The Seven Pillars of Wisdom

One of the emerging jurisdictions for lawyers from England and Wales which seems to generate an increasing amount of work is the Middle East and in particular the Dubai International Financial Centre.

As noted on its own website the DIFC was set up in accordance with the following vision:

The Dubai International Financial Centre (“DIFC”) was launched in accordance with United Arab Emirates (UAE) Federal Decree No. 35 of 2004 as a part of Dubai’s strategic vision to diversify its economic resources and attract capital and investments in the region. It is a Financial Free Zone defined in Federal Law No. 8 of 2004. An independent jurisdiction within the UAE, DIFC is empowered to create its own legal and regulatory framework for all civil and commercial matters. 

The following three independent bodies have been established at the DIFC to enable and support the growth and development of businesses in the Centre: the DIFC Authority, the Dubai Financial Services Authority (“DFSA”) and the Dispute Resolution Authority (“DRA”).

It is the Dispute Resolution Authority and in particular the courts applying the common law which sit in Dubai, which are of particular interest.

For an overview of the applicable procedures which apply, I can do no better than recommend the excellent guide produced by Rupert Reed QC and the team at Wilberforce Chambers, a copy of which can be found here: Rules-of-the-DIFC-Courts-2016, gratefully placed on this website with the permission of its author.

Now on its fourth edition, the guide may some day attract the authority of the White Book, when considering matters pertinent to disputes in the DIFC.

The pleasure with dipping into jurisdictions which are surprisingly similar but also very different, is to see how lawyers and judges overseas, have devised their own solutions to familiar problems.

Thus the guide has this comment to make on the possible introduction of costs budgeting:

DIFC practitioners will be relieved that they have as yet been spared the process by which English lawyers, under the Jackson processes of ‘costs management’, are now required to quantify their clients’ costs in advance and held to that ‘budget’, at least in terms of their clients’ ultimate recovery in costs.

There has, however, been a certain amount of discussion not least during the course of lectures in the DIFC Academy of Law lecture series of costs budgeting as a solution to the concern of general counsel that litigation costs require firmer control. In circumstances where most proceedings in the English Commercial Court are now subject to costs budgeting, it seems likely that the DIFC Court will give serious consideration to this and other prospective means of limiting costs.

Earlier this year the courts also consulted on the introduction of a new Practice Direction to provide some regulation of the practice of litigation funding. A copy of the Practice Direction can be found here: 16-Jan-2017-Practice-Direction-for-Third-Party-Funding-in-the-DIFC_NB.

The key provisions of the draft Practice Direction were as follows:

4. A Funded Party who enters into an LFA in respect of Proceedings must put every other party to the relevant dispute on notice, in accordance with subsection (5) and (6), of the fact that he has entered into an LFA in respect of the relevant dispute or Proceedings. For the avoidance of doubt, thus subsection (4) does not require disclosure of a copy of the LFA.

5. For Part 7 claims, notice under subsection (4) must be given:

A. In the Case Management Information Sheet to be submitted prior to the Case Management Conference (CMC), pursuant to RDC 26.3; or

B. When the Funded Party enters into an LFA after the CMC, within 7 days of the date of the LFA. Such notice shall be in writing and shall be served on every other party to the relevant Proceedings as well as the DIFC Courts Registry.

The draft Practice Direction thus proposed notification of the existence of litigation funding, in a way reminiscent of the provisions of the CPR which applied to notification of additional liabilities: but does not attempt to codify any principles or consequences applicable to a party having the benefit of litigation funding. As the draft Practice Direction noted:

This Practice Direction is without prejudice to any subsequent decisions of the DIFC Courts ruling on the legality of LFAs in general or any specific LFA in particular (or any part thereof).

It will be interesting to see over the next few years precisely how the law of litigation funding unfolds in the DIFC courts and to see to what extent it parallels that in the jurisdiction of England and Wales.

A Conversation on Costs: The Summer Tour

Each year I undertake a number of seminars entitled A Conversation on Costs, usually at the offices of solicitors who instruct me, or would like to instruct me. It is a chance, in an informal question and answer session to discuss some of the burning issues of the day in costs and litigation funding.

There are still a few slots on my summer tour available. If you would be interested in me coming to your firm by all means pick up the phone for a chat (0115) 947 2581 or email on andrewhogan@ropewalk.co.uk

On another note I would be interested in developing this website: both in terms of its appearance and content and would welcome some feedback.

For some time I have been pondering refreshing the design, though I have a great fondness for this blog theme. Any suggestions for further topics to include in the content will be read with interest if you care to send them to me at andrewhogan@ropewalk.co.uk

At the current time an average of 1500 people a week visit this blog according to my measurements looking for a wide variety of information and brought here by various search terms entered into Google.

A small percentage of the searches which bring the reader to my website are along the lines of  “What happens if I don’t pay my solicitor?”.

