InBrief Issue 16

Inside this issue:

Page 3 Family fees from 9th May 2011

Page 4 Funding Regimes Come And Go

Page 6 Growth Conundrum Industry

Issue No 16

www.kain-knight.co.uk

costs in brief International private client scene in trepidation

One of the topics we have never really touched upon is that of the Private Client and I am pleased to say that the main articles in this edition are dedicated to this particular topic.

Less clouds on the UK tax horizon?

As is widely known, private wealth has been a major target of this and the previous government.

In addition to the increase of the top income tax rate to 50% and high profile cases focusing on wealthy entrepreneurs seeking to become non-UK resident for tax purposes (Gaines-Cooper, etc.), the government has tightened the rules on foreign individuals living in the UK (“res non-doms”).

Last in order of time, the annual levy for non-doms has been raised from £30,0000 (after 7 years of residence in the UK) to £50,000 (after 12 years).

However, the Budget dated 23 March, the government has also shown the first signs of a change of attitude towards wealth and the contribution of wealthy individuals to the UK economy. Thus, it was announced that, from 6 April 2012, non-doms will be able to remit foreign income or gains to the UK for ‘commercial investment in UK businesses’ with no charge to UK tax. We will be in suspense for some time yet as to the scope of this rule change – there is to be consultation in June 2011, with the legislation forming part of Finance Bill.

In addition, the government has announced the introduction of a statutory residence test.

Currently, the absence of such a test (and the uncertainty that goes with it) places the UK at a competitive disadvantage when competing with foreign jurisdictions.

Meanwhile, across the Channel...

When Sarkozy came to power, there was wide expectation that he would introduce measures to attract wealthy individuals (back) to France.

One such measure was the introduction of a “5 years’ holiday” for wealth tax purposes, according to which individuals who move to France only pay wealth tax on French assets for the first 5 years of residence. However, recent announcements indicate that the French government is taking a tougher approach towards wealthy individuals. These measures range from the possible reintroduction of an exit tax for people who leave France from the abolition of the socalled tax shield (“Bouclier fiscal”) which limits total taxation in France to 50 percent of income.

Meanwhile, across the border, the people of Zurich voted for an abolition of the lump-sum system, according to which foreigners who move to Switzerland may elect to pay tax by reference to their expenses (often capped to 5 times the yearly rent), rather than their income. An initiative to abolish this system throughout Switzerland may be off the cards for now, but the Swiss government was forced

Welcome to the 16th edition of Costs in Brief. Since the launch of our updated newsletter in September 2002, we have covered all aspects of legal costs such as Probate, CFAs, After the Event Insurance, Personal Injury, Third Party Funding and more. Our contributors have not only been from within Kain Knight but have included Costs Judges, Barristers, Insurers and Accountants.

For those of you dealing with Private Clients, I am delighted to let you know that we are holding a one day conference on 21st June at Brewers Hall in London. For more information please see the information sheet enclosed with this newsletter.

Penny Ridoutt Client Relationship Manager

to announce a tightening of the rules in order to appease the political backlash. Meanwhile, a recent article in The Economist suggested that a number of wealthy foreigners who had moved from the UK to Switzerland to find a tax shelter, are considering moving back to the UK for lifestyle reasons.

More mobility, less complexity?

The above examples show just how mobile wealth has become over the past few years.

The EU has recognised this and, following the publication of a Green Paper on the rules of succession in the EU, the Commission has published a draft Regulation on Successions, the purpose of which is to harmonise the connecting factors that determine the applicable law in the case of international successions. Whilst this is undoubtedly good news, the UK government has announced that it may decide not to opt in because of the possibility, under the laws of most continental European countries, to “claw-back” lifetime gifts that violate the relevant forced heirship rights accorded to close relatives (usually the surviving spouse and ascendants/ descendants). According to the UK government, the recognition of claw-back rules would “have a significant adverse impact on the legal certainty of lifetime gifts completed within the UK”.

