Freedom of Choice of Lawyer under Legal Expenses Insurance

Christine Brown-Quinn and others v Equity Syndicate Management Ltd and another [2012] EWCA Civ 1633

Legal expenses insurers are under an obligation to comply with Council Directive 87/344 EEC and the Insurance Companies (Legal Expenses Insurance) Regulations 1990, which make it entirely clear that the insured’s freedom to have the lawyer of his choice is to be expressly stated in the contract made with the insured.

The Powers of an SCCO Costs Officer

This is a point that is often overlooked by paying parties.

In my experience, and in general terms, Costs Officers in the SCCO have shown considerable expertise in their field over the years, save for the occasional suspect choice of footballing allegiance. Unlike most District Judges and even Regional Costs Judges they deal with absolutely nothing but costs. They deal with us costs draftsmen all day......every day. And they do that by deliberate choice. Crikey! Hats off to them!

But.... they do not enjoy the same range of powers on assessment as either the Masters, Costs Judges or District Judges in the provinces. Their powers are restricted by CPR 47.3 and there are two specific restrictions which are often overlooked -

Fixed Fees on All Fast Track Cases

The proposals for fixed fees in all fast track PI cases have now been made public. The MOJ's proposals can be found here [MOJ PROPOSALS].

The proposals in respect of the amounts of fixed costs that will apply outside the portals are particularly harsh, although there will be an escape clause (see the reference to "+20%") which will probably be based on the current CPR 45.12 provision for exceeding predictive costs in RTA cases. The question is will the new rule require exceptional circumstances (as now), in which case forget it, or just circumstances that justify a departure (in which case, chaos will ensue and the whole scheme will collapse in a quivering heap of costs lawyers and irate District Judges).

Interest under a Final Costs Certificate

In a recent case costs due following part 36 acceptance were agreed in an all inclusive sum very close to assessment, and a Final Costs Certifiate was sealed showing (with the full agreement of the opponent) the correct net amount, so that subject to payment on day 14 the interest would match up with the agreed sum. The opponent then tried to pay the net sum only, and to claim that their liability was discharged. Our advice follows - 

What an infuriating and devious opponent!

If this continues, we should give her chapter and verse, which is –

The award of costs being a “deemed order” upon acceptance of a part 36 offer (CPR 36.10), the entitlement to interest arises under CPR 44.12 (2), which says –

“Interest payable pursuant to section 17 of the Judgments Act 1838² or section 74 of the County Courts Act 1984³ on the costs deemed to have been ordered under paragraph (1) shall begin to run from the date on which the event which gave rise to the entitlement to costs occurred.”

Interest therefore runs on the amount of the substantive costs from 19^th July 2011.

s.74 (3) CCA 1984 provides that –

“The payment of interest due under subsection (1) shall be enforceable as a sum payable under the judgment or order”

The amount of interest is set at 8% by The County Courts (Interest on Judgment Debts) Order 1991.

Notwithstanding that there was also an express agreement as to the fully inclusive amount (which one would hope that an Officer of the Court would consider herself bound by), the liability, scope and amount of interest that we have sought are all set by the Civil Procedure Rules, or by other primary or secondary legislation.

In short, it doesn’t really matter what argument she comes up with - the Final Costs Certificate (and the interest that accrues under it) are enforceable as a judgment debt and your client can simply send in the Bailiffs.

Update as at 15/10/12 - after three weeks of attempted evasion, interest was paid in full.

Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2008

Hurley -v- Maruki : A recent decision in which a CFA was rendered unenforceable due to the failure of a CFA signed away from the office to contain notice of right to cancel (redirects to article on Simon Gibbs excellent costs blog).

Absurdity in and of Costs Negotiations

For a number of years I have been on what I think may have  been a sole crusade to reduce the cost of costs negotiations and try and instil some sense in defendant negotiators by being ultra reasonable. All we want is a reasonable amount for a job well done - we don't incite costs war! So, when the defendant raises the highly erudite objection that goes "you've claimed 5 routine communications to get two sets of hospital notes, we offer 4", I like to say to respond by saying "well.......here are the five letters and calls, which one of them do you think we did for the sheer joy of it?". I do the same for all of the objections that they have raised. There's no genuine issue of privilege because the main litigation is over and done with, and I think rather than the spirit of openness supposedly enshrined in the CPR, many people in reality like to keep their cards close to their chest for pure bloody mindedness, to remind us all of why we ditched old style "taxations" which were bedevilled by last minute ambushes,  and in some cases so that the less scrupulous amongst the legal fraternity can attempt to recover much more than their work was in reality worth.

