of solicitors, Hudson Morgan Williams.

In a postscript to the judgment, Hickinbottom LJ said it would be “remiss if I did not express my dismay” at the way the parties’ costs had “so vastly, and so obviously, exceeded any substantive claim that the claimants may have had”.

Although the court did not have “precise figures” for costs spent so far, he said Atlasjet’s costs for the part 1 trial – an initial trial of both legal issues and lead claims – were “in the region of £800,000” and the claimants’ costs, including the success fee, would be the same if not more, making a total not “far shy of £2m”.

Hickinbottom J said that, from a “very early stage” in the litigation, it was clear that “the main driver of these proceedings was clearly not the substantive sums claimed but costs”.

He said the claimants, described by their own counsel as “modest folk”, each claimed sums “in the low hundreds” of pounds from Atlasjet.

“We do not have details of the CFA between the claimants and their solicitors; but we do know (i) that the solicitors must have regarded the claims as being high risk, as the success fee was put at 100%; and (ii) the claimants did not have the protection of after-the-event insurance.

“On any view, this litigation, for the claimants, presented a very high commercial risk out of all proportion to the potential prospective rewards.

“On the other hand, knowing that the claims were necessarily very modest in amount, Atlasjet refused to consider any form of compromise, until shortly before the trial, when, in effect, its efforts were both too little and too late.

“The judge correctly observed that this case cried out for some early, sensible consideration of compromise.”

Hickinbottom LJ said only two of ten lead claims against Atlasjet succeeded at trial before Mrs Justice Whipple in February 2016. Whipple J ordered Atlasjet to pay 33% of the claimants’ costs and £225,000 on account.

He said that “in a group claim such as this, whilst the defendant may be unitary, the claimants are not”. Of the total of 838 individual claims, following the part 1 trial, Atlasjet was successful in 792 of them and was entitled, as a “starting point”, to its costs from those claimants.

He said the purpose of the trial was not merely to “conclusively” determine the lead claims, but to help determine the rest of the claims.

“Looking at the litigation as a whole, whether a party is ‘successful’ is an issue which has to take into account both the extent to which a party has been successful in such issues and the consequences of the trial for the balance of claims.”

He went on: “In my view, unfortunately, Whipple J was wrong to equate ‘who receives the cheque’ with the successful party for the purposes of CPR rule 44.2(2) in the context of this complex group claim.

“She was required to consider who was successful, in the context of the group litigation as a whole; and that was not truly reflected by the fact that a limited number of claimants were successful in and as a result of the part 1 trial.”

However, Hickinbottom LJ said Atlasjet’s conduct should also be taken into account.

“It was certainly open to the judge to conclude that Atlasjet’s conduct in failing to engage in attempts to compromise this litigation, in circumstances which were ‘crying out for some sensible attempt at negotiation before costs racked up and the parties’ attitudes hardened’, was a matter which should be reflected, against Atlasjet, in consideration of costs as between the parties.”

HIckinbottom LJ replaced Whipple J’s order that Atlasjet should pay 33% of the claimants’ costs, with no order for costs: “In the part 1 trial, it is clear that neither party had anything close to complete success, and indeed that honours were fairly even.”

Lord Justice Davis agreed, describing the litigation as a “melancholy tale”.

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Warby: setting up users committee

Lawyers and other users of the new media and communications list are unhappy with how the Civil Procedure Rules (CPR) apply to the field, and particularly costs budgeting, according to the outcome of a consultation launched by Mr Justice Warby.

It was announced in February that Mr Justice Warby had been put in charge of the new list and he has carried out a consultation with users to highlight areas of concern.

An overwhelming majority of the 22 respondents said the CPR and practice directions did not “adequately cater for the needs of those who litigate in this area”.

A further majority (13 of the 19 expressing an opinion) said they believed the “single most important case management issue” which needed to be tackled was costs budgeting. Another five said the most important issue was delay.

There was unanimous agreement that it would be “worthwhile” to collect statistics on the controversial subject of injunctions restraining freedom of expression, with only two respondents deeming the current system acceptable.

Respondents to the consultation included six law firms, three newspaper groups and two barristers’ chambers. Five individual solicitors replied, a solitary litigant-in-person (LIP) and the Independent Press Standards Organisation.

In his response, Warby J said respondents had put forward a “wide range of detailed and specific proposals” for changes to the procedural regime for cases in the media and communications list.

He said that among them was a change to the defamation pre-action protocol obliging claimants to “specify meaning and precise monetary relief claimed”, docketing to specialist judges, early judicial assessment of claims by LIPs and more applications dealt with on paper.

Warby J said responses did not “disclose in detail” which aspects of costs budgeting were considered to be unsatisfactory, and they were not asked for this. “This is a matter for further exploration, as is the perennial problem of delay.”

The judge added that, apart from the single LiP, respondents unanimously backed the creation of a media and communications list users committee.

He said that a meeting would be held at the High Court later this year, at which setting up the new committee would be discussed.

Warby J said any changes to the rules would have to go before the Civil Procedure Rule Committee, and it was “too early in this process to formulate any firm proposals”.

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Cummings: substantial increase in claims costs

The Association of British Insurers (ABI) has today set out its terms for agreeing to end the controversial practice pre-medical offers to whiplash claimants.

Senior policy adviser Rob Cummings said that if the changes to medical evidence introduce “a greater degree of rigour” and the fee for the report is incorporated into the Civil Procedure Rules, “the industry is willing to consider stopping pre-med offers”.

Speaking to Manchester Law Society’s personal injury conference, Mr Cummings noted that the vast majority of pre-med offers are for low-value whiplash claims, and “some insurers rightly question the benefits of asking for a medical report on an injury which has no objective test, which has little chance of coming back with a negative diagnosis and which will add over 10% to the cost of the claim”.

This was even more so when a number of these reports are for claims that could be months, if not years, after the accident “and where the doctor has nothing more to go on than the subjective word of the claimant”.

He said: “If the reforms to the medico-legal reporting framework are not introduced properly or are watered down to protected vested interests, simply banning pre-med offers will achieve little. In fact, it would only serve to add additional costs for personal injury claims which would ultimately lead to increased premiums.”

The government said last month that it was “attracted to introducing a rule to ensure that a medical examination and report is completed before a claim can proceed”.

On referral fees, the banning of which the ABI supported, Mr Cummings acknowledged that “it was a major self-inflicted blow for insurers to participate in a personal injury claims market involving a merry-go-round of referral fees and other unnecessary costs”.

He continued: “Given the financial rewards that were to be had from referral fees, it comes as little surprise that people across the market continue to look at new and innovative schemes; or whether there are gaps in the law or between regulators, to get around the ban.

“People should be asking themselves, not whether these practices are within the letter of the law, but whether they are in the spirit of the LASPO reforms. The government banned referral fees not to stop honest claimant lawyers from marketing their services but to stop the increasing number of frivolous and exaggerated personal injury claims.”

Mr Cummings said that while – at least for now – claims frequency is reducing, the cost of claims “has not seen a corresponding reduction”.

He explained: “Fixed fees have reduced but at the same time as awards for general damages have increased. The Judicial College Guidelines and the Simmons v Castle decision have together driven up general damages awards by around 20%. Insurers are also reporting significant increases in the number of rehab referrals and psychiatric reports since the reduction in fixed fees was introduced. Overall then, there has been a substantial increase in claims costs.”

Continuing to push the case for an increase in the small claims limit for personal injury to £5,000, he said there needed to be three safeguards to ensure access to justice for genuinely injured claimants is not undermined:

  • Improved education and awareness so that claimants know how to file a claim for compensation in the new system and what their rights are;
  • The mandatory use by claimant and defendant representatives of independently regulated software-based damages calibration tools to assess general damages awards in all cases, litigated or not; and
  • The claims portal employing a small number of staff to process paper-based claims from those who are not able to file a claims notification form online.

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By Katie Fitzgerald, predictive coding specialist at Kroll Ontrack UK

This past month Ireland has given me cause for celebration due to the decision in Irish Bank Resolution Corporation Ltd & ors v Quinn & ors [2015] IEHC 175, which sanctioned the use of predictive coding technology in the disclosure process.

For those who don’t yet know, this technology learns from human document reviewers and prioritises and categorises documents automatically using algorithms. The use of this technology in discovery has been sanctioned in the US for some time. For the first time, a court closer to home has agreed to the validity of using this technology and the benefits being reaped from it. As an advocate for predictive coding, this makes me about ready to jump for joy.

The judgment is a great read, for anyone inclined to do so, and a shining endorsement of the potential benefits of this technology.