Whatever the position of the UK government will be, the introduction of harmonised

International private client scene in trepidation continued . . .

succession law rules based on residence and (to a certain extent) nationality will not remove the complexities currently inherent to UK successions, as UK inheritance tax is levied by reference to the deceased’s domicile (rather than residence).

More transparency In the past, mobility enabled individuals to escape the taxman in their country of origin by moving to a different country. This was the direct result of the principle of sovereignty, according to which a country would not assist a foreign State in the collection of taxes.

It is well known that the UBS and LGT debacle that led to the explosion of tax information treaties. However, the EU has also moved a step closer to a system of international recovery of unpaid taxes throughout the EU. By 2013, EU Member States will have to assist each other in the collection of “all taxes and duties of any kind”, thus including inheritance and succession taxes. In the UK, the enforceability of foreign succession taxes was already introduced in 2008 to reflect another

international instrument, the OECD/Council of Europe Convention on Mutual Assistance on Tax Matters of 1988 (signed by the UK in 2007).

As a separate development, HMRC has just published statistics, according to which, by 31 March 2011 there were 1,351 registrations under the Liechtenstein Disclosure Facility yielding £140.08 million. It would appear that increased transparency, and tax collection, are here to stay.

Trusts and foundations in a shrinking world Another interesting trend brought about by globalisation and mobility is the introduction of foundations law in a growing number of common law jurisdictions, in part to capitalise on the recent difficulties experienced by Liechtenstein. Jersey introduced foundations in 2007 whilst the law in the Isle of Man is awaiting Royal Assent. In addition, Guernsey has just commenced a consultation process on its own process. Whilst the tax treatment of foundations in the UK (and the US) remains uncertain, UK practitioner who deal with international families will need to familiarise

themselves with these animals and, to a certain extent, may need to re-tool.

Conclusions The pessimistic views over the competitiveness of the UK as a hub for wealthy international clients turned out to be wrong, in part helped by the change of attitude in other countries. At the same time, mobile family have come to realise that mobility increases the level of complexity of their affairs and that they need to plan in a compliant and transparent world. For practitioners, this raises a number of challenges due to the complexity of the issues, but those who are able to deal with the issues and master new wealth planning tools stand to benefit from the current trend.”

Filippo Noseda Head of International Wealth Management WITHERS LLP

It’s not over until the fat lady sings… Or is it!

Whatever the position of the UK government It’s not over until the fat lady sings …. Or is it!

until the general public take all of this on board the Jackson /Clarke train rolls on.

Since the Lord Chancellor’s announcement that the Ministry of Justice will be pressing ahead with most of Rupert Jackson’s proposed changes to the cost of litigation, the Defendant camp have been jumping up and down with joy, whilst the Claimants have been crying into their beer.

Andrew Dismore, former Labour MP and former Partner of Thompson Solicitors and Russell Jones Walker has taken up the challenge on behalf of the Access to Justice Group and he believes that “there is still everything to play for”. He may well be right but from where I am sitting to stop this train it is going to need a massive boulder firmly placed on the tracks.

The only people who have not expressed an opinion seems to be the general public who probably have not got a clue how it will affect them. When Sir Rupert first made his announcement I expected to hear all about it on News at Ten, if not, on the front page of the Sun or at least in the Leicester Chronicle.

But barely a whisper has been heard.

I wonder how Mr X will react when he is told that he will have to give part of his damages to his Solicitor for a success fee and part to his ATE insurer having been told for years now that he “will receive 100% of his damages”.

I think he might start to take notice then but

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Alas, I cannot see that happening. Perhaps that boulder may be in the format of a general election. Who knows what David Cameron might be thinking! Even if he did call a general election I suspect that the Government of the day will still proceed as planned.

I think our best hope is that it will take years to come to fruition.

Michael Kain Chairman

Family fees from 9th May 2011

The Legal Services Commission has introduced two new fee schemes for family work, the Private Family Law Representation Scheme and the Family Advocacy Scheme for all cases where the Funding Certificate is issued on or after the 9th May 2011. The new scheme is similar to the one brought into place for Public Law Care and Supervision Order Proceedings in October 2007 where Instructed Solicitors are able to claim a fixed fee for preparation work. The new scheme now introduces fixed fees for three further types of cases, private law children matters, domestic abuse and financial matters.

