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.

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.

A thought on fixed costs reforms

Some time ago the Voice of Common Sense on the District Bench reminisced about those halcyon days pre 1999, now long gone, when there was little law on costs, no CFAs and a dispute about costs was usually settled by agreement in advance of any taxation hearing.

I pointed out that was not quite the case: even in the days of scale costs fixed by the County Court Rules, every scale 1 bill seemed to start with a request for the exercise of a discretion for an award of costs in excess of the scale.

There have always been disputes about costs, and always will be, as long as there is a shifting of costs from the losing party to the winning party in litigation. What has changed, is perhaps the enthusiasm for reform.

Each legal generation notoriously has re-invented the wheel, whether in the Civil Justice Review of 1988, the Woolf Report of 1996, the Jackson Report of 2010 or in earlier reforms.

What has changed this time round in my view is the degree of enthusiasm for reform. For instance, after fairly seismic changes in 2013, a period of stability might have been appropriate, if only to assess whether the changes had actually produced a net benefit to the public.

Far from it. At the current time the misleadingly entitled whiplash consultation has closed, which contemplates the enactment of primary legislation to remove from an entire class of claimant a substantive common law right to damages and less significantly a fairly sweeping change in the small claims track limit.

A clear issue exists about whether such claimants will be able to effectively source legal advice and representation. What I found interesting in the documents was the indication that perhaps 70% of claimants in road traffic claims have the benefit of legal expense insurance.

In which case one would have thought that the problems of collective funding and ensuring access to justice would have been best addressed by ensuring that the legal insurance market worked effectively in this field and was extended to cover the remaining 30%.

That however is an issue which is curiously absent from the government’s own documents, the responses I have seen from compensating parties and those who represent claimants. Such a solution, would render the raising of the small claims limit something of a side issue as claimants would claim on their legal expense insurance policies to obtain advice and representation in the Small Claims Court.

In addition, there is further work being undertaken by Jackson LJ, in relation to an overarching scheme of fixed costs, presumably applying to all cases, possibly worth up to £75,000. It is this exercise which I think should be of the greatest concern, as it will represent a development easily on a par with the abolition of additional liabilities in terms of its impact on access to justice and the funding of the legal profession.

Such a change to the recovery of costs would have sweeping consequences for access to justice and whether the “polluter pays” principle is maintained in a recognisable form, whether the viability of litigation is adversely affected or improved and the viability of certain sectors of the legal profession.

It also would be introduced presumably because costs budgeting and management would be perceived to be an expensive failure and hence fixed costs would be the cheaper and simpler solution to bespoke costs management in the context of an individual case.

And yet still further, there is a long promised consultation on fixed costs in clinical negligence cases, and on the horizon a digital bill of costs, whose use is compulsory from October 2017 and which may yet prompt a surge in the sales of “Microsoft Excel for Dummies” as the most modest of the expenditures solicitors would have to make in order to draw their bills.

With these reforms in mind, it struck me that the fires of satellite litigation are being banked ever higher, as rules are tested, explored and arguments made by those who perceive an advantage in doing so. Even relatively small points, which should be uncontroversial can give rise to argument.

A little while ago, I was asked to advise on whether in the context of a road traffic accident case, which concluded at trial where a single firm of solicitors represented three claimants, that meant a single amount of fixed costs should be awarded, or three sets of fixed costs. The paying party contending the former, the receiving party the latter.

Each claimant in the proceedings was jointly represented and solicitors issued a single claim form, naming the claimants as first, second or third claimant.

Turning to consider the rules, rule 2.3 defines a claimant as a person who makes a claim. It defines claim for personal injuries as meaning proceedings in which there is a claim for damages in respect of personal injuries to the claimant or any other person or in respect of a person’s death. The rule further defines a statement of case to mean a claim form, particulars of claim where these are not included in a claim form, defence, Part 20 claim or reply to a defence.

A “claim” is not the claim form, nor even the proceedings before the court, but rather the individual demand by a particular person for damages which is included in proceedings. Each claimant has an individual “claim”.

Turning to consider 45.29A, the starting point to note is that section IIIA of part 45 only has application where “a claim” is started under the protocol. Rule 45.29B provides that the fixed costs in rule 45.29C apply where “a claim” is started under the protocol and where the claim notification form is submitted after July 2013 and limits those costs accordingly. It does not limit costs by reference to “proceedings”.

It follows, that the wording of the rule, relates to “a claim”, being the individual’s demand for damages, indicating that costs are awarded per claim, not per claim form or per set of proceedings. It would be an absurd result, if the contrary were true and the fact that three claims are brought in one claim form, as opposed to three claims in three claim forms might make a material difference.

