TALES FROM COSTS LAW CONFERENCE IV: PROPORTIONALITY – A LITIGATOR'S SURVIVAL GUIDE V

November 15, 2016 · by · in Costs, Costs budgeting, Proportionality, Uncategorized

The issue of proportionality raised its head more than once at the recent ACL conference.  However I addressed the issue directly (or perhaps obliquely). My central argument being that proportionality requires a fundamentally different approach to litigation. Further there is virtually no guidance being given to litigators.

WHAT DOES PROPORTIONALITY MEAN?

District Judge Besford had his own slides on the different views on proportionality.

proportionalityslide

WHATEVER IT MEANS IT IS HERE TO STAY

I  was talking on “Proportionality in Practice” took as my stating point the observations of Coulson J in GSK Project Management -v- Galliford [2015] EWHC 481 (TCC).

“It is therefore time to say, in the clearest terms, that parties and their solicitors can no longer conduct litigation in a manner which does not keep the proportionality of the costs being incurred at the forefront of their minds at all times.”

“In the forefront of their mind at all times”

IF YOU DON’T THINK ABOUT PROPORTIONALITY THEN YOU ARE GOING OUT OF BUSINESS

If a litigator does not have this at the forefront of their minds then:

  • Anyone working under a conditional fee agreement could (and probably will be) doing a lot of work they are not going to get paid for.
  • Anyone doing work on a privately paying basis is likely to have a lot of very unhappy clients.

Some examples

It is not difficult to find examples of litigation that the courts would (and have) castigated as disproportional.

Seagrove -v- Sullivan [2014] EWHC 4410 (Fam) where the applicant spent £800,000 in costs seeking to recover £500,000. If the costs judge felt that £300,000 was a proportional figure in costs then the applicant would, effectively, be litigating for nothing.

Ted Baker plc -v- Axa Insurances UK Plc [2014] EWHC 4178 (Comm) where the parties ran up a combined bill of £7 million in a case worth about £904,000.

PROPORTIONALITY CANNOT BE IGNORED

  • You can’t ignore it.
  • You have to consider it
  • You will have to work with it
  • It could make you go bust

 PRACTICAL ADVICE TO LITIGATORS

It is surprising that there is an absolute dearth of material on proportional litigation.  There is a huge market here. However one could search for hours (I know) for practical guidance to litigators on living with proportionality.   So I had a go.

(1) IF IN DOUBT DON’T TAKE THE CASE ON

Every litigator I know has cases that they wish they had never taken on. They suck energy, motivation (and money) from the practice. They are often (wrongly) given (or demand) priority over other clients.

I recommend you read Lawyerist The Bad Clients You Don’t Take Will be the Best Money You Never Made.

(2) TELL THE CLIENT ABOUT PROPORTIONALITY

In simple language the costs have to be kept reasonable.  Costs can be reduced by co-operation and the client understanding that they are part of a team. Being a client does not necessarily mean passivity.

This is not a new theme.  I wrote an article on “Reducing the Costs of Litigation” in Law For Business in April 1991 (when it comes to these matters Jackson L.J. is basically, a new boy on the block).  See the points made when I reprieved the article in Understanding and Reducing the Costs of Litigation: Educating Your Client.

(3) EVERY STEP HAS TO BE TAKEN WITH PROPORTIONALITY IN MIND

“Proportionality” has to be the litigator’s watchword.  The test is – can I justify this to the most parsimonious of costs judges? If so how?  Record your decision on proportionality and be prepared to justify it twice (on budgeting and on assessment).

(4) ALWAYS KEEP IN MIND HOW MUCH A CASE IS (REALLY) WORTH

Value is only one part of proportionality. The reality is that it will become the dominant element in most cases. The cases on which (claimant lawyers in particular) are going to lose money are those which are pitched high but where damages were low.

Read F and S -v- TH [2016] EWHC 1605 (QB) where a claimant was cross-examined in relation to the schedule of damages:-

“The thrust of Mr Fewtrell’s cross examination was that the schedule was a fiction. I have little doubt that is the case. Indeed, the point was recognised on behalf of both Claimants…”

“F said that the figures were not his. The difficulty for him is that the claim is his. The documentation was verified with a statement of truth. I must take it that the schedule was prepared on his instructions and in accordance with them, and put forward with his authority. I had no evidence it was not.”

Also read Duncum -v- Churm (HH Judge Harris QC, Oxford County Court 12th September 2014)

“ It is appropriate to observe that, when composing schedules of damages in personal injury cases, the authors of such schedules will of course put the case towards the top end of the bracket which it may legitimately inhabit. It is tactically unsound to cast a case too low at an early stage and all professional litigators clearly understand that reductions are likely to be necessary from theoretically arguable calculations in order to quantify a realistic view of the value of the claim, in order to negotiate productively, and in order to appear reasonable and thus persuasive should the case come to trial. But there must be a sound and honest evidential basis for an initial schedule. It is not appropriate, as a tactic, to quantify, for example, a case with a true worth of £200,000 at £1,000,000, five times as much. This is because questions of honesty apart, which are of course important, such a discrepancy will be unsupported by evidence and will go far beyond putting a valuation at the top end of a legitimate bracket, and because such an approach is likely to produce an unfruitful negotiation and an unnecessary trial. A Defendant might quite understandably say, well if that is what you are after, there is no point in our talking. Another consequence, though not an inter-parties matter, is that an honest Claimant is likely to be acutely disappointed.”

(5) KNOW WHEN YOU HAVE EXCEEDED ANY PHASE OF THE COSTS BUDGET

At the conference only one firm had a system in place to let it know when a particular phase had been exceeded. A phase is a good guide to proportionality.

Read:-

(6) MAKE A REALISTIC PART 36 OFFER AS EARLY AS YOU CAN

This has always been the case for defendants. However it is surprising how few claimants make Part 36 offers, even in the run up to a trial.   The advantages of this are manifold if the matter does go to trial (I will put the debate about late acceptance to one side).  When costs are determined on an indemnity basis then proportionality is not an issue.

Read

(7) PROPORTIONALITY IS NOT AN EXCUSE TO DO A BAD JOB

Undoubtedly the litigator’s job is more difficult. It now requires a considerable amount of judgment. It is not possible to run a case on “autopilot” following procedure. Each step has to be costed and justified.

My view is that this offers considerable opportunities to litigators.  Those with judgment in particular. (The ones without judgment will not be reading this post so no-one should feel insulted).  To run litigation profitably will require considerable knowledge, nouse and skill.  A process of simply handing the case to the lowest level possible without training and supervision, is unlikely to be effective.

(8) WHEN PLANNING A CASE START AT THE END AND WORK BACKWARDS

I have always been sceptical of “case plans”, however these are now essential.  In essence they are the “advice on evidence”.  Before proceedings are issued (if you are the claimant):-

  • What will you need to prove at trial?
  • What evidence is needed to prove it?
  • How much will it cost to obtain that evidence?

It helps to remember that civil procedure is, essentially, preparation for trial.  In the vast majority of cases that trial never, in fact, takes place.  However proportionality means, in essence, the minimum steps that can be taken to get the matter to trial.

A SURPRISING LACK OF GUIDANCE?

I said when I started this series I stated

“I have not found any guidance for  litigators on how  the requirement for “proportional” costs will affect their  work and practices. In short there is, so far as I can tell, no guidance at all on how litigators can, and undoubtedly must, change to adapt to the fact that “disproportionate” costs are not going to be recovered”

This still remains the case two years later.  The cases reported in the interim show that bills are being reduced dramatically.  New ways of working have to be developed.

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