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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Severance of Retainers

The Court of Appeal have acted to clarify the law concerning severance of retainers and whether it was reasonable to sever the same due to a client’s unwillingness &/or inability to pay.

The case concerned was Cawdery Kaye Fireman & Taylor v Gary Minkin [2012] EWCA Civ 546, with Lord Justice Ward neatly summarising the case as follows:

“Every solicitor will encounter, in one way or another, the kind of problem which gives rise to this appeal. The solicitor is instructed to conduct certain litigation on the client’s behalf. He gives his best estimate of the cost of doing so. He asks for a payment on account. The litigation becomes more complicated than had been envisaged. The estimate is exceeded. More money is requested on account. The client is by now dissatisfied with the service he has been receiving and believes that the costs are excessive and that the solicitor is achieving nothing. The fractious relationship is terminated and the solicitor’s bill is assessed. Then – and this may be the unexpected turn of events, at least from the solicitor’s perspective – the costs judge conducting the assessment concludes that it was the solicitor who wrongfully terminated the retainer and did so before the litigation had come to its end. Not having performed an entire contract, the solicitor is entitled to no further fees: indeed he must repay the fees he has already received on account”

In this case, the solicitors gave an initial estimate of the likely costs and requested a payment on account of those likely costs. However, the opposing party changed the course of the litigation and so the estimate was no longer valid and costs were increased. Mr Minkin expressed his concern and explained his inability to pay and the relationship deteriorated to the stage that the agreement between the solicitors and Mr Minkin was terminated. At the initial detailed assessment, Master O’Hare found for Mr Minkin stating that the solicitors had acted unreasonably. Master O’Hare reduced the first bill rendered from £3490 to £2785 thus triggering the 20% rule and so awarded Mr Minkin costs summarily assessed at £17,650. The second bill only had £10 plus VAT assessed off.

I pause for a moment to dwell on the fact that Mr Minkin was complaining he couldn’t afford £6565 and yet he incurred a liability to his new solicitors summarily assessed at £17,650! Staggering.

Master O’Hare’s Judgement was upheld on appeal but as Ward LJ stated “It seemed to me that clarifying what solicitors can and what they cannot do was a compelling enough reason to grant permission for this second appeal.”

This is what they did and overturned the original decision. The vital question is whether the solicitors were entitled to, and did, suspend the retainer or whether they wrongly terminated their engagement.

“In my judgment they were wrong. The fact that the client complained promptly cannot assist him if his complaint is not a reasonable justification in itself. The complaint that the bill exceeded the estimate cannot stand in the face of the fact that the letter enclosing the Terms of Business, the contents of which the client accepted in writing, made plain by paragraph 2 that estimates were not intended to be fixed or binding and that other factors might mean that the estimate would be varied from time to time.

“Mr Minkin could not reasonably expect his solicitors to wait for payment until they had an order for costs made against Mrs Minkin. That is not the way the world works and Mr Minkin was well aware of that fact….I conclude, therefore, that the client had no reasonable justification for not meeting the bill presented to him.”

Giving the last word to Elias LJ

“I have no doubt that Mr Minkin was justified in raising his concerns about the invoices with the firm, given that the amounts exceeded the estimates and that he had not been notified about this, as he should have been. But in my view, once there was a cogent explanation for the increase it was unreasonable for Mr Minkin to continue to refuse to pay, particularly since if he was dissatisfied with the amounts he could have challenged them. It seems to me that any other view would compel a solicitor to carry on working for a client even though there may be little realistic prospect of payment.”

So the verdict is solicitors do not have to carry on working without realistic prospect of payment provided they dot the ‘i’ and cross the ‘t’ and operate a belt & braces approach with the difficult clients

Are retrospective success fees recoverable?

This was the question dealt with in the case of J N Dairies Ltd v Johal Dairies Ltd & Anor  [2011] EWHC 90211 (Costs), or more specifically “Whether the Claimant should recover success fees charged by its solicitors and counsel in respect of work done before the conditional fee agreements which created the liability to pay such fees were entered into”.

Both the Claimant and the First Defendant were wholesale dairy companies. The Second Defendant was a driver employed by the Claimant until November 2008. The Claimant’s case was that, shortly after his employment had been terminated, the Second Defendant returned to the Claimant’s warehouse in Wolverhampton and took a number of invoices. These gave details of the Claimant’s customers, their orders and the prices that they paid. The Defendants then used that information to seek to solicit the Claimant’s customers.

The Claimant succeeded in its claim and was awarded costs. The Defendant appealed against the decision on grounds of unfair trial and lost.  Shortly before the appeal hearing, the Claimant entered into a Conditional Fee Agreement with his solicitors due to cash flow issues. The CFA was intended to have retrospective effect. A CFA in similar terms was entered into with Counsel.

On assessment, it was deemed that the success fees on work done before the conditional fee agreements were entered into are not allowed, on the ground that they were not reasonably incurred. That applies to work done by both solicitors and counsel.

 

 

New Bill Format

Proposals are underway to revamp the much maligned Bill of Costs. Whilst not an accusation leveled at our often praised bills, it is often the case that there is a distinct absence of detail within bills and Lord Jackson has claimed that the production of bills of costs should be reduced to the push of a button, thus generating pristine bills full of detail that are readily viewable, adaptable and alterable so all parties can change them to see varying outcomes. This will ultimately lead to reduced time preparing the bills and reduced time adding up the bills following a detailed assessment.

Noble aspirations.

At CLC, we are already able to do both the readily amendable and instant calculations as proven at a recent detailed assessment where half a million pounds worth of costs across a number of bills were ready by the time the Judge had made his order. But this misses a trick. The fact that the Costs Lawyer has taken the time to read the file and prepare the bill knowing what he can and cannot reasonably expect to recover is removed by Jackson’s proposals, and in addition, time spent preparing and considering is increased to reflect the fact the Costs Lawyer is less familiar with the case.

As such, it is highly debatable whether what Jackson aims to achieve will be achieved.