Motto v Trafigura Appeal

Following the mammoth judgement that was Motto v Trafigura by Senior Costs Master Hurst, permission to appeal certain issues was given. These were:

i) Proportionality;

ii) Vetting costs;

iii) Pre-Action Protocol;

iv) Medical reports;

v) Abandoned claims;

vi) Settlement and distribution;

vii) Cost of funding;

viii) Success fee;

ix) ATE premium.

The interesting and useful findings that have general application are as follows:

ii) Vetting Costs - subject to a valid retainer being in place to cover the work, and any arguments over proportionality, reasonableness and necessity, the work done in vetting the clients is recoverable.

With regards vii) costs of funding, the Court of Appeal have ruled:

"The time, expertise and effort devoted by solicitors to identifying a potential claimant, and negotiating the terms on which they are to be engaged by the claimant, in connection with litigation, cannot, in my view, be properly described as an item incurred by the client for the purposes of the litigation. Until the CFA is signed, the potential claimant is not merely not a claimant: he is not a client. When advising a potential claimant on the terms and effect of the CFA, the solicitors are acting for themselves, not for the potential claimant: the solicitors are negotiating with him as a prospective client, not for him as an actual client."

"It seems to me that the expenses of getting business, whether advertising to the public as potential clients, making a presentation to a potential client, or discussing a possible instruction with a potential client, should not normally be treated as attributable to, and payable by, the ultimate client or clients. Rather, such expenses should generally be treated as part of a solicitor's general overheads or expenses, which can be taken into account when assessing appropriate levels of charging, such as hourly rates."

"the cost incurred in having such discussions and taking such instructions was not so much a cost of the litigation as a cost which was collateral to the litigation, being a cost incurred to ensure that the claimants were not at risk on costs."

The remainder of the judgement is largely case sensitive and we await the Court of Appeal's findings on interest

Countdown to J Day

Reports out today suggest that J Day, or Jackson Implementation Day, is to be 1 October 2012.

Matters to be decided is the appropriate level of fixed costs for fast track matters, not exclusively limited to Personal Injury, but to include Insolvency. The fixing of costs will eliminate the arguments over the costs of costs and so the court system will be breathe a sigh of relief. Well a temporary one. MPs are warning the Judiciary that there will be a significant increase in Litigants In Person. LIPs are set to invade family courts following the reductions in availability of legal aid. Judges will no doubt be screaming how they long for the return of detailed assessment hearings.

Solicitors Code of Conduct, Part 2

Following my earlier blog, and noting that new regulations were coming in to effect from 6 October 2011 as per the SRA website at the date of writing this blog, I thought it prudent to have a look.  The draft Outcome Focused Regulations for client care are detailed

below in their wonderful flowery language.

Outcomes

You must achieve these outcomes:

O(1.1) you treat your clients fairly;

O(1.2) you provide services to your clients in a manner which protects their interests in their matter, subject to the proper administration of justice;

O(1.3) when deciding whether to act, or terminate your instructions, you comply with the law and the Code;

O(1.4) you have the resources, skills and procedures to carry out your clients' instructions;

O(1.5) the service you provide to clients is competent, delivered in a timely manner and takes account of your clients' needs and circumstances;

O(1.6) you only enter into fee agreements with your clients that are legal, and which you consider are suitable for the client's needs and take account of the client's best interests;

O(1.7) you inform clients whether and how the services you provide are regulated and how this affects the protections available to the client;

O(1.8) clients have the benefit of your compulsory professional indemnity insurance and you do not exclude or attempt to exclude liability below the minimum level of cover required by the SRA Indemnity Insurance Rules;

O(1.9) clients are informed in writing at the outset of their matter of their right to complain and how complaints can be made;

O(1.10) clients are informed in writing, both at the time of engagement and at the conclusion of your complaints procedure, of their right to complain to the Legal Ombudsman, the time frame for doing so and full details of how to contact the Legal Ombudsman;

O(1.11) clients' complaints are dealt with promptly, fairly, openly and effectively;

O(1.12) clients are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them;

O(1.13) clients receive the best possible information, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter;

O(1.14) clients are informed of their right to challenge or complain about your bill and the circumstances in which they may be liable to pay interest on an unpaid bill;

O(1.15) you properly account to clients for any financial benefit you receive as a result of your instructions;

O(1.16) you inform clients if you discover any act or omission which could give rise to a claim by them against you.

