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Harmans Costs Brief - April 2013
Welcome to the latest edition of our e-newsletter, Harmans Costs Brief, the first edition since the Jackson reforms so there's lots to talk about! We hope you will find it helpful. Make sure you never miss a copy by joining our growing subscriber list - please see below.
 
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Jackson Reforms - what you need to know

Following the Lord Justice Jackson review on civil litigation costs and the Ministry of Justice consultation on civil justice procedure, 1 April 2013 saw the biggest shake-up of the civil litigation costs and funding regime for many years.  So what do you need to know?  We’ve taken a look at the budgeting parts of the reforms.
 
What are the main aims of the reforms?
-  Greater costs certainty
-  Addressing disproportionate legal costs
-  Streamlining the injury claims process
-  Combating compensation culture
-  Reforming ‘no win, no fee’ claims
-  Tackling referral fees 

What are the key elements of the proposals?
-  Costs Budgeting will apply to all multi-track cases issued after 1 April 2013 in the County Court and in the High Court (Chancery and Queen’s Bench Division only)
-  Both parties need to exchange a costs budget in the form of Precedent H as specified in the Directions (formerly Allocation) Questionnaire or 7 days before CMC
-  Success fees and ATE fees no longer recoverable from losing party
-  Qualified one way cost shifting, meaning an individual claimant is not at risk of paying the defendant’s costs if the claim fails (with some exceptions) – PI and Clinical Negligence only
-  Contingency Fees (known as Damages-Based Agreements or DBAs) will be permitted for all claims
-  Courts will apply a 10% increase in general damages for personal injury cases, this applies only under particular circumstances (where the claimant recovers more than its Part 36 offer) and only on part of the damages

What are the implications for you in relation to costs budgeting?
-  The costs budget is an estimate of the total costs of the claim to date and to the end of the trial and the assumptions upon which that is based.  It includes all costs, not just solicitor and disbursements, but also counsel.  It does not require as much detail as the Bill for detailed assessment, but does require a breakdown of anticipated hours as well as the total cost for each phase
-  Only page 1 of the Form H need be completed if costs less than £25k
-  The costs budget is split into phases: pre-action costs; issue/pleadings; CMC; disclosure; witness statements; expert reports; pre-trial review; trial preparation; trial; and ADR/Settlement discussions
-  If Precedent H is not filed, the only allowable inter partes costs will be the applicable court fees
-  The parties are encouraged to agree their respective costs budgets, in whole or in part
-  The Court is likely to make a costs management order.  Where the budget is not agreed between the parties, the Court will approve and revise the costs budget.  This is not the same as detailed assessment, but is a broader process; essentially deciding whether the budgeted costs fall within the range of reasonable and proportionate costs.  The Court’s approval relates only to the total figures for each phase.  Having approved and revised budget, the Court will then control the parties’ budgets in respect of recoverable costs
-  Common sense and collaboration between parties will be key, not least because limited court time will be allocated for hearings and justice is likely to be rough and ready as well as the delays in obtaining court dates for updated budgets
-  In deciding whether to approve a costs budget, the Court will apply the new proportionality test by scrutinising not only the reasonableness of each party’s budget but will also consider whether the total sums on each side are “proportionate” in accordance with the new more restrictive definition of that term.  In an aside, there is already concern at the lack of guidance on the new proportionality rule and the possibility that it will lead to satellite litigation over costs.
-  Costs budgets will form a central part of any costs assessment
-  On an assessment of costs on the standard basis, the Court will not depart from the approved or agreed budget unless satisfied that there is good reason to do soThe future?
In a time of huge uncertainty what is guaranteed is that it will be a very steep learning curve for all involved.  What is also clear is that collaboration between parties will be key.  However, until the changes are tried and tested and the new rules bed down it is impossible to predict the exact costs consequences.
 
