Guiding light shines down on costs

The Senior Costs Judge, PT Hurst, has issued the following costs guidance to all District and Circuit Judges at the Designated Civil Judges Conference held on 24 November.

The guidance is provisional pending formal decisions by the court.1.1 Providing information about funding arrangementsA party who seeks to recover an additional liability must provide information about the funding arrangement or any change to that arrangement to the court and to the other parties (CPR 44.15).S.19 of the Costs Practice Direction sets out the provisions relating to the giving of information about funding arrangements in accordance with CPR 44.15.

Notice of funding is given in Form N251 and the statement of costs for summary assessment should follow as closely as possible Form N260.1.2 Recovery of success fees and insurance premiumsThe new law is not retrospective.

Recovery of an additional liability is only possible in respect of conditional fee agreements or other arrangements about costs entered into on or after 1 April 2000 and not even then if they replace a previous arrangement entered into before April 2000.The court must not assess any additional liability until the conclusion of the proceedings or the part of the proceedings to which the funding arrangements relates.

If the court carries out a summary assessment of the base costs before the conclusion of proceedings, it is helpful to identify separately, the amount allowed in respect of solicitors' charges, counsel's fees, other disbursements and any VAT.

If an order for the base costs of a previous application or hearing did not identify separately those amounts, the court that later makes an assessment of an additional liability, may apportion the base costs previously ordered and will have to do so if solicitors and counsel each seek a different percentage increase.

At the conclusion of proceedings, the court may:(a) Make a summary assessment of all the costs, including any additional liability;(b) Make an order for detailed assessment of the additional liability, but make a summary assessment of the other costs; or(c) Make an order for detailed assessment of all the costs (CPR 44.3A).A party may not recover as an additional liability:(a) Any proportion of the success fee, relating to the cost to the legal representative of the postponement of the payment of his fees and expenses;(b) Any provision made by a membership organisation which exceeds the likely cost to that party of the premium of a insurance policy against the risk of incurring a liability to pay the costs of other parties to the proceedings;(c) Unless the court otherwise orders, any additional liability for any period in the proceedings during which he failed to provide information about a funding arrangement in accordance with the Rule Practice Direction or court order;(d) Any percentage increase where a party has failed to comply with:(i) a requirement in the Costs Practice Direction; or(ii) a court order to disclose in any assessment proceedings the reasons for setting the percentage increase at the levels stated in the Conditional Fee Agreement (CPR 44.3B).2 Guide to summary assessment of costsThe Guide was published and sent to judges in December 1999, since then there have been significant changes to the costs rules, and to a number of the guideline rates.

On 23 October a letter was sent to all Designated Civil Judges asking them to confirm the rates for their particular area, responses were requested by 1 December 2000.It is hoped that the revised Guide will be published early in the New Year.

It will include guidance in relation to funding arrangements and also guideline figures for counsel's fees for hearings up to one hour and up to half a day; in the Queen's Bench Division, Chancery Division and Administrative Court and in respect of junior counsel up to five years' call, between five and ten years' call and over ten years' call.The Guide will also include a section on summary assessment of costs in the Court of Appeal, and will, it is hoped, also incorporate guideline figures for counsel's fees in the Court of Appeal.3 Fixed fast-track trial costsConcern has been expressed that, in many fast-track cases, counsel have been briefed to attend at fees less than the fixed advocate's fee.The following table shows the value of claim and the amount of fast-track trial costs which the court may award:

Up to 3,000: 350More than 3,000 but not more than 10,000: 500More than 10,000: 750

The question has arisen whether the court has the power to award to the successful party no more than the amount marked on counsel's brief.

The argument is, that to allow more would be a breach of the indemnity principle.

The Government has already indicated that it proposes to do away with the indemnity principle and that argument may therefore become academic.

In the meantime, pt 46 is clear as to what the powers of the court are: 'The court may not award more or less than the amount shown in the table, except where: (a) It decides not to award any fast track trial costs; or (b) R.46.3 applies, but the court may apportion the amount awarded between the parties to reflect their respective degrees of success on the issues of trial'.

R.46.2(2).

The power to award more or less than the amount of fast track trial costs is set out at r.46.3.

The court is prevented from awarding anything other than the fixed fast track trial costs, unless the case falls into one of the categories set out in r.46.3.

The fact that counsel has been marked at a fee lower than the fixed costs is not a factor which enables the court to make a different order.The question was raised whether r.46.3(7) could be invoked.

The rule states: 'Where the court considers that the party to whom fast track trial costs are to be awarded has behaved unreasonably or improperly during the trial it may award that party an amount less than would otherwise be payable for that claim as it considers appropriate'.The starting point is that the costs belong to the successful client (if the successful party is Legal Services Commission (LSC) funded the costs belong to the legal representatives).

The fixed fast track trial costs recovered should therefore go to reduce the client's liability to both the solicitor and to counsel, the fact that counsel has agreed to act for less than the fixed costs does not affect the issue provided that the solicitors account properly to the client for the amount recovered.

