The way ahead: electronic bills and paperless assessments: where are we now?
Much has been written in these columns about the “New” bill, “J” Codes and when, if ever, will they become compulsory (see for example the December 2014 bulletin about “J” codes). Now there is progress, if by that is meant that something is happening.
Going back a bit, on 31 July 2015, the Hutton committee released its “New” bill designed to replace the “Old” paper bill with an electronic version, following recommendations made by Sir Rupert Jackson in his report into civil costs that the “Victorian Account Book”, as he described the paper bill, should be scrapped. Consultation/feedback was sought in August and September 2015. This in the main was negative, with consultees commenting upon the complexity of the electronic bill, the reliance on the J codes and the likely cost of implementation. Undaunted, on 1 October 2015, the Senior Courts Costs Office commenced a voluntary pilot scheme under which the new bill would be accepted from that date as an alternative to the paper bill (as things stand at the moment, only a couple of electronic bills have been presented and in both matters, the costs were agreed). There was also a suggestion that a compulsory pilot scheme would begin on 1 April 2016, which was later put back to 1 October 2016, with that date, too now having been abandoned. The voluntary pilot, however, was extended until December 2016.
The reason for the re-think stems from the recognition that if a compulsory pilot was introduced to apply to budgeted cases in which final orders for costs had been made on or after 1 October 2016, many such cases would by that start date have been running for a number of years. In these circumstances, the electronic bill would need to cover work undertaken before J codes had been used for time recording and the amount of time and expense involved in converting non-J coded work into electronic form would be immense. For that reason, the Hutton committee recommended that the new bill be introduced without a pilot for all work undertaken after a given date in cases which were and can be subject to costs management orders. That date would need to be set at a sufficient distance ahead in order to give the legal profession enough time to acquire the appropriate software and to enable firms to record their time in a way that is compatible with the preparation of the new bill. That way, the need to “reverse engineer” the working of J codes to cover work undertaken before systems were in place would not be required, albeit that this would mean that there would be two bills in different formats for work undertaken before and after the cut-off date. However, that would minimise or eliminate any need to revisit old time records into the new bill of cost format.
For its part, the Civil Procedure Rule Committee (“CPRC”) took the view, at a meeting before Christmas, that before any decision was made as to any mandatory use of the new bill, wider consultation was needed with the Ministry of Justice and Her Majesty’s Courts Service. They in turn sought views from the Law Society which are still awaited. There matters stood until two weeks ago when Sir Rupert Jackson made another speech about the implementation of his costs reforms at the Law Society on 21 April 2016.
In Sir Rupert’s view, the current form of bill “makes it relatively easy for a receiving party to disguise or even hide what has gone on”. No reason or other guidance about why that should be the case was given in his speech. The reality is that the present bill, if anything, makes it very simple to identify “padding”. References, for example, in the documents item to “considering next steps” or “reviewing file with partner” or “considering emails” immediately puts a paying party and an inquisitive costs judge on enquiry into exactly what has, or has not, “gone on”. It is far from clear how the electronic bill, which Sir Rupert suggests will give the relevant information to the court and to the paying party and is transparent, will actually do either. It is all very well just to record time by J codes. Whether or not the work thus recorded actually needed to be done and if it did, whether it took too long, is another matter altogether.
That all said, in his speech, Sir Rupert advanced the following as the way forward.
"5.2 The Hutton committee’s proposed version of the bill should be adopted as the new bill format, with the references to the J codes removed. The CPR [Civil Procedure Rules] should allow practitioners to prepare that bill in any manner of their choosing; whether with the assistance of J codes, automatically generated by an Excel spreadsheet or by hand.
5.3. A digital copy of the bill should be served on the court and the paying party along with an electronic spreadsheet which clearly and accurately details the work done in the course of the litigation, following the precedent H stages. This should be in the same format of phase/task/activity and adopt the precedent H guidance for what work falls in a given phase….
