Inside this issue:

Page 2 The Corby Group Litigation 2009

Page 4 The True Cost of Bullying

Page 5 New Flagship Office in London

costs in brief

Lord Justice Jackson’s far reaching and challenging costs review is expected to be published at the end of the year and should be hitting our desks in early January.

Those who have attended any of the workshops /seminars will know that having identified the issues to be tackled in his preliminary report, the workshops that LJ Jackson has been carrying out up and down the country have not necessarily given him the answers that he was looking for, but may well have added to the confusion and possibly even raised issues that us Practitioners have side stepped on a daily basis, mainly because to look too deep, may take us to a place that we would rather not go.

Is that such a bad thing however?

LJ Jackson has looked at all of the issues and has invited input from many, a lot of whom answered his call, though not always giving him the response that he wanted or expected.

At the Reynolds Porter Chamberlain “workshop” I believe that LJ Jackson walked into the meeting thinking that most Practitioners

supported his view that “risk free litigation” was not fair to all sides. LJ Jackson walked out having heard the comments from the floor where the majority view was that to look to the client to pay the Success Fee or even the ATE Premium was a step backwards.

Talking about walking, The Association of Personal Injury Lawyers (APIL) walked out of talks of a mediation process set up at the request of LJ Jackson on extending fixed costs in personal injury cases.

Fixed Costs are already in place for road traffic cases worth up to £10,000 but APIL opposes the extension. They are clearly unhappy about the way they are being treated.

One thing that does seem to be positive from our position, is that there does not appear to be too many opinions in support of the abolition of costs shifting, e.g. “loser pays the costs”.

To predict what LJ Jackson’s report is going to recommend is anybody’s guess but I think one thing is sure we are in for a “thrilling” bumpy ride if not immediately but in the future. Michael Kain Nov 2009

Michael Kain

www.kain-knight.co.uk

New “Thriller” to be out in January.

Issue No 13

If you don’t have the time to contact us by telephone our free advice line is just a click away.

Visit the Kain Knight website and look for the Costs Helpline.

www.kain-knight.co.uk

DON’T FORGET INCREASE IN THE STANDARD VAT RATE The standard rate of VAT was temporarily reduced to 15 per cent on 1 December 2008 and it will return to 17.5 per cent on 1 January 2010.

The change only applies to the standard VAT rate. There are no changes to sales that are zero-rated or reduced-rated for VAT. Similarly, there are no changes to the VAT exemptions. Any sales you make at these rates are unaffected by this change.

Costs Helpline. Your cost questions answered

The Corby Group Litigation 2009 EWHC 2109 (TCC)

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The action known as the Corby Group Litigation was assigned to the Technology and Construction Court.

The various Claimants applied for the issue of liability to be tried as a preliminary point.

Judgment on the issue of liability was handed down on 29th July 2009.

It was accepted that the Claimants had effectively “won” the Group Litigation issues.

A separate hearing was convened on the 11th August 2009 to address the costs issues arising with the Group Litigation having effectively been brought to a close with each individual case being referred back to the QBD for the assessment of damages where appropriate for those Claimants to have their damages assessed.

The Court was asked to decide as to costs:

1. Whether a Costs Order should be made at all at this stage.

2. If so, whether costs should be awarded in favour of the Claimants.

3. If so, should costs be payable on the indemnity or standard basis.

4. Should there be any reduction on any basis in the amount of costs payable?

5. Should there be an Interim Costs Payment Order, if so, what amount and subject to what terms, if any, should such an Order be made.

These various points were argued against backdrop to the effect that the Council was contemplating an appeal against the Judgment on the issue of liability and in the light of further information provided to the Court by way of costs estimates and the existence of a Costs Capping Order.

Mr Justice Akenhead concluded that in principle there was no good reason not to make a Costs Order at this stage as the Claimants had effectively won on the Group Litigation issues. The Council had made no admissions in respect of those issues nor had they made any Part 36 Offers or payments into Court.

He accepted there was force in the argument from the Defence that until the issue of quantum was decided in respect of each individual Claimant it would arguably be premature and inappropriate to award costs at this stage. On balance he concluded however that it would be wrong for the Claimants to be out of pocket even though there was a hypothetical possibility that all of the Claimants would fail to recover any compensatory damages.