The actual hourly rates remain the same and are set out in Community Legal Service (Funding) Order 2007 and the Community Legal Service (Funding) (Amendment) Order 2011.

In respect of Public Law matters where the Certificate is issued before the 9th May 2011 the same procedure is still in place as per Funding Certificates issued on or after 1st October 2007. For matters where the Certificates are issued after the 9th May 2011 there are reduced fixed fees for preparation costs (excluding Advocacy). The fixed fees have been reduced to take into account Advocacy fees within the Family Advocacy Scheme in which the fees claimable not only include the time spent at Court but also the time for preparing for Hearings.

In respect of the Family Advocacy Scheme Instructed Solicitors must fill in Form EX506 (Family Advocacy Scheme Advocate’s Attendance Form) for each Hearing and must

be signed and sealed by either the Judge or Magistrate. These forms include various details including the type of case, length and date of Hearing together with details of the client and the Funding Certificate. Various bolt-on payments are also able to be claimed over and above the fixed fees for Advocacy work which include fees for the number of pages within the Court Bundle and a fee for exceptional travel where mileage is in excess of 50 miles. Other bolt-ons include a percentage of the Hearing fee where there are cross examinations of experts and where there are allegations made against the client or where the Instructed Solicitor represents a person who has difficulty in giving instructions. A copy of the EX506 Form can be found on the LSC website.

Without the Advocate’s Attendance Form being submitted to the LSC with the relevant Claim 1A the Advocate will only receive the Standard Hearing Unit fee (up to 1 hour) and no bolt-ons. Therefore, it is of the utmost importance that Instructed Solicitors provide Kain Knight with the EX506 Forms all signed and sealed so that all Advocacy costs can be correctly claimed.

There are different standard fees for London and non-London areas and the higher rates for the London area represent a 20% uplift on the national fee.

expert’s hourly rate, total preparation costs, the rate for attending Court and travel together with other costs claimed.

There are however still some cases which fall outside of the scope of the new schemes and these include Emergency Protection Orders, Discharge of a Care Order, Wardship and Child Abduction together with TOLATA Proceedings. These matters will continue to be billed by way of hourly rates rather than fixed fees.

For a more in-depth explanation and guidance of the new scheme, regulations and fixed fees go to the LSC website www. legalservices.gov.uk/civil/guidance_fees_ funding.asp

Instructed Solicitors will also be required to obtain detailed information from experts instructed. The new Claim 1A Form includes a new section headed “Expert Invoice Details” and information will be required as to the

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Funding Regimes Come And Go

Funding regimes come and go, and the contemporary theme is shifting such that the burden of paying for unsuccessful cases and other unrecovered costs is no longer going to be borne by the state or by opponents, but is going to be borne largely by the Client or his Solicitor (or both). In many ways, what is proposed is similar to the regime that existed at the end of the 19th century. Students of costs law will know that that was a time when Solicitor and Client disputes were commonplace: such was the consequence of placing the burden of funding on the Client.

Indeed, contemporaneous reports suggest that the position between Solicitor and Client caused just as much concern then as disputes between opposing parties do today.

Will the same happen again? Anecdotally, the answer is not only that it will happen, but that it is happening. Over the past 24 months or so costs practitioners have seen an increase not only in litigation between Solicitors and Clients, but also in Solicitors seeking general advice about such matters. The desire to avoid such disputes is understandable: Solicitor and Client disputes are at best expensive and disruptive, and can often degenerate into rancorous affairs that are about more than just money.

The future The question is whether this is a trend that is set to continue. Whilst it is always a good idea to seek to learn the lessons that history can teach, present-day factors need to be taken into account too: there are factors which might give rise to a reversal of the trend, but the bald truth is that most factors point in the other direction (see below). The writer’s informed speculation – which is no more that -- is that the trend will continue and that there is likely to be a mild acceleration in that trend in about two years time (or perhaps a little later, depending on the speed with which the Jackson reforms are implemented).