5.7 …. The CPRC should choose a future date for the implementation of the new bill. Work done before this date may be recorded in the old system with the old bill format. Work done after this date should be done in the new format bill. There will be no retrospective imposition and no need to go through historic information, trying to apply the phase/task/activity format retrospectively. May I suggest that the new form bill of costs should be mandatory for all work done on or after 1 October 2017?"
It is clear from the proposal, therefore, that practitioners would be free to use any method of time recording and spreadsheet formatting that they wish, so long as an electronic bill is produced which meets the standards and performs the functions required of the Hutton committee model bill. J codes, accordingly, will never be compulsory and the way in which information is captured will not matter provided that the end product is an electronic bill which contains the required information by reference to phase/task and activity.
Subscribers reading this bulletin will be aware of another speech by Lord Justice Jackson in which he gave his proposals for introducing fixed costs in multitrack cases up to a value of £250,000. In view of what he went on to say in his April 21 speech, they may be scratching their heads in wonder at what purpose will be served in investing in the software necessary to record their time in a way compatible with the electronic bill, when their costs in most cases are to be fixed. Sir Rupert’s answer to that is that there will be a continuing need for costs management and assessment, big cases will still need bills and in any case, the timing and extent of the introduction of fixed costs is uncertain. In that, Sir Rupert may be correct. Both as regards timing and level, recent indications are that any implementation of fixed costs will be incremental and may start at a level well below £250,000.
If Sir Rupert’s proposals come to pass, we shall all be electronic bill-wise with effect from 1 October 2017. Will detailed assessments also become paperless? Where work in the office is undertaken electronically, as now is more frequently becoming the case, the idea that a receiving party should print off thousands of emails for the use of the cost judge, to justify the work on assessment, is clearly laughable. At the moment, paperless detailed assessments are conducted but where that happens, they are undertaken without court rules or practice directions: a common sense approach is adopted, whereby, for example, a laptop containing the relevant documents is delivered for the cost judge to “pre-read” in place of the dusty boxes which have been a feature of detailed assessment for years. Once the new bill is mandatory, however, it must follow that detailed assessments will also be carried out electronically and, in due course, there will be a practice direction which sets out how, and in what form, electronic files are to be lodged so that the court is able to assimilate the relevant documents without recourse to any papers. So it will be goodbye to the Victorian Account Book bill and farewell to the dusty boxes!
CFAs and the sin of too much information
Shortly we shall publish Engeham v London & Quadrant Housing Trust and Another  3 Costs LO 357. The judgment was given as long ago as 1 December 2015, but the transcript has only just become available. The case concerns conditional fee agreements (“CFAs”) and appears to give much wider guidance than was originally thought when Floyd LJ (with whom Dyson MR and Simon LJ agreed) gave his extempore judgment before Christmas. The issue is whether the identity of the defendant in the CFA against whom the claimant succeeds has any bearing upon the ability of the claimant to recover costs from that losing defendant.
The facts demonstrate the point. Ms Engeham suffered injury in her flat when plaster fell on her after a leak had occurred in her bathroom ceiling. In order to pursue her case, she made a CFA with her solicitor, which covered “Your claim against the defendants for damages for personal injury suffered on 9 March 2008”. At that stage, the sole target of the claim was London & Quadrant Housing Trust. After a period of investigation, Ms Engeham issued proceedings on 5 March 2011 against London & Quadrant and against another entity called APL. Negotiations towards a settlement followed and on 26 July 2011 terms were agreed whereby:
"APL to pay the claimant’s costs of this action … Upon payment by APL of the agreed sum and costs, London & Quadrant and APL be discharged from all further liability to the claimant in respect of claims made by the claimant in this action
- The claimant has agreed to accept the sum of £10,000 plus costs in full and final settlement of the claim brought in this action
- The sum of £10,000 be paid by [APL] to the claimant’s solicitors by 4 pm on 26 July 2011."
So far so good. The money was paid but there was trouble ahead when Ms Engeham served her bill for detailed assessment.