He accepted that the Claimants had won on the preliminary issues and therefore the Council should pay the Claimants’ costs to be assessed if not agreed but subject to the issue as to whether there should be a reduction in the percentage terms of the full amount.

He went on to award the Claimants their costs on the standard basis having strongly formed the view that this was not a case where indemnity costs should be ordered.

He drew attention to the fact that the Claimants had failed to disclose the key evidence of a material witness before the commencement of the trial. He was critical of the Claimants’ expert evidence. He was generally critical of the scattergun approach adopted towards the presentation of the case against the Council. He did not criticise the parties for failing to look to explore the possibility of settling the preliminary issues by means of an alternative dispute resolution. In addition he did not consider that there was any force in relation to the Claimants’ Part 36 Offer upon the issue of liability.

He concluded that a certain amount of time had been wasted in the prosecution of the trial and limited the Claimants’ entitlement to costs to 90% of the whole to reflect such conduct.

The Judge went on to decide whether there should be an Interim Payment Order.

He reviewed the recent Judgment in Blackmore –v- Cummings 29th July 2009 which suggests that there was no legal presumption that a party was entitled to realise the benefit of a Costs Order in his favour by having an Interim Payment on account. The Judge stepped around that however by noting that he did not proceed on the

basis that there was a presumption to an Interim Costs Order but simply on the basis that he had the discretion to make an Interim Costs Order to Order an Interim Payment.

Whilst he expressed concern as to the impecuniosity of the Claimants he felt that provided sufficient undertakings were given on their behalf that it would not be realistic to do anything other than make an Interim Payment Order at this stage.

He then went on to address the amount of the Interim Payment having been advised, among other things, that the Claimants After the Event legal expenses insurance premium was for a sum just in excess of £1 million. He had further been advised that the Success Fee claimed on behalf of the Claimants was 100% of base costs. The Claimants having submitted that they should be entitled to an Interim Costs Order in the sum of £3.2 million based on total costs subject to Detailed Assessment of £4.6 million.

The Judge allowed, by way of Interim Payment, £2.9 million reduced to £2.6 million to reflect the conduct issue. By way of Interim Payment he allowed 60% of that figure which rounded down was £1.6 million.

The Judge was highly critical of the declared intentions of the After The Event Insurers in taking their entire insurance premium from the Interim Payment. It was presumably a deferred premium and so the Claimants were doubtless contractually liable to pay the full premium as a first charge upon any sums recovered by them as costs.

The Judge was of the opinion that “decent Insurers” would have limited their recovery to 50% of the premium pending any challenge from the Council at Detailed Assessment that it was not a reasonable premium proportionate to the claim as a whole.

There is therefore a relatively modest surplus available to the various Claimants to be applied on account of costs and therefore, given the prospect of an appeal against the liability Judgment, and the question mark which must inevitably hang over those Claimants ability to recover substantial damages they must give

The Claimants brought an action in negligence against the Council alleging that as a result of the ingestion of harmful substances generated by their reclamation works at Corby that a group of children born between 1986 and 1999 had caused birth defects.

Case 1. The Liquidator instructed a local firm of Solicitors to act against the former Chairman of a small football club in setting aside a legal charge of some £76,000. In 2000 Judgement was given to the Liquidator setting aside the charge and awarding costs against the Chairman.

After a very long delay a Bill of Costs was prepared amounting to about £400,000 and Kain Knight were instructed to oppose the Bill.

There then followed a whole series of Applications, Appeals and Hearings. The Bill was finally assessed in January 2009 after an eleven day Hearing in the sum of £122,000. The Chairman was awarded the costs of the Detailed Assessment and ended up paying the sum of £6,000!

The local Solicitor who had rendered Bills in excess of £500,000 walked away with at least £250,000 leaving the Insolvency Practitioner to explain the outcome to the Creditors, the main creditor being the Chairman, how he recovered £6,000 and had spent £250,000 on the local Solicitor including a fee to the new Solicitors who had acted in the Detailed Assessment from 2000 and who were charging him £400 per hour.

Case 2. Kain Knight were instructed to prepare a Bill of Costs on behalf of a well known London firm of Solicitors who had succeeded on behalf of a well known Insolvency Practitioner obtaining a Judgement in excess of 2.5 million against a friendly foreign country.