There exists in any case the possibility of individual part 36 offers being made in relation to individual claimants at varying stages, and the rules make no provision for apportionment of a single award of costs.

It can be mere chance that all three claims will go to trial  as opposed to one settling pre-issue, one settling after issue, and one being determined at trial, all of which predicate different awards of costs.

Finally the old PD 45.7 made it plain that costs accrued per claimant, cases of this nature were always settled, per claimant: if a radically different approach were to be taken, then one would have thought that there would be something clear to this effect. The rules are clear, once it is appreciated, what a “claim” is, from rule 2.3.

I was told it took half a day’s argument before the court concluded that indeed three sets of costs were recoverable. If a point like that can absorb so much argument, the new framework of fixed costs as and when it emerges may create just as many difficulties as those it purports to solve.

Discontinuance and detailed assessment proceedings

From time to time, for a variety of reasons, it may become necessary to discontinue detailed assessment proceedings. This may be because they have misfired, or there are problems with a retainer, or a potential for embarrassment, or some other reason.

When they are discontinued, there is no obligation to give an explanation as to why they are being discontinued, a fact which may be of some comfort to the erstwhile receiving party and may vex the putative paying party.

The usual procedure for discontinuing proceedings under part 38 CPR is modified in certain respects.

The Practice Direction to part 47 CPR provides as follows at paragraph 9.4:

(1) The receiving party may discontinue the detailed assessment proceedings in accordance with Part 38 (Discontinuance).

(2) Where the receiving party discontinues the detailed assessment proceedings before a detailed assessment hearing has been requested, the paying party may apply to the appropriate office for an order about the costs of the detailed assessment proceedings.

(3) Where a detailed assessment hearing has been requested the receiving party may not discontinue unless the court gives permission.

(4) A bill of costs may be withdrawn by consent whether or not a detailed assessment hearing has been requested.                                 

Rule 38.2 provides as follows:

(1) A claimant may discontinue all or part of a claim at any time.

(2) However –

(a) a claimant must obtain the permission of the court if he wishes to discontinue all or part of a claim in relation to which –

(i) the court has granted an interim injunction(GL); or

(ii) any party has given an undertaking to the court;

(b) where the claimant has received an interim payment in relation to a claim (whether voluntarily or pursuant to an order under Part 25), he may discontinue that claim only if –

(i) the defendant who made the interim payment consents in writing; or

(ii) the court gives permission;

(c) where there is more than one claimant, a claimant may not discontinue unless –

(i) every other claimant consents in writing; or

(ii) the court gives permission.

(3) Where there is more than one defendant, the claimant may discontinue all or part of a claim against all or any of the defendants.

Rule 38.3 provides as follows:

(1) To discontinue a claim or part of a claim, a claimant must –

(a) file a notice of discontinuance; and

(b) serve a copy of it on every other party to the proceedings.

(2) The claimant must state in the notice of discontinuance which he files that he has served notice of discontinuance on every other party to the proceedings.

(3) Where the claimant needs the consent of some other party, a copy of the necessary consent must be attached to the notice of discontinuance.

(4) Where there is more than one defendant, the notice of discontinuance must specify against which defendants the claim is discontinued.

Rule 38.4 provides:

(1) Where the claimant discontinues under rule 38.2(1) the defendant may apply to have the notice of discontinuance set aside.

(2) The defendant may not make an application under this rule more than 28 days after the date when the notice of discontinuance was served on him.

Rule 38.7 provides:

A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if –

(a) he discontinued the claim after the defendant filed a defence; and

(b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim.

It is noteworthy that the requirements of part 38 where permission is required, are primarily concerned with instances, where the claimant has received interim payments or an interim remedy, or given undertakings to the court, or might be contemplating a further set of proceedings.

This supports the conclusion that the requirement to obtain permission is to ensure that a claimant has to come to court to satisfy the court that such matters are “tidied up” and not left unaddressed when proceedings are concluded by way of discontinuance, or that a claimant has not obtained a collateral advantage by discontinuance or abused the process of the court by starting proceedings and discontinuing them by eg retaining interim payments.

The power to discontinue proceedings post dates the Judicature Acts of 1873-75 and replaced the common-law power of non-suiting a litigant. The root of modern authority lies in the case of Castanho.v.Brown & Root [1981] AC 557where the House of Lords per Lord Scarman at pages 571-572 considered when it might be appropriate to strike out a Notice of Discontinuance as an abuse of process (there being no requirement in the RSC as then formulated to seek the court’s permission) and the conclusion at page 577 that discontinuance would be permitted once the issues of costs, repayment of interim payments and future proceedings had been settled.