Obviously this is all subject to client agreement and there are a few safeguards before papers can be released;  my standard practice is to ask my opponent for an undertaking that - 

1. They will not use the documents for any purpose other than assessment / negotiation of costs
2. They will not release the documents or any part of them to their client or any other third party
3. They will not take or retain either physical or electronic copies, and
4. They will return any hard copies to me post hearing

What I want is to ensure that the documents are used to ease the assessment process and nothing more. I do not want Mr.Smith's comment that his former employers were a bunch of thieving crooks to end up in the hands of his former employers, who then take it out on Mr.Smith's wife and children. Or similar. All sorts of potential disasters.

If they accept that they can have a full copy of the papers and (massively radical idea coming here) the claimant and defendant's advisers can between them arrive at a relatively inexpensive joint opinion as to a reasonable level of costs. If there is a disagreement, the precise dispute can be pin-pointed down to individual document level and the court asked for a decision before everyone has set the "costs of assessment" juggernaut rolling down the hill, belching clouds of generic PODs and Replies, heading for a  rather messy head on collision with the judiciary at large. 

So what is the problem?

None really. Except that today I have been told by a defendant costs specialist that the undertakings are "onerous" and "absurd". 

Onerous? Not sure that the person concerned has actually looked up the definition of the word. How badly must you have to want to copy something for an undertaking not to copy it to be "onerous"? Is there a call for a self-help group?

As for "absurd", you have my profuse apologies. On reflection, and having given it very considerable thought, I agree that reducing the costs of assessment for those with a vested interest in ensuring that they continue to spiral could, I suppose, be seen as an absurdity. Massively high assessment costs have certainly helped to ensure that we all have a long, prosperous and most of all certain future ahead of us!

Having a Pop

Following on from the earlier entry on the LSC's approach to assessment of expert's fees (http://kjccosts.blogspot.co.uk/2012/10/lsc-approach-to-assessment-of-experts.html), in which to paraphrase we ended up effectively getting £24 per hour for a massively experienced clin neg specialist doing a very diligent job, we decided to take the next step up the slightly wobbly LSC appellate step-ladder. Oh what naive fools!

I am sure that the good old Legal Aid Board at some point back in the 80s or 90s had a "Crystal Mark" from the Plain English Campaign. I may be wrong. Certainly the colour coded certificates were quite straight forward. Anyway, as far as I can tell the LSC is no longer a holder. Here, perhaps, is why....

The Appeal is not an Appeal. It is not a Review.

It is an "Application to certify a Point of Principle of General Importance" or, a "PoP". 

But what is a POP you ask? POPs are "statements which seek to clarify a costs assessment principle or interpret a contractual assessment provision". Obviously. With me so far? Good. Keep up.

And the procedure is thus, as described in the Focus magazine from August 2005 -

"If you are unhappy with the decision of a Costs Committee then you can, within 21 days, apply to another Costs Committee for certification of a POP. This is effectively the permission stage and even if  the Costs Committee certify the POP it has no effect on the underlying assessment nor is it binding under the Contract. In order for the POP to have effect it has to be certified by the Costs Appeals Committee"

So, Think of Committe 1 as a "Popstop" (they really should have consulted me about the descriptions!). If Committee 1 certify your POP they do not do the obvious and decent thing and pass it on to Committee 2 themselves. You get 21 days in which to possibly forget to do that, and you must invite Committee 2 to certify it for a second time. I suspect that if you do not meet the time limits you remain for ever in a limbo. Your pop is half way there but has no teeth. Like Coldplay.

And of course the Committee may or may not certify. You could find yourself with a popflop.

Successful POPs will appear in the POP manual, the latest edition of which is available here - http://legalservices.gov.uk/docs/cls_main/point-of-_principle-manual.pdf. All 154 fun pages of it.

Curiously POP CLA15, which is now nearly 17 years old, seems to pretty much cover the point that we are raising here. It says that if you get prior authority for a disbursement , that does not place a ceiling on the fee. Even if the amount eventually paid out is more, it can be allowed as long as it is reasonable. And that really just emphasises the regulations, which say that (apart from in terms of instructing Leading Counsel) prior authority really has no effect on assessment. If the disbursement is reasonable it should be allowed in any event.

So, to back track to the circumstances of this particular appeal (I refuse to do any more pops), our experts' fees were reduced on grounds that "they had not been subjected to the scrutiny of the prior authority procedure". That does not sit well with CLA15 or with the regulations.