The answer to the latter can only sensibly be “Bad things. Very bad things can happen indeed.”

Through the Looking Glass

‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’

‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’

-Through the Looking Glass

As a society, we engage from time to time in collective delusions. A collective delusion is an idea, which works as along as enough people understand it and subscribe to it. When people stop believing in it, it disappears, sometimes overnight.

The collapse of democracy and the rule of law in Weimar Germany, the disappearance of the gods of the religion of Ancient Greece or republican Rome, are all examples of collective delusions coming to an abrupt end.

Although not in the same bracket, the current belief that proportionality is a meaningful concept that can be consistently deployed by the courts to enhance access to justice, is another such delusion. It is one that I detect is already starting to creak, hence the enthusiasm for fixed costs and the unstated desire to reduce the role of costs budgeting, as faith in an individually applied approach to proportionality in budgeting or on detailed assessment starts to fade.

More positively fixed costs could be viewed as the new incarnation of proportionality: instead of “fixing” proportionate costs on a case by case basis through assessment, a fixed costs regime constitutes the expression in the rules of an award of proportionate costs applied across the board to a range of cases.

Granted that there will be swings and roundabouts, but across an entire class of litigation, the theory is that proportionate costs will not only be awarded, but will be predictable in advance and the transactional or frictional costs of assessment and budgeting can be avoided altogether, representing a more efficient deployment of resources.

I regard proportionality as an essentially meaningless concept which adds nothing to the concept of reasonableness in theory or as formulated in the rules. The importance of proportionality is its existence as a concept, meant to encourage the judiciary that legal costs claimed between the parties to litigation are too high and that they should use the concept as a reason to reduce them, to make justice more affordable.

But a robust application of the principle of reasonableness would achieve the same result. In a detailed assessment hearing I argued in Hastings last summer where an RTA case settled for £50,000 the Bill of Costs claimed no less than £271,000 of costs and was assessed down on the basis of reasonableness to £73,000:comfortably below the paying party’s offer of £80,000.

The District Judge declined to reduce the sum further by reason of proportionality, noting that a significant part of the costs allowed related to experts fees and the solicitors costs/counsels fees of dealing with the expert evidence.

There have been a number of decisions in the last 9 months or so, where the principle of proportionality has been expressly applied and which have had the consequence of “setting the cat amongst the pigeons” and also precipitating satellite litigation.

The first of these, and due to be heard by the Court of Appeal in the autumn is that of BNM -v-MGN Limited [2016] EWHC B13 (Costs) a decision of Master Gordon-Saker:

8.The Claimant commenced proceedings against the Defendant on 31st July 2013, having obtained an anonymity order the day before. She claimed an injunction to restrain the Defendant from using or publishing confidential information taken from her phone, damages and an order for delivery up of any confidential information.

9.The Defendant made substantial admissions in the Defence and the claim was concluded by a consent order dated 14th July 2014, under the terms of which the Defendant undertook not to use or disclose the confidential information, agreed to pay damages of £20,000 and agreed to pay the Claimant’s costs of the action.

10.The costs claimed were in the sum of £241,817. That included a success fee in respect of the solicitors’ costs of 60 per cent, success fees in respect of the costs of both counsel of 75 per cent and an after the event insurance premium of £58,000 plus insurance premium tax of £3,480.

Such were the facts which underpinned the assessment of the winning claimant’s costs:

13.Following the hearing in November 2015 the parties agreed the figures resulting from the line by line assessment as:

Base profit costs £46,321
Base Counsel’s fees £14,687.50
Court fees £1,310
Base costs of drawing the bill £4,530
Atkins Thomson’s success fee £16,780.83
Counsel’s success fee £4,846.88
ATE premium £61,480
VAT £17,433.24
Total base costs £62,318.50
Total costs £167,389.45

14. At the hearing in April 2016 the Defendant argued that these sums were disproportionate and should be reduced further. I concluded that the sums which had been allowed as reasonable on the line by line assessment were disproportionate and were about twice the sum which would be proportionate. As I had been given the breakdown set out above I gave separate figures for the sums allowed:

Base profit costs £24,000
Base Counsel’s fees £7,300
Court fees £1,310
Base costs of drawing the bill £2,250
Atkins Thomson’s success fee £7,920
Counsel’s success fee £2,409
ATE premium £30,000
VAT £8,775.80
Total costs £83,964.80

15. At the hearing the parties calculated the total as £84,855.80, a difference of £891.

16. Apart from the court fee, each of the items was reduced by about one half. The success fees are 33 per cent of the respective base costs allowed.