If, as was suggested, the client is not aware of what is happening, and the extra money goes straight in the solicitor's pocket, this is quite plainly dishonest.

It is not clear that r.46.3(7) is apt to cope with this situation since it refers to the conduct of the 'party'.

However r.44.14(1)(b) (court's powers in relation to misconduct) refers to 'the conduct of a party or his legal representative' and the court may therefore make an order under that provision.

There are clearly arguments as to whether the present fast track trial costs regime is too inflexible and whether the fixed costs are too high, but the effect of the rules, as at present in force, is not ambiguous.4 Transferring cases to the Supreme Court Costs OfficeThe Supreme Court Costs Office (SCCO) now deals with assessment of all costs in the Family Division and the Principal Registry of the Family Division (PRFD).

Increasing numbers of cases are being transferred to the costs office from other courts.

District judges are urged not to send cases to the costs office unless they are high value, complex or contain a difficult point of law.

It should be borne in mind when considering whether to send a case to the SCCO for assessment, that in cases in excess of 50,000 there is likely to be a significant waiting time before a detailed assessment can be carried out.It should be remembered that the parties may not wish to have the matter dealt with in London, and they should be given the opportunity to make representations as to whether or not the case should be transferred to the SCCO.5 CPR 44.12A costs only proceedings - guidanceR.44.12A was introduced with effect from 3 July 2000 to provide a procedure enabling parties who have settled the substantive dispute between them to resolve any outstanding question relating to costs.

The new procedure appears to be being misused by both claimants and defendants in breach of the overriding objective.

This misuse has given rise to difficulties for district judges.It appears that solicitors acting on behalf of claimants, having settled the amount of damages, are saying to defendants' insurers: 'Our costs are x and if this figure is not agreed/paid within 14 days costs only proceedings will be commenced'.

In one court there has been a bulk issue of 800 applications.Defendants' representatives for their part make unreasonably low offers in respect of pre-proceedings costs and in some cases accompany the offer with a statement that the offer is made for the purpose of negotiation only and that they do not agree to the matter being resolved by use of the costs only procedure.

If a claimant is forced to commence proceedings under pt 7, rather than costs only proceedings under pt 8, defendants will find themselves having to pay, not only the reasonable and proportionate costs of the claim itself, but also the costs of the pt 7 proceedings and any related assessment proceedings.

If the defendant has acted unreasonably in compelling the commencement of pt 7 proceedings, consideration should be given to making an order for costs on the indemnity basis.

Two distinct steps are required: firstly the pt 8 application seeking an order for costs; and secondly detailed assessment of those costs.

The intention is that the proceedings should effectively be brought with the consent of both parties as a convenient means of resolving the dispute over costs.

If the acknowledgement of service indicates that the application is not opposed the court may make an order for costs without a hearing.

(It is recognised that at present Form N210 makes no provision for indicating that the claim is not opposed.

This is being addressed.) Para (9) sets out the circumstances in which the court may dismiss the application without a hearing.

The procedure under r.44.12A is intended to be cheap and straightforward.

The steps are as follows:(1) The parties must have reached an agreement on all the issues including which party is to pay the costs.(2) That agreement must be made or confirmed in writing.(3) No proceedings must have been started and the parties (after a proper attempt at agreement) must have failed to agree the amount of the costs.(4) Either party may start costs only proceedings under r.44.12A.(5) The pt 8 claim form must:(a) Identify the claim or dispute to which the agreement to pay costs relates; (b) State the date and terms of the agreement on which the claimant relies;(c) Set out a draft of the order sought;(d) State the amount of the costs claimed; and(e) State whether costs are claimed on the standard or the indemnity basis.(6) The evidence filed in support of the claim must include copies of the documents on which the claimant relies to prove the defendant's agreement to pay the costs.(7) The matter should not be listed before the district judge until an acknowledgement of service has been filed.

If the defendant agrees that the order should be made, or a consent order is filed, the court will make the order without the necessity of a hearing.(8) If the time for filing acknowledgement of service expires, the claimant may request the court by letter to make an order in the terms of the claim.

If the defendant files an acknowledgement of service out of time but before the court has made an order in the terms of the claim para (9) applies.(9) The court may (i) make an order for costs; or, (ii) dismiss the claim.

The court must dismiss the claim if it is opposed.

A claim is treated as opposed if the defendant states in the acknowledgement of service that it intends to contest the proceedings or to seek a different remedy.

The court will then dismiss the claim without a hearing.(10) The court may make an order by consent in terms which differ from those set out in the claim form.

The order is treated as an order for the amount of costs to be decided by detailed assessment.In no circumstances should a district judge or costs judge attempt to hear the application and then immediately embark upon a summary assessment of the costs in dispute.

Arguments that the district judge/costs judge should do so are incorrect, since a summary assessment is an assessment made by a judge who has decided the substantive issue.

In costs only proceedings the only issue decided by the judge is whether or not there should be an assessment of the costs.