Our proposed points of principle are as follows - 

POP1

Failure to obtain prior authority under regulation 60 or 61 CLA(G)R 1989  is not a factor that should be taken into account on assessment in determining the reasonableness of the fee, either as to principle or as to quantum; if the fee was reasonably incurred and is reasonable in amount it should be allowed whether or not prior authority was sought.

POP2

Where (in a case to which prescribed experts’ rates does not apply) an appropriately qualified expert is instructed and in all other respects his fee appears reasonable, failure to approach similar experts for a fee comparison is not a factor that should be taken into account on assessment in determining the reasonableness of the fee, either as to principle or as to quantum; if the fee was reasonably incurred and is reasonable in amount it should be allowed whether or not any comparator quotes were obtained.

Both appear to me to be reasonable. Bearing in mind that POP1 really just re-states what the rules have said since 1989 I would hope it will not cause controversy.

You have to wonder though whether this system, in which by the way there are no provisions whatsoever for recovering your appeal costs, and which seems to be specially designed to sap the will to proceed in cases that are already making massive losses, really is giving any real incentive for good lawyers to provide proper access to justice. 

Costs Estimates and Allegations of Fraud, Rhyl County Court

First of all....the Pier Hotel, Rhyl........luxurious, friendly and and exceptionally good value...... http://www.thepierhotel.co.uk/.  I cannot recommend it highly enough. The owners even managed not to laugh at my continuing footware fashion faux pas. Mind you, they've had Christopher Biggins stay during panto season, so they've had plenty of practice at not laughing.

The case -

Seven young men from Wrexham hire an MPV to visit a friend in Lancashire. Arriving back at Wrexham, the driver swerves to avoid a cat shaped thing in the road (possibly a cat?) and hits a parked vehicle. All six passengers have orthopaedic injuries. One injures his scrotum. Not entirely sure what he was doing at the time of impact....probably best not to ask. They instruct a small firm with two fee earners, both of whom are grade A. On their advice the claimants, very sensibly, make realistic part 36 offers before anything much has happened.

The insurers, LV=, think "staged accident" and instruct Keoghs in Bolton. Liability is denied and LV= are joined to the proceedings as 2nd Defendant. The Defence never actually asserts fraud, but the Claimants are put to proof, their veracity is questioned and the insinuation is pretty clear.

In the allocation questionnaire we mistakenly include profit costs only in the costs estimate.

The Claimants' ATE insurers, for understandable reasons, get a bit edgy and insist on the six claimants being seen in conference by Counsel, so that he can assess their credibility. They pass with flying colours.

In the meantime the case is allocated to the multi track, not because of fraud (as there was no specific allegation), but because there were six claimants and the case would go for more than a day. It is fairly certain though that the fraud innuendo was in the back of the DJ's mind.

Shortly after that LV= make part 36 offers at levels close to those of the Claimants.

Two main arguments on assessment. Firstly that the bill wildly exceeded the costs estimate, secondly that the case could have been dealt with by a grade C fee earner.

Costs Estimate

LV= had confirmed pre assessment that they had not relied at the time on the erroneously low estimate by way of setting a reserve. Instead they asserted that they "wished to rely" on the estimate at this stage in order to dispute the reasonableness or proportionality of the costs, i.e. taking advantage of the newer part of the Practice Direction [section 6.5A(2)(b)]. In the circumstances the Court found quite rightly that the guidance laid down by the Court of Appeal in Leigh -v- Michelin Tyre Plc [2003] EWCA Civ 1766, [2004] 2 All ER 175 applied, namely -

It is not a correct use of the power conferred by the Costs Practice Direction to hold a party to his estimate simply in order to penalise him for providing an inadequate estimate. So if -

• the paying party did not rely on the estimate at the time (e.g. by setting a reserve or deciding to fight a case that it may otherwise have settled) [and if they did, in my view there should be proper evidence not just an assertion]
• the Court would not have made different case management decisions had the figure been correct (e.g. it may have allocated to a different track, limited experts or imposed a costs cap)
• the costs claimed are otherwise reasonable and proportionate

There should be no reduction.

Grade of Fee Earner

We were not allowed grade A, but grade B on the basis of the following argument.

Firstly, Keoghs are specialist providers to the insurance industry. Their website indicates that they have the largest counter fraud services department in the UK, saving over £100 million last year on fraudulent claims. Their  motor fraud unit employs more than 120 people and is supported by a 30 strong "intelligence" team. They deal with more than 75% of the UK insurance market.

So, in our view, a grade C fraud specialist from Keoghs packs a bit more punch than a grade C from a High Street firm in Wrexham. Some grade C fee earners are more equal than others. Parity of arms, and so on.