The Solicitors acted on a full Conditional Fee Agreement (CFA). The Bill, including the ATE, the costs of financing an amount for security and the success fee amounted to about £5million.

The Detailed Assessment proceeded over a 9 day period in which the Solicitors recovered the £5million plus interest and £300,000 for the costs of the Detailed Assessment.

The Creditors were paid 100% in the pound. The Solicitors went on to charge further fees on enforcement and the overall costs and interest will amount to about £7.5 million. Everyone has been very happy apart from the friendly foreign Country who probably did not even notice the loss.

So what’s the message to Insolvency Practitioners?

DON’T GO TO SOLICITORS THAT DON’T KNOW WHAT THEY ARE DOING!!!!

A Tale with Two Ends

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This year we have been involved with two high profile Detailed Assessment Hearings with Solicitors acting for Insolvency Practitioners with two very different endings.

undertakings to repay such sums as they have received on account of costs to the Council leading to a somewhat unsatisfactory outcome for the Claimants and their legal representatives.

The key points to be taken from this Judgment are that success on the issue of liability is likely to result in the Defendants having to make a substantial Interim Payment on account of a Claimant’s costs. In assessing the liability for costs conduct issues will be reflected with the Court allowing a sum that is reasonable and proportionate by way of Interim Payment reflecting previous costs estimates and Cost Capping Orders.

Interim Costs payments will be made even where the Claimants are impecunious such that there is a danger that if subsequent appeals or Detailed Assessments alter or vary the liability for costs the paying party still has to part with a substantial sum of money on account of those costs not without considerable risk that they will never be repaid.

The case also reflects the Court’s frustration of its inability to limit the amount that the legal expenses insurers will receive in satisfaction of the LEI premium. In this case full payment was required and no doubt received.

Were this case to have been tried against the backdrop of the proposed reforms to conditional fee agreements proposed by Lord Justice Jackson then changes to the costs-shifting rule would leave the Council unable to recover any of its defence costs had their defence prevailed. As a corollary to that however the Claimants would not have been required to incur a substantial LEI premium in the sum of £1 million as no adverse costs risk would arise in such circumstances.

If the Claimants’ case prevails then there will no doubt be a review of the LEI premium at any subsequent Detailed Assessment of costs.

It remains to be seen whether in the event of an appeal upon the issue of liability by the Council they will seek to stay the implementation of the costs rulings made by the trial Judge on 11th August 2009.

Robert Connelly, Child And Child

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For all of our Media Friends

The True Cost of Bullying Thomson v. Berkhamsted Collegiate School [2009] EWHC 2374 (QB)

The claim had a potential value of approximately £1m. A few weeks prior to the hearing the Claimant dropped the case and withdrew. The Defendant was granted a Costs Order against the Claimant’s parents as this was “a case of family funding”.

Mr Justice Blake said that whilst this was “a case of family funding” there was a “quantity of material indicating that the parents were not merely funders but were directly concerned with the facts of the claim and promoting the remedies that they identified”.

The question was whether or not the Defendant was entitled to obtain disclosure and whether or not the parents could be cross examined in Summary Proceedings to ascertain more information.

The Judge made the Disclosure Order as sought by the Defendant on the basis that the correspondence required was likely to be probative and not privileged, at least not in its entirety and it was not disproportionate for the material to be sought at least for a certain period.

“Costs Estimates are Mandatory for Libel Cases”

The MoJ has shelved the suggested introduction of fixed hourly rates and compulsory cost-capping for libel cases and instead opted for a mandatory costs budgeting pilot.

Under this pilot, if parties are involved in a libel case, they must exchange and lodge with the court, cost estimates for the whole proceedings. The court will be able to call regular costs management conferences.

Also, Claimants must give early notice to Defendants in libel if an ATE insurance has been taken out. This will be followed by a 40 day “cooling off” period where, if Defendants admit liability and it leads to a settlement, they will not be liable for the ATE premium.

Kain Knight can help you with your Costs Estimates to ensure that they are as accurate as possible.

This matter related to a 25 year old student who commenced negligence proceedings against his former school for their failure to prevent bullying and to protect him from bullies.

