After The Event Insurance Premiums Recoverability in the Portal system

When the RTA portal was designed and the rules written, the easiest thing ever would have been to state that a premium was recoverable and it should be either staged or one stage only. But oh no – that would be too easy.

Instead, the rules were drafted to say ‘may’ and so began the war of county court decisions vs county court decisions.

Wanting their cake and eating it, the Defendant lobbyists argued for staged premiums when it was fixed price, or fixed price when it was staged and/or argued there was no need for such a premium as there was no risk on the portal – notwithstanding the huge variety of ways of the case falling out of the portal, the delays caused by Defendants on the go-slow………………

So, the mantle was thrown down for District Judge Smedley sitting in Liverpool County Court to create a test case and the Claimants and Defendants sat back and waited for his decision released today. The salient points are:

“…So, the claimant and his solicitor dealing with funding at the outset know that their particular claim may or may not resolve within the Protocol. If they choose a single premium policy and the case settles within the Protocol, it will be said on assessment that they should have chosen a staged, reduced-premium policy. If they choose such a policy and the case exits the Protocol and goes to trial, it will be said they should have chosen a single premium policy – in each case because the choice made was unreasonable. I accept Mr. Finn’s evidence on this point. There is no “right” or “wrong” decision to be made. Both single premium and staged premium policies are legitimate.

Having regard to all the matters I have considered, I am satisfied that in the present stage of development of the use of the Protocol, with the inevitable teething problems, and with the uncertainty whether a case will remain in the Protocol or not, a claimant and his solicitor are entitled to choose either a single premium policy or one with staged premiums. Either is permissible; neither can properly be said to be unreasonable…”

So DJ Smedley agrees with what most people other than insurers thought.

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What is your time worth?

Some time ago there was a TV ad featuring BT and Gordon Ramsey (neither of which top my favourites list); which spelled out with fantastic accuracy the small-business dilemma. You might recall; it showed Gordon lying on the floor opening the back of his computer with a carving knife.

So, hands up – which business owners are guilty of doing something similar to this? I know I am.

In the ad, there is a great compounding of errors which includes ruining an essential business tool (the carving knife) and ruining another essential business tool (the computer) as well as the absurdity of the kitchen running out of control whilst Gordon messes up the computer.

It’s OTT, but it is also very real.

Most small-business owners, asked to put a value on their time, will come up with a reasonable figure – say £2 – 500 a day – yet most of us will happily spend half a day doing what a professional could do in an hour – without collateral risk.  In the case of solicitors, the billable hour is rated at £111-500 or more in some cases. So why would a solicitor want to spend time on non-chargeable work?

To an extent this approach is encouraged in business literature; Duncan Bannatytne, for example states that the first thing he did was learn accounting ‘to save paying for an accountant’. Thinking this through, why do you pay an accountant – there are basically 3 reasons:

1. As bookkeeper. So Duncan values his time less highly than the cost of a bookkeeper? Unless you genuinely enjoy pumping in figures whist Songs of Praise is on telly (and some people do), then this cannot constitute good use of time.

2. As auditor. This is not optional and has to be undertaken by an unrelated party so is not relevant.

3. As advisor/consultant. The results from this should be quantifiable, so there is a clear business rationale to employ or not employ the services of an accountant.

Additionally, amateur accounting, like opening a computer with a carving knife, can produce misleading – or just plain wrong – results, which in turn can lead to bad business decisions.

Don’t get me wrong; it is an excellent idea for a business owner to understand accounts – they aren’t just for Companies House and the Tax Man – management information (MI) is invaluable for business; learning accountancy will help you to understand and interpret the information which is provided.

But to save money on accountants – sorry worst reason ever.

So, in summary, solicitors should restrict their activities to profitable fee earning work.

Non-profitable work should be outsourced to someone who can do it cost effectively. I would suggest costs falls into this category. Our work is generally costs-neutral in that it generally costs you nothing to employ us. We can do the work quicker and more profitably, in general, than solicitors can.

Non-fee earner work should be outsourced to experts, such as accountants, practice managers, business development managers etc. Being in the legal sector for a number of years, we can certainly help out also on the business development front.

The Problem Child Part 2

Regular readers may recall I recently raised the issue of the problem child – the client who costs you more money than you can hope to recover. What form does a problem child take?

Medical issues can be the cause – it is not always due to a ‘bloody minded client’. In one case, a client had an RTA which resulted in her sustaining moderate injuries but as the years went by the client became worse not better. The Judge at trial declared Munchhausen Syndrome By Proxy as a result of the mother’s influence and so the client who was expected to get a several figure sum, received a five figure sum instead and the solicitor client only recovered part of the costs.

A similar form may be that which is undermined by surveillance evidence, such was the case in Booth v Britannia Hotels. In that case, a chambermaid was claiming serious injuries but was caught out showing characteristics that were those of a fit and healthy person. Costs were awarded to the Claimant but on the basis that she only receive costs as if she were pursuing a case for £3500 as opposed to a six figure sum.