One of the main reasons for coming to this conclusion is because market conditions are likely to encourage the development of a new cottage industry (or, more accurately, SOHO industry) with an uncomplicated and realistic business model: to attack Solicitors’ fees and to take a cut out of the monies saved. That business model would be exactly the type of low risk, low capital enterprise that would appeal to those skilled Costs Draftsmen who find themselves short of work as a result of

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the Jackson reforms. Moreover, there is a complete absence of the necessary political will that would be required to discourage such a SOHO industry: indeed, provided it does not degenerate into a vehicle for advancing unmeritorious technical points (more of which below), Lawyers will find it difficult to argue that the industry is not in the public interest.

It will certainly be almost impossible for Lawyers to take the moral high ground.

The effect of the Jackson reforms If the trend does accelerate, this will in part be caused by the effect of the Jackson reforms on the market conditions mentioned above (i.e., more Costs Draftsmen chasing less work), but there are two more specific factors that are likely to be relevant. The first is QWOCS. It is not known whether QWOCS will apply to Solicitors and Client disputes, but it would be difficult for Solicitors to argue against QWOCS without laying themselves open to an allegation of special pleading. (It is possible, however, that QWOCS will not apply to costs awards made under section 70 of the Solicitors’ Act 1974, in which case QWOCS would apply to only a minority of disputes.)

The second factor is the proposed introduction of contingency fees for civil litigation: if that type of funding were to become lawful, then the lure of the financial rewards may tempt even those at the top of their profession who would otherwise be doing between the parties work.

Management options: lessons to be learned What can a Solicitor do to manage the risk?

The steps that he can take will change from firm-to-firm and even Solicitor-to-Solicitor, but one of the first things he must do is to familiarise himself with the fact that Solicitor and Client disputes have a long lead time (of usually between two and three years). This means not only that there is latency between the disputed costs being incurred and resolution of the dispute, but also that it can take years before the Solicitor becomes aware of the fact that there is a problem. Thus, problems can be replicated across hundreds or thousands of files before they come to light.

This is the dreaded proliferated defect which, in its worst form can mean that a firm’s entire WIP is contaminated with uncertainty about the legality of the costs debt. Those who think this is far fetched usually change their minds when, for example, they look at

regulation 19 of the Consumer Protection (Distance Selling) Regulations 2000 and think about the problems that their own retainers would face if their Client took the point. This illustrates the second lesson that the Solicitor must learn, and that is that arguments in the hands of a paying party may seek grubby and overly technical, can take on an entirely different flavour when placed in the context of consumer protection. The third lesson to be learned is that the highest cost is often not the cost of litigating the point, but the administrative cost of liaising with all the relevant Clients in order to take remediable measures.

Management options: practical steps Fortunately, proliferated defects are nothing to be feared because they are avoidable and, even if not avoided, they are usually manageable. There are many steps that a firm can take without having to incur the costs taking specialist advice. Where possible, it best to arrange Clients’ affairs in such a way as to avoid having to write costs off simply because the cost of implementing a remedy is too high (see the third of the points made above). This usually means incorporating some form of safety feature into the retainer. The following are examples of the types of general feature that can be used: Master T&Cs: Contracts of retainer can be linked to a master set of terms and conditions which can be changed centrally in much the same was as banks and building societies change their terms of business; Contractual requirement to act reasonably: Some retainers contain provisions that require Clients to act reasonably if and when a defect in the retainer is discovered; this means that the Client owes a duty of care to the Solicitor as well as vice versa;

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Severability clause: Some retainers contain a provision which permits an objectionable provision to be severed from the agreement in the event of the retainer being found to be unenforceable by reason of that objectionable provision; this can happen either automatically or on notice; Fallback provisions: Where a retainer is replaced with a new retainer, it is common for the new retainer to contain a fallback provision such that if the new agreement fails for whatever reason, the old retainer will continue to have effect; and Dispute resolution: It is possible to include a mandatory alternative disputes resolution procedure; given the cost of Solicitor and Client assessments, this can be a provision that saves a considerable amount of expense.

