Harmans Costs Brief - March 2017

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Another busy month and lots to discuss, not least the new format bill of costs - Mat Knight takes a look below.  We have also summarised the decision of Merrix v Heart of England NHS Foundation Trust plus much more.

We hope you find this latest instalment of Costs Brief useful. Do let us know if there's something in particular that you'd like us to cover in a future issue.

Many thanks, Harmans Costs
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The new format bill of costs is upon us, so what now asks Mat Knight
The 86th Update to the CPR which came into force on 3 October 2016 extended the new bill of costs pilot scheme by a year and was modified to alleviate concerns raised about the existing form’s reliance on J Codes. The parties are able to file their new format bills in electronic format to assist the Court in assessing the bill, as any adjustment made by the Court to say the rate or hours claimed, would automatically be carried through to all relevant parts of the bill.
Practice Direction 51L relates to the new bill of costs pilot scheme. Although the new format bill remains voluntary at the moment, there is an express plan in Practice Direction 51L that the preparation of the new format bill will become mandatory.
The Rule committee are currently monitoring and reviewing the Pilot Scheme with an aim to fix the mandatory form of the new bill of costs at its meeting in May 2017.  The Pilot scheme was put in place with a view to establishing a mandatory form of bill of costs to apply to all work done after 1 October 2017.
The new bill of costs means the bill of costs in Precedent AB annexed to Practice Direction 51L as a “pdf version” together with an electronic spreadsheet version of the same bill in the form provided in paragraph 1.4 of Practice Direction 51L.
In order to utilise the new format bill to its full potential, firms of solicitors will be required to record their fee-earning time with reference to phase, task and activity. The use of J-Codes is recommended but not mandatory. Schedule 1 which is attached to Practice Direction 51L defines the phases, tasks, activities and expenses to utilise when preparing the new format bill.
We still await a decision on exactly when the new bill of costs will become compulsory and whether there is a transitional period between the use of the old format bill and the new one. There is still a lot of uncertainty with regard to how to deal with costs of long running matters.
A point to note is there is currently no new statement of costs (N260) in the pipeline as the Hutton Committee is concentrating on getting the new format bill right. I anticipate that there will be some form of new statement of costs in the future to reflect the changes to the new format bill.
With the above in mind, Harmans utilise CostsMaster to produce all of their bills of costs which is already geared up to prepare the new format bills.
Merrix v Heart of England NHS Foundation Trust

The issue of costs budgets continues to occupy court time with The Honourable Mrs Justice Carr DBE the latest, and most senior, judge to give consideration to what, if any, weight an approved costs budget had when the bill of costs was the subject of a detailed assessment.

Merrix v Heart of England NHS Foundation Trust was originally heard on 13 October 2016 by District Judge Lumb sitting as a Regional costs judge.

The issue – “to what extent, if at all, does the costs budgeting regime under CPR Part 3 fetter the powers and discretion of a costs judge at a detailed assessment of costs under CPR Part47” ?

The argument – The Paying Party seeking to reduce the bill of costs on assessment was required to show good reason to depart from the approved budget and absent good reason there was no requirement to undertake an assessment

The outcome – The powers and discretion of a costs judge was not fettered by the costs budgeting regime save that the figures should not exceed unless good reason shown.

Irwin Mitchell for the Claimant appealed and the matter came before Mrs Justice Carr DBE 16 February 2017 with her judgment given 24 February 2017 [2017] EWHC 346 9QB).

In a detailed judgement which includes a helpful history of costs budgeting the Court addressed the three grounds of the appeal:

  1. The provisions of CPR 3. 18(a) and (b) shifted the burden to the paying party to show good reason at detailed assessment or summary assessment why the budget should not be departed from;
  2. The provisions of paragraph 7.3 of Practice Direction 3E related to approval of a total phase in order to enable the court to identify what was a reasonable and proportionate amount to spend on each phase of the litigation
  3. The consideration of a costs budget at a costs management hearing was not only to establish an individual fund, but to give the parties an indication as to what was reasonable and proportionate to spend prosecuting or defending their claim. Therefore what was reasonable and proportionate at a detailed assessment, unless the paying party could show good reason as to why it was not the case, should be in accordance with any costs budget set?
You can read the Judge's conclusion here, along with the thoughts of Partner and Costs Lawyer Gary Knight.
Legal Futures Special Report - Profit Motive: Increasing Margins in Challenging Times
Lord Chancellor announces changes to personal injury compensation payments

On 27th February, Elizabeth Truss announced her decision to lower the Discount Rate from 2.5% to minus 0.75% in accordance with the law and in her capacity as independent Lord Chancellor.

The new discount rate will come into effect on 20 March 2017, following amendments to current legislation.

The law makes clear that claimants must be treated as risk averse investors, reflecting the fact that they are financially dependent on the lump sum, often for long periods or the duration of their life.

Compensation awards using the rate should put the claimant in the same financial position had they not been injured, including loss of future earnings and care costs.

Lord Chancellor and Justice Secretary Elizabeth Truss said:

“The law is absolutely clear – as Lord Chancellor, I must make sure the right rate is set to compensate claimants.

I am clear that this is the only legally acceptable rate I can set.”

The Discount Rate had remained unchanged since 2001.

This decision, as well as seeing compensation payments rise, will have a significant impact on the insurance industry and a knock-on effect on public services with large personal injury liabilities – particularly the NHS.

But in the announcement to the London Stock Exchange, four key pledges were also made.

The Department of Health is currently seeking views on its proposal for a mandatory system of fixed recoverable costs for lower value clinical negligence claims in England and Wales.

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