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PARAMOUNT LEGAL COSTS

WELCOME TO ISSUE TWO OF OUR QUARTERLY E-NEWSLETTER Welcome to the 2nd edition of our new look e-newsletter! We hope you enjoyed the ‘fresh look’ of our first edition and we hope you enjoy reading this edition and find it informative too. There have been some significant changes in this last quarter in both Family & Civil Costs. In light of this we have some Procedure Updates and Case Law from Robin Dunne at Clerksroom (Specialist Costs and Litigation Barrister) and Claire (our Head of Care & Family) and Gina (our Administration Manager and Processing Expert) have written an update on the Family changes. They have also written an article which highlights costs limitation. You will also see in this edition an excellent article about Financial Forecasting from Mark Baines, Legal Sector Manager at Armstrong Watson’s Leeds Office(Accountants, Business & Financial Advisers) as well as an article by Tom (one of our Senior Costs Draftsmen) on the hottest subject around (well in costs anyway)and that’s budgets! Having drafted budgets for over a year, read what he has found from his experiences.

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We would welcome any views or further comments you have for inclusion in our quarterly newsletters. We hope you can see the benefits of this invitation as we feel that it would be beneficial for people to feel part of a community, potentially provide opportunities to pool resources and share ideas and essentially help each other through what is going to be another challenging year. If you would like to be involved and write a few words to go in future e-newsletters please click here to email me. We hope you enjoy reading this e-newsletter and if you would like to get in touch we would welcome any comments or suggestions that you may have. Please click here to email me.

CONTENTS Page 2 Budgets One Year On by Tom Brocklebank Page 3 Case Law & Procedure Update by Robin Dunne Page 4 Know Your Costs Limitation by Gina Nixon & Claire Robson Page 5 Know Your Costs Limitation continued Family & Care Update by Claire Robson Page 6 Financial Forecasting by Mark Baines

Paramount Legal Costs Ltd | June 2014


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BUDGETS ONE YEAR ON We’ve now had just over a year of the Jackson led reforms and the hottest topic when I speak to Clients is without doubt, costs budgeting. This was all brought to everyone’s attention with the “plebgate” saga surrounding Andrew Mitchell and his Solicitor’s failure to lodge their budget (Mitchell v Newsgroup Newspapers Limited). Their application for Relief from Sanction was rejected, and the reporting of this case has been far reaching. Andrew Mitchell was not the only “celebrity” to suffer, as Linford

Reports? The safe option is to pick your Stage and ensure you mention this work under the “Assumptions” on page 1. It is undoubtedly the future costs which pose the most questions, as no one has a crystal ball. The incurred costs of a budget do give a Solicitor and Costs Draftsman a good idea to the level of work actually required to conduct certain work, and this should be used as an indicator for the future costs to be incurred. It is hard enough working out profit costs sometimes, but what about Experts’ fees?

“It is undoubtedly the future costs which pose the most questions, as no one has a crystal ball.” Christie’s Solicitor was slow out of the blocks and didn’t lodge the Precedent H correctly (Burt v Linford Christie). These high profile lapses are firmly on every Solicitor’s radar, but with some planning and a knowledgeable costs draftsman, the deadlines really should be met. Despite completing budgets for over 12 months, there are still some issues that require addressing with the Precedent H form. As of 22 April 2014, the Statement of Truth has been updated which should negate the difficulties in-house costs lawyers faced when signing the budget. The guidance notes supplied at the beginning assisted to a certain extent, but these would benefit from a review given that there is still uncertainty over which stage certain work should fall. Which stage would you place the obtaining of medical records? Pre Action? But what if these are obtained after the issue of proceedings, is it Disclosure or Expert

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I cannot stress how important it is to obtain details of fees from Experts and Counsel, as these do vary, and I would much rather see on a file an email from a particular Expert/Counsel with details of their expected fees to trial. Perhaps a reminder to do this once proceedings are issued would help. It is sometimes easy to forget how much work is required in obtaining an expert report – the instructions, writing to the Client, informing the Defendant, the report itself, advising the Client, any amendments, sending to the Defendant, the Defendant’s expert’s report, the joint report, obtaining comments, the conference, discussions with Counsel, the letters and calls. And that is before we reach trial. Oh and where is the trial, local? Travel time and expenses….