He continued:

18.The new test of proportionality was introduced because the old test did not promote access to justice at proportionate cost. In Willis v Nicolson [2007] EWCA Civ 199 Buxton LJ, delivering the judgment of the court, said:

When the Civil Procedure Rules replaced the Rules of the Supreme Court, and encouraged active intervention by the court and the application of public values and not merely those values with which the parties were comfortable, it was hoped that that practice might change; and that hope was reinforced when this court said, in [2] of its judgment in Lownds v Home Office [2002] 1 WLR 2450:

‘Proportionality played no part in the taxation of costs under the Rules of the Supreme Court. The only test was that of reasonableness. The problem with that test, standing on its own, was that it institutionalised, as reasonable, the level of costs which were generally charged by the profession at the time when professional services were rendered. If a rate of charges was commonly adopted it was taken to be reasonable and so allowed on taxation even though the result was far from reasonable.’

However, in the event nothing seems to have changed. That is because, as explained in [29] of the same judgment, ‘proportionality’ is achieved by determining whether it was necessary to incur any particular item of costs. And then ‘When an item of costs is necessarily incurred then a reasonable amount for the item should normally be allowed’: and the reasonable amount per hour of the professional’s time continues to be determined by the market.

19.At a public seminar held in Cardiff on 19th June 2009 as part of Sir Rupert Jackson’s Review of Civil Litigation Costs, Sir Anthony May, then President of the Queen’s Bench Division, said:

In my experience, there is no doubt at all but that costs are assessed with nodding respect only to proportionality. An application of rule 44.5 of the Civil Procedure Rules and section 11 of the Costs Practice Direction can scarcely expect to do better than that.

20.It is clear that the new test of proportionality was intended to bring about a real change in the assessment of costs.

The Master then went on to note, after a review of such authority as there was:

36.Presently there is little guidance on how the new test of proportionality should be applied.

37.In the 15th implementation lecture Lord Neuberger said:

While the change in culture should reduce the scope of costs assessments at the conclusion of proceedings, it will not obviate the need for a robust approach to such assessments. Again the decision as to whether an item was proportionately incurred is case-sensitive, and there may be a period of slight uncertainty as the case law is developed.

That is why I have not dealt with what precisely constitutes proportionality and how it is to 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. Any question relating to proportionality and any question relating to costs is each very case-sensitive, and when the two questions come together, that is all the more true. 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.

The Master then considered how the principle of proportionality was to be applied in this case:

40.Had it been intended that costs should never exceed the sums in issue the rule could easily have stated that. There will be cases in which the costs bear a reasonable relationship to the sums in issue even though they exceed those sums.

 41.This is such a case; and the Defendant did not seek to argue otherwise. Mr Carpenter, on behalf of the Defendant, contended that a proportionate figure for base costs to the stage that the claim reached would be £20,000.

 42.The sum in issue in these proceedings was always going to be modest. The claim settled for £20,000. The Claimant’s first offer was £40,000.

 43.The value of the non-monetary relief claimed is not easy to quantify, but in my judgment it was not substantial. The Claimant knew in March 2011 that the Defendant had access to the information on her phone. The phone was returned to her in May 2011. Yet it was not until March 2013 that the Claimant’s father approached Atkins Thomson “to sound out whether any civil action could be brought”. That enquiry was prompted by press reports of a similar case in which Atkins Thomson had acted.

 44.No information taken from the phone had been published in the intervening 2 years. When proceedings were issued no application was made for an interim injunction. The anonymity order was required only because of the issue of proceedings. While the undertakings and the apology given by the Defendant as part of the settlement will have been of comfort to the Claimant, this was not a claim for substantial non-monetary relief. But for the claim for damages, it is unlikely that a claim would have been pursued.

 45.Nor was it a particularly complex case. I accept that a privacy case is more complex than the run of the mill. In the course of the detailed assessment I accepted that this case was of importance to the Claimant, that it was specialist “Londoncentric” work, that the allegations against the Defendant were serious, that it was reasonable for the Claimant to issue proceedings without prior warning given that she did not know what use the Defendant had made or would make of the confidential information, and that it was reasonable for her to apply for an anonymity order. It is these factors which make this a case where the costs can bear a reasonable relationship to the value of the claim even though they exceed that value and even though the claim was concluded at an early stage.

 46.Little additional work was generated by the conduct of the Defendant. There was some correspondence between the parties following the service of the anonymity application with an unfortunate allegation that the court had been misled, but the amount of that correspondence was limited to a few letters. The same can be said of the Defendant’s requests for extensions of time to serve the Defence and the Defendant’s failure to respond to a Part 18 request. I do not think that the conduct of the Defendant added significantly to the costs.

 47.Nor do I think that there were any wider factors involved in these proceedings. There was no real threat of publication and the Claimant was not seeking in any real way to protect her reputation. While the Defendant’s conduct can fairly be categorised as reprehensible, so much of civil litigation is based on the bad behaviour of others. I cannot see that there was any wider public importance.

 48.This claim settled at a relatively early stage, a year after the issue of proceedings and 16 months after solicitors were first instructed, before the first case management hearing, before disclosure of documents or exchange of witness statements, before any hearing other than the application for an anonymity order. The scope of the evidence would be very limited and the case was neither factually nor legally complex.

