Success fees and ATE insurance premiums recoverable, SCCO judge rules

A claimant’s decision to switch from funding their case via legal aid to a conditional fee arrangement (CFA) just days before the Jackson reforms were implemented was reasonable, a senior costs judge has ruled.

In AMH v The Scout Association, the claimant was pursuing a claim for damages against the Scout Association in relation to childhood sex abuse. The claimant’s decision to switch from funding his case via legal aid to one based on a CFA, supported by an ATE insurance policy, followed a brief telephone conversation with his solicitor in the weeks leading up to the 1 April 2013 Jackson reforms implementation date. During that conservation, the solicitor explained to the claimant that he may lose his legal aid funding if he got a new job. In addition, the solicitor also explained to the claimant that, if he switched to funding his case via a CFA after the Jackson reforms came into effect, he might be financially disadvantaged by the new recoverable costs regime.

Delivering his judgment in the Senior Courts Cost Office, Master Leonard criticised the “incomplete” advice given to the claimant by their solicitor, stating that some of the advantages of the new post-Jackson regime had not been explained. However, Master Leonard ultimately concluded that the claimant’s decision to switch from funding his dispute via legal aid to a CFA-based arrangement was reasonable. In explaining his reasoning, Master Leonard stated that any decision regarding the reasonableness of such actions must – to some extent – be facts specific.

In light of his decision that the claimant’s funding switch was reasonable, Master Leonard decided that it would not be appropriate to disallow the success fees and ATE insurance premium.

Judge predicts trouble ahead for costs budgets

Civil Procedure Rule Committee member Chris Lethem DJ has expressed his “deep unease about the desert of applications” to vary costs budgets, two years after the introduction of costs management.

Speaking at a roundtable of judges and practitioners organised by the Association of Costs Lawyers, Letham DJ said he hardly ever saw applications to do so. This, he suggested, was storing up trouble, because it was likely that parties would discover they had overspent at the end of the litigation process.

The only other explanation for the lack of applications to vary budgets, he suggested, was that he had achieved a “crystal vision” – a skill he did not believe he possessed.

Other practitioners speaking at the round table discussion said they deliberately avoided making applications to vary budgets, either because they believe the judge might not allow a change to take place, or because they feared the judge would then take the opportunity to reopen the previously-agreed budget.

Responding to a comment made by senior costs judge Master Gordon-Saker than no budgeted case had – to date – reached the Senior Courts Costs Office for detailed assessment, Lethem DJ predicted that, as cases began to settle, a “huge fertile ground for detailed assessment” would emerge. Parties were likely to disagree over whether phases had been completed, and also whether incurred expenditure were reasonable, he said. He also suggested it was not clear what amounted to a good reason to depart from a budget.

I do not think Andrew is going to be out of a job in the foreseeable future”, Lethem DJ added, referring to Master Gordon-Saker’s comments.

Confronting Costs Management – Lord Justice Jackson delivers a lecture on the progess and development of costs budgeting

In May this year, Lord Justice Jackson gave a speech at Gray’s Inn Hall in London in which he identified a number of problems to have emerged as a result of his reforms. His paper can be found here.

We agree with several of Jackson’s LJ’s observations. Less so with others.

First, the good news: Lord Justice Jackson offered a generally positive overview of how his reforms were working in practice. Those involved in litigation now had better knowledge of their financial position, he said, early settlements were being encouraged, and costs were being controlled. Even solicitors and judges were now generally supportive of costs management, he added – albeit with varying degrees of enthusiasm.

Yet, despite this generally upbeat message, Jackson LJ also explained that new challenges had emerged as a result of his reforms. Perhaps not surprisingly, Jackson LJ was happy to share his thoughts about how these problems could be addressed.

The first problems identified by Jackson LJ related to the judiciary: notably, judicial inconsistency, and also the tendency for some members of the Bench to micromanage costs budgets. To address both problems, Jackson LJ suggested that formal costs management training “should be compulsory for all civil judges”. He also offered specific advice regarding what he regarded as unnecessary micro-management – specifying rates or the number of hours permitted.

One can only hope that certain members of the judiciary take notice of Jackson LJ’s comments, and modify their practice accordingly.