Tom is a senior costs draftsman & negotiator, specialising in clinical negligence and all civil & PPI matters If you have any questions about this article please contact Tom at: Tel: 01228 815394 Email:

tom.brocklebank @paramountlegalcosts.co.uk

Paramount Legal Costs Ltd | June 2014


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CASE LAW & PROCEDURE UPDATE BY ROBIN DUNNE Chartwell Estate Agents Ltd v Fergies Properties SA & Anor [2014] EWCA Civ 506

The Bank of Ireland & Anor v Philip Pank Partnership [2014] EWHC 284 (TCC)

The court of appeal have given the strongest indication yet that they will be very reluctant to interfere with a case management decision.

The sanction at r. 3.14 did not apply where there was a minor failure in the statement of truth served with a costs budget. The court held that even if the sanction had been engaged relief would have been granted, this being a failure of form rather than substance.

In this case the judge below had granted relief from sanctions in relation to the failure to serve a witness statement in time. Absent any relief the party would have been unable to rely on the evidence and their claim would fail. An interesting question in this case was whether the application was to be considered a 3.9 application since the sanction did not trigger until the trial (and at the time of the application there was technically no sanction.) The court of appeal stated that such an application was to be heard under 3.9 (and also questioned the guidance in the current White Book regarding this issue.)

The Secretary of State for the Department of Energy and Climate Change Coal Products Limited v Jeffrey Jones (and others) [2014] EWCA Civ 363 The court of appeal upheld the decision of the high court which allowed interest of 4% above base rate in respect of disbursements which were funded by the solicitors. This was only recoverable if the Claimants were successful.

Robin Dunne is a barrister at Clerksroom specialising in costs and litigation funding, personal injury and enforcement. If you have any questions about this article please contact Robin at:

Kaneria v Kaneria & Ors [2014] EWHC 1165 (Ch)

Tel: 0845 083 3000 Email: dunne@clerksroom.com

On a similar point the High Court found in this case that an application for extension made before a deadline has passed will not be treated as an application under 3.9. This shows the importance of applications being made before the sanction applies.

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PROCEDURE UPDATE Extension of Time Direction to be included in CPR Update Following the Mitchell decision the QBD Masters approved a direction, which allowed the parties to extend time periods within the directions by up to 28 days without the need to trouble the courts. Many county courts have followed suit (and practitioners should always seek inclusion of this order.) However, not all judges have been willing to do so, citing the fact that the direction had not been approved outside of the QBD. This ability to extend time has now been approved and will come into force on 5th June 2014 (Civil Procedure Amendment No. 5 Rules 2014.) Extension to costs budgeting The Costs Budgeting regime has been substantially extended. Costs budgeting will now apply to commercial cases worth up to

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£10m, replacing the £2m cap as set out in the original rules. This applies from 22nd April 2014. New Form H wording From 22nd April the statement of truth in the form H has changed to: “This budget is a fair and accurate statement of incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation.” This is an interesting change. The statement no longer mirrors the ‘indemnity principle’ wording, presumably because prior to directions the parties were unable to properly make such a declaration.

Paramount Legal Costs Ltd | June 2014


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KNOW YOUR COSTS LIMITATION BY GINA NIXON & CLAIRE ROBSON In a previous online article we highlighted the fact that well organised and tidy files can have an impact on how quickly you can receive payment from the Legal Aid Agency. Another positive of having well organised files is that it would also make it easier for you to keep a check on your work in progress in order to keep within the cost limitation of a Public Funding Certificate. Costs limitations are calculated on net costs and include your profit costs, disbursements and Counsel Fees (all excluding Vat).

claim form and would advise you to mention this in your covering letter to the LAA when sending in the claim for payment (or we would note this in our covering letter if we undertake the processing of your work).

In the event that a cost limitation of a Public Funding Certificate has been exceeded, Counsel is paid first, then disbursements are

Where a cost limitation has been exceeded in a Bill for assessment by the Court, the matter should be costed in full and submitted to the Court for assessment. The Court may make reductions bringing the Bill within the cost limitation. If, after assessment, the Bill is still over the limitation, then you would need to reduce your profit costs on the summary page of the Bill. These figures are then included on the Assessment Certificate (EX80A/B) and you will

paid and Solicitors are paid last, therefore Solicitor’s profit costs would be reduced if there is not enough costs scope under a Public Funding Certificate.

need to explain to the Court that the profits costs have been reduced in line with the cost limitation of the Certificate. The LAA will reject a Bill if the cost limitation has been exceeded.