The court held that:

  • The rules of court in Ireland do not require a manual document review to be carried out;
  • The evidence establishes, that in discovery of large data sets, technology-assisted review (TAR) using predictive coding is at least as accurate as, and, probably more accurate than, the manual or linear method in identifying relevant documents;
  • As TAR combines man and machine, the process must contain appropriate checks and balances which render each stage capable of independent verification. The parties need to agree to these;
  • Provided the process has sufficient transparency, TAR using predictive coding discharges a party’s discovery obligations;
  • Predictive coding will save time and money if used to refine a data set and to limit the pool of documents to be manually reviewed (in this case, 10% of the 680,809 documents would need to be manually reviewed after employing predictive coding); and
  • Parties should first agree to the use of predictive coding, run agreed upon keyword searches to initially refine the dataset and then use predictive coding subject to agreed-upon checks and balances. Documents suggested by the software as being potentially relevant should then be reviewed manually by a human review team.

The ruling addresses major concerns expressed about predictive coding and seeks to sway the sceptics. It unequivocally states that predictive coding will save time and money. Although there is no specific reference to proportionality in Irish law, the judgment states that we should be minded that cost should not be a barrier on access to justice.

English lawyers, litigants and courts take heed given the fact that proportionality is a key aspect of the Civil Procedure Rules. The methodology underpinning the use of this technology has been declared sound, as has the benefits of using it.

Is the use of predictive coding technology best practice?

The logic of the TAR process described in the judgment is sound, although the use of both keyword searching and predictive coding might raise a few eyebrows.

There is some debate within the e-discovery industry as to whether or not this is best practice: should we continue to use keywords given the limitations around their use which we now know exist (returning to many or too few documents)? There is also conflicting case law on this topic in the US. For now, the answer is that keywords remain an effective culling tool.

Is predictive coding as accurate as human review?

The court compared and discussed the merits of human review versus the use of predictive coding. Following this discussion, the judge decided that predictive coding is at least as accurate as, if not more than, a human review.

Will using predictive coding technology mean relevant documents will be missed?

The judge addressed these concerns. Common sense counters this; relevant documents will always be missed. There are likely to be mistakes, even in a human review. So long as we take the correct validation steps and our predictive coding relevance scores are sufficiently high, then we have met our obligation.

Does the use of predictive coding necessitate disclosing commercially sensitive, non-relevant information to the other side?

The final, and most interesting point to note, is the discussion of the disclosure of the document set used to train (teach) the predictive coding system, for transparency purposes.

When I talk to people about predictive coding, one of the biggest concerns is that they will have to show the other side commercially sensitive non-relevant information, to prove they have correctly taught the system how to identify relevant documents and categorise them.

The judge held that this is not the case. The training set (with the exclusion of relevant data) would not have to be disclosed; in a linear review the other side would never be allowed access to the ‘not relevant’ material and the same is true for a predictive coding review.

What does the acceptance of predictive coding mean for clients?

This case is a landmark decision in Europe and the judgment tackles with ease the concerns often articulated about predictive coding. It also provides a solid foundation for a protocol on the use of this kind of technology in the disclosure process and states with conviction that predictive coding will save time and money.

Overall, I am thrilled with this decision and the increased confidence with which clients can take advantage of this technology. I anticipate the decision will inspire many litigants to use predictive coding, safe in the knowledge that courts closer to home think the technology works and is a bona fide method to save time and money.

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Imran Akram, CEO, Asons Solicitors

Founded in 2009 by brothers Kamran and Imran Akram, Asons Solicitors employs over 250 staff at its Bolton HQ and has established itself as one of the north-west’s largest law firms.

As a new start up, Asons needed to find a way to compete with the many well-established giants of the personal injury sector. Investment in technology was required in the form of a case management software solution that was user-friendly, adaptable and would allow for the consistent management of high volumes of cases with the utmost quality and efficiency.

A Proclaim Case Management system was chosen as it provided a centralised desktop solution with a consistent look and feel for all of Ason’s case types, not just personal injury but also other areas they may choose to go into. The integrated Proclaim development toolset also ensured the system would be future-proof as it allowed for straightforward expansion creating confidence for ambitious growth plans.

Proclaim has been fundamental in giving Asons a competitive edge. Staff numbers have grown from 3 to over 250 (8,200% growth) since its inception. All routine tasks are now automated allowing fee earners to fully focus on client relationships rather than non-value adding administration. As a result of this, 88% of the firm’s staff are revenue generating fee earners with only 12% dedicated to ‘support’ functions.

All claims are processed and stored 100% digitally, even including the scanning in of all incoming hard copy documentation. Proclaim’s integrated reporting suite has proved essential for providing performance intelligence and monitoring business KPIs, ensuring profitability is maximised.

“Proclaim has provided us with the power to continually enhance our processes, drive out waste and increase margins”, says Imran Akram, CEO.


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Fitzpatrick: lawyers do so much more than the statistics suggest

Fitzpatrick: lawyers do so much more than the statistics suggest

Posted by Michael Fitzpatrick, Newcastle regional manager at Litigation Futures sponsor John M Hayes

The dictionary defines pro bono work as work ‘done or undertaken for the public good without any payment or compensation’ – in other words ‘free of charge’. Those three magical words are invariably subjugated by natural cynicism – ‘there’s no such thing as a free lunch’ and ‘you don’t get ‘owt for nowt’ spring to mind. Media-driven perceptions of the legal profession might engender similar sentiments.

But no. The legal profession is not just a collection of businesses, it is a public service collective which has justice at its heart, and it is certainly no stranger to working for nothing.

The Access to Justice Foundation

Section 194 of the Legal Services Act 2007 (which came into effect on 1 October 2008) formally recognises this. It subverts the indemnity principle and articulates the power of a court to make what is tantamount to an order for inter partes costs – an order made against the opponent of a litigant with no funding in place. The costs recovered are paid to the Access to Justice Foundation, a charity which provides much needed finance to law centres and other similar advisory services.

The foundation does, of course, receive money from other sources, including unclaimed client account balances from solicitors, legal support trusts’ fundraising events, and other generous donations from a plethora of individuals, associated legal institutions and enterprises, including the Law Society, the Bar Council and numerous legal publications

The essential pre-requisites and features of Section 194 are, in summary:

  • Made only by a civil court;
  • Recipient has legal representation, all or part of which was free of charge;
  • Can be made even if counsel was not acting free of charge;
  • Cannot be made against a party who was also represented pro bono or legally aided;
  • Cannot exceed what would have been determined by a conventional costs order;
  • Costs claimed must have been incurred after 1 October 2008;
  • VAT must not be claimed; and
  • Onus on winning litigant to apply for the order and to quantify the costs

Positive evidence

The Solicitors Journal reports that since 2008, the scheme has resulted in some 160 pro bono costs orders with a cumulative value of approximately £600,000.

Statistical evidence from the Trustlaw – Index of Pro Bono 2015 (part of the Thomson Reuters Foundation) reveals further positive evidence. A sample size of 8,043 fee-earners in England & Wales suggested an average of 21.9 hours of pro bono work each annually; the percentage who performed 10 hours or more amounted to 35.3%. Partner engagement also showed a consistent and positive trend in line with previous years, with 37.8% recording time on pro bono matters; and the number of pro bono hours performed by partners increased by almost 10% to 14.9 hours.

The recent attitude of government

We live in times of immense change and austerity, something that the last Lord Chancellor (Michael Gove) claimed to be acutely aware of. In his inaugural speech, he said: “The law is more than a marketplace, it is a community, the legal profession is more than a commercial enterprise, it is a vocation for those who believe in justice being done…

“Many of the most prestigious chambers at the Bar and many of the solicitors’ firms already contribute to pro bono work and invest in improving access to the profession… it is clear to me that it is fairer to ask our most successful legal professionals to contribute a little more rather than taking more in tax from someone on the living wage.”

Laudable though it is for a senior politician to extol the virtues of the legal profession, it is rather less commendable to engage in an almost subliminal shifting of responsibility. In the words of Andrew Caplen, the then president of the Law Society, in 2014: “Pro bono legal advice should never be seen as a substitute for a properly funded legal aid system. It is right to publicise the tremendous work that so many solicitors do free of charge.”

There speaks the voice of experience and reality, the incisive summation of an experienced lawyer, as opposed to the politically manoeuvring rhetoric of Mr Gove, a journalist by trade and a (then) Lord Chancellor by design.

The recent attitude of the legal profession

Perhaps there is more potential for pro bono work (on a formal basis at least) but it cannot be a panacea. Statistics suggest that much is being done, and my own experience of clients and friends in the legal profession suggest that they do so much more than the pure data reveals.

Lawyers typically spend a great deal of unpaid time dealing with their clients, providing practical advice, reassuring them, giving them a proverbial ‘shoulder to cry on’ and just being there for them – instances of pro bono work by every lawyer that go unrecorded.

As committed professionals, their remit is to deliver justice and a high-quality service; the overall framework within which this is achieved, however, is quite clearly the responsibility of government. Sadly an ever-burgeoning part of our society are being denied access to justice in the name of austerity.

In the words of Lord Falconer (shadow justice secretary): “Access to justice has been all but dismantled for the poorest in our society… The number of social welfare cases being granted funding has plummeted, victims of domestic violence are struggling to get help, employment fees are a significant barrier to workplace justice and the essential safeguard that is judicial review has been severely restricted.”