Costs management orders (CMO) was raised at two points in Jackson LJ’s speech – firstly in relation to the wide variations between courts regarding the forms of CMOs now being made, and secondly in relation to whether CMOs should be the norm – a default position not contained in Jackson LJ’s initial reforms. To overcome variances between courts, Jackson LJ suggested that a standard form of CMO be developed, either by the Ministry of Justice, the Rule Committee and / or the Judicial College. On the second point, he suggested that recent changes to CPR 3.15 and PD 3E should be repealed, and judicial discretion – subject to official guidance – should be restored regarding whether or not CMOs should be made.

The Master of the Rolls, Lord Dyson, speaking alongside Jackson LJ, expressed some misgivings about any “opt-out” option. We agree, if costs budgeting is to become the norm, it should be embraced fully by the courts. Given the judiciary a discretion to opt parties out would likely lead to considerable uncertainty, unfairness and potentially yet further satellite litigation.

In relation to the filing and exchanging of budgets, Jackson LJ suggested that the CPR should be amended so that it became the norm – and not merely the default position – for costs budgets to be filed 14 days before the CCMC. This reform, he said, would prevent situations where practitioners were given as little as seven days to discuss and agree budget ahead of a CCMC. However, he added that any reform of this issue should allow a court to retain its discretion to specify a different period for lodging budgets when circumstances required.

Also on the subject of CCMCs, Jackson LJ noted that different courts had different approaches in relation to whether case and cost management conferences should be combined. His preferred approach was that the court should deal with both issues in a single hearing: first giving case management directions (CMD), then budget the costs and finally revise the CMDs if costs are still thought to be disproportionate.

Jackson LJ suggested that detailed assessments was proving problematic in some cases, because approved budgets could not be “married up” with the final bill of costs. To overcome this challenge, Jackson LJ suggested that courts should follow the approach taken by the SCCO and some of their peers, and order the receiving party to lodge a summary of its bill of costs in a format which matches Precedent H. In light of Jackson LJ’s endorsement of this approach, it is possible that more orders of this nature may be made, going forward.

Unfortunately, until such time as practitioners develop their practice of recording work in line with the budget phases this would prove extremely problematic and impractical in many cases, not to mention costly.

Also on the topic of Precedent H, Jackson LJ said he agreed it could be improved. In particular, he suggested that its provisions regarding assumptions and contingencies “may need attention”. Further guidance on how to deal with expert costs would be helpful, he added. That said, Jackson LJ also acknowledged that successive changes to Precedent H might be unhelpful, given that legal practices had adapted their IT systems to allow them to complete the form. He therefore suggested that, because the new form bill of costs would require yet more changes to Precedent H in any event, it might be sensible to delay further changes to it until the new form bill of costs was finalised.

We agree with Jackson LJ’s statement that cost budgeting is generally helpful to all parties. However, we also agree with his observations that new problems have arisen as result of his reforms. We hope that those now responsible for updating the civil justice system take notice of Jackson LJ’s observations, and also his suggested solutions. In our view, only once changes are made do we believe that Jackson’s vision of justice being delivered efficiently, and at a proportionate cost, can be fully realised.

Government puts out new Regulations as High Court overturns “no permission, no payment” civil legal aid rules

Here at T M Costings, we welcome the recent ruling in Ben Hoare Bell Solicitors & Ors, R (On the Application Of) v The Lord Chancellor [2015] EWHC 523 (Admin) (03 March 2015). This ruling overturned recently-introduced limitation on the availability of legal aid funding for judicial review cases.

In Ben Hoare, the focal point of the judicial review was regulation 5A of the Civil Legal Aid (Remuneration) (Amendment) (No 3) Regulations 2014 SI 2014 No 607, which came into force on 22 April 2014. This regulation effectively banned guaranteed payments for civil legal aid-funded judicial reviews unless the court either a) “gives permission to bring judicial review proceedings” or b) “neither refuses nor gives permission and the Lord Chancellor considers that it is reasonable to pay remuneration in the circumstances of the case”.

In practical terms, the impact of this regulation meant that solicitors and counsel bringing a legal aid-funded judicial review would not be paid between issue and permission, unless permission was ultimately granted. And, in circumstances where the court did not ultimately decide on the permission issue – if, for example a claim was withdrawn – the only option available to a claimant’s legal team was to seek payment from the Legal Aid Agency (LAA). However, under the regime introduced by Regulation 5A, the LAA was not obliged to make such a payment.