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Fixed Rate Or Flexible

New Flagship Office in London signals further expansion for Kain Knight

We are pleased to announce that our London Team have relocated to a new suite of offices on the 4th floor of the prestigious Carpenters’ Hall in the City of London.

This move marks a significant new development in the firm’s growth and an important step towards improving the service we offer existing clients.

The London Team of Draftsmen led by John Staab is supported by fellow Directors Chris Butler and Matthew Kain and together they will continue to provide an exceptional costs service.

If you haven’t used us for a while, why not take the opportunity of contacting John to arrange a no obligation meeting to discuss

your costs requirements and the many new services we can now offer you.

“I am delighted that we have expanded and moved in to new and exciting offices in the City.

However we still retain our traditional core beliefs of quality, professionalism and expedition that is without equal.” John Stabb

Over recent months I have had to put on an extremely brave face in various conversations with family, friends and indeed clients.

I am sure that many of you reading this article will have shared similar emotions to my own.That is to say a great deal of people, apart from me, have not been shy in coming forward to share their good fortune at having Tracker Mortgages, repayable at a slight percentage over the Bank of England Base Rate. In many cases, I understand that monthly mortgage payments have been reduced by over £1,000! Regrettably, I am one of those unfortunate few who has a fixed rate mortgage for a number of years at a considerably higher rate.

I have also had a number of discussions with clients as to the position regarding interest on costs. Following the House of Lords decision in “Hunt -v- R M Douglas (Roofing) Limited [1990] 1 AC 398” it was held that interest on costs ran from the date upon which Judgment is pronounced and not from the date of the Costs Officer’s Certificate. Since April 1993 the rate of interest on Judgment debts has been 8%, as prescribed by the Judgments Debt (Rate of Interest) Order 1993. This has led to a significant and substantial windfall in relation to costs which are not promptly paid. This is especially so in the light of the current Bank of England

Base Rate being only 0.5%.

Recent experience shows that a number of Paying Party’s Solicitors have suggested to the Receiving Party’s Solicitors, that in the light of the aforementioned Bank of England’s Base Rate, they should not be paying 8% interest on costs. Rather they should only be paying a proportion thereof.

There have recently been two important cost decisions in this respect:

Schlumberger Limited -v- Electo Magnetic Geo Services [2009] EWHC 773 Mann J.

The Defendant argued that, in the current market, 8% was unjustifiably high. It was suggested that the Court should exercise its powers under CPR 40.8(1) and CPR 44.3.6(g) to postpone the date at which 8% would apply until the costs were quantified. It was argued that the rates should be 1% above Base Rates. The Court held that statute does not permit the Court to vary the rates. The Civil Procedure Rules permit the Court to adjust dates in relation to applicability of interest, but there is no power to adjust the rate. It was stated that a fixed and

constant Judgment Debt Rate gives certainty and clarity. Indeed, in some cases it is an incentive for paying sooner rather than later. On the fact of this matter it was not appropriate to adjust the rates from which interest was to run.

Bebollito -v- Arriva London [2009] EWHC 90136 (Costs)Master Rogers

The Defendant contended that no interest should be payable because the Claimant initially had the benefit of the Before the Event Legal Expense Insurance and therefore the claim had been financed under a Conditional Fee Agreement. It was argued that the Claimant had not paid anything to his Solicitors as at the date of the Judgment. Therefore, as aforesaid no interest should be payable. These arguments failed. Interest was awarded, pursuant to statute, at 8% from the date of the Judgment.

Clearly, any suggestions that any interest on costs should be flexible and not at 8% should be dismissed out of hand. Receiving Parties are, like myself, stuck with a fixed rate. The only upside for me is that my fixed rate is not quite as high as 8%! John Staab, Costs Lawyer Kain Knight - London

The London Team

John can be contacted by telephone 0203 215 1011 or by email john.staab@kain-knight.co.uk

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Your costs questions answered

Our Costs Helpline is proving to be very useful to solicitors up and down the country so we have decided to share some of the questions and answers with you.

(Q) Is it possible for a losing party to dispute a 100% uplift on Counsel fees claimed by the winning party?

(A) Yes, it is possible for a losing party to dispute a 100% (success fee) uplift on Counsel’s fees. We regularly see reductions on Assessment and perhaps only one in every twenty cases will be allowed a 100% uplift.

