Harmans Costs Brief

Harmans Costs Brief - May 2013

Welcome to the new edition of our free e-newsletter, Harmans Costs Brief, full of industry comment on the latest developments in Costs post-Jackson. We hope you will find it useful. Make sure you never miss a copy by joining our fast growing subscriber list - please see below.

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Steve Jones speculates on the consequences of the Jackson reforms

The Jackson reforms have brought about widespread unease amongst Claimant solicitors, concerned understandably as to the continued viability of their existing business models. These reforms have been imposed upon the legal industry as a consequence of perceived market failure, deemed to be manifested in an absence of price competition as a consequence of the ready availability of conditional fee agreements to act as vehicles for risk free claims.

The status quo (pre April 2013) was considered undesirable as it was believed to lead to unnecessarily high insurance premiums for motorists, householders, local authorities and others by virtue of the recoverability of success fees. This regime was easy meat for the red tops who delighted in informing their readership that â€œspiv lawyersâ€ were pursuing dodgy claims and raking in doubled fees (whilst happily accepting advertising revenue from claims farmers).

It is no longer realistic to call for the reinstatement of public funding for personal injury matters but it is worth remembering that this situation has come about as a direct consequence of the abolition of the one strand of Legal Aid that would have required very little manipulation to pay for itself.

Whilst it is easy to poke fun at sensationalist journalism, the new regime is the work of an extremely intelligent man who consulted many other luminaries whilst conducting his review. The loss of the ability to pass the success fee on to an insurer will no doubt lead to price competition where there previously was none, however the consequences of the altered market for legal services may not endear the new system to the judiciary, to practitioners or ultimately to the public.

It is going to be very hard for ordinary players in the legal industry to persuade a public that has grown used to being bombarded with invitations to pursue claims for free that they should surrender part of their compensation to their solicitor. The advent of the ABS coincides neatly with the new rules on success fees and it seems inevitable that the claims farmers will be either be replaced by or will resurface as claims factories. One qualified solicitor overseeing teams of unqualified staff. It will not be hard to fill such factories as there is no shortage of jobless graduates.

The consequences of such business models are largely undesirable. Once price competition has driven success fees to zero, it is easy to envisage a race to the bottom in terms of cutting overheads. Claimants are likely to be represented by unqualified staff in distant locations. A viable branch of a long standing profession is likely to be decimated, leading to further boarded up windows on high streets. Courts are likely to be infuriated by poorly prepared cases.

The plight of claimant lawyers is probably not a cause held dear by many members of the wider public, particularly in times of recession. The success or otherwise of these reforms will ultimately have to be judged in the context of the stated aim of driving down the cost of insurance for the public. The author of this piece will not be holding his breath for reduced renewal premiums in 2014.

The Legal Aid Sentencing and Punishment of Offenders Act 2012 (â€œLASPOâ€)

LASPO represents the most profound change in the provision of Legal Aid for decades. It repealed the Legal Aid aspects of the Access to Justice Act 1999 and brought in an entirely new statutory regime from 1 April 2013.

The Legal Services Commission closed on 31 March 2013 and on 1 April 2013 its replacement, the Legal Aid Agency came into existence.

Cases started before 1 April 2013 remain subject to the Access to Justice Act regime whereas cases started on or after 1 April 2013 are subject to the new LASPO regime.

The Access to Justice Act provided that work was â€œin scopeâ€ unless specifically excluded by the Act.

LASPO provides that only work specifically included in Schedule 1 is â€œin scopeâ€.
Unfortunately, Schedule 1, which sets out what work will be in scope, is not easily understood; it requires a certain amount of cross-referencing and navigation of double negatives in order to understand whether a case is in fact in or out of scope.
When considering whether a case is in scope solicitors will need to check that it is included in Part One (of Schedule 1) but is not excluded by Part Two and that the venue is included in Part Three if advocacy services are to be provided.

In addition to LASPO the changes are governed by various sets of regulations including the Civil Legal Aid Procedure Regulations 2012 and the Civil Legal Aid (Merits Criteria) Regulations 2013 in addition to the Remuneration Regs and the Legal Aid Eligibility Regs.

LASPO provides exceptionally for legal aid to be approved for a case that falls outside the scope of Legal Aid. The Exceptional Cases Funding team has been set up to handle applications made under this provision.

The LAA is expecting an average of 6,500 applications per annum for Exceptional Cases Funding and there is a new form ECF1 which will need to state the case as to why a particular matter is exceptional. However, there is no payment for any work done until such time as the application succeeds.