APL took two points of principle: first, that because APL had not been named in the CFA, the contract of retainer was limited in its operation to the action against London & Quadrant. Second, that because the damages were payable by APL, she had not “won” her claim against London & Quadrant within the definition of the CFA. If that be right, it followed that Ms Engeham was not liable to pay her solicitors their basic charges, disbursements and success fee and by operation of the indemnity principle, there were no costs for APL to indemnify and their liability to her was nil.
In respect of point one, the court below had held that the words of limitation in the CFA “Your claim against the defendants London & Quadrant” were not wide enough to encompass an action against anybody else, a ruling which Ms Engeham did not challenge on appeal, and about which Floyd LJ said “I consider she was right to do so”. It followed that nothing could be recovered in costs in so far as her claim against APL was concerned and the only costs which could be payable were those relating to her action against London & Quadrant.
Point two failed. In the view of the court, the parties could not have contemplated that a win was restricted to causing London & Quadrant to be the payer even if it was the only anticipated defendant at the date of the CFA. Per Floyd LJ:
“I therefore consider that the ‘win’ clause in the CFA is not limited by reference to the identity of a person who actually pays the damages. Once one construes the CFA in that way, it seems to me that the Tomlin order is plainly an agreement to pay damages within the meaning of the CFA.”
Accordingly, Ms Engeham could recover the costs she had incurred in the action in so far as they related to London & Quadrant.
The importance of the case is that it has now resolved the issue about “the sin of addition”. Suppose the CFA had not mentioned any defendants by name at all, could the paying party have seriously argued that it had no liability to pay the costs? Put differently, was the claimant’s problem simply that she had given too much information? Had the clause in question simply referred to “your claim for damages for personal injury suffered on 9 March 2008”, would APL have escaped liability for the costs? In the circumstances of the case, it appears that the sin of addition, namely identifying one defendant but not the other, proved fatal. As we have stated many times in this bulletin, CFAs made before 1 April 2013 have a long tail. Those coming up for detailed assessment soon should be checked to ensure that too much information does not result in disaster as happened in Engeham.
The headnotes and full texts of the cases below are available to online subscribers at www.costslawreports.co.uk.
NEW! Costs Law Reports 2016/2
Hutchinson v Grant  2 Costs LR 189: Compromise of an action: whether an action as a whole can be compromised where the question of costs has not been agreed.
Miller v Associated Newspapers Ltd  2 Costs LR 195: Additional liabilities; whether award of additional liabilities to the claimant is incompatible with the defendant’s right to freedom of expression under Article 10 of the ECHR.
Nicolson v Grant Thornton UK LLP and Others  2 Costs LR 211: Costs following unsuccessful appeal; s 17(5) Audit Commission Act 1998, court’s discretion in making an order for payment by the audited body of expenses incurred in connection with the application or appeal.
R (Faulkner) v Director of Legal Aid Casework  2 Costs LR 237: Legal Aid Agency’s discretion to waive the legal aid statutory charge under s 47(3) Community Service (Financial) Regulations 2000 in a case to which s 10(7) Access to Justice Act 1999 applied.
Sidewalk Properties Ltd v Twinn and Others  2 Costs LR 253: Assessment of the costs of an in-house solicitor: method to be adopted to remain that for solicitors in private practice, namely to deal with the costs as though it was the bill of an independent solicitor: Re Eastwood (deceased) 1975 Ch 112 followed.
ABC v Barts Health NHS Trust  2 Costs LR 271: CPR 36.13(5): liability for costs following claimant’s late acceptance of Part 36 offer where the majority of the pleaded case had failed.
Stenhouse v The Legal Ombudsman and Another  2 Costs LR 281: Jurisdiction of the Legal Ombudsman in relation to costs orders.
Patience v Tanner and Another  2 Costs LR 311: Court’s discretion as to cost; factors, including conduct, to take into account when deciding who should pay the costs of the action where settlement had occurred just before trial.