The amount of any Success Fee uplift is dependent upon the actual risks involved in the case at the time the Conditional Fee Agreement (CFA) was entered into. Only a case that had a no better than 50:50 prospect of success would justify a 100% uplift. After that the appropriate percentages are: 55:45 – 82% uplift 60:40 – 67% uplift 65:35 – 54% uplift 75:25 – 33% uplift 80:20 – 25% uplift

The greater the prospect of success the lower the recoverable uplift will be.

You should ask for a copy of Counsel’s CFA and Risk Assessment. If your opponents are not willing to disclose this then at the very least they should provide a full Statement of Reasons explaining why Counsel believes a 100% uplift is appropriate.

(Q) What is the general practice for charging for preparation of Bills of Costs (ie nationally, not just your own company)? If a percentage basis, what percentage?

(A) We can confirm that there has never been a formal structured practice for the charge made by Law Costs Draftsmen for Bill preparation although prior to the introduction of Guideline Hourly Rates for Summary Assessment in 1999 the preferred method of charge was on a percentage of the total profit costs claimed (on an as drawn basis) ranging from between say 5% and 7% thereof depending perhaps on the nature,size and urgency of the Bill required.

Following the introduction of Guideline Hourly Rates the Courts have preferred Independent Drafting firms to charge their time in line with Solicitors i.e on the basis of a flat Hourly Rate. Again such Rates can vary depending on the location of the Solicitor client/the Draftsmen’s office etc.

Typically an experienced Draftsman will charge between £120-£150 per hour for Bill preparation and can normally justify perhaps another £20 per hour in excess of this for advocacy at a Detailed Assessment hearing.

(A) Copying charges are not generally recoverable between the parties (see CRR CPD 4.16).

‘The cost of making copies of documents will not in general be allowed but the court may exceptionally in its discretion make an allowance for copying in unusual circumstances or where the documents copied are unusually numerous in relation to the nature of the case. Where this discretion is invoked the number of copies

made, their purpose and the costs claimed for them must be set out in the bill.’

Exceptional photocopying however may be allowed, although there are no guidelines, particularly since the CPR, regarding the amount generally allowed either for County Court or High Court. Our experience is that a commercial rate of 25p per page would not be unreasonable although it may be worth noting that the Court charges 50p per page for copying.

(Q) We have been asked to provide a copy of a large amount of documents. Is there a recognised maximum price per page when charging for photocopying and does this change depending on whether County Court/High Court?

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(Q) I would like some assistance on understanding the validity of an ATE Premium under the free helpline scheme.

I am instructed for the Defendant in a professional negligence matter which has just settled for £37,500.

Our own costs are around £20,000.

The Claimant’s costs are £28,000 of which £18,000 are Solicitor’s Fees. This includes a Success Fee on a proportion of the base costs.

They entered into an ATE Policy and the Premium payable is £22,452.10. The premium has been calculated on the following basis: The ATE providers total expenditure was £23,707.20 (made up of disbursements of £2,896.51 and adverse costs of £20,810.69), once they apply the multiplier of 90.196% to this figure a premium of £21,382.95 plus IPT is generated. The IPT on the matter is £1,069.15. Therefore, the total premium payable is £22,452.10.

Could you offer some brief thoughts on whether the ATE premium is reasonable?

(A) Thank you for your enquiry. The ATE policy you describe is a First Assist pursuit type policy where the Insurer applies a multiplier to “Adverse” costs; the type of insurance was considered at length by Senior Costs Judge Master Hurst in the RSA Test Cases wherein the type of policy was approved; the idea, as you will appreciate, is to encourage early settlement when the “adverse” costs will be low however the scheme does throw up very high premiums.

The above scheme was accepted by many defendant organisations and applies to many cases they are involved with; the “adverse” costs reflect the insurers liability had the case failed i.e. Claimant’s disbursements (excluding Counsel if Counsel under CFA) and Defendant’s costs.

We will often challenge the multiplier i.e. the, in this case, 90.196% however the multiplier reflects the insurers assessment of the risk when the application for insurance was made and usually stands up to scrutiny.