Similarly, in the case of Gilham.v.Browning and Another [1998] 1 WLR 682 a defendant was debarred from adducing evidence on his counterclaim, and sought to discontinue proceedings in order to circumvent the debarral, by fresh proceedings. The judge at first instance struck out the notice of discontinuance as an abuse of process. The defendant offered no evidence at the trial of the counterclaim and it was dismissed. The Court of Appeal upheld the judge’s reasoning (and the result). See in particular the discussion of the origins do discontinuance at pages 686 and 691 of May LJ’s judgment. The key to striking out the notice or by way of analogy, granting or refusing permission or applying terms, was the seeking of a collateral advantage.

In the recent case of High Commissioner for Pakistan in the UK.v.National Westminster Bank and others [2015] EWHC 55 (Ch)the High Court set aside Notice of Discontinuance, because the claimant was attempting to obtain a collateral advantage by doing so, the resumption of sovereign immunity. See paragraph 78 of the judgment. See further the discussion at paragraphs 79 to 83 in which the court discussed what terms would have been imposed in order to grant a discontinuance.

It should be noted that due to rule 38.7 a second set of proceedings cannot be started as of right against the same parties: in such a scenario it may well be necessary to lift the cloak of privilege when applying for permission, in order to explain to the court why it would be just to give permission.

The time of changes

I have always been a fan of autumn. The season of changes, it is pleasingly full of falling leaves, muddy boots, and crumpets with bramble jelly by the fire.

In keeping with the autumnal zeitgeist last month I moved rooms in chambers, vacating the room that I have had for 18 years and moving to new quarters on the first floor.

I also sadly said farewell to a chair that has been in my room for the same period of time. Never sat in by me, it has been a useful repository for books, umbrellas, papers and sundry pupils for nearly 2 decades. Here is a picture of it:

img_3525

It was one of a matching pair, but its twin vanished long ago, and only recently did I become aware of where the missing chair ended up:

chair

Yes, my chair was stolen, and it seems ended up as a prop in the torture scene in Casino Royale.

I was in turn tempted to keep the remaining chair, in case it came in useful in the future eg: to encourage defaulting solicitors to pay the fees that they owe me.

But life is too short for such indulgences, the chair has been thrown on the scrap heap and so will some certainties in the world of costs, as the pace of change is now accelerating as we move towards 2017.

The three big issues that I identify for the next year, are the imminent consultation on fixed fees for clinicial negligence cases likely to be limited to those cases with a value of up to £25,000, the impending Court of Appeal case(s) on the proportionality test and the introduction of the new Bill of Costs.

I have selected these three reforms because each of them has the potential to be systemic in their own right and in the wider consequences they have for the law and practice of costs.

Fixed costs in clinical negligence cases will undoubtedly affect the economics of practice in that area, but will also act as a template for further reform, both in terms of the upward expansion of fixed costs in clinical negligence, but also in other areas which at the moment have pleaded special privilege in terms of their complexity or the need for a bespoke award of standard basis costs.

The proportionality appeal(s) will crystallise the correct approach to proportionality for the lower courts, and determine the volume of costs litigation in the next few years: if the scope for a reduction is broad and sweeping, far more costs disputes will be litigated than at present. Conversely, if the scope is small, then the retention of the principle of proportionality at all, is thrown into question, because it can legitimately be asked what does it add to the criterion of reasonableness?

The digital bill has been slow in its evolution, greeted with a lack of enthusiasm by the profession, but has the potential to greatly erode one of the profit centres of the costs lawyers profession, the drawing of bills. Its arrival fits with the move to digitisation.

It would require enormous expenditure to implement the firm wide systems which must underpin it and its potential complexity, could in turn affect the volume of costs litigation as parties grapple with its introduction.

Interesting times ahead.

casino_royale_daniel-craig-mads-mikkelsen

“Do you expect me to talk, Le Chiffre?”

“No Mr Bond, I expect you to cry.”

Reviewing provisional assessments of costs

I have now undertaken more than two dozen oral hearings, in the aftermath of a provisional assessment, when the paying party tries to make its points of principle, or the receiving party tries to claw something from the wreckage.

The rules provide that either party can request an oral hearing up to 21 days after receipt of the paper determination. But it is important to note that the scope of this hearing is strictly confined: it is not a rehearing where all issues are up for grabs, but a review, as the wording of rule 47.15 makes clear.

47.15

(1) This rule applies to any detailed assessment proceedings commenced in the High Court or the 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) In proceedings which do not go beyond provisional assessment, the maximum amount the court will award to any party as costs of the assessment (other than the costs of drafting the bill of costs) is £1,500 together with any VAT thereon and any court fees paid by that party.

(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.