 49.In these circumstances base profit costs of £46,000 and base counsel’s fees of £14,000 must be disproportionate under the new test, being over 3 times the amount of agreed damages, and covering work which fell far short of trial. In my judgment costs of about one half of those figures would be proportionate.

 50.The ATE premium of £58,000 excluding tax is also disproportionate. For the reasons that I gave in the course of the detailed assessment, I could not conclude that the premium was unreasonable. I also accept that it was necessary for the Claimant to purchase after the event insurance. But costs may be disproportionate even though they were necessary: CPR 44.3(2)(a).

 51.This was not the premium which would cover the whole claim. £58,000 was the premium payable at the fourth of seven stages. Had the claim proceeded to judgment, the premium would have risen to £112,500 plus tax.

 52.As is common, the policy insures the Claimant against her liability to pay the premium in the event that she does not succeed; and, if she does succeed, the premium is limited to the amount allowed by the court on assessment. However the court approaches the new test of proportionality, if the premium is reduced on the basis that it is disproportionate, it is important that the court should identify the figure allowed.

 53.The premium has added significantly to the costs that were reasonably incurred, broadly matching the aggregate of base profit costs and counsel’s fees. I concluded in the course of the detailed assessment that, at the outset, the Claimant’s prospects of success were “significantly in excess of 50/50”. Those prospects did not reduce. The Defendant made substantial admissions in its Defence. A premium of £58,000 at the stage that the claim settled, potentially doubling to £112,500, cannot be said to bear a reasonable relationship to a claim which settles for £20,000, where there was no substantial claim for non-monetary relief, which was not particularly complex, where no significant additional work was generated by the conduct of the paying party and where there were no wider factors involved.

 54.In my judgment no more than one half of that amount could be considered proportionate.

Since that decision there have been a number of other decisions which repay careful examination, and many of which turn on the application of particular aspects of the transitional provisions for pre-and post 1st April 2013, and also the provisions relating to those categories of cases, which involve recoverable success fees. Cases worth reading are Dr Brian May -v- Wavell Group Plc [2016] EWHC B16 (Costs) Master Rowley and Murrells -v- Cambridge University NHS Foundation Trust (SCCO 17th January 2017) Master Brown. The Brian May case is also on its way to the Court of Appeal, to be heard in the autumn along with BNM.

A lot of time, money and ink is being expended on debating what proportionality actually means. This is because the application of the rule is untested in the higher courts and a binding formulation of general application has not been made.

As I write this, I also note with interest that the 88th set of revisions to the Civil Procedure Rules which are getting longer and longer, every year, has recently been published. The single topic which absorbs the biggest number of pages in the Rules is the topic of costs.

Do all these amendments reduce the cost of litigation, enhance access to justice and contribute to the public good? I doubt it. There is no evidence to support such a conclusion.

Why not put a moratorium on any further amendments and expansions to the Rules? Just stop changing them. Recognise that no system will ever be perfect, but that it costs people a lot of money in frictional or transactional costs arising from uncertainty over what new provisions mean.

And instead of encouraging satellite litigation between privately funded parties to determine what the costs rules mean, why not invest in training for the judiciary on what the rules should mean and what they are intended to achieve through the Judicial College. So a common view emerges? Why not spend some time considering how reasonableness should be applied in a disciplined, predictable, meaningful sense?

In a sense the judges share the key quality of Humpty Dumpty: they can pronounce what they want a word to mean, and if by “reasonableness” they meant a tough detailed assessment which balances the interests of both parties, cutting out wasteful activity, making paying parties pay for the costs of work they have caused through misjudging the strength of their case, I suspect the principle of proportionality could be safely left in Wonderland.

The bleeding obvious

Basil: Can’t we get you on Mastermind, Sybil? Next contestant Sybil Fawlty from Torquay, special subject the bleeding obvious.

-Fawlty Towers

The recent decision of Mrs Justice Carr in the case of  Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 QB is perhaps unsurprising in its result, but has predictably caused a fluttering on the legal web dealing as it does with what is undoubtedly an important point of practice on the relationship between costs budgeting, costs management and detailed assessment.

It could also be regarded as a useful exposition of the “bleeding obvious” contained in folio after folio of beautifully written text, exploring all the nuances of what in essence is a very short point: once a costs management Order has been made, and costs budgets adjusted under it, then the criterion of “good reason” must be met for the budgeted costs on a detailed assessment, to be adjusted downwards or upwards, with the distinction between budgeted and incurred costs, now established in the revised practice direction 3E having been quite apparent from the earlier versions of the rules.

That the arguments were made at all is a reflection of the effect of the law of unintended consequences: although the higher judiciary (particularly in the TCC) anticipated in 2013 a co-operative approach to costs budgeting and costs management; in the trenches of personal injury and clinical negligence litigation, costs budgeting was only ever going to be seen as another stick with which to thump the receiving party at the outset of a case and detailed assessment its counterpart to thump the receiving party at the end of the case.