The Law Society, Bar Council and the Chartered Institute of Legal Executives have recently launched a working group to explore the feasibility of a contingent legal aid fund; this follows on from a speech by Sir Rupert Jackson earlier in the year. Conceptually this might involve the creation of a pooled fund of resources which would be capitalised and topped up by a contribution from damages in successful civil cases, in which the winning party is backed by that fund – a form of self-perpetuation.

An initial report is due by September and a final report before the end of the year. Whatever conclusions are reached, it is to be hoped that they are done so in a spirit of social realism and in a genuine effort to facilitate greater access to justice.

Concluding thoughts

Ultimately there is a funding shortfall when it comes to access to justice. The government (and lest it be thought that this is a party political attack, governments of all hues for some years) appears to be abrogating its responsibility to effectively ensure access to justice for all, one of the core principles of any democracy worth the name. It is greatly to the credit of so many lawyers that they are mitigating this effect, not because they are obliged to, but because they put the public good before their own.

The legal profession are clearly playing their part and now it is time for government to play theirs – and I can tell you that pro bono!

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Beatles: Copyright infringement dispute

A High Court judge was wrong to order a non-party costs order (NPCO) where the respondent had not been warned that the applicant was going to seek one, the Court of Appeal has ruled.

Lord Justice Floyd found that that the judge had been wrong to disregard the respondent’s submission that he would have acted differently had he received such a warning.

Sony/ATV Music Publishing LLC & Anor v WPMC Ltd & Anor [2018] EWCA Civ 2005 concerned a claim of copyright infringement in a documentary about a 1964 concert given by The Beatles.

The claimants were successful at trial before Mr Justice Arnold and ordered WPMC to pay SATV’s costs, on the indemnity basis after the date when a rejected part 36 offer had expired.

It was clear to the claimants before the trial that WPMC could not pay any costs order, and that its only apparent asset was its rights in the documentary.

Just over a year after judgment had been handed down, SATV wrote to David Bailey, the director and majority shareholder of WPMC, so say that it intended to seek an NPCO against him under section 51(3) of the Senior Courts Act 1981.

Amongst his reasons for defending the application was that he had not been warned at any stage up to then that this was a step which SATV intended to take in the event it succeeded in the action.

Mr Bailey told the judge that, had he been given such a warning prior to trial, he would either have put WPMC into liquidation or accepted one of SATV’s settlement offers.

Further, he said that, if he had been warned after the trial, he would have tried to raise funds to pursue the appeal on the one issue for which permission had been granted.

Arnold J concluded that there was no explanation of why SATV did not warn Mr Bailey. While the judge accepted that his evidence had been given honestly, he also said it been given “with 20/20 hindsight”, and that he “did not accept that it necessarily reflects how Mr Bailey would actually have acted”.

As a result, the judge went on to hold that a warning would not have made any difference.

On appeal, Lord Justice Floyd said Arnold J fell into error. “He left out of account a feature which he should have considered, namely the prospect that Mr Bailey would have conducted the defence of the case differently if a warning had been given.”

The fact that evidence was given with hindsight, as often happened, did not necessarily mean that it was not reliable, Floyd LJ said.

“Mr Bailey had given evidence in the clearest possible terms as to how he would have behaved if he had known that he was running the risk of a NPCO. No request had been made to challenge this evidence by applying to cross-examine him.”

He also found that the reasons given by the judge for concluding that the warning would not have caused Mr Bailey to act differently were “inferential ones”, namely that Mr Bailey was motivated by recouping money for his fellow investors, by the advice he had received from his lawyers and by the fact that they were prepared to act on a conditional fee agreement.

“Those factors do not mandate a conclusion that Mr Bailey would have acted in the same way if he had known that he would face a costs bill for several hundreds of thousands of pounds.

“It is one thing to help out fellow investors if there is no appreciable downside, quite another if it is to going to result in a large costs liability if the defence is unsuccessful.”

Mr Bailey, Floyd LJ said, was an experienced entrepreneur, used to assessing risk against reward. “The judge was not entitled, in my judgment, to reject Mr Bailey’s evidence as to how he would have behaved in the event of a warning.”

He added: “I also consider that it is fair to take into account the fact that Mr Bailey could have protected his position by ATE [after-the-event] insurance.

“The judge rejected this point because there was no evidence that Mr Bailey asked for or was given advice about the remedies which were open to SATV if no ATE cover was obtained and WPMC lost.

“However, it was obvious that Mr Bailey and SATV were operating on the assumption that any costs order made against WPMC would not be met. It is not clear to me therefore what should have prompted Mr Bailey to ask for such advice.

“However, if he had been warned that a NPCO was being sought against him, there was every reason for him to ask for and obtain appropriate advice as to how he might protect himself against such an order.”

Exercising the discretion afresh, Floyd LJ described the absence of any form of warning as “fatal” to the application for the NPCO.

“It is plain, as the judge indeed held, that SATV knew or should have appreciated that WPMC would not be able to pay their costs in the event that the claim succeeded, and they knew that WPMC, and Mr Bailey with whom they dealt directly, were operating on the same assumption.

“In those circumstances the failure to warn until a year after final judgment is given strikes me as manifestly unfair to Mr Bailey.

“It would be unjust because Mr Bailey was deprived of realistic opportunities to settle the litigation or to protect himself against the adverse effects of a NPCO, or to abandon the defence of the litigation at a much earlier stage.

“I would therefore allow the appeal and set aside the NPCO.”

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McNally: will keep regulation of funders under close review

The government yesterday rejected Labour calls to delay implementation of the civil justice reforms by six months.

It also refused to move on demands that the 25% cap on the success fee that can be taken from a personal injury claimant’s damages is calculated on the basis of all heads of loss, rather than just past loss.

It came during a relatively short, and scarcely attended, grand committee debate in the House of Lords on the motion to approve the draft Conditional Fee Agreements Order 2013 and Damages-based Agreements Regulations 2013. Having been approved, they will also have to go through the House of Commons.

Labour spokesman and solicitor Lord Beecham – who complained about how little time practitioners would have to prepare for the changes in the draft legislation – said that with all that is happening with civil justice reform, including the uncertainty over portal extension, “one might have thought that it would be sensible to bring all the changes together and to do it at a time which allows the parties and the professions to prepare adequately”.

He added: “I hope that the minister will look again at the timetabling with a view to deferring implementation of whatever regulations finally emerge for six months until October of this year.”

However, justice minister Lord McNally replied: “We are not persuaded that the timescales we have set are unreasonable, and we will not be deferred from the course that we have set… These orders will go through to take account of the fact that LASPO comes into effect on 1 April 2013.”

Both Lord Beecham and Liberal Democrat solicitor peer Lord Phillips of Sudbury cited Lord Justice Jackson’s change of heart over including future loss in the success fee/contingency fee calculation, when he said last year that he could “see the sense” of allowing it “in appropriate cases”.

But Lord McNally said the case for the cap did not rest on it being the judge’s original recommendation. “A sharp-eyed lawyer would say that the noble Lord’s quote about Lord Justice Jackson did not endorse the counterview but simply said that it had merit, which is not the same as advocating that the government change their policy.

“Even if it were, this is the government’s policy. It is the right policy because it protects the future earnings and the future cover for victims in these cases. It remains our policy on that merit, and we are willing to defend it on that basis.”

Lord Beecham raised a range of other questions and criticisms of what he described as “a pretty defective-looking set of regulations”.

Among them was a bid to exclude VAT on the success fee from the cap. But Lord McNally said including VAT “will provide further protection for the claimant’s damages and add certainty for the claimant as to the likely deduction from their damages”.

The Labour peer also focused on third-party litigation funding, and expressed concern about “a kind of hedge fund for legal claims” having control of cases. He said: “I understand that 25 funders are already established in the UK for damages-based agreements, of which only nine have signed up to their own self-regulated Association of Litigation Funders. They are not even joining their own association, let alone being responsible to any independent and impartial organisation to oversee their work.

“Again, I invite the minister to reconsider whether there should be such a system of regulation. There is apparently around £1bn already held by organisations in the UK to fund these arrangements. Some of them, interestingly, are apparently based offshore – a sort of Starbucks of the damages-based agreement world. One can only imagine where any profits will ultimately go.”

During the passage of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, the government rejected moves to introduce statutory regulation of litigation funders in favour of giving self-regulation a chance. Both Lord Beecham and Lord McNally yesterday mentioned that they had had meetings with the US Chamber of Commerce, which has lobbied hard in the UK for statutory regulation.

Lord McNally said: “What we have decided so far is to keep the matter under review. That phrase can often hide weasel words and weasel intent, but we want to see just how much this is going to become a factor in our legal system, while making sure that some of the warning signs that the noble Lord has quite legitimately raised are on the radar of ministers as well. We will keep this matter closely under review.”