The nature of a review is significant: the court does not allow fresh evidence or further points to be taken. Rather the purpose of a review is to identify where the court might have fallen into error or misunderstood the material before it or made an error of law. Many parties seek to introduce new points (often in skeletons exchanged shortly before the hearing) or to lodge further documents, which were not before the judge for the paper exercise, including in a number of instances the retainer.

A review in this context is not an appeal, nonetheless it is clear from the formulation of the rule, that the approach the court should adopt at this hearing is akin to an appeal by way of review. In Tanfern Limited.v.Cameron-MacDonald [2000] 1 WLR 1311, Brooke LJ noted this:

  1. As a general rule, every appeal will be limited to a review of the decision of the lower court. This general rule will be applied unless a practice direction makes different provision for a particular category of appeal, or the court considers that in the circumstances of an individual appeal it would be in the interests of justice to hold a re-hearing (CPR 52.11(1)). The appeal court will only allow an appeal where the decision of the lower court was wrong, or where it was unjust because of a serious procedural or other irregularity in the proceedings in the lower court (CPR 52.11(3)).
  2. This marks a significant change in practice, in relation to what used to be called “interlocutory appeals” from district judges or masters. Under the old practice, the appeal to a judge was a rehearing in the fullest sense of the word, and the judge exercised his/her discretion afresh, while giving appropriate weight to the way the lower court had exercised its discretion in the matter. Under the new practice, the decision of the lower court will attract much greater significance. The appeal court’s duty is now limited to a review of that decision, and it may only interfere in the quite limited circumstances set out in CPR 52.11(3).
  3. The first ground for interference speaks for itself. The epithet “wrong” is to be applied to the substance of the decision made by the lower court. If the appeal is against the exercise of a discretion by the lower court, the decision of the House of Lords in G v G [1985] 1 WLR 647 warrants attention. In that case Lord Fraser of Tullybelton said at p 652C:

“Certainly it would not be useful to inquire whether different shades of meaning are intended to be conveyed by words such as “blatant error” used by the President in the present case, and words such as “clearly wrong”, “plainly wrong”, or simply “wrong” used by other judges in other cases. All these various expressions were used in order to emphasise the point that the appellate court should only interfere when they consider that the judge of the first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which a reasonable disagreement is possible.”

  1. So far as the second ground for interference is concerned, it must be noted that the appeal court only has power to interfere if the procedural or other irregularity which it has detected in the proceedings in the lower court was a serious one, and that this irregularity caused the decision of the lower court to be an unjust decision.

It should also be noted that the request has to specify what points are to be taken at the oral hearing: this re-emphasises that the court’s scrutiny is confined to those points which are challenged and the soundness of the decisions provisionally reached.

So a party resisting the oral reconsideration is likely to take as a ball point a general theme to beat the applicant with as follows:  “as it is a review, where do you say the District Judge got it wrong?” a submission which has a delightfully childlike simplicity to it, and in certain courts can have a determinative effect.

Despite the wording of the rule it is apparent that different courts are interpreting it rather differently and effectively starting the hearing from scratch, though it may be because the scope of the hearing is not raised as an issue before them.

The wording of the rule has also given rise to three further interesting points. The first is the issue as to whether the costs of the assessment are to be divided into two parts, the paper assessment where costs are capped at £1500 plus VAT plus court fees, with additional costs for the oral hearing relating only to the oral hearing, or whether once a case goes to an oral hearing, costs for the assessment in general are at large and the cap falls away completely.

The second relates to whether after a paper assessment, it is open to a paying or receiving party to accept a part 36 offer without obtaining the permission of the court.

The third, is whether after a paper assessment, and an oral hearing has been requested, it is open to a party to make a further part 36 offer.

There is of course no law, still less any binding authority on any of these points: but they are interesting examples of how ambiguities in the rules create scope for lucrative creativity in interpretation.

Statutory construction and the Civil Procedure Rules

In recent weeks, I have had a number of enquiries from frustrated costs lawyers, as to what certain provisions within part 45 actually mean. They are frustrated, because the rules do not appear to cover or explain with certainty, what costs are recoverable in certain scenarios, or because the rules are ambiguous. Such frustrations are not new.

The Civil Procedure Rules are delegated legislation made by the Civil Procedure Rules Committee and given force of law by statutory instrument. But they are not drafted by Parliamentary counsel, trained for many years in the discipline of statutory drafting.

Instead, like all products of a committee they represent a compromise between the views of those who gamely “have a go” at framing general rules to fit particular cases.

Often the results are unhappy: and an interesting study could take place into the comparative costs of employing parliamentary counsel to produce a more skilled and certain set of provisions, and the wasted costs thrown away in satellite litigation over the years, seeking to achieve the same end.