The judge’s conclusions were as follows:

The judgment below was the product of the careful and reasoned thinking of an experienced specialist costs (and clinical negligence) judge, which naturally deserves respect. However, there is on any view legitimate scope for disagreement, as other recent judgments from specialist costs judges have readily demonstrated. For the reasons set out above, I have come to the conclusion that the answer given to the preliminary issue by the Costs Judge was wrong.

In my judgment, the answer to the preliminary issue is as follows: where a costs management order has been made, when assessing costs on the standard basis, the costs judge will not depart from the receiving party’s last approved or agreed budget unless satisfied that there is good reason to do so. This applies as much where the receiving party claims a sum equal to or less than the sums budgeted as where the receiving party seeks to recover more than the sums budgeted.

The appeal will therefore be allowed.

To use a preliminary issue in a factual vacuum for resolution of issues such as this is inevitably to apply a blunt tool. There are so many potential variables and nuances that the answer on any particular given set of facts might require refinement. But the central message is that set out in CPR 3.18, namely that the approved or agreed budget will bind the parties at the detailed assessment stage (on a standard basis) whether the costs claimed are for less than, equal to or more than the sums approved or agreed by that budget, unless there is good reason otherwise.

One can be confident that this decision on first appeal will not end the debate. I respectfully make the perhaps obvious point that the issue would appear to be ripe for early consideration by the Court of Appeal raising, as it does, an important point of principle or practice. Indeed, I learned only days before the appeal came before me that there is in fact an appeal already listed to be heard in the Court of Appeal this May against Master Whalan’s decision in Harrison (by way of “leapfrog” direction and albeit on a “floating” basis only). It may be that any appeal from this decision could be listed alongside that matter, if that were thought appropriate.

Whatever the future holds, however, it is important that a growing body of judgments on the same issue does not emerge in piecemeal manner. It is essential that there is procedural co-ordination. The same solicitors and/or counsel are involved in many of these matters in what is a relatively small world. I am told that many stays of detailed assessments are already in place, pending the outcome of this appeal. The parties may accept my judgment as binding for their purposes. Alternatively, it may be that further stays need to be imposed, to prevent unnecessary court and judicial time and expense being devoted to a debate which the Court of Appeal is very shortly going to consider.

The effect of the decision is likely to be limited in two particular respects. The first is that the topic is likely to be revisited by the Court of Appeal in at least one appeal in the next three months.

Secondly, the decision only applies to what are now termed by Practice Direction 3E “budgeted costs”. Incurred costs, which have been expressly left out of the budgeting process are not subject to the test applied in rule 3.18.

Conversely the decision could prove to be quite important in two other respects. The first and narrower point is the requirement now for a paying party to be quite specific whether in the Points of Dispute or a witness statement as to why there should be a departure downwards from budgeted figure for costs on a detailed assessment, addressing with particularity the reason which is said to be a “good reason”.

The second wider point is that the decision will surely prompt a change in litigation behaviour. If incurred costs are not subject to the “good reason” requirement, or the stringencies of a costs management process, there will be an enhanced incentive to front load the preparation of a case, so that as high a percentage of the costs as possible, are in the incurred column, rather than potentially subject to the strait jacket imposed by a robust costs budgeting exercise.

The back of the queue

This post first appeared as an article in the February 2017 issue of Litigation Funding magazine.

As 2017 opens, despite predictions that the Brexit process would absorb the attentions of lawmakers and divert scarce resources away from the dry and dusty terrain of costs reform, to greener European pastures, there are a significant number of reform projects under way.

First the misleadingly entitled “Reforming the soft tissue injury (whiplash) claims process”, secondly the imminent and overdue consultation on fixed costs in clinical negligence claims, thirdly Jackson LJ’s further report into fixed costs and fourthly the move to a digital bill of costs in October 2017.

However seemingly left high and dry, despite the flood waters of reform flowing, remains the vexed question of amending the current regime for Damages Based Agreements (DBAs) prescribed by the Damages Based Agreements Regulations 2013 made under section 58AA of the Courts and Legal Services Act 1990.

That this reform is sorely needed, is apparent to me from the increasing trickle of cases which come across my desk, where the shortcomings, failings and drafting infelicities of the current Regulations are manifest. It is salutary also to note both that there are no decided cases on the Damages Based Agreements Regulations 2013 and also that the Law Society has produced no model DBA.

A few examples of some of the problems will suffice. As is well known, the government declined to give lawyers what they really wanted, which was a form of hybrid Conditional Fee Agreement (CFA), whereby the lawyers would be able to recover costs from the losing party to litigation and a success fee, calculated as a percentage of the damages recovered by the client.

Instead the “Ontario” model was adopted, whereby the client agrees to pay a percentage of the damages recovered, and then in turn is able to deduct from the payment, the amount of costs recovered from the other side and retained by his lawyer.