Whilst some of these measures are of questionable worth, they are rarely harmful in the hands of a competent drafter, and, most drafters will include some of them as a matter of course. That said, the vast majority of retainers will work perfectly well without them. The same cannot be said to be true of the half-a-dozen obscure technical points that are presently below the radar of most Costs Draftsmen but which will eventually surface.

Whilst it is only the writer’s opinion, it is likely that the only reason they are below the radar is because either there is case law that prevents opposing parties from relying on them, or because there is a deliberate commercial agenda not to take such points during the course of the Jackson review. Such issues will not trouble former Clients and their legal advisors. Whilst nobody wants to take the risk of being first, one or more of those points will eventually surface.

The writer will not be so irresponsible as to set out all of those points that are currently below the radar, but the following list sets out the steps that can be take to deal with some of the better known points: ‘Section 74(3) notice’: Where fixed costs apply in the county court, a Solicitor will not be able to recover any additional monies unless there is specific written agreement to that effect (this, of course, being relevant to the proper operation of the scheme where an extra 10 percent of damages is to be paid in lieu of the success fee); a ‘section 74(3) notice’ will be evidence of such an agreement; ‘Unusual’ costs notice: CPR rule 48.8(2)(c) provides that costs may be disallowed if they

are ‘unusual’ and if the Client was not told that they may not be recovered from the other side; as such, it is prudent to record that unusual costs and/or costs which are not reasonably necessary for the purposes of progressing the litigation are likely not to be recovered from the other side; Distance selling notices and provisions: It is possible to make a retainer unenforceable by reason of non-compliance with Consumer Protection (Distance Selling) Regulations 2000; as a bare minimum, the Client must be asked to agree that the retainer will last longer than a period of 30 days, and that the provision of legal services may continue after the expiry of that period; and Consumer protection notices and provisions: Likewise, some retainers may need to comply with the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2008; space does not permit a discussion of those regulations in this short article, but it is worth recording that once the system is in place, it is very easy to achieve compliance.

These are only some of the measures that may need to be taken to avoid Solicitor and Client disputes. There are many others. This final point is a matter that needs looking at very carefully. One particular problem that the writer has noticed is that there is an electronic version of the relevant notice that is being used that looks fine on-screen but when it is printed, it losses the box that enclose the notice. A proliferated defect such as that is worth avoiding because it can be palpably expensive to remedy (think of the costs of going through each and every file to determine whether the notice was required in the first place).

What to do For a small firm with a good grasp of the law of costs – not just the practice of costs, but the law – then close attention to the two lists set out above will avoid trouble in the vast majority of cases. That said, it is exactly that type of firm that could be hardest hit by a proliferated defect: the decision as to what to do will depend on how ‘risk averse’ the firm in question is. Save in the most extreme case, there will be no right or wrong answer to the question of how seriously the threat of Solicitor and Client disputes needs to be taken. The following factors may be relevant: Profit maximisation: The biggest risk factor (in

the writer’s experience) for proliferated defects is the Solicitor’s attitude to profit (or, more accurately, his firm’s attitude to profit): a Solicitor who seeks to extract the maximum profit from each case will be at greater risk than a Solicitor who takes a more relaxed attitude to profit; Nature of firm: Because proliferated defects are generally avoidable, they can result in blame, recrimination and occasionally serious adverse personal consequences; this means that firms who delegate responsibility to individuals tend to be more risk averse than firms who make decisions collectively; Need for accountability: It is impossible to buy insurance against proliferated defects, so some firms place great weight on the idea of having someone to look to if everything goes wrong; that said, this is by no means a panacea as most specialists will limit their liability to the level of their PI insurance; Place where business is carried out: A Solicitor who creates his retainers by post, email, telephone or following home visits is (significantly) more at risk of proliferated defects than other Solicitors; Source of income: A Solicitor who does not recover costs from his own Clients will be at less risk from proliferated defects than a Solicitor who expects his own Clients to contribute to his fees (this is because there are certain types of proliferated defect that only a Client can rely upon); Nature of income: Solicitor who derives his income from private retainers (i.e., ordinary retainers) will be less at risk than, say, a Solicitor who is using a conditional fee agreements and who plans to use contingency fee agreements in the future; and Resilience and diversity: A Solicitor who works in a firm which uses a range of different retainers drafted by different people will be less at risk of proliferated defects than Solicitors who have a formulaic approach to retainers.