However there is no sign that the flames of the “bonfire of the quangos” will be engulfing the Rules Committee any time soon, and so I set out some thoughts on how the rules (any rules) are to be interpreted or construed.

The starting point to note is that delegated legislation is to be construed in the same way as primary legislation. This proposition leads us then to consider what are the appropriate ways to consider primary legislation.

Of all the canons of construction, the most important is that the courts should give effect to the purpose behind the legislation. Legislation is thus to be given a purposive construction which considers that the statute as a whole and read in the context of the situation which led to its enactment.

Purposive interpretation as a phrase must be considered in context: it certainly does not mean that the court is free to consider in a vacuum what Parliament intended, or to carry out a far ranging review to hypothesise what Parliament meant and give effect to it’s own view.

Instead, a purposive construction is one either following the literal meaning of the enactment where that meaning is in accordance with the legislative purpose or applying a strained meaning where the literal meaning is not in accordance with the legislative purpose.

Purposive construction is therefore not a principle which conflicts with the literal wording of a statute, rather the courts take the view that the literal meaning must be taken to reflect the purpose that Parliament intended a set of provisions to have. Parliament uses the literal meaning to explain its purpose, if you like.

Statutory interpretation thus requires the court to identify the meaning borne by the words in question in the particular context. The phrase “intention of Parliament” is shorthand for the intention the court reasonably imputes to Parliament in respect of the language used.

Prima facie the meaning of an enactment which was intended by the legislator is taken to be that which corresponds to its literal meaning. This directs the court to  to consider the natural and ordinary meaning of the word or phrase in question, that is its proper and most known signification. If there is more than one ordinary meaning, the most common and well established is preferred (other things being equal).

This in turn poses the interesting question “natural and ordinary” to whom? A set of words may mean one thing to an educated Guardian-reading academic, quite another to a semi-literate manual labourer, and something different again depending on which region of the United Kingdom they come from.

Conversely, a strained construction is applied, where it is apparent that something has gone wrong in the drafting. This is where the court plays Humpty Dumpty, in Wonderland, taking the view that words mean what the court says they mean, as a nice knock down point.

A “strained” construction will be justified when there is a repugnance between the words of the enactment and some other enactment, or the consequences of a literal construction are so undesirable that Parliament cannot have intended them or there is an error in the text which plainly falsifies Parliament’s intention or the passage of time since the enactment was originally drafted.

Technical terms of law or expertise are to be given their technical meaning unless the contrary intention appears. This in turn poses the question of what is a technical term of law or expertise, but usually the context will again provide a steer. The Civil Procedure Rules are littered with technical terms of law, which are so well known to lawyers that they require no deeper definition of their meaning.

These days, there is usually a plethora of consultative material, or ministerial statements, which precede significant developments, including in relation to the Civil Procedure Rules, as recent reforms to part 45 demonstrate.

But it is far too simplistic, to simply point to this material and suggest that it fills in the gaps in obscure provisions. It is for the courts to interpret legislation not the executive and even precisely framed official statements are of limited assistance at best in interpreting legislation.

The court may under proper safeguards have regard to the enacting history of Act as an aid to its construction but must bear in mind that the creation of statute law is subject to a continuous process of development. Measures can go through multiple drafts.

Whilst Explanatory Notes are admissible as an aid to construction private notes are not as it is fundamental that all materials relevant to the proper interpretation of an instrument should be available to any person who wishes to inform himself about the meaning of the law.

Finally, the courts take as a working assumption, the view that the drafter of legislation is assumed to be competent with a sufficient knowledge of the law, which as a legal fiction is probably a necessary assumption, even if honoured as much in the breach as the observance.

 

Costs budgeting and evidence based policy

Earlier this month, two significant lectures were given on the topic of costs budgeting by Jackson LJ and Dyson MR, with the title “Confronting Costs Management”. The text of those lectures can be found here: Confronting Costs Management by Lord Justice Jackson and here Confronting Costs Management by Lord Dyson.

Although Jackson LJ in particular was careful to say that he was expressing a personal view, the message intended to be sent out was that costs management and in particular costs budgeting is here to stay. The lectures raise interesting points about the current regime and where it might be leading, which are worthy of close consideration.

When I first reviewed the Jackson proposals more than five years ago, in the aftermath of the publication of the Final Report, what struck me was the flimsy evidential base for many of the proposed reforms. In particular, the questions that I posed then, can be only slightly reformulated now. If the working hypothesis in 2010, was that costs were disproportionate and needed to be reduced, the key questions were and still are:

  1. To what degree are civil litigation costs disproportionate, both collectively across the civil justice system as a whole, and individually, in the context of particular cases?
  2. To what degree, or by how much therefore, should civil litigation costs be reduced from their current level, both collectively across the civil justice system as a whole, and individually in the context of particular cases?
  3. In the light of the answers to 1 and 2, what should any relevant rule change be seeking to achieve, through a control mechanism for the reduction of costs?
  4. What transactional or frictional costs, might be generated by such a control mechanism, which need to be offset against any reductions achieved by rule change?
  5. How can the effects of this rule change be measured by quantitative data, or other hard evidence, which enables the potential savings/increases in costs to be evaluated?