The first problem that this creates is a conceptual one: what costs are to be credited against the payment, if a client has entered into multiple DBAs, with for example a solicitor and counsel, or a DBA with a claims management company and a further CFA with a solicitor’s firm? Is it the totality of the costs recovered from the other side? Or just the costs peculiar to each “representative”? Given that claims management companies “costs” will not be generally recoverable from the other side to litigation this creates real doubt as to the client’s liability.

Secondly, because the payment agreed under the DBA, acts as a cap for the purposes of the indemnity principle on costs recoverable from the losing side per rule 44.18 CPR, the suitability of the DBA for litigation which takes a surprising turn, may change overnight. A £3000 claim for example, funded by a DBA with a provision for payment of 25% of damages recovered, would cap any recoverable costs at £750. This would be a good deal for a solicitor, if the case settles after a dozen letters have been written.

It could prove an unfortunate bargain, if proceedings need to be issued, fraud is raised as a defence, and a low value case proceeds as a multi-track claim. Although the retainer may be capable of novation in such circumstances, should the client agree, a further layer of needless complexity will need to be addressed to ensure retainer issues are not problematic at the end of the case.

Thirdly, do you trust your client? If the client has entered into a DBA and as things get tougher, in prosecuting the claim, changes his mind, and no longer wishes to proceed with the claim, he can end the DBA. Whilst the client can end the agreement, unless it concerns an employment matter, then the Regulations give the solicitor no facility to send the client a bill for early termination. The Regulations are silent as to the client’s liability in those circumstances: but given that regulation 4 prescribes what payments can be made and the only payments that can be made, the solicitor is likely to be horribly exposed.

An unintended consequence of the introduction of DBAs, which can be utilised by claims management companies (CMCs), as well as solicitors, and which apply to the provision of claims management services, is that they are being deployed to arguably circumvent the referral fee ban, in personal injury litigation. The client enters into a DBA with the CMC, the CMC refers the case to a solicitor who enters into a CFA with the client and no prohibited referral fee changes hands.

But a solicitor cannot ignore the presence of the DBA, or turn a Nelsonian blind eye, to the client’s agreement with the CMC, taking the view that this occurred before his instruction and is none of his business, but is under a duty to advise a client of the nature of the agreement and his obligations.

The sad cases of Beresford and Smith, where solicitors failed to do so and whose relationships with claims management companies were pored over and found wanting, are instructive and on point: the decision of the Solicitors Disciplinary Tribunal was upheld by the High Court: Beresford and Smith v Solicitors Disciplinary Tribunal [2009] EWHC 3155 (Admin).

Although the Solicitors Practice Rules have been swept away and replaced by the Solicitors Code of Conduct, I do not think it is the case that the regulatory requirements have eased in the years since this case: far from it, if anything the regulatory net is likely to tighten further both for solicitors and CMCs who will shortly be regulated by the FCA.

There are other flaws with the drafting of the Regulations and the uses to which they might be put: these issues can be divided into drafting issues and matters of policy. These were addressed in a very interesting and useful report from the Civil Justice Council entitled The Damages Based Agreements Reform Project: Drafting and Policy Issues.

The report was published in August 2015 and runs to 145 pages, of closely argued text, dealing with the details of the confusingly named Damages Based Agreements Regulations 2015. These “Regulations” as the report makes clear in its introduction are a set of draft Regulations, provided to the report’s working party, which were intended to be brought into force in 2015, subject to any revisions or amendments flowing from the working party’s report.

In this respect, it is interesting to note what the working party recorded the then government as wishing to achieve in its terms of reference:

In particular, the Government’s intention is ‘substantively to improve the regulatory framework without encouraging more litigation’, and that the overriding objective is ‘to ensure that any  changes we make do not encourage litigation which would not otherwise be taken forward. Given the  similarities in substance between DBAs and CFAs, the Government does not see DBAs are filling  an access to justice gap — rather, they are intended to be an alternative form of funding, perhaps  in niche areas of litigation.’ In stating this, however, Lord Faulks acknowledged that it was a  ‘complex issue’, and that the Government was keen to avoid, so far as was possible, the ‘unintended  consequences’ that may flow from the redrafting of the DBA Regulations.

Reading that passage one comes away with the conclusion that not only was the government of the day reluctant to reform DBAs for fear of the law of unintended consequences, but it had no interest in promoting DBAs as a form of mainstream funding, perhaps seeing the model, as another unwelcome piece of fuel for the “compensation culture”.

Accordingly, given the current zeitgeist, I suspect the excellent 2015 report will remain to gather dust on the shelf for quite a while to come. DBA reform, is, in Mr Obama’s memorable phrase “at the back of the queue”.

A copy of the article as originally published can be found here: The Back of the Queue PDF

Rogue One

The whiplash “industry” of claims management companies, solicitors, medical reporting agencies et al provokes strong views from those who are part of it and those who deal with it.