The only other speaker was Liberal Democrat barrister Lord Marks of Henley-on-Thames, who asked whether DBAs would be available to defendants. While under the regulations they will not, Lord McNally saidhe would give the matter “further thought”.

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Truss: only legally acceptable rate I can set

Lord Chancellor Liz Truss has today cut the discount rate from 2.5% to minus 0.75% but at the same time promised a consultation on whether the methodology needs to change.

The government has also committed to ensuring that the NHS Litigation Authority has “appropriate funding to cover changes to hospitals’ clinical negligence costs”.

The insurance industry has reacted with shock and fury.

Ms Truss said the law was “absolutely clear – as Lord Chancellor, I must make sure the right rate is set to compensate claimants. I am clear that this is the only legally acceptable rate I can set”.

In a statement to the stock exchange this morning, she explained: “The current legal framework makes clear that claimants must be treated as risk-averse investors, reflecting the fact that they may be financially dependent on this lump sum, often for long periods or the duration of their life.

“The discount rate was last set in 2001, when the then-Lord Chancellor, Lord Irvine of Lairg, set the rate at 2.5%. This was based on a three-year average of real yields on index-linked gilts. Since 2001, the real yields on index-linked gilts has fallen, so I have decided to take action.

“Having completed the process of statutory consultation, I am satisfied that the rate should be based on a three-year average of real returns on index-linked gilts. Therefore I am setting it at minus 0.75%.”

The statutory instrument to effect this change will be laid today, and will become effective on 20 March 2017.

Despite having gone through an exhaustive consultation process over the past four years, Ms Truss said the government intended to review the framework under which she set the rate “to ensure that it remains fit for purpose in the future”.

She said: “I will bring forward a consultation before Easter that will consider options for reform including: whether the rate should in future be set by an independent body; whether more frequent reviews would improve predictability and certainty for all parties; and whether the methodology – which in effect assumes that claimants would invest only in index-linked gilts – is appropriate for the future.

“Following the consultation, which will consider whether there is a better or fairer framework for claimants and defendants, the government will bring forward any necessary legislation at an early stage.”

In the meantime, acknowledging the “significant implications across the public and private sector” of her decision, Ms Truss said that in addition to supporting the NHS Litigation Authority, the Department of Health would work closely with GPs and medical defence organisations “to ensure that appropriate funding is available to meet additional costs to GPs, recognising the crucial role they play in the delivery of NHS”.

Finally, she said Chancellor of the Exchequer Philip Hammond would meet representatives of the insurance industry to assess the impact of the rate adjustment.

According to Bill Braithwaite QC, the change could double some damages awards. “For someone in their 20s, lump sum damages would change from £4.8m to £11m. For someone in their 60s, where it impacts less, lump sum damages would change from £3.8m to £6.5m.”

Huw Evans, director general of the Association of British Insurers, described the decision as “crazy”.

“Claims costs will soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK. We estimate that up to 36 million individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year.

“To make such a significant change to the rate using a broken formula is reckless in the extreme, and shows an utter disregard for the impact this will have on consumers, businesses and the wider operation of the insurance market.

“We have repeatedly warned the Government that this could lead to very significant price rises, with younger drivers in particular likely to find it much harder to get affordable insurance. It is also a massive own goal that lands the NHS with a likely £1billion hike in compensation bills when it needs it the least.

“We need a fairer deal for consumers and claimants. We cannot wait until Easter – the Ministry of Justice must commit to alternatives immediately so changes to the law can be included in the Prison and Courts Bill.”

The Association of Personal Injury Lawyers welcomed the decision but said it was “long overdue”.

In a statement, it said: “People already coping with the most severe injuries have been deprived of the help and care they need for years. Meanwhile insurance companies, which have saved millions of pounds in unpaid compensation, have been aware that a decision to change the discount rate has been on the cards for six years, since APIL first began judicial review proceedings on the issue.

“They have had plenty of time to prepare for this change and the fact that many are now saying premiums will have to rise to cover the cost simply beggars belief.”

Jasmine Murphy, a barrister at Hardwicke, tweeted: “Claimant sols will be busy today withdrawing pt36 offers in any case with a significant element of future loss.”

Nigel Teasdale, president of the Forum of Insurance Lawyer, said the decision was “extremely concerning”.

He said: “The announcement has all the hallmarks of a rushed decision and the government’s current approach seems disjointed at best.

“On the one hand suggesting that saving the average consumer money on their insurance premium is a priority, then on the other reducing the discount rate which will have a major inflationary effect on premiums now and for many years to come.

“The timing is wrong given the uncertainty in the market, and the decision also fails to reflect how people actually invest their compensation. The reality is that when paid large amounts of money in a lump sum most claimants will invest in a range of assets through an independent financial adviser…

“The most likely outcome in addition to increasing premiums is a return to a more adversarial system of litigation where major heads of damage will be challenged.”

Christopher Malla, a partner at leading defendant firm Kennedys, said such a drastic cut would have “a massive impact” on the value of the most serious claims – adding 30% to the future loss element of catastrophic injury cases, and 50% to high-value clinical negligence claims involving children.

There would also be significant delays in current cases as claimants withdraw part 36 offers to settle.

He said: “This is not about denying injured people the compensation they need. At the same time, claimants should not be over-compensated, especially when it is public bodies, such as the NHS and local authorities, which are paying.

“Unfortunately, in the face of its own research and the fact that the investment climate has changed since the review began in 2012, the government is now at risk of doing exactly that…

“We don’t pretend that this is an easy balance to find but in Europe and the USA, the discount rate is significantly higher than even the old rate, which indicates just how out of step we have now become.”

Daniel Frieze, barrister and head of personal injury at St John’s Buildings, said the new rate was “undoubtedly a positive thing for claimants”, but added: “However, with claims now worth a lot more, the result of a successful claim leaves potential losses at up to double their previous amount.

“As a result, these changes also act as a benefit to insurers to argue for the implementation of fixed costs, which the government has already heavily championed in recent weeks.”

Admiral Group plc told the stock exchange in response that it was postponing the preliminary announcement of its 2016 annual results by a week to consider the impact of the change.

It told investors: “The reduction in the discount rate will have the effect of increasing the cost of personal injury claims, therefore also increasing the ultimate loss ratio for all business written up to the effective date, part of which will be earned and part unearned.

“The majority of the financial impact in respect of premiums earned during 2016 and prior years will be reflected as a one-off charge against 2016 second half profits…

“The estimated total net financial impact of all claims settling at the new rate is £140m to £175m. The estimated net financial impact on 2016 reported profit is £70m to £100m…

“The group anticipates that if market pricing adjusts future premiums to reflect the lower discount rate, there will be no significant impact on future business and its profitability after the change.

“The group is also confident that its strong capital position, along with its prudent approach to claims reserving, will allow it to address the outcome without significant change to its business or long term financial outlook.”

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Chang: confiscation order

A doctor who fraudulently submitted false medical claims worth £183,000 to unwitting solicitors has been jailed for two years.

Benjamin Chang, 57, of Mill Hill, London, was found guilty at the Old Bailey of one count of fraud by false representation and for being in possession of articles for use in fraud and money laundering. He will also be subject to a confiscation order.

Doctor Chang was a registered but not a practising GP. He was employed to conduct medical examinations on behalf of solicitors for people making personal injury claims following car accidents.

Chang would make medical assessments through his medical agency, Hertford Healthcare, based in Milton Keynes. He would then invoice solicitors for the medical assessment and then later send another invoice from a company called Proteus Healthcare, which he claimed had provided the patients with several physiotherapy sessions following the initial medical assessment.

However, Proteus Healthcare did not exist and was registered to an address where another business with no knowledge of Proteus was operating. The physiotherapist who was supposed to have provided the treatment did not exist either.

Chang’s fraudulent activity was discovered when a claimant saw physiotherapy treatment provided by Proteus Healthcare listed as part of their claim. The claimant told their solicitors that they had never received physiotherapy and had never heard of Proteus Healthcare.

Further investigation revealed that Chang had invoiced the law firm for 18 different claimants’ physiotherapy treatment provided by Proteus Healthcare. None of the claimants had received this treatment and three of them had not even received a medical assessment from Chang.

His conviction followed a three-year investigation by the City of London Police’s Insurance Fraud Enforcement Department (IFED).

Detective Constable Mick Jones, who led the investigation, said: “Doctor Chang committed fraud for a number of years and completely abused his position to do so. The solicitors who employed Chang trusted him to provide a service for their claimants. Instead of doing this he bowed to his own greed and used the opportunity to make money that he simply wasn’t entitled to.

“This extensive investigation into Chang’s criminal behaviour took a team of officers all over the country as well as to Gibraltar, where we were able unpick some his financial wrongdoing.”

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Neuberger: costs management to have salutary effect

Satellite litigation may be necessary to work out the new rule on proportionality in costs, the Master of the Rolls has said, but it will be a “very small price to pay”.