Delivering their joint judgment in Ben Hoare, Lord Justice Beaton and Mr Justice Ouseley rejected two out of the three arguments put forward by the claimants – that the regulation was ultra vires, and also that it would have a “chilling effect” on access to the High Court. However, the judges did accept the claim that the new regulation was inconsistent with the legal aid scheme’s statutory purpose, as set out in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO). This was because “the scope of regulation 5A extends beyond the circumstances which can be seen as rationally connected to the stated purpose given for its introduction.” On this basis, the judicial review application challenging the introduction of Regulation 5A succeed.

In delivering their ruling, the judges noted their “great concern” about a 23 per cent decline in applications in legally-aided funded judicial review cases, and a 15 per cent drop in the number of certificates granted, since the new regulation was introduced, together with the “evidence of so many experienced practitioners” who made submissions in this case. The judges therefore welcomed comments made by the government’s counsel, James Eadie QC, that the practical impact of the regulation would be kept “under review”. In doing so, the judges expressed their belief that: “that such a review is necessary”.

The government was quick to react, putting out some new Regulations, The Civil Legal Aid (Remuneration) (Amendment) Regulations 2015, which came into force on Friday, 27 March 2015.

TMC respectfully disagrees with Master Cook’s statement regarding whether costs lawyers should attend costs budgeting hearings

In recent months, the official status of the costs lawyer profession has continued to grow. We’ve recently re-launched our degree-level professional qualification, and have been formally recognised within the new guideline hourly rates (GHR) regime for the first time. It’s therefore unfortunate that Queen’s Bench Master David Cook has questioned our role in the costs budgeting process.

Speaking at a recent medico-legal conference organised by 7 Bedford Row, Master Cook stated that costs lawyers “should be discouraged from attending budgeting hearings save in exceptional cases.” He explained his position by stating that: “I need to hear from the solicitor with conduct of the case about why work is being done, what has actually been achieved for the spend to date, and why it is being said that the complexity or some other issue leads to the need for greater spend.” Master Cook then stated: “far too often, costs lawyers do not have the knowledge of the case or the experience to answer these important questions.”

Perhaps not surprisingly, we at TM Costings do not agree with Master Cook’s analysis. In much the same way that solicitors and barristers often attend court together, but then fulfil different functions when they arrive, we believe that the combined presence of solicitors and costs lawyers at budgeting hearings can enhance, rather than hinder, the budget approval process.

Our solicitor colleague may well be best-placed to explain why certain work has been done. However, because of our intimate involvement in drawing up a matter’s budget, costs lawyers are more likely to have a more detailed grasp of what specific costs have been incurred in delivering those objectives. And, while a solicitor will be able to explain why greater expenditure may be required, costs lawyers’ experience of assisting with previous cases can often help the court verify the robustness of these assertions. In addition, our specific training in costs procedure means we have a particular expertise in assisting the court in assessing whether costs incurred or anticipated are permitted and / or proportionate.

Of course, in many situations, it may not be necessary for a costs lawyer to attend a budgeting hearing. However, we believe that each party should be free to decide which legal representatives to send to such hearings, depending on the specific facts of each case. Already, PD 3E 2.2 (b) discourages unnecessary expenditure on court appearances, by limiting all recoverable costs of the budgeting and costs management to no more than two per cent of the approved or agreed budget.

In light of all of these facts, it is difficult to understand what benefit Master Cook’s suggestion would bring to the costs budgeting process.

Court fees battle enters new phase

The war of words between the Ministry of Justice (MoJ) and the legal profession over court fees escalated during the last week of February. Nine signatories, including the Law Society, Bar Council and Chartered Institute of Legal Executives, have now signed a pre-action protocol letter as a prelude to a possible judicial review of the MoJ’s plan. The letter claims six grounds for challenging the MoJ’s scheme – including that they would be tantamount to ‘selling justice’, contrary to the principles of Magna Carta.

The focal point for the dispute relates to the MoJ’s plans to alter the way in which court fees for money claims worth £10,000 or more are calculated. Under the ministry’s proposals, the fees would be fixed at five per cent of the claim’s value – up to a cap of £10,000 for claims worth £200,000 or more. By way of comparison, the current court fees for a £200,000 claim are just £1,515.