Also we will suggest that the “adverse” costs reflect the “as drawn” basis rather than as

assessed/agreed. By this we suggest that had the case not succeeded it is unlikely that the insurer would have paid the opponent’s costs in full no doubt attempting to reduce by 10-15%.

First Assist are usually reluctant to negotiate the premium and accept reduction, they are confident that the calculation can be supported particularly in the light of Master Hurst’s decision; the costs of challenging will be significant.

Best approach:

Enquire what, if any, other insurance quotes were obtained; in your experience do you feel other insurance products were available attracting lower premiums; ask how they arrived at 90.196% and suggest any multiplier should reflect as assessed/agreed costs not as claimed.

Unfortunately in most cases the fee sought is payable in full.

(Q) When preparing a costs statement, a partner has to certify that all disbursements over a certain amount have been incurred and paid. What is the amount over which the partner has to certify?

(A) Thank you for your question sent via our costs helpline. I can confirm that the level of disbursement that you must certified as having been paid is £500.

(Q) If a claim is stayed for a lengthy period of time (say 5+ years) and the Claimant is funding by way of a CFA with a staged ATE premium that increases on a quarterly basis, is the premium effectively ‘frozen’ during the life of the stay or does it continue to (substantially) increase during this period?

(A) We have tried to argue in the past that these additional payments are funding elements and therefore under CPR Part 44.3B (1) (a) are not recoverable. However, our experience is that the court tends to look at the overall total for the insurance premium, including these payments, and then decide if they are reasonable. This does obviously not stop the paying party arguing that the additional costs have been unreasonably incurred and therefore, on the standard basis, not recoverable.

1, 2 and 4 PriorsLondon RoadBishop’s StortfordHertfordshireCM23 5EDTel: 01279 755552Fax: 01279 755936DX: 50405 Bishop’s Stortford

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

Regis House9, Dane John WorksGordon RoadCanterburyKentCT1 3PPTel: 01227 786499Fax: 01227 786665DX: 5310 Canterbury

11 Swan RoadLichfieldStaffordshireWS13 6QZTel: 1) 01543 419187 2) 01543 410947 Fax: 01543 415640DX: 19011 Lichfield

contact us:Head Office: Also at:

DisclaimerConsistent 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.

Action Aid

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Kain Knight working with Action Aid in 2010.We are pleased to announce that in 2010 Kain Knight will be sponsoring the Hyderabad Railway Children’s Shelter in Andhra Pradesh. The Shelters have an impressive track record, helping at least 80% of the children they come into contact with. The staff work desperately hard to find residential schools for the younger children and try to find vocational training for the older ones and in some cases after counselling for the children and parents they can be reunited with their families.

ActionAid has been funding these shelters since 2001 but funds are now low and this is where we want to help.

Kain Knight have a team of four who will be working tirelessly through 2010 to raise £17,300 to help keep the Hyderabad Shelter open.

Throughout 2010 we will be organising four events collectively known as “The Four Seasons”.

Our first major fund raiser is a “Winter Quiz Nite” in February 2010

As this event will take place in the City we would like to invite our London based clients to participate by sending a team(s) of between 6-8 people for this event please contact ASHTON LIBURD on 0203 215 1011

Spring Charity Golf Day – May/June 2010 at the fabulous Hertfordshire Golf Club

Summer Family Fun Day – Date to be agreed Christmas Karaoke - December 2010

In addition to these events we will also be participating in a “sporty event” yet to be agreed.

About Action Aid:

Why not sign up for our free monthly e-zine which will let you know of any ground breaking costs new as it happens.

Contact Penny Ridoutt by email at: penny.ridoutt@kain-knight.co.uk

Very rarely will you see us “blowing our own costs trumpet”. Recommendations have been the life blood of our Company over the years and we would like to extend our thanks to those of you who have kindly recommended us in the past.

However…. It is now Company policy to thank the “recommenders” if you have occasion to sing our praises to a colleague and they instruct us. If so please ask them to let Penny Ridoutt know as we would really like to send you a token of our appreciation.

Monthly e-zine“Send a Present To a Friend”

“ActionAid doesn’t just tackle the effects of poverty. We also change what keeps people poor. ActionAid improves people’s lives every day. But we know that’s not enough. So we work relentlessly to change whatever is keeping them trapped in poverty.This means we have a better chance of ending poverty for good.”