Lawyers were also warned that if they fail to submit a budget under the new rules for costs management coming in next April, then it will by default comprise only the applicable court fees.

Speaking at an event on costs management at the Law Society last night, Lord Neuberger also revealed that two specific members of the Court of Appeal will sit on all appeals arising out of the Jackson reforms “to ensure consistency and efficiency”.

Giving the latest lecture in the Jackson implementation programme, Lord Neuberger emphasised that proportionality will apply throughout the life of a case, rather than just at the end. The rule will enable courts to judge the reasonableness of individual items in a bill and then stand back and consider whether the total figure is proportionate.

He said: “The effective, and consistent, implementation of case and costs management informed by the new costs rule should have a salutary effect on litigation conduct and costs.

“It should focus the minds of all involved on the need to consider the costs and benefits of each step proposed to be taken in proceedings, not least because parties will need to be made fully aware of the fact that certain steps taken may, or will, be at their own cost, or may be futile.”

The judge deliberately steered away from saying what precisely would constitute proportionality and how it would be assessed. “It would be positively dangerous for me to seek to give any sort of specific or detailed guidance in a lecture before the new rule has come into force and been applied…

“The law on proportionate costs will have to be developed on a case-by-case basis. This may mean a degree of satellite litigation while the courts work out the law, but we should be ready for that, and I hope it will involve relatively few cases. It will be a very small price to pay.”

Despite the new arrangements in the Court of Appeal, Lord Neuberger called for “a strong respect for, an inclination to uphold, first instance decisions on costs issues. When making costs decisions, first instance judges should not be looking over their shoulders, and parties should not be encouraged to appeal costs decisions”.

In an accompanying lecture on costs management – which for the first time released the new rules – Mr Justice Ramsey told the event that all parties will usually have to exchange budgets within 28 days of service of the defence, which will then be checked by the court. In default the budget will only comprise applicable court fees, which he said would come as “something of a shock” to those who have hitherto been ignoring budgeting.

Ramsey J emphasised that there will, in most cases, be a presumption in favour of making a costs management order.

Addressing concerns that the costs of costs management will themselves prove a problem, he revealed that the costs of initially completing precedent H (the budget form) should not normally exceed £1,000 or 1% of the approved budget, and the costs of the process should not exceed 2%.

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Tax dispute

Case centred on company director’s remuneration

A senior tax judge has become one of the first to go through the Denton principles on relief from sanction, in finding that an 11-day delay in serving a statement of case was not significant.

In his ruling in the Tax Chamber of the First Tier Tribunal, Judge Jonathan Cannan outlined how the approach set out in Denton could be applied by other non-specialist courts.

Judge Cannan said the first stage of the Denton test was to focus “not on whether the breach has been trivial, but on whether it has been serious or significant”.

He went on: “Whether a breach imperils future hearing dates or otherwise disrupts the conduct of the litigation may well be a useful measure of whether it has been serious or significant.”

Judge Cannan said the first stage of the test did “involve consideration of unrelated failures”, which were better dealt with at the third stage.

He said that when, during the second stage of the test, courts considered why the default occurred, they could find “good and bad reasons” in the Mitchell ruling. “Plainly pressure of work will rarely be a good reason.”

The judge went on: “The third stage involves consideration of all the circumstances of the case. The need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with rules are of particular importance in the third stage and should be given particular weight.”

Judge Cannan was ruling in Elder v HMRC [2014] UKFTT 728 (TC), a case in which HMRC failed to serve its statement of case as directed; 11 days after the deadline, the time for service was extended by a tribunal judge. The applicable rule does not contain a sanction, but the claimant sought to have HMRC disbarred from taking part in the proceedings and Judge Cannan said the Denton guidance was directly relevant, and that – as the Court of Appeal said in its ruling – it was not necessary to cite pre-Denton rulings.

Referring to Lord Dyson’s comment in Denton that courts should always “have regard to all the circumstances of the case”, Judge Cannan said the 11-day delay was not “serious or significant”. “That is not a significant delay in the context of appeals generally, or in the context of the first and second appeals in the present case.

“That is not to say that such delays are to be in any way encouraged. However it did not imperil a future hearing date. Nor should it have disrupted the conduct of these appeals or other appeals.”

Judge Cannan accepted that there was “no good reason” for HMRC not to have sought extension of time for service of the documents, and noted its failure to engage with the appellant to agree directions and that the statement of case did not “deal adequately with quantum”.

However, “apart from these aspects”, the judge said he was not satisfied that any other breaches were significant. He dismissed the application.



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Stock exchange: announcement by City of London Group

City of London Group plc (COLG) is looking to sell its 50% stake in third-party litigation funder Therium Capital Management, it announced yesterday.

Therium’s long-touted international joint venture, which would have been its largest fund, has also been scrapped.

COLG’s acting chief executive, John Kent, said that in line with its operational strategy of focusing on SME lending, it has decided “not to inject further development capital into Therium and, since the end of the financial year, has reached agreement with the management of Therium to initiate a process to identify an alternative partner”.

COLG is a financial services group focused on providing merchant banking services to finance the SME and professional services sectors.

The statement, contained in COLG’s preliminary announcement of its annual results, emphasised that “Therium remains a business with strong management, good growth prospects and an excellent position in the marketplace”.

Over the year to 31 March 2014, Therium has had four litigation cases resolved, winning two and losing one, with one case being withdrawn at a very early stage. These four cases have been relatively small, Mr Kent reported, and many of Therium’s larger cases are still ongoing.

Since the year end, he added, Therium has had four cases resolved in its favour and has lost one.

Therium reported a loss before tax of £600,000 for the financial year, compared to £700,000 in 2012/13.

Mr Kent continued: “Therium has experienced continued delays in relation to its proposed international joint venture, which was intended to provide the scale necessary to generate profits without reliance on performance fees.

“This joint venture will not proceed as negotiations have been terminated by the parties. Other fund raising activities had been curtailed during these discussions and have only recently been resumed.”

In the meantime Novitas, Therium’s 50% owned associate, which extends secured lending to law firms and their clients, has recorded a strong advance, increasing its loan book “substantially” over the year.

Mr Kent said: “The business is profitable and foresees continued growth with the introduction of new products.”

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Motor insurance prices continued their recent downwards trend during the first quarter of 2014, according to one of the key surveys being watched to judge the impact of the civil justice reforms.

According to the Motor Insurance Price Index in association with Towers Watson, the 7.5% reduction over the first three months of 2013 means that comprehensive prices have fallen by around 19% in the last year, from £736 to £596. The last time that the average premium stood below £600 was at the end of 2009.

Car insurance: 19% fall in premiums over last year

Comprehensive policyholders in Manchester and Merseyside received the largest annual average price cuts in the country, amounting to 23% or a price saving of nearly £250. “These areas have previously been associated with particularly high third-party claims costs and so would be expected to see greater benefit from LASPO and related reforms,” the survey said.

Stephen Jones, UK head of P&C pricing at Towers Watson, said: “This quarter’s price reductions are sizeable, even allowing for the fact that motor insurers may wish to be tactically competitive around this time of year due to growing new vehicle registrations and the pattern of market renewal dates.

“Further contributing factors could include optimism surrounding potential reforms in the medical assessment of whiplash and action which may be taken on third-party repair and hire costs.

“Another factor to consider is that some insurers declared increased reserve releases when announcing their year-end results, perhaps indicating growing confidence in their understanding of the claims cost impact of recent legislative changes including LASPO.”

The survey showed that telematics policies – involving a device fitted to cars that tells insurers how well the policyholder is driving – are an increasingly significant feature of the cheapest prices.

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Eclipse200Eclipse Legal Systems, the Law Society Endorsed provider of legal software solutions, has announced its plans for integration with Veyo, the soon-to-launch comprehensive conveyancing portal.

Eclipse’s conveyancing clients include the full range of practitioners from new start-ups through to high-street practices and volume conveyancing firms. Eclipse’s Proclaim Conveyancing Case Management Solution provides an end-to-end approach and is widely regarded to be the most ‘integration friendly’ system in the marketplace.

Veyo, the joint venture between The Law Society and Mastek (UK) Ltd, a global IT Solutions company, will bring together electronically all the processes, checks and documentation prepared and undertaken by solicitors and licensed conveyancers in the sale and purchase of residential properties.

By integrating with Veyo, Eclipse’s clients will benefit from unique features such as the chain view and deal room, sharing information seamlessly between the Proclaim Case Management Solution and Veyo’s system – removing the need for duplication and increasing transparency.

Darren Gower, marketing director at Eclipse, comments:

“We at Eclipse pride ourselves on enabling our clients to be at the cutting edge of their business sectors. By giving our conveyancing clients the option to integrate with Veyo, we are providing the flexibility and increased communication channels that the increasingly competitive property market requires. Our clients will have the ability to utilise their best-of-breed Proclaim Conveyancing Case Management Solution within the new collaborative ‘chain’ environment of the Veyo portal.”