Indicative behaviours

Acting in the following way(s) may tend to show that you have achieved these outcomes and therefore complied with the Principles:

Dealing with the client's matter

IB(1.1) agreeing an appropriate level of service with your client, for example the type and frequency of communications;

IB(1.2) explaining your responsibilities and those of the client;

IB(1.3) ensuring that the client is told, in writing, the name and status of the person(s) dealing with the matter and the name and status of the person responsible for its overall supervision;

IB(1.4) explaining any arrangements, such as fee sharing or referral arrangements, which are relevant to the client's instructions;

IB(1.5) explaining any limitations or conditions on what you can do for the client, for example, because of the way the client's matter is funded;

IB(1.6) in taking instructions and during the course of the retainer, having proper regard to your client's mental capacity or other vulnerability, such as incapacity or duress;

IB(1.7) considering whether you should decline to act or cease to act because you cannot act in the client's best interests;

IB(1.8) if you seek to limit your liability to your client to a level above the minimum required by the SRA Indemnity Insurance Rules, ensuring that this limitation is in writing and is brought to the client's attention;

IB(1.9) refusing to act where your client proposes to make a gift of significant value to you or a member of your family, or a member of your firm or their family, unless the client takes independent legal advice;

IB(1.10) if you have to cease acting for a client, explaining to the client their possible options for pursuing their matter;

IB(1.11) you inform clients if they are not entitled to the protections of the SRA Compensation Fund;

IB(1.12) considering whether a conflict of interests has arisen or whether the client should be advised to obtain independent advice where the client notifies you of their intention to make a claim or if you discover an act or omission which might give rise to a claim;

Fee arrangements with your client

IB(1.13) discussing whether the potential outcomes of the client's matter are likely to justify the expense or risk involved, including any risk of having to pay someone else's legal fees;

IB(1.14) clearly explaining your fees and if and when they are likely to change;

IB(1.15) warning about any other payments for which the client may be responsible;

IB(1.16) discussing how the client will pay, including whether public funding may be available, whether the client has insurance that might cover the fees, and whether the fees may be paid by someone else such as a trade union;

IB(1.17) where you are acting for a client under a fee arrangement governed by statute, such as a conditional fee agreement, giving the client all relevant information relating to that arrangement;

IB(1.18) where you are acting for a publicly funded client, explaining how their publicly funded status affects the costs;

IB(1.19) providing the information in a clear and accessible form which is appropriate to the needs and circumstances of the client;

IB(1.20) where you receive a financial benefit as a result of acting for a client, either:

�� paying it to the client;

�� offsetting it against your fees; or

�� keeping it only where you can justify keeping it, you have told the client the amount of

the benefit (or an approximation if you do not know the exact amount) and the client

has agreed that you can keep it;

IB(1.21) ensuring that disbursements included in your bill reflect the actual amount spent or to be spent on behalf of the client;”

So essentially, the rules are the same, just broken down into ‘Outcomes’ and ‘Indicative Behaviours’.  As always, we strive to make sure you, our clients, do not fall foul of the above and are always on hand to help. See our main website for further details of our costs drafting services.

How much does the government's decisions cost?

Every time the government makes a change in policy, there is a cost consequence. At present, the costs consequences of the Jackson reforms are unknown but one would estimate that they will be significant. However, the costs consequences of other decisions are known.

We were instructed to act for one of the local authorities in a Judicial Review of a decision by the Secretary of State for Education, when he decided to cancel the buildings for schools program on the grounds that it was believed that the costs of such a scheme were inflated. The costs consequences of one decision, no matter how reasonable the decision was, resulted in significant costs being paid both by the local authorities and the relevant bodies responsible for the building programs to their legal representatives, such bill of costs ultimately being passed on to the government. The costs consequences collectively had several figures.

It is clear that it is necessary to account and justify every decision made both by the government, and those challenging the decisions such are the costs consequences. It is therefore important to work with a costs conscious firm of experts such as Carlisle Legal Costing, when conducting litigation.

Legal Aid, Sentencing & Punishment of Offenders Bill

Following sending my MP one of the many generic letters doing the rounds in objection to the above bill, I received a response stating.

"In recent years the system has become unbalanced, fuelled to a significant extent by the way that 'no win, no fee' conditional fee agreements now work. They have played an important role in extending access to justice but they also enable claims to be pursued with no real risk to claimants and the threat of excessive costs to defendants....Following careful consideration...the Government has decided to reform no win no fee arrangements to stop the perverse situation in which fear of excess costs sometimes forces defendants to settle, even when they know they are right."