This article has focused on proliferated defects, but there are many other issues between Solicitor and Client that need to be considered. A firm such as the publishers of this newsletter would be fully capable of advising on such matters.

DR MARK FRISTON KINGS CHAMBERS

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Case Law Corner

Case Law Re Costs Estimates Eversheds LLP v Cuddy [2009] EWHC 90154 (Costs) FACTS: The Defendants instructed the Claimants to act on their behalf. A detailed assessment took place under section 70 of the Solicitor’s Act 1974 when four bills were challenged. During the course of the detailed assessment several issues arose which required further evidence. The bills were assessed subject to consideration of those further issues which were considered by Master Campbell on 4 and 18 November 2009.

Judgment was reserved and handed down on 17 December 2009.

ISSUES: 1. Did Eversheds give Mr Cuddy an oral estimate that the costs they would incur would be “in the region of £150,000.00”?; 2. If yes, are their costs limited by the estimate uplifted by £50,000.00 for additional work falling outside the estimate?; 3. If no, should there be a reduction to this level or to a figure above this amount which, in all the circumstances the Court considers it reasonable for Mr Cuddy to pay?

HELD: 1. On the evidence before him, Master Campbell held, as a matter of fact, that the figure of £150,000.00 came up in conversation.

However, he found that these “mere words” could not “be elevated to the status of an estimate” because “no confirmation of the figure in question was requested or given and it is common ground that no individual document actually mentions the sum of £150,000.00” and the words used by Mr Richards for Eversheds that “the costs were £150,000.00” were open to more than one interpretation: “namely that it was £150,000.00 to date or alternatively that it was going to be £150,000.00 all in”; 2. There was a conversation between the parties during which Mr Richards said “it could be £200,000.00”. The dispute was whether this was an additional £200,000.00 or £50,000.00 on top of the £150,000.00 previously advised.

As this was a Solicitors Act assessment to which CPR 48.8(2) applied the Judge was obliged to give the benefit of the doubt to the receiving party;

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3. The only costs information Mr Cuddy received from the date of the client care letter (May 2007) to the termination of the retainer (2 August 2007) were the invoices he received in the second week of July. In order to discharge its obligations about providing costs information under the terms of the retainer and paragraph 6 of the Solicitors’ Code of Conduct, in the absence of an estimate, Eversheds ought regularly to have told Mr Cuddy about the level of costs he was incurring. The Judge held, applying CPR 44.4(1), that if costs are incurred in breach of the Code they “are vulnerable to reduction” and decided that a reasonable amount for Mr Cuddy to pay would be in the region of £25,000.00 instead of the £91,754.86 charged.

for that period of time.

Costs Information is Key! – A Kain Knight Case Study

“On this question of retainer, I would observe that where there is a difference between a Solicitor and his client on it, the courts have said for the last 100 years or more that the word of the client is to be preferred to the word of the Solicitor or at any rate more weight is to be given to it…The reason is plain. It is because the client is ignorant and the Solicitor is, or should be, learned. If the Solicitor does not take the precaution of getting a written retainer he has only himself to thank for being at variance with his client over it and must take the consequences.”

BP v MP, KP & TP, Senior Courts Costs Office This recent Solicitor/Client assessment before Master Campbell in the SCCO was a strong reminder of the importance of providing costs information and having the terms of your retainer clearly set out in writing regardless of there being a long established Solicitor/Client relationship.

