Costs: it’s a liability

The Pre-Action Protocol for Personal Injury Claims provides inter alia:

Once the claimant has sent the letter of claim no further investigation on liability should normally be carried out until a response is received from the defendant indicating whether liability is disputed.

Viewed from the perspective of a costs lawyer, instructed at the conclusion of any given claim for damages for personal injury, this is arguably the most frequently ignored provision of the Protocol.

This last week alone, I have considered dozens of claims for costs (low value/high volume stuff – the substantive claims, I mean) and in the majority of them this issue has arisen to some extent. One such case in particular (now settled, I should add) serves as a perfect illustration of my point; consider this abbreviated chronology:

Index accident.

Attending client to take initial instructions, discuss funding options and explain procedure/timescales – 1 hour.

Reviewing instructions and drafting letter of claim – 30 minutes.

Reviewing file, noting Insurers’ acknowledgment of letter of claim and diarising end of protocol period – 6 minutes.

Attending client to take full details for a statement regarding accident circumstances and obtaining details of potential witnesses – 1 hour 30 minutes.
Reviewing notes of attendance and drafting statement of client (8pp) – 1 hour 30 minutes.
Preparing witness questionnaires – 24 minutes.
Writing to four potential witnesses with a view to taking statements – 30 minutes.

Attending client by telephone to go through statement – 30 minutes.
Revising/amending statement following attendance on client – 30 minutes.
Attending Messrs Smith and Jones and Mesdames French and Saunders, witnesses to client’s accident, to chase up questionnaires sent – 24 minutes.

Considering completed questionnaires received from four witnesses and preparing initial proofs of evidence – 1 hour.
Writing to the four witnesses with draft proofs – 24 minutes.

Perusing statements returned, unchanged, by client and witnesses – 18 minutes.

Noting admission of liability and considering action required – 12 minutes.

By my calculation, and ignoring for present purposes the other bits and bobs of work relating to enquiries as to the issue of liability also claimed, the entries dated 02/04/12 to 18/04/12 inclusive above total seven hours. The hourly rate claimed was £217.00 and, being a public liability claim, a success fee of 100% was claimed (naturally). Thus, such work gave rise to a claim for £3.645.60 in costs, in addition to the remainder, which the claimant expected to be met by the defendant.

The claimant’s costs draftsman was not best pleased with the global offer of settlement made on the defendant’s behalf and sought, fairly enough, to explore with me the reasoning behind the figure advanced. He volunteered, again fairly, his expectation that the hourly rate and success fee would be reduced should the matter reach (provisional) assessment but even allowing for that, he averred that the offer implicitly sought to substantially reduce what he considered to be a reasonable time spend.

In response to me saying, in blunt terms, that the defendant had no offer to make in respect of those highlighted pieces of work above (‘blunt terms’ being a bald assertion that such costs were unreasonably incurred prior to the defendant’s stance on liability being known), I was accused of viewing the claim for costs with the benefit of 20-20 hindsight.

How was the claimant’s solicitor to know that the defendant would make a reasonably prompt admission of liability? What if the defendant subsequently withdrew that admission of liability? It is perfectly reasonable to make those enquiries and to obtain that information/evidence. He protested well, to be fair, although in an entirely expected fashion.

In response, it was convenient, if tedious, to begin by reminding my friend of the salutary dicta of Her Honour Judge Alton, cited with approval by Lord Woolf CJ in Jefferson -v- National Freight Carriers Plc and Home Office -v- Lownds:

In modern litigation, with the emphasis on proportionality, it is necessary for parties to make an assessment at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which would be necessary and appropriate to spend on the various stages in bringing the action to trial, and the likely overall cost. While it was not unusual for costs to exceed the amount in issue, it was, in the context of modest litigation such as the present case, one reason for seeking to curb the amount of work done, and the cost by reference to the need for proportionality.

It was the “necessary work” part of that mantra which warranted emphasis, and indeed response from the claimant, in the light of Paragraph 2.10 of the Protocol set out above. If no further investigation on liability should normally be carried out until a response is received from the defendant indicating whether liability is disputed, what made this claim and/or this claimant different?

Nothing. Nothing at all. The claim was always to be of modest value, the factual matrix of the accident should have left even a novice litigator in little if any real doubt about liability being established against the defendant and medical evidence was all but certainly only ever going to consist of a single report in a single discipline. All that proved to be (there I go – hindsight again) and damages were swiftly and amicably agreed, without litigation, shortly after disclosure of the claimant’s medical report and modest schedule of loss.

Was it proportionate to front-load this claim in such a way? Was it necessary to spend c.£3.5k (okay, so the rate, time and success fee would be challenged, likely conceded too, in any event) on a handful of witness statements in a would-be fast track (possibly small claims track after the autumn…) claim at the outset and before the defendant’s position on liability was known? Put another way, would a reasonable litigant of reasonable means paying for legal services in cash gamble a sum of money not far removed from the potential spoils on gathering evidence that may, more likely than not, not be needed?

No. No was my answer to all those questions and my friend proffered nothing to change that. And so, the matter was eventually compromised and that compromise included no provision for those seven hours detailed above. That’s a normal working day thrown away needlessly.

The real point of this tale, predicated on one, insignificant case, is this. There will soon be no or at least little need for arguments such as those above as costs across the fast track will be fixed, moving forward, by the end of next month and from that point on, such unnecessary work must, finally, be avoided.

Indeed, I also put it to my friend, more by way of an academic tangent than by way of ‘submission’, that performing unnecessary work such as that described above will make fixed fast-track costs, within or outwith the portal, entirely unprofitable for his clients and claimant lawyers generally. Initially, I think my friend found my observations tedious (as do you, perhaps!). But soon, I think he found interest in my thoughts – particularly the observation that that very case, if it were to have concerned an identical accident/claim on, say, 01/08/13, the fixed, base profit costs would be just £900.00 if it were to stay in the portal and just £1,650.00 even if it were to exit the portal (but still settle without litigation). Either way, the total recoverable base profit costs post-01/08/13 will be less than the unnecessary waste highlighted in that case. Incidentally, the total base profit costs claimed in that case were c.£6,000.00! Even 25% of the damages under a CFA or DBA won’t bridge that enormous gulf (assuming that DBAs will ever find favour in this area of law; we shall see, perhaps, once the revised regulations appear – rumoured to be in or around October 2013).

But before the dawn of fixed costs, how many such hours have already been spent on similar claims, on how many such similar claims not yet settled, and how many such hours can reasonably be expected to be recovered from the tortfeasor? In these days of WIP valuation and mergers and acquisitions, perhaps it isn’t just a problem for negotiation/assessment of costs between parties to claims.

Practices must change and change quickly if law firms undertaking work in this area of law are to remain profitable – even if, inevitably, such firms might never be as profitable as they were during the heady days without fixed costs and with uncapped additional liabilities recoverable as between the parties.