It will be noted that the above questions are posed in the context of what could be described as evidence based policy making. Evidence based policy making can be summarised thus:

Using evidence to inform policy is not a new idea. What is new and interesting however, is the increasing emphasis that has been placed on the concept in the UK over the last decade. The term EBP gained political currency under the Blair administrations since 1997. It was intended to signify the entry of a government with a modernising mandate, committed to replacing ideological driven politics with rational decision-making. EBP has now become a focus for a range of policy communities, where the government departments, research organisations or think tanks.

EBP is a discourse or set of methods which informs the policy process, rather than aiming to directly affect the eventual goals of the policy. Advocates a more rational, rigourous and systematic approach. The pursuit of EBP is based on the premise that policy decision should be better informed by available evidence and should include rational analysis. This is because policy which is based on systematic evidence is seen to produce better outcomes. The approach has also come to incorporate evidence-based practices.

(Evidence Based Policy Making: Sutcliffe and Court ODI 2005)

Evidence based policy making therefore, might be seen as a tool to fashion a set of rules which meet utilitarian goals: to produce the best and fairest rules, benefiting the widest range of groups and interests overall.

But there is of course no such thing as utility. There are only sectional interests. A common question from my students and pupils, is why rules (or laws in general) are the way they are. The answer is usually because it suits a particular interest group or collection of groupings that that is so.

Another aspect of rule change would be to consider more widely the behavioural economic and psychological consequences of changing a rule: the importance of these two interlinked disciplines is manifest in government policy both by the establishment of the behavioural insight team in the Prime Minister’s office and the way that many government policies are increasingly constructed to take into account these factors.

In the context of costs management although this may be seen by the judiciary or some elements of the judiciary as a tool by which the Holy Grail of proportionality may be achieved, conversely by liability insurers or the NHSLA costs management may well be seen as a “big stick” with which to beat claimants pursuing claims against them, offering an extra opportunity to seek to drive down costs or to limit their incurrence.

Even if the process causes delay to the civil litigation process, this again may work to the benefit of liability insurers or the NHSLA, which can enjoy possession of their funds, for a longer period of time before having to pay them out by way of damages and costs.

Notwithstanding then that there will be no such thing as a utilitarian solution but only a solution based on the interests involved, even so, it can be noted that there are benefits to be derived from an evidence based policy approach:

Given that the benefits of evaluations are hard to account for in an instrumental way (i.e that evaluations leads to improvements in the policies they evaluate), then it is hard to complain about the political expectations of politicians and officials that work for them: without such expectations it is arguable that few evaluations would ever be conducted. If there is a good chance that any report we pickup has been written under some pressure to produce favourable or non-embarrassing results-some direct, some indirect and some self imposed by researchers anticipating the reactions of those paying them-what is the value of any evaluation picked at random, aside from any political uses it might have? The value of even the most rigourous evaluation usually lies in the more indirect it may enhance our understanding of how policies and interventions work and informed debates and deliberations about policy change. The value of the research becomes a matter of how far can make this indirect contribution. In debates about how policy works, even research that might have been designed to find a preestablished position can have value if it contains a serious attempt to weigh up this position against alternatives and/or if it provides evidence of data that can be used by others to do this. Only if it does neither could one consider it junk.

(Evidence based politics. Government and the production of policy research.-The LSE GV314 group)

So when evaluating the benefits of costs budgeting and costs management more generally it might be thought logical to consider whether this rule change has worked to reduce costs, from disproportionate levels to proportionate levels and to consider how much the rule change itself has cost in terms of transactional or frictional costs.

This latter consideration could be looked at narrowly in terms of the costs of drawing up budgets, negotiating the attending costs management hearings and the ongoing process of review of costs: “the costs of the costs”. Alternatively it could consider costs more widely in terms of the effect of any delays created by the process the knock-on consequences for higher litigation costs overall and perhaps wider economic benefits and dis-benefits.

Accordingly against this backdrop one turns to consider the papers presented at the Harbour lectures.

Looking at the lecture by Jackson LJ itself it is quite apparent in terms of the material gathered to underpin it that it is based upon anecdote and conversations with a small number of judges and practitioners, and is devoid of anything approaching quantitative data.