Those who represent injured claimants with damaged vehicles regard themselves as obtaining access to justice on behalf of victims, from plutocratic insurance companies who have taken the premiums for the very risk that has materialised.

Insurance companies conversely regard the whole superstructure as riddled with fraud, and absent proof of fractured vertebrae, each claim is either exaggerated at best or fraudulent at worst.

The legal press and social media in the last couple of months, has been full of coverage of the views of those with an interest in the reforms on either the part of the insurers or those who represent claimants, vociferously arguing the toss with the publication of Reforming the Soft Tissue (‘whiplash’) Claims Process a copy of which can be found here: Reforming the Soft Tissue Injury (‘whiplash’) Claims Process.

It is hard to resist the conclusion that more heat than light has been generated by the debate so far: both sides are overstating their case, with the insurers painting a gloomy picture of a fraud riddled compensation culture dragging the insurance industry down to bankruptcy and in turn claimants representatives seemingly suggesting that it would be positively un-English if the Small Claims track limit were to be raised.

On a more human note there is a very real expressed fear amongst claimants’ representatives that significant reform will imperil the viability of their businesses and lead to wide ranging redundancies. The same concerns afflict the insurance industry’s panel firms to a lesser degree, but are expressed in a more muted tone.

The further conclusion that I have drawn is that the debate is not driven by evidence: nor does the consultation represent the fruits of any exercise in evidence based policy.

The pity is that there are undoubtedly a number of issues thrown up by the debate which would benefit from the production of evidence, to inform rational decision making for the collective good.

The starting point is surely to determine whether whiplash is a genuine condition or not. I have fond memories of litigating these claims in the 1990s when a series of studies from the Baltic countries, were regularly produced by medical experts instructed by the defence to suggest that whiplash in the UK was an illusory condition, or largely so.

Such views were always counter to the mainstream and indeed common sense. On the internet, one can observe videos of crash tests using dummies, at 20 mph, which illustrate vividly how a strain injury might be caused. Equally one can observe videos of impacts at 3mph and wonder how on earth anyone with a human neck could possibly sustain injury in that context.

If one takes the view that a physical whiplash type injury may well be sustained in a negligently caused collision to the extent that is more than de minimis, then the common law would prescribe that a remedy in damages should be given: to the full extent of the loss, not one penny more, nor one penny less. Because the common law is judge made law, the levels of damages awarded are those devised by the judges.

The next issue then is in what forum and against what criteria, should full compensation be awarded? Nearly 20 years ago I remember traveling to the Lincoln County Court in the full majestic panoply of wig and gown, my instructing solicitor in tow to argue issues of liability and quantum in a three party road traffic accident trial against two other barristers and two other solicitors.

It occupied a full day of a kindly QC’s time sitting as a Recorder, who took full and proper notes with his Mont Blanc pen poised over his red note book.

Each of the parties claims was worth about £3000: collectively well under £10,000 was at stake. Even then it struck me as absurd that a quicker and cheaper way of shifting small amounts of money from one party to another on simple criteria could not be devised.

What sort of justice system do you want to determine liability and award a remedy? You can have one where a wise man or woman sits under a palm tree to hear disputes between parties. They could each pay him or her a donative of £10 by way of fee: he or she would listen to each side’s version of events, with a fixed time of 15 minutes and then give a decision and remedy based upon what he or she considered fair. Simple, quick and cheap.

Or you can have a more involved system, with a settled system of laws, which grade results by ever finer and more complex criteria, to try and reach an increasingly perfect decision. You can require the parties to provide documents by way of disclosure.

You can require witness evidence in written form. You can require expert evidence, on those tricky areas of knowledge that are not within the purview of a layman, to try and reach a better decision.

But all this superstructure, requires a legal profession to operate it efficiently and to advise people how to use it. And that and the steps required by the process cost money.

Which of these models is best suited to whiplash injuries ?

Assuming you take the view that palm tree justice is inappropriate for today’s society and you need a legal system with a degree of complexity and professional lawyers, costing money the question then is who pays?

There are a number of options. The first is to require individuals to pay their own costs. This runs counter to the costs shifting philosophy of English law: that the party in the wrong pays the reasonable costs of the injured party getting vindication at law.

The second is to note that legal costs, or rather the overheads of legal practice are likely to result in a bill in an individual case, which is too large for an individual to reasonably bear.

This in turn leads to a conclusion that such costs should be collectively funded: in the same way that other services such as medical treatment, social security or ill health insurance are.

The question then is what structure of collective funding is likely to be effective?

Provision can be made through the state, through a Legal Aid scheme. If that is not thought to be appropriate, it can be made through insurance, or through other forms of collective organisation such as trade unions or membership organisations.

Buried away in the whiplash consultation is the interesting statistic whose provenance is uncertain that 70% of injured whiplash claimants have BTE insurance.