“Well organised and tidy files can have an impact on how quickly you can receive payment from the Legal Aid Agency” Matters that do not fall into the Fixed Fee & FAS Schemes

Matters that fall into the Fixed Fee & FAS Schemes

For example, the cost limitation on a Certificate is £2500. Solicitors’ costs are £2950 (not including vat) broken down as follows:

In these cases FAS fees are included within the cost limitation and reducing Claim 1As/Bills becomes a little more complicated. Solicitor’s profit costs are now broken down into core costs and FAS fees. When a cost limitation is exceeded in these matters it is still the Solicitor’s costs that are reduced to comply with the cost limitation but it should be the FAS that is reduced first and then the Solicitor’s core costs if necessary. What needs to be taken into account if it becomes necessary to reduce the Solicitor’s core costs is

Profit Costs: Disbursements: Counsels Fees: Total:

£2200.00 £500.00 £250.00 £2950.00

Solicitor’s profit costs would be reduced in order to bring the amount you are claiming within the financial limitation of the Certificate, as below: Profit Costs: Disbursements: Counsels Fees:

£1750.00 £500.00 £250.00

Total:

£2500.00

Where a cost limitation has been exceeded in a Claim 1 for assessment by the LAA, Paramount Legal Costs would limit the profit costs on the

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Claire is the Head of our Care & Family department she is also an affiliate of Resolution. If you have any questions about this article please contact Claire at: Tel: 01228 815396 Email:

claire.robson@paramountlegalcosts. co.uk

that if they are reduced to below the exceptional threshold (2 x the Fixed Fee for Public Law or 3 x the Fixed Fee for Private Law) then the matter is no longer exceptional and only the Fixed Fee can be claimed. In these cases you may need to consider whether it would be more favourable to reduce the disbursements to allow the claim to remain exceptional (disbursements would still need to be paid from Solicitor’s costs).

Paramount Legal Costs Ltd | June 2014


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KNOW YOUR COSTS LIMITATION Lastly, don’t forget! On 17 February 2014 the Legal Aid Agency announced that there will now be a single e-mail address ContactCivil@legalaid.gsi.gov.uk which will replace all the emails listed below; • • • •

This new single e-mail address has been brought in to ensure that your enquiry is dealt with by the correct person at the Legal Aid Agency by using a ‘key’ word in the subject title of your e-mail. You can follow the link for the guidance from the Legal Aid Agency.

legal.queries@legalaid.gsi.gov.uk means.queries@legalaid.gsi.gov.uk finance.queries@legalaid.gsi.gov.uk FGF-FAS.queries@legalaid.gsi.gov.uk

CHECKLISTS CHECKLISTS CHECKLISTS The LAA have updated their checklists which they use when assessing bills. The new checklists include several new/amended requirements which need to be fulfilled to prevent a bill being rejected. One such new requirement is the need to number the disbursements in the Claim1/Claim1A and in the assessment bundle. This makes it easier for the LAA to see that evidence of all disbursement /expert’s fees have been included in the assessment bundle. The LAA’s checklists can be found here and we strongly advise that you make yourselves aware of the information provided in thses checklists.

Gina is our Adminstration Manager and also heads the Processing department If you have any questions or would like more information about our processing service please contact Gina at: Tel: 01228 815390 Email:

gina.nixon@paramountlegalcosts.co.uk

FAMILY & CARE UPDATE To coincide with the introduction of the single Family Court on 22/04/14, the Legal Aid Agency introduced new Care Fixed Fees and hourly rates for matters under a Public Funding Certificate issued from this date. These new Care Fixed Fees and hourly rates represent a 10% reduction on previous Care rates/Fixed Fees and details can be found here There has been no reduction in relation to any FAS Fees.

FAS There are also new FAS forms to be used from 22/04/14 which now show the level of Judge presiding over the matter rather than in which Court the matter was being heard. These new FAS forms can be found here

Evidence We, at Paramount Legal Costs, have recently been informed that the LAA now require copies of hearing attendance notes (as well as the FAS forms) in assessment bundles. The LAA have confirmed that although this requirement is not specified on their checklists, it is stated on page

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38 of their Electronic Handbook. The LAA have confirmed that they are in the process of updating their checklists, so we would advise to keep an eye out for those, as the checklists and evidence requirements appear to be continually updated. We have also been informed that the LAA are now rejecting claims for mileage to the Court of less than 10 miles each way where there is no justification given for the claim. These rejections as based on Paragraph 5.22(3) of the Practice Direction to Rule 47.6 CPR (Civil Procedure (Amendment) Rules 2013) which states that local travel expenses incurred by legal representatives will not be allowed on assessment. Further explanations of what the LAA class as ‘local’ travel and where discretion could be applied can be found on page 63 of the LAA’s Electronic Handbook. If you have any questions in relation to the above article, any costing queries in general or would like to take advantage of our experience and use our costing and processing service please use the contact details on this page.