Desmond Hudson, chairman of Veyo, comments:

“We are delighted to announce our partnership with Eclipse. We have always recognised the importance of integration with reputable case management systems that are widely used across the full spectrum of legal practices. By partnering with Mastek UK, we have developed a truly agile portal that can integrate seamlessly with a myriad of systems.

“We are bringing in a revolutionary change to the home buying process which is long overdue. For the first time, Veyo will allow all solicitors to collaborate online and to move away from traditionalist practices and communications, further speeding up the process and enhancing transparency and efficiency. We are looking forward to working with Eclipse and other leading service providers to bring this change.”

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Hunt: scheme will take 12-18 months to establish

Health secretary Jeremy Hunt today announced plans to develop a state-backed indemnity scheme for general practitioners (GPs) in England.

He said the aim was to deliver “a more stable and more affordable system for GPs and their patients” that could provide financially sustainable cover for future and, potentially, historic claims arising from the delivery of NHS services.

In a statement to Parliament, Mr Hunt said the Department of Health has been talking to the four medical defence organisations (MDOs) and GP representatives over recent months. The transfer of historic liabilities from MDOs to a new scheme would be “dependent on satisfactory negotiation with the MDOs”.

He continued: “We will explore with GP representatives how to embed new indemnity arrangements, including the future costs, into GP contract negotiations…

“Any scheme would take at least 12-18 months to establish and require careful negotiation. GPs should continue to ensure they have appropriate indemnity cover in line with General Medical Council requirements to enable them to practise.”

Mr Hunt said NHS England has already committed to provide additional funding to GP practices to cover the estimated annual indemnity inflation for 2016/17 and 2017/18. NHS England has also announced additional money for indemnity cover over the coming winter.

No decision has yet been taken on whether NHS Resolution will run the scheme.

Simon Kayll, chief executive of the Medical Protection Society, welcomed the announcement, but said it did solve the underlying issue of rising clinical negligence costs, particularly in light of the change in the discount rate earlier this year.

“The fact that the government has recognised the importance of protecting GPs from the increased costs, after months of discussions, is positive,” he said.

“A scheme which would in time deliver access to state-backed indemnity for all NHS doctors in England – reflecting the changing nature of primary care – will be welcome news to many GPs.

“This new scheme would not however solve the underlying issue of rising clinical negligence costs. The cost of claims will always need to be paid for, and will continue to increase unless the root of the issue is tackled, through legal reform.”

Mr Kayall added that the society was in a “strong position to adapt to the changing face of indemnity”.

“The new scheme would not include assistance with complaints, GMC inquiries, inquests, disciplinary proceedings or indemnity for non-NHS activity. MPS would continue to provide this support to GPs – just as we have for hospital doctors since NHS indemnity was introduced for them in 1990.”

The Medical Defence Union (MDU) – which has been running a ‘Save General Practice’ campaign because of the rising cost of indemnity insurance – not only backed the government announcement but also said it would be reducing indemnity subscriptions for GPs and primary care staff working in England by around 50% ahead in of anticipation of the scheme.

It said this reflected the MDU’s expectation that claims arising from NHS primary care provided after the announcement “will in due course be picked up by the new NHS scheme”.

In the transitional period until it is up and running, members could continue to report claims to the MDU, it said.

Chief executive Dr Christine Tomkins said: “We are pleased to see the government’s announcement today of a state-backed indemnity scheme for general practice in England. To be workable, the scheme will not only need to pick up new GP claims, but also claims costs which have not already been paid for GPs working under an NHS England contract.”

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Full-service law firm, Gorvins, has implemented the Proclaim Practice Management Software solution from Eclipse Legal Systems.

The South Manchester-based practice employs 100 staff and provides a full range of legal services for its clients which include blue chip organisations, SMEs, entrepreneurs, public sector and regulatory bodies, and private individuals.  As part of the firm’s growth plans, and its strategy to focus on providing the very best in client and customer service, Gorvins embarked on a rigorous selection process to replace its incumbent, dated Practice Management System.

Gorvins has rolled out the full Proclaim Practice Management solution across the entire firm.  Now all staff, including solicitors, secretaries and support, have instant desktop access to Proclaim Matter and Case Management tools, providing a consistent environment for all file progression – from process-driven work to complex multi-path matters.

As part of the integrated solution, Gorvins now uses Proclaim’s matter inception and CRM features to enhance management of all new enquiries and matters.  Gorvins plans to roll out the FileView Interactive and SecureDocs online self-service solutions next, to enhance client communications and electronic document viewing / signing.

A full client and financial migration from the previous Gorvins system has been carried out by Eclipse, having converted all relevant data to Proclaim.

Lorraine Lockie, Managing Partner at Gorvins, comments:

“We selected Proclaim based upon both the system’s standout features, and Eclipse’s qualities as a supplier.  Proclaim provides a one-stop solution for us, seamlessly integrating our key requirements which include financial management, workflow, CRM, compliance and document management.  The system stood ahead of its peers in providing this holistic approach, and in also boasting the flexibility to ensure it develops with our practice.

“As a firm we are looking to grow, not only in terms of scale but also the breadth and depth of our service offerings.  The ethos at Eclipse is very similar to ours at Gorvins – approachability, professionalism and a strong focus on making sure the client is happy.  We look forward with confidence to the future with Proclaim as our platform for growth.”


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Rolls Building

CLLS: List offers “opportunities to create procedures”

The lower limit for claims heard by specialist judges at the Rolls Building through a new ‘financial list’ should be £10m rather than the £50m proposed, the City of London Law Society (CLLS) has suggested.

In its response to the judiciary’s consultation on the issue, the CLLS said the £10m threshold over which costs budgeting does not automatically apply, might be the “more appropriate limit”.

The litigation committee of the CLLS also called for a review of the Commercial Court’s procedures, to ensure they were suitable for financial cases.

“The creation of a financial list offers an opportunity to create procedures that meet the needs of this particular category of case, rather than to impose on it the general procedures applicable to all litigation, as happens currently.”

The committee agreed that “private equity deals” should fall within the list but called for other transactions not involving private equity to be in included.

The CLLS said it was “the nature of the transactions that private equity undertakes that should lead to their inclusion”, not the fact they were undertaken by private equity providers.

“So, for example, the sale of a business between two corporates should fall within the financial list even though no private equity firm is involved.”

The CLLS called for “mandatory publicity” for all test cases, either on the judiciary’s website or by notifying a user’s committee and for trade bodies to be allowed to bring market test cases, rather than merely being joined to test cases brought by others.

“In practice, it may be that few financial institutions will be prepared to bring test cases for the good of the market as a whole, whether through a dislike of publicity or because the costs will generally be irrecoverable.

“Trade bodies are ideally placed to bring test cases, both because of their market perspective and because they can spread the cost across the industry as a whole.”

The committee said “some scepticism” was expressed as to whether the test case procedure would be prove attractive or practicable, but a pilot scheme should “flush out” whether or not this was the case.

The CLLS made it clear that it supported the creation of the financial list.

“It is important for the English courts to improve, and be seen to improve, the service they provide to international litigants rather than merely to rest on the courts’ historic laurels.

“In particular, litigants expect judges to be familiar with the subject matter of a case. The financial list potentially offers litigants the assurance that cases will be heard by a judge with an understanding of the global financial markets, rather than a judge who happens to be available, and demonstrates the benefits that the English courts can bring to dispute resolution in those markets.”

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Thomas: disproportionately adverse impact on SMEs

Thomas: disproportionately adverse impact on SMEs

The senior judiciary and Civil Justice Council (CJC) have outlined their “deep concerns” about the new 5% court fee for all money claims worth £10,000 or more – which will mean an increase on the current levels of up to 622%.

The fee is capped at £10,000 – which will be the fee for any claim worth £200,000 or more – but calculations by the CJC showed how extreme the increase will be on claims.

It peaks at claims for £190,000, where the current fee is £1,315 but under the new regime will be £8,185, an increase of 622%.

For claims worth £15,000, the fee will increase from £610 to £750, a 23% uplift. For £100,000 claims, it goes from £1,115 to £5,000 (348%); for £200,000, from £1,515 to £10,000 (576%); and for £500,000, from £1,920 to £10,000 (421%).

Both were writing last month as statutory consultees of the Ministry of Justice as it decided to press ahead with the proposal first made a year ago. They were only published once the government issued its paper on the way forward last Friday.

Writing on behalf of the senior judiciary, the Lord Chief Justice, Lord Thomas, said there was likely to be a “disproportionately adverse impact” on SMEs and litigants in person.

He said: “It needs to be borne in mind that while the court fee normally represents a relatively small proportion of total litigation costs, it has to be paid up front and in full; whereas for individuals and smaller businesses the funding of litigation is often after the event, post-judgment. And these are significant sums.”

Lord Thomas also highlighted the difficulties of applying the new fee to unspecified money claims, either because the valuation of the claim has not been completed at the start of the case, especially in personal injury cases, or because the primary purpose of the claim is a non-monetary outcome, such as an injunction or other remedy.