If that is so then I would suggest a real issue that is thrown up by the consultation but not addressed by it, is how that provision might be extended to 100% of injured claimants.

They would then have the benefit of insurance funding for their costs whether those were incurred in pursuit of a claim allocated to the Small Claims Track or a costs bearing track.

Then the further issue is to ensure that the BTE insurance which is provided is actually adequate to ensure that access to justice is not only preserved but enhanced with proper indemnities and freedom of choice when it comes to instructing a lawyer.

If this could be achieved then the expressed fears of the courts collapsing under the strain of unrepresented litigants or being exploited by claims management companies or unscrupulous Mackenzie friends might not come to pass.

Spring is in the air

The early part of 2017 has seen the pace of costs reform picking up in relation to the introduction of fixed costs in clinical negligence claims and what might be considered to be more fundamental reforms in relation to small personal injury claims generally.

Two major consultations have been embarked upon and the consultation period for the misleadingly entitled Reforming the Soft Tissue Injury (“whiplash”) Claims Process closed on 6th January 2017. A copy of the consultation document can be viewed here: Reforming the Soft Tissue Injury (‘whiplash’) Claims Process.

I describe the document’s title as misleading: as its principal proposed reform is to increase the Small Claims Track limit for personal injury claims, to a level where any claim where damages for pain, suffering and loss of amenity is worth up to £5000 will now be treated as a small claim.

Thus a small workplace injury claim, or a tripping claim involving injury sustained on the public highway, will be affected by the principal reform proposed in the paper.

I describe the proposed increase in the Small Claims Track limit as the principal reform, because I regard it as the realistic one. It only requires secondary legislation to raise the Small Claims Track, there is a respectable argument that an inflation based increase at least, is well overdue and the government can avoid the perils of primary legislation, necessary to remove someone’s right at common law to claim damages for a soft tissue injury, or to substitute a fixed scheme of compensation.

It is worth noting as well, that there may be nothing to prevent an insurer or other defendant, from admitting a liability to compensate for an injury and plead an admission that the damages for PSLA are say, £4500, and thus reach a further mezzanine level, where only if damages are worth £5000 more than the admitted sum will a case escape the Small Claims limit.

The consultation contemplates a reform which will undoubtedly affect both the public and that section of the legal profession which depends on the whiplash industry (or small personal injury claims generally) to earn its daily crust.

The latter is not lying down. There have been numerous submissions to the consultation and the progress from here on, is likely to be controversial.

In due course the recent Supreme Court judgment of R on the application of Moseley v London Borough of Haringey [2014] UKSC 56 the leading case on the requirements for any consultation to be lawful will undoubtedly be dusted down and a judicial review of any secondary legislation is likely.

The Moseley case was the first time that the Supreme Court has considered the extent of a public law duty to consult.  This is perhaps surprising: the development of the doctrine of legitimate expectation requiring consultation in such cases as R v North and East Devon Health Authority Exp Coughlan [2001] QB 123 by the Court of Appeal has not escaped criticism in other common law jurisdictions around the world.

In the Supreme Court, the main judgment was given by Lord Wilson: although there are differences between his judgment and that of the other justices who concurred in the result, his reasoning repays careful scrutiny.

Of particular interest, are his comments at paragraphs 27 and 28 of the judgment which suggest that sometimes fairness will require that interested persons be consulted not only upon the preferred option but also arguable yet discarded alternative options. Even where the subject of the requisite consultation is limited to the preferred option, fairness could require passing reference to be made to arguable yet discarded alternative options.

In the Moseley case the subject of the consultation was the Council’s preferred scheme relating to relief from the liability to pay the Council tax, but in order for the consultation to be fair, the consultees had to be aware of the other ways in the which the shortfall in funding which was vexing the Council could have been deployed. The alternative options would not have been obvious to those who were being consulted. The consultation had in fact been positively misleading, by suggesting that there were no other options.

There seems an increasing vogue for public law challenges to alterations to the framework within which private law claims are made or funded: see the recent case brought by the ABI over the discount rate for multipliers in personal injury claims.

I have little doubt that when the government actually announces its preferred option, at the very least, consideration will be given by the various interest groups to a judicial review of whatever measures are to be introduced.

Costs 2017 on 3rd March 2017 in Nottingham

On 3rd March 2017, I shall be delivering a paper on current issues in litigation funding and costs at the Ropewalk Chambers Personal Injury Conference in Nottingham.

Although primarily of interest to those who work in the fields of personal injury and clinical negligence I shall be covering some issues of general interest including fixed costs, the collective delusion of proportionality and other matters.

Attendance at the conference is notionally free: I do ask however for a small donation to charity. You also get lunch. And some of my greatest gags.

You can book a ticket here:

http://ropewalk.co.uk/knowledge-sharing/events2

I hope to see some of you on the day. In the usual course, the paper will be posted online shortly after the conference.