Can the relationship be recovered? In a case involving a large PI company, the client questioned whether anything was going to be done on his case following a site inspection several months earlier. This was deemed by the firm as ‘relationship broken down irrecoverably’ aka they did not think that the case was winnable.  The case was picked up by a small firm who were happy to take a risk and speak to the parties involved and a result was achieved.

In all these examples, the need for good solicitor-client relationships is highlighted. Know your client – pick up the phone instead of emailing or writing a letter. As a wise man once said however, if something important is worth saying, it is worth writing as it maintains a record of any difficulties and steps taken to resolve the issue. It also solves the issue that a local Judge keeps mentioning – what would happen if the solicitor were knocked down and someone else had to pick up the case?

Supervision is also an important weapon to protect from the problem child. Not all supervision is chargeable as profit costs, but those who remember the A + B factor in determining hourly rates will recall the A was for work done and overheads and B was for profit. Included in the A bit was an allowance for supervision, so use it. It not only offers the chance of an independent eye to spot the problem child, but also offers the chance to protect the firms’ name and reputation that a divisive  hacked of litigant may cause.

As a costs draftsman, why should I care about the problem child – because it affects costs recoverability. When I first started this job, all I argued about was 6 minute units – you should have read the report in 24 mins instead of 30 mins. Those were the days. Now, its fending off allegations of fraud, malingering, misrepresentation, defective retainers, exceeding estimates, after the event insurance. The stakes have gone up considerably. So to make my job easier, watch out for those problem children and sort it out immediately, so I can concentrate on arguing over those 6 minutes once more.

Coaches

Coaches & managers are in the news at the moment, particularly with regards to England Football and England Rugby. For what its worth, my view is that England Rugby set up has it right with appointing an overall head coach, with a Defence coach, forwards coach, attack coach – experts in the relevant field. Looking at the football side, why not have a central figurehead, with coaches such as Southgate and Pearce, not just training England as and when required, but then going to clubs up and down the country preaching the England way – how England want to do things, getting the message right and inspiring players to develop.  I adopt the experts method when coaching my under 11s rugby team, with a fitness coach, forwards coach and backs coach and someone overlooking to ensure that all players develop equally and to the best of their ability.

It is clear that having the right support, expertise and coaching is vital in business as well as on the sports field.  In order to survive over the next few years, law firms need to surround themselves with the correct support team. The most important is someone concentrating solely on funding, profitability and costs. It still surprises me how many solicitors only think about the client’s interests. This is admirable, but you cannot support/protect your client with nothing in the bank. However, not all firms can employ someone full time to do this, so why don’t you outsource to the experts?

We have 10 years experience in doing exactly what all firms need to concentrate on – money. Let us ensure that you can protect your clients knowing that your cashflow is secure, that someone is protecting your interests, that your retainers, funding arrangements, costs recovery and reputation are preserved, protected and underwritten by the best provider – Carlisle Legal Costing.

Costs in Employment Tribunal cases

Changes to the power of tribunals to award costs are expected to be introduced in April 2012.

It is intended that the cap on tribunals to award of costs will increase from £10,000 to £20000, unless assessment is by the court where higher awards may be achieved. We recently recovered £400,000.

To make matters more ‘interesting’ the increase in cap is to be coupled with a move away from the general presumption of ‘No Order For Costs” towards the normal presumption of civil matters which is costs follow the event, and the loser pays with both parties being able to ask for their costs if offers have been beaten.

This change is in stark contrast to the Jackson reforms where costs certainty is being preached and moves are afoot to introduce more fixed costs and qualified one way costs shifting – as in the defendant cannot seek to recover costs.

It is clearly a good time to check your retainers, whether they be damages based agreements (contigency fee agreements) or Legal Expense Insurance for companies given the changes in costs consequences.

Carlisle Legal Costing are experienced in advising on client care retainers as well as recovery of costs from tribunal matters. Contact us on 01228 63 55 45 if you require any further advice or assistance.

 

LSC Costs Recovery Action Success

The Legal Services Commission has successfully obtained judgment on the rights to recover payments on account made under the Legal Aid Act 1988 – LSC v Loomba and others [2012] EWHC 29 (QB), Cranston J.

The case involved three claims listed together as test cases. All three claims concerned moneys which the LSC asserted were owing to it by solicitors as a result of legal aid payments to them on account of work being undertaken for clients in civil cases. The Commission contended that the claims were authorised by law. Since it concedes that there were no express legislative power to make the claims, its argument raised some difficult issues of statutory interpretation. If the claims cannot be legislatively justified the Commissions advanced other legal bases for them, including restitution. The defendants contended that there was no legislative authorisation for the Commission’s actions, and in any event the claims are defeated by various defences. They also submitted that the Commission’s claims fail for public law reasons including the unfairness with which they have been pursued.

Judgment was entitled to recoup the payments on account in the manner it has pursuant to the incidental power in section 4(1) (b) of the 1988 Act.

This case highlights the need for lawyers reporting properly to the LSC, particularly when winding up a practice, and involving costs experts to prepare the appropriate bills of costs and claim forms to ensure costs are accounted for.