Khaira and Others v Shergill and Others  2 Costs LR 327: Time for assessment of the costs of action under CPR 47.1: whether costs awarded in the Supreme Court were to be treated as separate proceedings, thereby avoiding the need for a “forthwith” costs order before the costs could be assessed.
Bolt Burdon Solicitors v Tariq and Others  2 Costs LR 359: Validity of a contingency fee agreement: whether an agreement under which the solicitors would recover 50% of any compensation recovered (£821,045.06) was unfair and unreasonable and accordingly should be set aside under s 57(5) Solicitors Act 1974.
Webb v Liverpool Women’s NHS Foundation Trust  2 Costs LR 411: Costs orders under Part 36: whether the court would be permitted to make an issue-based costs order, notwithstanding that judgment had been more advantageous to a claimant than a Part 36 offer that she had made.
R v Hunt  2 Costs LR 429: Payment of fees under the Graduated Fee Scheme: whether remuneration should be paid as a trial, because a “Newton” hearing had taken place, or as a cracked trial in accordance with the Criminal Legal Aid (Remuneration) Regulations 2013.
These cases will appear in Costs Law Reports Online 2016/3. Headnotes and transcripts will be available online shortly.
Dechert LLP v Eurasian Natural Resources Corp Ltd  3 Costs LO 327: Proceedings for the detailed assessment of solicitors’ bills under s 70 Solicitors Act 1974: principles which apply when deciding whether the court should make an order under CPR 39(2) that the assessment be carried out in private.
Engeham v London & Quadrant Housing Trust and Another  3 Costs LO 357: Conditional fee agreements: whether costs are recoverable from a defendant not named in the CFA: whether there has been a “win” against the first defendant named in the CFA where only the second defendant is liable to pay the damages.
Costs Law Reports Online 2016/2
Broadhurst and Another v Tan and Smith  2 Costs LO 155: CPR 45 Section IIIA, fixed costs in low value PI Claims; CPR 36, costs consequences following judgment where Section IIIA of Part 45 applies; whether claimants who beat their own Part 36 offer are entitled to more than fixed costs.
Legg and Others v Sterte Garage Ltd and Another  2 Costs LO 167: Appeal against non-party costs order pursuant to discretion under s 51(3) Senior Courts Act 1981; insurers’ liability to indemnify the claimants’ costs under the Third Party (Rights against Insurers) Act 1930.
Stevensdrake Ltd v Hunt  2 Costs LO 187: Conditional fee agreement in insolvency proceedings: action “won” but judgment unpaid: whether insolvency practitioner’s liability to pay costs to his solicitor was contingent upon recovery.
Sarpd Oil International Ltd v Addax Energy SA and Another  2 Costs LO 227: CPR Part 25, security for costs; whether costs incurred in Part 20 proceedings are defendant’s costs for the purpose of a security for costs order; relevance of costs budgets in assessing amount of security for costs.
Flanagan v Liontrust Investment Partners LLP and Others  2 Costs LO 247: Issue based costs orders under CPR 44.2(6)(f); departing from the general rule in CPR 44.2(2)(a) that the winner should receive the costs of the action; parties’ conduct when deciding costs order.
Littlestone and Others v Macleish  2 Costs LO 275: Part 36 offers; whether payment made following admissions should be aggregated with a Part 36 offer; cross-appeal against costs order awarding costs on the standard and not indemnity basis.
Oak Cash & Carry Ltd v British Gas Trading Ltd  2 Costs LO 289: Relief from sanctions under CPR 3.9: failure to comply with an unless order and thereafter to apply for relief timeously after the default had been made good.
Group Seven Ltd and Another v Nasir and Others; Equity Trading Systems Ltd v Notable Services LLP and Others  2 Costs LO 303: Costs management order under CPR 3.15: costs budgeting, hourly rates, determination of local solicitor point, counsels’ fees and approach to costs incurred pre-budget.