How can Harmans help?
Harmans are always on hand for any questions or queries you may have and we will do our utmost to help you with any problems you may encounter post Jackson.  We are also geared up to assist you in dealing with your costs budgets whether it be the actual preparation or advice for the completion of the document.  We are continually updating our website with news and developments as well as sharing our views on Twitter and LinkedIn. 

COSTS BUDGETS v COSTS ESTIMATES
 

Section 6.4 of the current Costs Practice Directions states that a party must file and serve an estimate of costs when filing and serving an Allocation Questionnaire or a Listing Questionnaire.  CPR 44.15(3) also makes provision for a new estimate of costs when a funding arrangement has changed and the previous information supplied is no longer accurate.
 
Section 6.5A of the current Practice Directions gives guidance in relation to potential punitive measures if the estimate is inaccurate.  In summary it states that if there is a difference of 20% or more between the base costs claimed by a receiving party on detailed assessment and costs shown in the estimate, the receiving party must provide a statement setting out the reasons for the difference.
 
If a paying party claims that he reasonably relied upon an estimate and wishes to rely upon the costs shown in the estimate in order to dispute the reasonableness or proportionality of the costs claimed, that party must serve a statement setting out his case in this regard in the Points of Dispute.
 
It is important to note that the work “must” is used.  However, when looking at Section 6.6 the potential effect is somewhat tempered by the statement that the Court may (emphasis added), have regard to any estimate previously filed by any party which may (emphasis added) be taken into account as a factor among others when assessing the reasonableness of proportionality.  The practice direction goes on to state that where there is a difference of 20% or more and it appears to the Court that the receiving party has not provided a satisfactory explanation for that difference or the paying party reasonably relied on the estimate of costs, the Court may (emphasis added) regard the difference as evidence that the costs claimed are unreasonable or disproportionate.
 
In the writer’s experience this rarely becomes a significant issue between the parties.  When acting for receiving parties it is not unusual to see a Defendant claiming that they relied upon an estimate when there is a difference of 20% or more, whereas the Claimant may have significant evidence to support reasons why a 20% margin of error has been exceeded (such as unexpected events in the case), it is often more difficult for a paying party to produce hard evidence to show how they relied upon the receiving party’s estimate.
 
The position has now changed somewhat and budgets have a part to play.
 
In the (currently drafted) practice direction to the 60th update, Section 3 deals with costs budgets and 3.1 states that where the parties have filed budgets in accordance with Practice Direction 3E but the Court has not (emphasis added) made a Costs Management Order under Rule 3.15 the 20% margin of error still applies.
 
Section 3.4 replaces the Court’s potential reliance on an estimate with the Court’s potential reliance on an approved or agreed budget and also states that the Court may have regard to any other budget previously filed by that party.
 
An interesting new twist emerges at 3.6 which appears to fall in line with the new “double jeopardy proportionality” trap.
 
This section states that the Court may restrict the recoverable costs to such sum as is reasonable for the paying party to pay in light of any reliance upon a costs budget, notwithstanding that such sum is less than the amount of costs reasonably and proportionately incurred by the receiving party (emphasis added).
 
However, note again the use of “may” and it is yet to be seen how much reverence is given to budgets when there has been no Case Management Order made.
 
One can’t help feeling however, that given the furore surrounding costs budgets, that the new practice direction is another clear indication that costs must be regularly monitored and adjusted where necessary.
 
James Scott, Partner
THOUGHTS OF A RETIRING PARTNER
 
After very nearly 23 years as a law costs draftsman/costs lawyer, of which the last 19 years were as a partner here at Harmans, I have decided to bite the bullet and retire. Although this has been by no means a sudden decision, having been thought about for at least the last two years, it will come as no great surprise to anyone in the light of the currently unfolding debacle that began on 1/4/13. As the full horror of the ill thought out implementation of the Jackson reforms began to unfold over the last few months the prospect of spending more time with my guitar began to look rosier and rosier.