Having worked in the coal face of costs for many years, I am yet to see any evidence that Defendant Insurers make economic decisions to settle purely because of the risk of excessive costs due to the additional liabilities. The significant costs in Campbell v MGN prove that.  If anything, with there being After the Event Insurance, they are better off under the present regime - in the future, they will be forced to litigate to trial and due to one way costs shifting, will not be able to recover a penny.

Fit to practice

The joke apparently goes that 99% of solicitors give the 1% a bad name. 

This certainly does not apply to our clients given the in house training we have undertaken and lengths we go to to keep our clients up to date.  Our Law Costs Drafting practice does not just concern ourselves with drafting bills of costs or negotiating, we offer a complete one stop shop for setting up funding, conducting cases profitably, obtaining insurance and attending the detailed assessment hearing - all without a hard-sell.

In keeping with our approach to helping keep the modern firm fit to practice, we are running a campaign with Lifestyle Fitness and offering one year's free gym membership to one of their exciting new centres opening up across the country. Fit in mind, fit in body, fit to practice. Brand new state of the art gyms opening in Chesterfield, Darlington, Stoke, Carlisle & Darlington with many more planned.

To claim the one year's membership with Lifestyle Fitness, all you have to do is send us 5 individual cases per fee-earner.

Bitter aftertaste | Features | The Lawyer

Bitter aftertaste | Features | The Lawyer

Yao Essaie Motto & Ors v Trafigura Ltd & Anor - Part 2

In a follow up to the substantial decision by Master Hurst, a further judgement has been given relating to the recoverability of interest. Given the fact that interest was potentially accruing at £800,000 per annum, this was a most important point following on from Gray v Toner.

Master Hurst ruled that in a CFA funded case, interest on costs should not begin to run until costs have been assessed, rather than the earlier date when judgment is given. His decision was based on different reasons to that of HHJ Stewart in Gray v Toner.

Both parties have indicated that the decision is likely to be appealed.

The question that parties need to ask is does your CFA permit recovery of interest in light of the above judgement. Contact us on 01228 63 55 45 to obtain impartial advice on the point. See our website for further information on our services

Professor Dominic Regan: PANORAMA

Professor Dominic Regan: PANORAMA: "The programme destined to be broadcast on july 4th is about how insurance companies bodge the handling of claims ,causing great costs to mou..."

Yao Essaie Motto & Ors v Trafigura Ltd & Anor

Yao Essaie Motto & Ors v Trafigura Ltd & Anor [2011] EWHC 90201 (Costs), (QBD) (SCCO) (Judgment 15.02.11). 

This was a class action involving 29,614 claimants which settled for £30 million.  The Senior Costs Judge had to determine 22 preliminary issues of which the following will be of interest to practitioners generally:

• Vetting (i.e. the costs of collecting, assessing and management of each claim): recoverable in principle but subject to the wording of the CFA in respect of the date from which the agreement is to run.

• Risk assessments for success fees: these should be reappraised when new CFAs are entered into, more claimants join an action, and if events during the litigation mean that the position on success might have changed.
• Costs of entering into a CFA and establishing an ATE insurance policy: confirmed that these are recoverable on ground that this is work properly carried out and for which they are entitled to charge.

The senior costs Judge is to deliver a supplementary judgment dealing with interest on costs in this very expensive piece of litigation.


The judgement is unsurprisingly given its size subject to an appeal.  

In search of the perfect costs

Reports from CERN, the particle accelerator in Switzerland, suggest that the search for Higgs Bosun, the legendary and definitive particle, what all matter is made up of, has been successful. But what prospect of developing the perfect costs model being formed on which to base fixed costs for all fast track matters as envisaged by Lord Justice Jackson?

The difficulties faced are enourmous when considering the question and clearly the involvement of experienced Costs Lawyers is vital. Take a typical public liability case conducted by one firm, with one medical report settling shortly after commencement of proceedings with profit costs of typically £7,500 compared with another firm whose bill crossed our desks with profit costs of £20,000 for an identical case. The problem is how can data be analysed when one firm conducts matters efficiently whereas another conducts theirs to maximise their potential profit costs. One quick point is that we duly attended a detailed assessment and reduced those profit costs to approximately £7500 together with costs of assessment as we had accurately advised our client on appropriate Part 47.19 offers. 