The CJC said the new approach could act “as an effective barrier to entry to the justice system through pricing many court users out of the courts”, as well as making alternative to the civil process far more attractive – “thus undermining the very intention behind the court fee increase and thereby risking significantly reduced fee income”.

Both were also highly critical of what they saw as insufficient evidence underpinning the reform.

However, they welcomed the decision not to introduce a higher limit for commercial claims and not to introduce daily hearing fees.

The Association of Personal Injury Lawyers said the increases “could have a profound impact on access to justice”.

“The government’s claim that fees are not a major factor in a person’s decision about whether or not to go to court is completely disingenuous,” said president John Spencer. “This move is bound to discourage people from making valid claims – people who have every right to make them. And the idea that seriously injured people making higher-value claims are more likely to be able to afford the new fees is outrageous.

“The severity of an injury has nothing to do with the injured person’s capacity to pay. This new regime will dictate that some seriously injured people will be expected to pay £10,000 up front to bring their cases to court, and many simply won’t be able to afford it.”

In its consultation response, the Ministry of Justice concluded that the increase would not make it harder to access the courts.

It said: “The research we have undertaken indicates consistently that fees are a secondary consideration in the decision to litigate, with the prospects of success and the likelihood of recovering the debt being primary considerations. Fees represent a small proportion of the overall costs of litigation and can, in successful civil proceedings, be recovered from the losing party.

“In addition, the fee to commence the large majority of money claims will remain unchanged under these plans [as] 90% of money claims are for sums of £10,000 or less; the fee is proportionate to the sums in dispute and is capped at £10,000; fee remissions are available for those who qualify; money claims can be brought under a ‘no win, no fee’ conditional fee agreement; and in limited circumstances legal aid remains available.”

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Tablets: Lithium had caused severe toxicity

The High Court has hammered both sides in a medical negligence case involving a mentally ill woman for outrageous “bimbling”.

His Honour Judge Gore QC, sitting as a High Court judge, said the word – which means to move at a leisurely pace – was used by one of his daughters.

In Holmes v West London Mental Health NHS Trust, the claimant was prescribed lithium from 1994 to 2012. She became ill and was admitted to hospital in 2012.

Tests showed that she was suffering from severe lithium toxicity and she was admitted to intensive care. She remained in hospital for two months.

The claim was not issued until February 2015. “Why are there such delays in initiating claims I ask, not rhetorically?” HHJ Gore said.

“Service was effected on 12 June 2015 – on the last day, therefore, of the validity of the claim form for service, but it took another six months to serve particulars of claim then another seven months, from that, for the service of a defence.

“I have heard no evidence or argument about the reasons for all of this, but my provisional view is that such ‘bimbling’, as one of my daughters calls it, is outrageous.”

The defendant trust bore the brunt of the judge’s outrage, culminating in the award of indemnity costs.

He said it was “highly relevant” that four years before the defence was filed, denying the claim in its entirety, the trust produced a ‘serious untoward incident report’ highly critical of the claimant’s care.

Delivering judgment on costs – which was published by the claimant’s law firm, Leigh Day – HHJ Gore said the claimants made a part 36 offer, on the basis that they recovered 95% of the full liability value of the claim, in February 2017.

Later that month, a case management conference was held where, HHJ Gore noted “with utter dismay”, a trial window was set for the case between October 2018 and April 2019 – seven years after the relevant events.

“To compound the distress that this undoubtedly caused to the claimant, she remains a patient of the defendants.” The defendants rejected the part 36 offer the following month.

HHJ Gore said preparation for the trial “dawdled on”, and the defendants did not “even condescend to respond to repeated invitations to engage in ADR”, with the result that the claimants issued an application in May 2018.

“It was, in my judgment, benign and charitable. It simply sought compliance with the case management needs of this case.

“I am surprised that it did not either seek to strike out the defence for non-compliance or at the very least seek an unless order that could have led to such an outcome.”

HHJ Gore rejected all the defendant’s submissions, accusing it of “drip feeding” offers before its eventual “capitulation” to the claimant’s offer to settle for 95% of the value of the claim, 15 months after the part 36 offer was made.

“That is not, in my judgment, the hallmark of a reasonably conducted defence based on reliable evidence with reasonable prospects of success.”

The judge said that the only way for the defendants to avoid paying indemnity costs was to have made their own part 36 offer, offering to pay 95% of the claim so long as standard costs were recoverable, which they had not done.

HHJ Gore said that “for all of the reasons that I have described and deprecated earlier in this judgment, conduct here was not ‘the norm’”.

The judge concluded: “And this therefore is a case in which I am satisfied in accordance with the wide discretion that I have as to costs, that the burden of proof should be shifted by ordering that the costs in this case should be paid by the defendant from the end of the relevant period for acceptance of the Part 36 offer on an indemnity basis.”

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Michalowska: Crowdfunding experiment

Group litigation specialist Leigh Day expects to send the first letter of a claim from a student to a university over the lecturer strike next week.

Solicitor Bozena Michalowska said she was acting for over 200 students wanting to bring compensation claims for lost teaching time, damage to exam preparation and stress caused by the strike.

London law firm Asserson said last week it had more than 1,000 students signed up, which was enough to launch a potential group action. It claimed universities may face bills of £10m each as a result of the strike.

Ms Michalowska, head of product safety and consumer law at Leigh Day, said the claims would be brought mainly under the Consumer Rights Act, as well as for breach of contract.

“They’re consumers, and they need to be treated as consumers and not just children,” she said.

Ms Michalowska said she did not want to name the university which would receive the first letter, but she said domestic and EU students had claims worth around £700 to £1,000, and overseas students £1,200 to £1,500.

One of her clients, Cathy Olphin, a student at Lancaster University, launched a crowdfunding page last week, to try and raise £10,000.

Ms Michalowska said she was talking to litigation funders about the claims, but nothing had been agreed yet.

“We have to figure out which is the best way to bring these claims as efficiently and economically as possible, so the students can keep as much of their compensation as possible.”

She said the priority was to protect the students against having to pay adverse costs and disbursements. She described crowdfunding as an “experiment” to minimise the need for them to lose a large chunk of their compensation in payments to litigation funders or for ATE.

Ms Michalowska said that given the low value of the claims, if the universities decided to fight rather than settle, the students would have to “band together”.

On her CrowdJustice page, Ms Olphin said the cost of tuition at Lancaster University would leave her with “crippling debt” at the end of the course.

“I’m fighting to hold the university authorities to account for their breach of contract with thousands of students. Together we have lost thousands and thousands of hours of expensive teaching time which we have paid for.

“This campaign is not in opposition to striking lecturers. It is in support of students who have borne the brunt of a dispute that could have been resolved and we will be launching similar cases in universities across the country.”

Universities want to change the Universities Superannuation Scheme from a defined benefit scheme, which gives a guaranteed retirement income, to a defined contribution scheme.

Meanwhile, Leigh Day confirmed yesterday that it is preparing a potential group action against the government on behalf of those who fall under the definition of the ‘Windrush generation’, “over the effects of the hostile environment policy devised by the Home Office to implement the provisions of the 2014 Immigration Act, which was put in place whilst Theresa May was home secretary”.

The firm said it was awaiting details of the government’s proposals for a compensation scheme.

The grounds were likely to be that the policies put forward by the Home Office in 2014 were discriminatory and unlawful as they were ‘inhuman and degrading’ and contrary to article 3 (prohibition on torture) and article 8 (right to respect for private and family life) of the European Convention on Human Rights.

Jamie Beagent, a solicitor in the firm’s human rights team, said that any compensation scheme “would need to be robust and fully and fairly compensate every individual for the particular harm and loss that they have suffered including the loss of dignity”.

If not, “we will be bringing a group action, under the Human Rights Act, on behalf of these member of our society who have been treated so badly by a government which sought to make the rest of society hostile toward them”.

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District judge held that NIHL is not a disease

Roberto Carassale, head of costs at Blackburn firm Joseph Frasier, considers whether noise-induced hearing loss claims are disease claims for the purposes of CPR 45.34

Historically, noise-induced hearing loss claims (NIHL) have been classed as a disease claim for the purpose of recovering a 62.5% success fee pursuant to CPR 45.23(3)(e) – section V ‘Fixed recoverable success fees in employers’ liability disease claims’.

However, it appears that some defendants are successfully arguing at detailed assessment that an NIHL claim is not a disease claim but is a bodily injury and as such the automatic 62.5% uplift normally allowed in these cases does not apply.

One such reported case is that of Kevin Smith v Secretary of State of Energy and Climate Change (20.09.2013, Mansfield County Court), in which District Judge Davies, having heard submissions from both parties, ruled in favour of the defendant (represented by Nabarro) and held that NIHL is not a disease within the meaning of CPR 45.23 and therefore the 62.5% success fee did not apply.