It is accepted that for bills of a modest size detailed assessment may be unnecessarily cumbersome and consideration is being given to introducing either a disposal procedure or a short form of bill in order to overcome this problem.

Any problems arising in relation to costs only proceedings may be referred to the senior costs judge who will provide guidance.6 S.11(1) of the Access to Justice Act 1999 - orders against a funded client and against the Legal Services Commission.Although the intention of s.11(1) of the Access to Justice Act was in part to reproduce the protection contained in s.17 of the Legal Aid Act 1888 (costs ordered against an individual in relation to any proceedings funded for him shall not exceed the amount which is a reasonable one for him to pay having regard to all the circumstances), the regulations have been drafted in such a way as to make it very difficult to understand how this provision should work.

The Lord Chancellor's Department lawyers are considering amendments to the regulations which when implemented should make the situation clearer.

To cover the period until the regulations are amended separate guidance is being produced, which will be circulated in due course.7 CPR 44.3(8) orders for costs on accountS.13 of the Costs Practice Direction makes it clear that it is the duty of the parties and their legal representatives to assist the judge in making a summary assessment of costs in any case by preparing a written statement of the costs claimed (para13.5).

The direction makes it clear that such a statement is expected even where the litigant is an assisted person or an LSC-funded client (13.5(3)).

Para13.9 stated that the court will not make a summary assessment of a receiving party who is an assisted person or LSC-funded client, this is because the regulations require there to be a detailed assessment of such costs.

There is, however, no reason why the court should not make an order for payment on account as described above.The question was raised: 'What is the position about making applications for interim costs in favour of successful parties who are LSC funded?' R.44.3(8) states that where the court has ordered a party to pay costs it may order an amount to be paid on account before the costs are assessed.

This rule is of general application.

Where a party is LSC funded the costs belong to the legal representatives and they are under a duty to account to the LSC at the end of the case for any money received by way of costs and damages.

If it is discovered that an overpayment has been made the legal representatives are under a duty to make an immediate refund of the amount overpaid.If there is some doubt over the 'safety' of the money, or as to whether the amount ordered to be paid might be too high, it is open to the court to order payment into court pending the outcome of proceedings.

The purpose of r.44.3(8) is twofold.

First to assist with the funding of the receiving party's litigation (in the case of a LSC-funded client this does not arise), and secondly to bring home to the paying party the fact that litigation is expensive and that interim applications which fail will result in an immediate order for payment of some or all of the costs.8 Benchmark costs - general updateShortly after the last Designated Civil Judges Conference in March, the senior costs judge wrote to judges at all levels at the request of Lord Woolf, asking them to consider, within their own particular jurisdictions, what proceedings were suitable for benchmarking and also to consult with court users and the profession.Lucy MacGill, of DL MacGill Limited, had been asked by the Lord Chancellor's Department to carry out a scoping study.

Her report recommended a sampling exercise in respect of data collection in all courts.

That report was considered by the civil justice reforms strategy committee on 5 July.

At that meeting, which was attended by senior members of the Judiciary, it was decided not to implement the recommendations in the scoping study, and the situation was therefore, that apart from the material collected in the Supreme Court Costs Office, no data relating to costs was being collected in any courts.

Both Lord Woolf and Lord Scott were firmly of the view that the benchmark exercise should continue with judicial input, informed by consultation with court user groups and the profession generally.The response to the letter from the senior costs judge of the 30 March 2000, was extremely good and the range of opinion, very wide.

Although there was widespread and understandable apprehension about the introduction of benchmark costs, those responding did suggest over 100 different procedures suitable for benchmarking.The next step is, for there to be further consultation before the final report and recommendations are sent by the senior costs judge to the Master of the Rolls.

The senior costs judge will be writing to judges at all levels, with a draft of the report on benchmark costs.

Although a very wide variety of proceedings were suggested in the responses, the proposals in the draft report are limited to a number of the more simple and straightforward proceedings (fewer than 20).

The draft paper which is being circulated for consultation sets out the assumptions which form the basis for each of the proposed benchmark figures.

Judges are being asked to undertake consultation with user groups and practitioners as to the accuracy or otherwise of the assumptions used.

Responses are requested before the end of March 2001.

There is likely to be a great deal of discussion about the assumptions which we have made (for example, the grade of fee earner to do the work, the length of time it should reasonably take and the level of counsel's fees).

Such discussion is to be encouraged, especially if, rather than merely criticising the assumptions for being wrong, it produces alternative suggestions.There will undoubtedly be arguments to the effect that, variable circumstances may make it impossible to arrive at sensible assumptions on which to base the benchmark figure.

It should be borne in mind that the benchmark figure is intended to reflect a reasonable figure for carrying out a piece of work with a limited and constant procedure.If circumstances in a particular case take the proceeding out of that category, the benchmark figure will not be apt, but it will still serve as a starting point from which the judge may arrive at an appropriate figure given the particular circumstances of the case.