At T M Costings, we fully support our fellow practitioners’ decision to threaten a judicial review, which we hope will cause the MoJ to withdraw its proposal. However, we also fear for what might happen if this dispute cannot be resolved in the next few weeks. Arguably the worst case scenario would be that court fees do increase as planned in April 2015 – but the change is then ruled unlawful several months later. Indeed, the forthcoming general election merely adds to the uncertainly regarding this issue. At present, we have no way of knowing if the next justice minister will support their own department’s current court fees policy.

In light of this potential uncertainty, we suggest that prospective claimants should consider issuing proceedings sooner rather than later. At the very least, issuing early will allow them to avoid uncertainty regarding the fees they will be asked to pay. In addition, claimants with higher value claims may also save several thousand pounds in fees, in the event that the MoJ is ultimately successful.

ACL granted leave to intervene in Coventry v Lawrence

The Association of Costs Lawyers (ACL) has been granted leave to intervene in the case of Coventry v Lawrence. The case will consider whether the recoverability of additional liabilities (ie success fees and ATE insurance premiums) under the Access to Justice Act 1999 infringed Article 6 of the European Convention on Human Rights and/or Article 1 of the First Protocol to the Convention.

Chairman of the ACL, Sue Nash, said…

We see our role very much as not advocating for an outcome but just trying to make sure the court is fully appraised of how it all works in practice… ACL members have been at the forefront of the assessment of and advice and arguments in relation to recoverability and we want to give the Supreme Court the benefit of our practical experience … We believe the arguments in favour of incompatibility – including that it created an imbalance solely to the benefit of claimants – may be based on an incorrect or incomplete view of how the system worked before 1 April 2013 and are also concerned about the impact an adverse ruling by the court would have on the many pre-Jackson cases which are still being litigated“.

The ACL is represented by Roger Mallalieu of 4 New Square.

The case is before the Supreme Court on 9, 10 and 12 February.

Grayling facing two JR bids on legal aid cuts

The Law Society’s Council has agreed to seek judicial review of the legal aid crime duty tender process. President Andrew Caplen said:

“In the interests of access to justice, the public and the legal profession, we have decided to seek a judicial review of the legal aid crime duty tender process. In our opinion, the process creates a serious risk of market failure which could have major implications for society as well as the profession.”

The CLSA and LCCSA have also confirmed they will pursue their own JR challenge. Jon Black, president of the LCCSA, said:

“If we don’t challenge these dangerous plans, our high streets will be cleared of legal aid solicitors and vast, distant legal warehouses will be created, which will frankly dispense tick box justice. A minister accepted in parliament this week  that the government is hell-bent on making hasty cuts without any considered evaluation of the consequences . We have no choice but to try and stop these justice-denying contracts in order to save a key component of the already maimed criminal justice system.”

Read the full Law Society Gazette article

Guideline Hourly Rates Survey…

The Civil Justice Council’s Costs Committee have launched their survey into guideline hourly rates.


The participation of “every law firm in England and Wales” is encouraged to ensure that the evidence base is as comprehensive as possible. The survey is available for completion until 29 November. Chair of the Committee, Mr Justice Foskett, has urged firms not to ignore the survey, speaking on Litigation Futures….

“The objective is to create as accurate a picture as possible of salaries and hours charged (and amounts recovered) for all fee-earners, from trainees to senior partners nationwide….

“In a busy world it is always tempting to ignore a survey or questionnaire. However, we have tried very hard to keep the survey short and clear, with questions that can be answered by reference to a firm’s most recent annual report and accounts together with its costs management system.

“My message to all firms engaged in litigation is that this is a real opportunity to contribute to an exercise designed to provide a reliable evidence base upon which to make our recommendations. Criticising the outcome will be somewhat hollow if the critic has not completed the survey.

“My final plea, therefore, to all litigation solicitors is this: don’t ignore it.”

Find the survey here.

The Damages-Based Agreements Regulations 2013

The Ministry of Justice has published the draft Damages-Based Agreements Regulations 2013, which come into force on 1st April 2013.

The draft Regulations make it clear that, save in respect of employment matters, the payment from a client’s damages shall be the sum agreed to be paid (capped at 25% in personal injury cases and 50% in any other claim or proceedings to which the Regulations apply) net of any costs (including fixed costs) payable to the representative by another party in the proceedings. Counsel’s fees are within the cap in all cases, save for employment matters.