That aside, accusations of fraud carry potentially very serious consequences. We have two cases at present in which an insurer (one an ATE and one a BTE) have refused indemnity on grounds that the insured has lied.  In both cases the solicitors are faced with a responsibility to discharge disbursements. In the BTE case they have significant profit costs for which, I suspect, they will have to whistle. There is a spectre of an application for a third party costs order...if the solicitors knew or ought to have known that the client was lying, are they not partly to blame.

So there is a need for a degree of experience to sniff out potential trouble, and to carry the can if and when things do go wrong.

On a final note, this is yet another case where the insurer has ended up paying far more than was originally offered. £45k offered, £46.6k allowed, close on £55k when assessment costs are taken into account. I am sure that overall there must be a net saving by Defendant cost negotiators, but it does make you wonder in some cases how they justify their approach!

In-growing toe nails, Mathematical Errors and Opportunist Defendants

It turns out Mum was right. I would one day regret failing to cut my toe nails straight. I'm not entirely sure she envisaged them starring in a witness statement in the Sheffield County Court or being at the centre of a costs dispute with a major insurance company. If she did have an inkling of precisely the trouble they would cause, I am pretty certain she would have insisted on nail clippers from day one.....and perhaps a career dealing with something more sensible than legal costs.

On 7th September 2012 I had the toe nails of each big toe removed. In hindsight, it was a mistake. Ingrowing toe nails cause infrequent and moderate pain. Avoiding impromptu football matches, dropping things on them and being trodden on by heavy people by and large reduces it to a tolerable and manageable inconvenience  Removal of toe nails, despite the chiropodist's assurances to the contrary, turns out to cause constant and excruciating physical pain for weeks on end as well as the emotional trauma of having to wear sandals in the autumn. I would liken the physical pain, without even a hint of hyperbole or melodrama, to having a rabid rat gnawing at the end of your toes until the end of time. As for the emotional pain of having to wear sandals with socks, need I say more?

In March 2012 I had embarked, rat free and still in possession of a sense of fashion, on the recovery of costs for one of my clients who had successfully represented a Claimant in a personal injuries claim, resulting in the Defendant's insurers, Axa, paying the sum of £10,000 in damages to the Claimant and agreeing to pay his reasonable costs. My clients tried to deal with matters themselves but, having presented a fairly sensible schedule of costs amounting to just over £11,000 to the insurers, realised on being told that the matter was being referred to "specialist costs negotiators" that they were probably now in it for the long haul. The opening offer was for just over £4,400. Is that a typo you ask? No, they really do purport to be specialists.

Anyway we had a few exchanges of opinion, as a result of which the negotiators made a slight increase from £4,400 with a final offer of £7,150, which they then increased to a final final offer of £7,500. We told them this was still too low, they disagreed, we served a formal bill for just under £10,800 and offered to accept £9,000 under part 47.19. 

So, the battle lines were drawn and the matter was listed for an assessment hearing on 28th September. Three weeks post toe nails. No problem. I would skip into Court.

Anyway, as it happened, 28th September was the very first day that I had tried to squeeze a pair of traditional leather shoes onto my still swollen, bleeding and not entirely aesthetically pleasing feet. The gnawing rat was subdued briefly by some heavy duty pain killers, but reawakened on arriving at Court, keen to become as involved as it could in the judicial process.

The hearing proceeded with the District Judge making decisions on the majority of the points in dispute, leaving the parties to agree between themselves just a few points on routine communications. Most of the decisions had gone my way. Both my opponent and I thought I had won. The rat was enthralled. So in the entirely ordinary way adopted since time immemorial the District Judge adjourned briefly so that we could go away and calculate the effect of his various decisions, tie up the final points on communications and come up with a final figure.

It was at this point that either the rat started to gnaw at more than just my toes, or the pain killers really kicked in in earnest. I made the most basic mathematical error, missing out both a chunk of nearly 4 hours of time, and £200 of VAT on disbursements. The net result was that.......shock / horror....... I had not beaten the Defendant's offer. The Defendant's representative apparently made exactly the same two errors, and agreed my calculation. It is not clear whether there was a rat involved on his side. I mean a rat gnawing at his toes, obviously. Despite much head scratching, I could not work out for the life of me where things had gone so badly wrong, and had to concede that we had lost and would have to pay the Defendant's costs of assessment.

So back in before the District Judge we went to report the outcome. After deducting the Defendant's costs of assessment, my clients were left with less than £2,000. I was left with sore feet and the suspicion that after 25 years I was perhaps no longer suited to the world of costs.