The clients were members of a family that had instructed the firm of Solicitors over a number of years with the firm having acted on a variety of matters some of which were linked to the present claim against the family. Given the established relationship and the running thread from previous matters a formal Rule 2 letter was never provided and neither was a formal costs estimate. The claim against the family was highly contested and eventually proceeded to a 5-day trial. The Solicitor successfully defended the claim on behalf of the clients but the Claimant in that matter was impecunious and so the Solicitor’s substantial costs of roughly £90,000 fell to be paid by the client. Unsurprisingly at this point, the long standing relationship deteriorated rather rapidly.

A number of issues arose, but two in particular, in addition to the costs estimate point, had a sizeable impact on the assessment.

Firstly, there was a failure to notify the client of an increase in hourly rates until an invoice was rendered some 9 months later. This immediately resulted in the substantially lower rate applying

Secondly, there arose a dispute as to whether the fee earner, now retired, had instructions to attend all 5 days of the trial as well as Counsel.

The clients claimed to have told the Solicitor he was only needed for the first day owing to the costs associated with his attendance. The Solicitor claimed that after the first day he had actually been asked to attend all of the remaining days to assist Counsel. There was a clear factual dispute as to what was said and the retired Solicitor was unavailable for the hearing.

Master Campbell noted that neither party had put in formal witness evidence and ultimately relied upon the judgment of Lord Justice Denning in the case of Griffiths v Evans [1953] 2 All ER 1364 at 1369 where he stated:

This principle was more recently confirmed in the case of Fereidooni v Pettman Smith [2001] EWHC 9007 (Costs) by Justice Butterfield. The lesson to be learnt is obviously to get everything in writing but obviously this can be easier to say with hindsight particularly in situations where a Solicitor does not foresee there being any problems with payment. It seems it is always best to err on the side of caution!

Master Campbell did not make a formal finding on the costs estimate point but was clearly none too pleased about the lack of appropriate costs information. This was perhaps unsurprising given his judgment in Eversheds v Cuddy. The Solicitor’s failure to provide sufficient costs information influenced his approach to subsequent challenges, with him clearly taking an unfavourable view of the approach taken by the Solicitor. Eventually the costs were assessed in the region of £56,000.

As to the costs of assessment, it should be noted that the costs deducted for want of a

Growth Conundrum Industry

retainer did not come into play when considering the 1/5 rule pursuant to s70(9) Solicitors Act 1974. This is pursuant to the decision in Re Taxation of Costs; Re a Solicitor [1936] 1 KB 523,

It is clear that with the financial landscape as it is such challenges are likely to become all the more frequent and it is essential that solicitors provide all necessary costs information and ensure all aspects of the retainer are in writing

to avoid future disputes. Costs information is key!

Mitesh Modha and Katie Broomfield

Growth Conundrum Industry

In these recessionary days difficulties face us all including Solicitors.

Not only lay Clients but also commercial Clients and Insurers are either saying they can’t pay or won’t pay. Where the Quantum of Solicitors fees are questioned, in extreme cases, this results in a request that Solicitors have their costs assessed. Whilst this is a growth industry for Costs Lawyers, it also throws up an interesting, if somewhat taxing, conundrum.

1. Do you accede to the Client’s request and have your costs assessed?

2. Do you inform the Client to issue his own Application to assess the costs?

3. Do you simply sue for your outstanding fees?

Prior to CPR, Solicitors costs were “taxed” in accordance with Section 70 of the Solicitors Act 1974. Section 70 (9) provides that if a Solicitor issues an Application to assess his own costs, unless the Client attends on the assessment or the Costs Judge certifies there are special circumstances, there will be no Order for costs of the proceedings. However, since the inception of the Civil Procedure Rules, the Senior Court Costs Office Judges have included an Order for payment of the assessed costs by the Client regardless of whether the Application was made by the Solicitor or the Client.