Second example of difficulties is when should medical evidence be obtained? A large number of solicitors choose not to obtain a medical report until after liability has been admitted or until the last resort such as in the event that liability remains an issue and so proceedings are issued, medical evidence would have to be obtained for attaching to the Particulars of Claim. Defendants however retort that had medical evidence been disclosed at the outset, then they would have made a nuisance payment at the outset rather than argue over liability and incur vast costs. Who is right? As a Costs Lawyer who has had the benefit of seeing many different firms work and styles of conducting a case, I can see that there are merits in both sides arguments. Answers on the back of a post card to Lord Justice Jackson. Don't forget to copy me in.

All we can hope is that the Judiciary involves Costs Lawyers at all stages of the consultation and that our views and opinions and notes of caution are heeded.

Solicitors Code of Conduct

It never ceases to surprise that many solicitors are still failing to provide adequate information regarding legal costs at the outset of a case and to provide the client with regular updates regarding their costs.  The Solicitor’s Code of Conduct was introduced in 2007 and is to be replaced with the Outcome Focused Regulations (OFR) in August 2011, with Rule 2 being promoted to Rule 1 given its importance. However, for the purposes of this article we shall quote the current rules.

In the continuing difficult trading climate, conforming to the Solicitor’s Code of Conduct is vital.  We are receiving an increasing number of instructions from Litigants in Person challenging their solicitor’s costs, and not without just cause for complaint.   It, therefore, seems appropriate to refresh our working knowledge of the Code: 

 (1)  You must give your client the best information possible about the likely overall cost of a matter both at the outset and, when appropriate, as the matter progresses. In particular you must:

(a) advise the client of the basis and terms of your charges;

(b) advise the client if charging rates are to be increased;

(c) advise the client of likely payments which you or your client may need to make to                others;

(d) discuss with the client how the client will pay, in particular:

(i)  whether the client may be eligible and should apply for public funding; and

(ii)  whether the client's own costs are covered by insurance or may be paid by someone else such as an employer or trade union;

(e) advise the client that there are circumstances where you may be entitled to exercise a lien for unpaid costs;

(f) advise the client of their potential liability for any other party's costs; and

(g) discuss with the client whether their liability for another party's costs may be covered by existing insurance or whether specially purchased insurance may be obtained.

(2)  Where you are acting for the client under a conditional fee agreement, (including a collective conditional fee agreement) in addition to complying with 2.03(1) above and 2.03(5) and (6) below, you must explain the following, both at the outset and, when appropriate, as the matter progresses:

(a) the circumstances in which your client may be liable for your costs and whether you will seek payment of these from the client, if entitled to do so;

(b) if you intend to seek payment of any or all of your costs from your client, you must advise your client of their right to an assessment of those costs; and

(c) where applicable, the fact that you are obliged under a fee sharing agreement to pay to a charity any fees which you receive by way of costs from the client's opponent or other third party.

(5) Any information about the cost must be clear and confirmed in writing.

(6) You must discuss with your client whether the potential outcomes of any legal case will justify the  expense or risk involved including, if relevant, the risk of having to pay an opponent's costs.

Two separate cases recently crossing our desks involved a solicitor failing to comply with 1(f) of the code, the client being shocked when confronted with a bill for the other side’s costs. In one of the cases, the liability for costs exceeded £1 million. Throughout, the client had been advised that they had a good case and there was no insurance in place. Not only was no protection afforded the client, breaching 1(g) of the Code of Conduct, but the solicitor was negligent in failing to advise the client properly. 

The other case involved a £15k costs order against the client in a matrimonial case where they had had no realistic prospect of resisting an application in this country on the grounds that proceedings were being pursued in another country as there was no legal jurisdiction abroad.  The solicitor had unnecessarily exposed the client to a costs order. 

We have developed a number of solutions to solicitor own client issues and costs protection via our contacts in the insurance industry. Do not hesitate to contact us to discuss your needs or click here.

Another common breach relates to Rule 2.03 (6). In one particular case a company instructed a solicitor to recover unpaid invoices in the sum of £5k.  The solicitor’s bill totalled £35k.  We were instructed by the paying party to oppose the bill of costs and successfully reduced the bill at a Detailed Assessment hearing to £20k, resulting in a significant shortfall and a loss of £10k to recover the £5k invoice. 

Litigation must always be cost effective. As experts in costs, we have spent a considerable amount of time working with solicitors in relation to budgets and time management, we would be happy to advise you and your firm on this topic, details of our services being found by clicking here.  We are experienced in the service of preparing budgets and costs estimates, the same becoming increasingly popular with Lord Justice Jackson placing particular weight on ways of controlling costs.