Something continued to gnaw at me though. And not just the rat. I could not see how I had got the initial calculations so wrong, or the part 47.19 offer so far off the mark. So on the Saturday morning a quick recalculation (this time in sandals, which is perhaps the key) demonstrated penny for penny precisely the two mistakes that had been made. I had in fact won. The real total was just over £8,100 and, adding in the cost of preparing the bill increased to just over £8,800. Both were above the Defendant's offer, the full figure was refreshingly close to my part 47.19 offer of £9,000. I had still got it. I could still strut my costs stuff. There had been a mutual mistake in reporting back to the Court. My clients were entitled to the real figure, along with their costs of assessment, and all was right with the world. The Defendants would not object. It would be ungentlemanly. They could not object. They would have no grounds.

So, it will come as no surprise to any claimant solicitor to hear that on the Monday morning I was informed by the Defendant's Solicitor that, although he accepted that there had been an error he / they considered me bound by the result -

"I’m going to have to maintain that there is a binding agreement between the parties in relation to the figure agreed for costs and disbursements and, as I see it,  the only basis to go behind the agreement is if there was an obvious mistake"

Two facts appeared to pass the  Defendant by. There was no "agreement" in the sense of a compromise to dispose of the proceedings without the risk of a judicial determination. We were working out the effect of the District Judge's decisions on detailed assessment. Secondly, the mistake was pretty bloody obvious!

Anyway, two and a half weeks down the line, an application to vary the order and a further £1,000 of legal costs later, the Court has today found wholly in our favour and expressed astonishment that the Defendant ran this argument. An application for permission for appeal was dismissed as being "absolutely without merit". The Defendant's solicitor was of course acting entirely on instructions (presumably without having  advised them), and described his clients as having tried to grab a windfall or words to that effect. Staggering. 

The net result in so far as Axa are concerned (and I genuinely wonder if they are aware of this - do please let me know) is that in a case that could have settled long ago for £9,000 inclusive, they have ended up paying more than £14,000 once costs of assessment, costs of the application and interest are taken into account. Presumably they also have to pay their negotiators and solicitors (although one does wonder whether Axa might have a potentially much more lucrative punt on a Solicitors Act assessment or two). At best £5,000 has been wasted arguing about costs. 

I wonder if those who have expressed concern about the escalation of the "cost of costs" and blamed greedy Claimant personal injury solicitors have actually been looking in the wrong place all this time?

Anyway, the moral of this story : never trust a chiropodist or a costs specialist, and always wear sandals to do your maths!

LSC Approach to assessment of Experts' Fees in Clinical Negligence Cases

My understanding has always been that whether or not prior authority for a disbursement was obtained was immaterial, as long as one could demonstrate the the disbursement was reasonable, in which case it would be allowed in any event.

The LSC are now however taking a different view, as the decision of an "Independent Costs Assessor" [who are these people?] on a recent appeal would appear to demonstrate.

In short, we investigated Mrs.L's treatment in hospital when, following a routine surgical procedure, she suffered a stroke. We instructed a Consultant Neurologist and a Consultant Neuroradiologist, both of whom had been part of a selection recommended by AvMA.

They both reviewed 11 years' worth of medical records and reported on liability and causation, and both spent an hour in conference with Counsel, when sadly it was decided that there was no case to answer.

The aggregate fees (for report and conference) were £1,000 and £1,150  for neurologist and neuroradiologist respectively, both of whom charged a rate of £250 per hour. The overall claim for costs was less than £5,000. So...a good job had been done for a reasonable fee - what could possibly go wrong?

Well the LSC decided that a neurologist is worth £170 per hour and a neuroradiologist £190 per hour. Not that much difference you say, but then on an LSC case with small margins, it is actually the difference between making and losing money. Purely on hourly rate the fees were reduced by £710. Our profit costs......£890. So bearing in mind that we are professionally bound to pay the experts in full, we had actually conducted this case for £180! That works out at slightly more than £12 per hour.

So we took umbrage and appealed.

With a remarkable lack of good grace the LSC's "Independent Costs Assessor" has allowed the appeal in part -

Yes, it was reasonable to instruct these particular experts

Yes, we recognise that they are specialists

Yes, we accept that everything was done economically and we have no criticism of the time spent by the experts........

BUT.....

"I consider, however,that £250 per hour for each of these experts is an excessively high figure where the rate has not been subject to the scrutiny of the prior authority procedure and without indication as to whether other experts were approached for fee estimates"

The experts were in fact allowed at £200 per hour, which means that we only have a £550 shortfall in experts fees and have therefore billed close on £24 per hour for this case, which is about half of what the LSC used to pay when I first started 25 years ago!

Good to see we are taking Access to Justice seriously still!