Fortunately, after rattling the piggy bank and listening very carefully to the thin jingling sounds emanating from within, I was able to conclude there were sufficient funds (just) to make retirement a possibility providing I did not want to eat too regularly. So, after comparing on the one hand the delights of regular meals as against the “delights” of regularly dealing with budgets and provisional assessments it was, to use that most infelicitous modern phrase, a “no-brainer”. Retirement it was!

I feel as if I should make some weighty final statement appropriate to the solemnity of leaving work after 40 odd years, particularly under these circumstances – perhaps along the lines of the supposed last words of William Pitt the Younger, “Oh my country – how I leave my country” and for “country” substitute “legal profession”. But all I can think of is what my history teacher told me were the actual words spoken by Pitt which were, “I feel like one of Bellamy’s veal and ham pies”. I do like a good veal and ham pie!

And so it is that I will ride off into the sunset on April 30th with my guitar in my hand, a Bach prelude and fugue under my fingers, to spend more time with my erstwhile creation, the Oxford Guitar Society. To all those who have instructed me over the years, and to all those who I have crossed swords with, very many thanks for making the last 23 years so interesting. And the very best of luck to you all in this new world the profession is entering!

Stephen Greenslade, Partner

The new Practice Direction Amendments


After much anticipation the new costs rules were published, The Civil Procedure (Amendment) Rules 2013, and after a further wait the 60th Update – Practice Direction Amendments was also finally published – 83 pages excluding the example bills, forms etc.

There have been changes, some small and some major affecting the way future claims will be dealt with by the Courts.  Case management is a key to how cases will progress and for case management think costs management.

The Amended rules and   Practice Direction 3E deal with Case Management which include the much anticipated introduction of Budgets for all cases allocated to the Multi Track and commenced on or after 1 April 2013.

To continue reading Gary Knight's comprehensive summary please click here.
Provisional Assessment of Costs
 
As from 1 April 2013 there will be paper-only assessments for any bill where detailed assessment proceedings are commenced and the costs are not expected to exceed £75,000.00.

New Practice Direction 47.15 applies:
(1) This rule applies to any detailed assessment proceedings commenced in the High Court or a county court on or after 1 April 2013 in which the costs claimed are the amount set out in paragraph 14.1 of the practice direction supplementing this Part, or less.
 
(2) In proceedings to which this rule applies, the parties must comply with the procedure set out in Part 47 as modified by paragraph 14 Practice Direction 47.
 
(3) The court will undertake a provisional assessment of the receiving party’s costs on receipt of Form N258 and the relevant supporting documents specified in Practice Direction 47.
 
(4) The provisional assessment will be based on the information contained in the bill and supporting papers and the contentions set out in Precedent G (the points of dispute and any reply).
 
(5) The court will not award more than £1,500 to any party in respect of the costs of the provisional assessment.
 
(6) The court may at any time decide that the matter is unsuitable for a provisional assessment and may give directions for the matter to be listed for hearing. The matter will then proceed under rule 47.14 without modification.
 
(7) When a provisional assessment has been carried out, the court will send a copy of the bill, as provisionally assessed, to each party with a notice stating that any party who wishes to challenge any aspect of the provisional assessment must, within 21 days of the receipt of the notice, file and serve on all other parties a written request for an oral hearing. If no such request is filed and served within that period, the provisional assessment shall be binding upon the parties, save in exceptional circumstances.
 
(8) The written request referred to in paragraph (7) must
(a) identify the item or items in the court’s provisional assessment which are sought to be reviewed at the hearing; and
(b) provide a time estimate for the hearing.
 
(9) The court then will fix a date for the hearing and give at least 14 days’ notice of the time and place of the hearing to all parties.
 
(10) Any party which has requested an oral hearing, will pay the costs of and incidental to that hearing unless
(a) it achieves an adjustment in its own favour by 20% or more of the sum
provisionally assessed; or
(b) the court otherwise orders.

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