For further details on applications for Exceptional Case Determination and a new survey on the impact of LASPO on solicitors please click here.

Jim Knight, Partner and Costs Lawyer

Statements of Costs for Detailed Assessment Proceedings

Paragraph 45.3 of Section 45 of the Costs Practice Direction supplementing CPR Rule 47.18 states that no party should file or serve a Statement of Costs of the detailed assessment proceedings unless the Court orders.

Traditionally this meant that at the end of the detailed assessment hearing, when it came to deciding the issue of liability and quantum of costs of the assessment, the successful party would hand over a Statement of Costs to the paying party and the Court and a summary assessment of those costs would follow.

From 1^st April 2013 the question of liability for costs of detailed assessment proceedings is covered by Rule 47.20 of the Civil Procedure (Amendment) Rules 2013.

There still appears to be some confusion in relation to the transitional arrangements and it is unhelpful that at the time of writing the Justice website does not contain Practice Direction 47.

Part 22 of the new rules contains transitional provisions and helpfully points out that provisions made by the new Rule 47.20(1) to (5) and (7) do not apply to detailed assessments commenced before 1^st April 2013, and in relation to such detailed assessments Rules 47.18 and 47.19 as they were in force immediately before 1^st April 2013 apply.

Therefore, if a Notice of Commencement was served before 1^st April 2013 there is no need to serve a Statement of Costs of Detailed Assessment Proceedings.

However, if relation to Notices of Commencement served after 1^st April 2013, it does not appear that the practice direction exists or is likely to exist.

An informal enquiry was made to one of the costs officers at the Senior Court Costs Office who expressed a view that it was not understood why there was a special provision for Statements of Costs for Detailed Assessment or why it was not necessary to serve the Statement of Costs with at least 24 hours clear notice prior to the hearing as with other costs schedules for summary assessment.

Whilst there are still many questions surrounding the implementation of the new rules and the transitional arrangements, the best advice is that when attending a detailed assessment hearing for a procedure which commenced after 1^st April 2013, prepare your Statement of Costs and serve it with at least 24 hours notice prior to the detailed assessment hearing.

James Scott, Partner and Costs Lawyer

Part 36 offers made in respect of Costs after 1 April 2013

The new rules governing Part 36 offers made in respect of costs do not apply to detailed assessments â€œcommencedâ€ before 1 April 2013.

The transitional provision concerning Part 47.19 offers confirm this. They can be found tucked away in the Transitional Provisions to the Civil Procedure (Amendment) Rules 2013 at s 22(1):

â€œThe provision made by rule 47.20(1) to (5) and (7) in the Schedule (liability for costs of detailed assessment proceedings) does not apply to detailed assessments commenced before 1 April 2013 and in relation to such detailed assessments, rules 47.18 and 47.19 as they were in force immediately before 1 April 2013 apply instead.â€

This is a very important provision as Part 36 has now been incorporated into detailed assessment proceedings by CPR 47.20(4). However, that section is expressly excluded from cases where detailed assessment is commenced pre-1 April 2013 by the transitional provision referred to above.

Surprisingly, this provision is not contained within the body of the CPR or the Practice Direction to the new CPR 47 (concerning Procedure for Detailed Assessment of Costs and Default Provisions). Nor is it contained within the Transitional Provisions section of the Practice Direction to the new CPR 48. Inevitably this has led to some understandable confusion among Solicitors and Costs Lawyers alike.

It is however clear that under the transitional provisions for cases where detailed assessment proceedings were commenced before 1 April 2013, a party cannot make a Part 36 offer in respect of costs (or repeat a previous offer as a Part 36 offer) post 1 April 2013 and expect it to have the effect of a valid Part 36 offer.

For the avoidance of doubt, Assessment proceedings are commenced by serving a signed Bill and formal Notice of Commencement.

Jim Knight, Partner and Costs Lawyer

Costs Budgeting - all you need to know...

We found HHJ Simon Brown's three part online guide to costs budgeting really useful and think you will too. Just click the links below to read it on New Law Journal's website while it's free:

Part 1 - Costs budgeting: Teaching old dogs new tricks

Part 2 - Costs budgeting: Teaching old dogs new tricks (pt 2)

Part 3 - Costs budgeting: Proportionality is trumps

Harmans are always on hand for any questions or queries you may have and we will do our utmost to help you with any problems you may encounter post Jackson. We are also geared up to assist you in dealing with your costs budgets whether it be the actual preparation or advice for the completion of the document. We are continually updating our website with news and developments as well as sharing our views on Twitter and LinkedIn.

Our team is limbering up for this year's London Legal Walk
on 20 May.
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