The easier option is to inform the Client to proceed with the Solicitors Act assessment himself. Sometimes the burden and expense of having to instruct new Solicitors to act on his behalf are sufficient to dissuade the Client into paying the outstanding bills.

month of the delivery of the Bill the High Court shall make an unconditional Order that the Bill be assessed. (ii) After one month has expired the Court may make the same Order, subject to such directions and such conditions as it thinks fit. (iii) Where 12 months have expired from delivery of the Bill, or after a Judgment has been obtained, or whether the Bill has been paid within 12 months of the Application, no such Order shall be made except in special circumstances.

perhaps more worryingly, even if some of the Bills are over a year old, the Client is able to ask the Court to look at them regardless of

That is to say, if you have acted for the Client and rendered a number of Interim Statute Bills, the Court will not allow them to be assessed, unless there are special circumstances, if they are over a year old. If they are between one month and twelve months old then the Court would only allow them to be assessed on conditions such as a payment on account or a payment into Court.

The choice, of which avenue you choose to travel, is yours.

this fact. In the Court of Appeal case of, “Watts (Thomas) & Co (a firm) v Smith (1998) 2 Cost LR 59, CA” it was held that, where the Solicitors sued for their costs they could not simply ask the Court, without any further investigation, to underwrite the amount they had chosen to claim.

It may well be that your Client is impecunious or simply refusing to pay. It may well also be that your Client has rejected your suggestion to have his costs assessed and has still not paid the outstanding bills. In such cases you may proceed to sue for the outstanding debt.

This may well have the benefit of speeding up the process by obtaining a Default or Summary Judgment. There are however some downsides. If the Client disputes only the amount of the Bill, on an Application for directions or, as aforementioned, an Application for Summary Judgement, the

Whether options 1 or 2 are proceeded with, Section 70 of the Solicitors Act 1974 provides:

Order would direct that the Bill be referred to a Costs Judge for assessment. That is to say you will have to go through exactly the same process as if you had originally pursued a

(i) Where the Application is made within one

Solicitors Act assessment. Additionally, and

John Staab Costs Lawyer Kain Knight - London

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Congratulations to Chris Butler who ran the 2011 London Marathon.

A quote from Chris “I can safely say that completing the course was very hard but was ultimately one of the most rewarding experiences of my life.

Chris finished in 4hrs 17mins and 53 seconds although he was hoping for under 4 hrs. He hopes to have raised £2,500 for St Clare Hospice once all the money is collected which is a fantastic achievement.

About Me I was born in Aberdeen, opening my eyes

and ears to the sound of bagpipes and the howling east wind.

Unable to make their endearments heard, Mum and Dad decided to up and leave for the softer climes of the Borders and later to Little Hallingbury, Hertfordshire. Here, we lived next to a farm where I spent my youth riding out the polo ponies that were bred there. Schoolwork came a definite second best.

Next step was marriage and beautiful twin daughters, Sarah and Nancy. It was at their

primary school that I met fellow parent, Michal Kain, Chairman of the Kain Knight Group.

What began as part-time work back in the 80s has become a fulfilling job as Client Relationship Manager. As this involves meeting people from different organisations, variety is part of the day-today job spec and I enjoy it tremendously.

So, if you have any comments, complaints or otherwise I am always happy to hear them.

Penny Ridoutt Penny.ridoutt@kain-knight.co.uk

contact us: Head Office:

Also at:

1, 2 and 4 Priors London Road Bishop’s Stortford Hertfordshire CM23 5ED Tel: 01279 755552 Fax: 01279 755936 DX: 50405 Bishop’s

Stortford

Carpenters’ Hall 1 Throgmorton Avenue London EC2N 2JJ Tel: 0203 215 1011 Fax: 0207 374 6265 DX: 138760

Cheapside 2

Disclaimer

Consistent with our policy when giving comment and advice on non-specific issues, Kain Knight cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems it is recommended that professional advice be sought from your normal contact.

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Regis House 9, Dane John Works Gordon Road Canterbury Kent CT1 3PP Tel: 01227 786499 Fax: 01227 786665 DX: 5310 Canterbury

1, Victoria Square Birmingham SB1 1BD Tel: 0121 616 0230 Fax: 0121 616 0555 DX: 715357 Birmingham 78