Paramount Legal Costs Ltd | June 2014


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FINANCIAL FORECASTING -

PIE IN THE SKY OR A USEFUL TOOL FOR GAINING A BIGGER SLICE OF PROFIT BY MARK BAINES Whether you are preparing a business plan for your ABS application or simply attempting to gain some idea of your income and expenditure over the next couple of years, you’ll need to get involved in financial forecasting. Generally most firms will base their future expenditure on what’s gone on before tweaked here and there for say rent increases or large capital projects, which if you stick to the plan can prove reasonably accurate. When it comes to forecasting fee income things generally become more imaginative, with hope sometimes overshadowing realism. Add to this the disconnect between setting a fee earner on a matter and that turning into a bill, and eventually into cash in the practice’s bank account, and your financial forecast can look like it was written by someone with no knowledge of your business or reality in general. This needn’t be the case, by focusing on the flow of work as a process, it becomes possible to more accurately determine when time recorded becomes bills and bills become cash. In fact by looking at drivers within the process it also becomes possible to tackle the deadly “lock up.” So let’s look at four drivers which will affect your income stream. RECOVERY RATES How much of the time recorded by fee earners is actually billed? Is it possible to get the fee earners to work more efficiently and turn more of that time into bills or should this area of the business be given less marketing spend and more emphasis be placed on more profitable areas? CHARGE OUT RATES This is the basic price you charge your clients and it interacts heavily with the recovery rate. It’s one thing having a charge out rate of £250 per hour, but if your recovery rate is only 50% you’re only ever going to get back £125 per hour. It’s also one of the most difficult to change realistically as you will be doing more harm than good if you increase it above that of your competitors without your client base perceiving any additional value. CHARGEABLE HOURS How many billable hours can you get out of a fee earner? Can you get additional billable

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hours out of your fee earners each week which will eventually turn into fee income. WORK IN PROGRESS AND DEBTOR DAYS How long from starting a matter to raising a bill? And how long does it take to collect the cash from that bill? This is a key area as it this time lag which the firm will have to finance, and if not handled well can have a disastrous effect on your liquidity. By coming up with realistic figures for each of these drivers, for each of your types of work, such as conveyancing, commercial litigation, clinical negligence, it’s possible to incorporate them into your forecasting to determine more accurately your level of fee income and when those fees will be delivered. This makes far more sense than simply looking at what happened last year and adding on a percentage increase. Additionally there will be marked differences between different work types, your conveyancing department will be much quicker at turning fee earners time into cash then your clinical negligence department. By separating these departments out, you can see which ones are costing the most to finance, and whether that financing is being recouped by way of better recovery rates and fee income. It’s the interaction between the underlying production drivers within each department which is missing in the traditional model starting with fee income, and can lead forecasts to be seen as irrelevant. All of the information required to determine the production drivers will be easily available from your accounting system and it’s more than likely that you use some of them as KPI’s already, so it makes sense to incorporate them into your business plan. The beauty of forecasting from this perspective is that you can run scenarios easily which will allow you to change one of the variables to see what effect it will have on the business overall. What happens if you can get an extra half an hour out of each fee earner a day? Would an increase in the recovery rate of 5% be worth pursuing?

Mark is Armstrong Watson’s Legal Sector manager and is responsible for managing the relationships with their legal sector clients in the Yorkshire region. These clients have ranged in size from small practices with a turnover in the region of £150,000 to large multi partner firms with £10m+ turnover. Mark has acted in this capacity since 2005, and over this period he has dealt with compliance with the SRA accounts rules, preparation of practice financial statements, and support with partnership and partners personal tax affairs. More recently, with the raft of changes impacting the legal profession, Mark has undertaken specialist work in the fields of law firm valuation, cashflow forecasting and due diligence. Mark also has an interest in understanding the factors behind the figures in the accounts in order to determine which areas are driving cost, and therefore which ones should be targeted to increase profit. If you have any questions about this article contact Mark at: Tel: 0113 2211 300 Email: mark.baines@armstrongwatson.co.uk Visit the website

Paramount Legal Costs Ltd | June 2014

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