Whilst a first instance decision only and consequently not binding, the judgment makes for an interesting read. Great reliance was placed by the district judge upon the High Court decision of Patterson v Ministry of Defence [2012] EWHC 2767 (QB), in which Males J held that a non-freezing cold injury was not to be classed as a disease claim.

The main points to be noted from the decision in Patterson are that:

  • Section IV (‘Fixed recoverable success fees in employers’ liability claims’) applies where the dispute arises ‘from a bodily injury’ but cannot apply where the claim related to a ‘disease’. However, some injuries can be regarded as diseases and fall within section V (eg, psychiatric injuries and upper limb disorders) even though they would not be regarded as disease in everyday language;
  • The term ‘disease’ appears to have a more extensive meaning for the purposes of section V than its meaning in everyday language given the above definition;
  • Where there is a dispute as to whether section IV or section V applies, the main point to consider is whether the condition qualifies as a disease and, if so, it does not matter whether the disease also constitutes or results from a ‘bodily injury’.

Males J considered and noted that there was no definition of ‘disease’ and that he would objectively interpret the word and that dictionary definitions, including medical dictionaries, were unhelpful and that ‘disease’ was to be understood in its ordinary sense. Within the context of ordinary, everyday language, a non-freezing cold injury could not be applied as a disease.

That was the basis upon which District Judge Davies approached the definition of the word ‘disease’. The district judge then considered the specifics of NIHL and whether it could be classed as a section V disease.

The defendant placed reliance on academic works such as Hunter’s Disease of Occupations and Mechanisms of Noise Induced Hearing Loss, and defined NIHL as being caused by: “…Increased oxygen free radical production within the ears, a process already taking place naturally, as a result of the stress caused by excessive noise where, due to the clear relationship between the exposure and the condition, it is clearly akin to an injury. Damage is caused by a discreet albeit repeated external stimulus and represents an acceleration brought about by external factors similar to other acceleration cases. A normal metabolic process is sped up by the trauma caused by excessive noise. NIHL is the result of an external insult speeding up a natural process which occurs with aging”.

The question which the district judge therefore asked himself was whether NIHL is a disease or an injury brought on by an external cause, which in NIHL would be excessive noise. Applying the guideline set down in Patterson, he found that a disease, unless specifically included and incorporated into the rules, is a “biological process caused by a virus, bacteria, noxious substance or parasite” and based upon that definition, NIHL could not be considered a disease.

Clearly the case has far-reaching ramifications. Even if courts in the future accept that NIHL is not a disease claim for the purposes of section V, then how will they approach what success fee should be applied? Section IV (25% success fee where the matter settles before trial) can only apply where the injury is sustained before 1 October 2004. The majority of NIHL claims are sustained over a long period of time and well before this date, and section IV appears to imply a singular accident rather than one which occurs over a period of time. Therefore, it is certainly arguable that section IV should not apply either.

Therefore, if neither section IV nor section V apply, then are we left with a situation in which the uplift is not fixed and is to be assessed according to the old Costs Practice Direction 11.7 and 11.8? If so, arguably this may be even better news for claimant solicitors, who can argue that such claims are difficult to win given the higher risk of failing on liability, require more investigation which carries a greater financial risk than other EL claims, and consequently should attract a higher success fee (this emphasises the need to ensure comprehensive risk assessments continued to be carried out in these type of cases).

Secondly, the judgment is contrary to the basic objectives of CPR 45 IV and V, which is to avoid arguments about the level of success fees.

Thirdly, the judgment is inconsistent with the “notes of guidance” given for the pre-action protocol for disease claims. This specifically mentions and includes NIHL and states: “This protocol covers disease claims which are likely to be complex and frequently not suitable for fast-track procedures even though they may fall within fast track limits. Disease for the purpose of this protocol primarily covers any illness physical or psychological, any disorder, ailment, affliction, complaint, malady, or derangement other than a physical or psychological injury solely caused by an accident or other similar single event.”

In both Patterson and Smith, the court effectively ignored the pre-action protocol on the basis that it is for the purposes of the protocol itself and before the commencement of CPR and that it does not form part of the formal CPR. It seems rich for the courts to have effectively ignored the pre-action protocol and applied its own definition of disease when clearly the pre-action protocol imposes sanctions for parties who fail to comply with it!

Fourthly, and perhaps of most importance, is that under the new claims notification process for low-value personal injury claims in employers liability disease claims, FORM ELD1 clearly stipulates deafness as one of the possible diseases which the claimant has suffered. It is therefore arguable that it was the intention of the Rules Committee to have included deafness claims as a disease claim within the original section V rules.

Although in time this argument will become of less significance given the post April 2013 position as to success fees, it remains to be seen how far defendants will push the issue on existing pre April 2013 cases.

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Acasta Europe

Andrew Williams, Acasta Europe

With the recent withdrawal of The Prisons and Courts Bill as a result of the dissolution of Parliament due to June’s upcoming general election, this is a welcome respite for Claimant Personal Injury Lawyers, who were opposed to the changes.

If implemented, the Bill would have radically changed the personal injury market by introducing a tariff system for whiplash damages and a ban on pre-medical offers.

ATE Insurance is a key element in many Personal Injury cases and on most Claimant Injury Lawyers shopping lists in the Post LASPO world, but there are still many Law Firms in the market who struggle with the concept of ATE Insurance and what the benefits actually are to insure their clients’ cases for adverse costs and own disbursements as early as possible rather than waiting until proceedings are about to be issued.

ATE Insurance

Acasta Europe Ltd offer a range of market leading ATE Insurance products to Claimant Lawyers on a delegated authority basis covering claim types such as RTA, EL, PL, OL and Employment which all provide cover for the clients’ disbursements and their opponents’ costs and disbursements. All of these products work on a flat rated delegated authority offering meaning that the Claimant Lawyer has the underwriting capability to insure their client’s cases up to an agreed level of indemnity (LOI) via an on-line Portal. All premiums are fully deferred and contingent upon the success of the case as well as being fully self-insured.

Making sure that your client is clear about how an ATE Insurance policy can protect them from adverse costs and own disbursements on their case should ideally be best practice. Not only that though, it is actually a regulatory requirement which could help to reduce your firm’s risk of a future professional negligence claim.

The Prisons and Courts Bill will no doubt be resurrected at some point in the future due to the amount of noise that the Motor Insurers will once again make by lobbying the new Government to get the Bill back onto their agenda, but it is unlikely to be implemented from October 2018 as was planned and will no doubt fall into a new date somewhere in 2019.


For further information or to contact Acasta Europe Ltd to discuss your ATE Insurance requirements before the Prisons and Courts Bill is implemented, please call 0800 668 1350 or visit

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Susskind: pioneering work

Susskind: pioneering work

The new Lord Chancellor has thrown his weight behind the Civil Justice Council’s recent proposals for online dispute resolution – while also indicating that this could lead to a shrinking of the court estate.

In a wide-ranging speech that also took in criminal justice, legal aid and the need for top lawyers to give back more to the community, Michael Gove recognised that “without our civil and family courts, or our tribunal services, our contracts are unenforceable, and individuals left with no recourse when deprived of their rights”.

He continued: “But it astonishes businesses and individuals alike that they cannot easily file their case online. And it astounds them that they cannot be asked questions online and in plain English, rather than on paper and in opaque and circumlocutory jargon.

“The current system adds to stress at times of need, and restricts access to high quality resolution of disputes by simply being too complex, too bureaucratic and too slow. Across our court and tribunal system we need to challenge whether formal hearings are needed at all in many cases, speed up decision making, give all parties the ability to submit and consider information online, and consider simple issues far more proportionately.

“Thanks to pioneering work the judiciary have commissioned from reformers like Professor Richard Susskind, there is now a huge opportunity to take many of these disputes online. Questions which have previously required expensive court time and have often as a result been marked by acrimony, bitterness and depleted family resources can now be resolved more quickly, efficiently and harmoniously.”

In February, the group led by Professor Susskind said it was time for a “radical and fundamental change” in the way the courts deal with low-value claims, and called for the introduction of state-backed online dispute resolution across England and Wales in 2017.

Mr Gove said automation would allow judges to spend their time on the most important work.

“The reform programme which the judiciary want to implement is being planned now. We have already committed to invest in the technology which will underpin it. This reform programme could liberate tens of thousands of individuals from injustice and free hundreds of thousands of hours of professional time.

“Online solutions and telephone and video hearings can make justice easier to access and reduce the need for long – and often multiple – journeys to court. And we can reduce our dependence on an ageing and ailing court estate which costs around one third of the entire courts and tribunals budget.”

The Lord Chancellor said that “inevitably, that means looking again at the court estate”.

“It is still the case that many of our courts stand idle for days and weeks on end. Last year over a third of courts and tribunals sat for less than 50% of their available hours (10am-4pm). At a time when every government department has to find savings it makes more sense to deliver a more efficient court estate than, for example, make further big changes to the legal aid system.”