Paragraph 2.1 of the lecture states quite baldly that “Costs management works.”, but this is a statement of hope or intent, rather than a conclusion based on data.  The benefits of costs management which are set out in the balance of section 2 of the lecture could also be regarded as aspirations rather than as observed results.

Moreover there is little sense of scale in the paper given that we know that the majority of cases or claims settle without issue, that of those that are issued the vast majority settle before trial, and yet the costs budgets requirement is imposed in every case on the multitrack requiring the expenditure of resources to produce cost budgets and to comply with the costs management rules on the basis of a scenario which will never come to pass: that all cases will go to trial.

The objections to the process are also dealt with within section 2 and it is interesting to note the way that they are dismissed.  Jackson LJ puts forward the proposition that in no other commercial project would someone embark upon their project without a budget.

That may be so but the litigation budgets which are produced will of course bear no resemblance to the likely course of litigation: which will conclude by way of settlement in the majority of cases despite an elaborate budgeting exercise which takes matters forward through to trial. No one in commercial life draws up a five year budget for a project that will last one year.

It is also interesting to note that the final point which is prayed in favour of the process is that Singapore is now in the process of introducing costs management into its procedural rules. Given the malign influence of Singaporean jurisprudence in the Mitchell debacle it seems surprising that this particular hobbyhorse is still being ridden.

If one therefore looks to consider within the lecture what the problems with costs management are at the current time, the first point to note is the problem of judicial inconsistency. What this means of course is that the district bench has widely differing approaches and attitudes to the problems and challenges of cost management.

The second problem that is noted is that the length of some cost management hearings and the micromanagement that takes place which is antithetical to what costs budgeting is trying to achieve.

The third problem noted is the wide variation in the forms of cost management orders issued by different court this is properly a refinement of the first problem: and the issue of delays and backlog is noted as a fourth problem.

This issue seems particularly acute in the context of clinical negligence cases issued in London. Indeed one of the few hard facts contained within the lecture points to a nine-month delay being added to clinical negligence cases.Jackson LJ’s proposed solution is simply to remit the requirement of costs budgeting in those cases which have already been issued: in effect providing a”get out of jail free card” to the Masters in the Queen’s bench division to deal with the backlog.

This is a stunning recognition that costs budgeting has failed in the context of an entire class of litigation.

The fifth point which is noted is that there is no effective mechanism for dealing with costs already incurred. Given that very substantial sums will already have been incurred but which are not taken into account or not dealt with at the budgeting phase the ambit of costs budgeting as currently constituted is handicapped from the start.

The further point to note is that the time for filing and exchanging budgets which is often done far in advance of any costs management hearing means that the work which is done has to be redone or is otherwise otiose in the context of costs budgeting.

Difficulties at detailed assessment are already apparent in that there is a mismatch between Precedent H and the currently constituted bill of costs. The origins of this problem can be traced back to the fact that no one seems to have considered when the rules were drafted how precedent H could be set alongside a bill of costs in the form of the schedule annexed to part 47.

If you cannot tell whether the individual parts of the budget have been exceeded or not what is the point of having individual phases of a budget and agonising over their content? The shortcomings of precedent H which has to be one of the most un-friendly and awkward forms ever devised for the purposes of civil litigation are of course well known.

The further point and perhaps the most important point contained in the lecture is that there is a suggestion in paragraph 4.5 that costs management orders should not be made in every case as rule 3.15 and practice direction 3E contemplate but should be used as a matter of discretion by the court as part of general case management. Jackson LJ further notes at paragraph 4.6

A number of judges who are skilled and swift cost management have expressed concerns about the above solution. They fear will become an excuse for certain of their colleagues to “opt out” and thus lead to forum shopping. I do not share these fears. I believe that once criteria laid down all judges will conscientiously follow them. It is important that there be a uniform approach across all civil courts. There will be an obligation on all judges with leadership roles actively to monitor how “their” judges are exercising the discretion to costs manage. If different practices emerge, this should be drawn to the attention of the deputy head of civil justice, so that he can give appropriate guidance

The lecture concludes with this prediction:

I predict that within 10 years cost management will be accepted as an entirely normal discipline and people wonder what all the fuss was about.

The oddity, is that the lecture taken as a whole seems to set out an excellent case for the abolition of costs budgeting across the bulk of civil litigation.

I think this paper put forward by Jackson LJ is to be welcomed.

It provides a comprehensive but anecdotal overview of the current issues in relation to costs management.

It provides no answers whatsoever at an empirical level as to how much cost management is costing, whether it is a worthwhile exercise in that it is reducing disproportionate costs to proportionate costs and makes no attempt to consider what the overall economic benefits and disbenefits of the process are.

What is apparent is that a rule change which has resulted in nine months of delay in clinical negligence cases obviously has significant problems.

Perhaps more significantly however is the failure both within this report and more generally to consider what the alternatives are to costs management. In particular terms although reference is made within the lecture to the introduction of fixed fees certainly in all FastTrack cases and also the lower reaches of the multitrack this is not grasped and pursued with the vigour that one might anticipate.

This is surprising. If one is looking at proportionality collectively over the entire civil justice system then fixed fees in the most numerous variants of cases will at a stroke indicate what is proportionate and what is not between the parties, provide certainty, eliminate frictional or transactional costs and enable costs budgeting to be reserved on a discretionary basis to those cases where it really matters.

In this sense costs budgeting and cost management may become what costs capping should always have been and could be utilised in a way more akin to the targeted rapier, than the sweeping broadsword it currently appears to be.

 

 

Setting aside default judgments and costs certificates

For many years, the principles on which a judgment or default costs certificate would be set aside, were relatively straightforward. If a judgment or costs certificate was regular, in that it had been obtained in compliance with the rules, and due to the fault or omission of the defendant or paying party, the court would set aside the judgment or costs certificate, if the party in default could show reasonable celerity in making their application and something to argue about on the merits. In 99% of cases, the court would award costs against the party in default: in recognition that the claimant or receiving party was being deprived of a regular judgment, and the court was exercising the prerogative of mercy. Applications to set aside thus created an opportunity to hold on to what had been won, and the opportunity to earn a few hundred quid in costs. Irregular judgments or costs certificates, were of course liable to be set aside as of right.

Within the last couple of years, however, the reformulated rule 3.9 and overriding objective, together with the Mitchell line of authority, have meant resisting applications to set aside regular judgments or costs certificates are now thwart with peril. One District Judge observed to me, that given that the parties can and are encouraged, to agree extensions of time of up to 28 days, if an application to set aside is made within 28 days it is made promptly, and should be consented to. Otherwise, the holder of the judgment is likely to be made to pay the costs.

The source of this attitude is readily to hand. In Denton the Court of Appeal made these observations:

  1. Justifiable concern has been expressed by the legal profession about the satellite litigation and the non-cooperation between lawyers that Mitchell has generated. We believe that this has been caused by a failure to apply Mitchell correctly and in the manner now more fully explained above.

The Court of Appeal went on:

  1. Litigation cannot be conducted efficiently and at proportionate cost without (a) fostering a culture of compliance with rules, practice directions and court orders, and (b) cooperation between the parties and their lawyers. This applies as much to litigation undertaken by litigants in person as it does to others. This was part of the foundation of the Jackson report. Nor should it be overlooked that CPR rule 1.3 provides that “the parties are required to help the court to further the overriding objective”. Parties who opportunistically and unreasonably oppose applications for relief from sanctions take up court time and act in breach of this obligation.
  2. We think we should make it plain that it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied and that they will obtain a windfall strike out or other litigation advantage. In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation. The parties should in any event be ready to agree limited but reasonable extensions of time up to 28 days as envisaged by the new rule 3.8(4).
  3. It should be very much the exceptional case where a contested application for relief from sanctions is necessary. This is for two reasons: first because compliance should become the norm, rather than the exception as it was in the past, and secondly, because the parties should work together to make sure that, in all but the most serious cases, satellite litigation is avoided even where a breach has occurred.
  4. The court will be more ready in the future to penalise opportunism. The duty of care owed by a legal representative to his client takes account of the fact that litigants are required to help the court to further the overriding objective. Representatives should bear this important obligation to the court in mind when considering whether to advise their clients to adopt an uncooperative attitude in unreasonably refusing to agree extensions of time and in unreasonably opposing applications for relief from sanctions. It is as unacceptable for a party to try to take advantage of a minor inadvertent error, as it is for rules, orders and practice directions to be breached in the first place. Heavy costs sanctions should, therefore, be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions. An order to pay the costs of the application under rule 3.9 may not always be sufficient. The court can, in an appropriate case, also record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR rule 44.11 when costs are dealt with at the end of the case. If the offending party ultimately wins, the court may make a substantial reduction in its costs recovery on grounds of conduct under rule 44.11. If the offending party ultimately loses, then its conduct may be a good reason to order it to pay indemnity costs. Such an order would free the winning party from the operation of CPR rule 3.18 in relation to its costs budget.

These paragraphs are a powerful weapon in the hands of the party seeking to set aside a regular judgment or costs certificate: they indicate that refusal to consent may have costs consequences going far beyond the instant application and indeed allow defendants and paying parties, to springboard a counter attack, by asking a judge to record unreasonable conduct in the order, and gaining a substantial costs windfall, later in the case.