News Category 3
Incurred Costs: A Fixed or Moveable Feast? - Marc Banyard, John M Hayes
02/04/18. In this article technical Costs Specialist Marc Banyard explores the thorny issue of the treatment of costs incurred between the date of an initial costs budget and the date on which an updated costs budget has been prepared and asks whether the same fall as “incurred costs” for the purpose of the updated budget or remain as future costs.
The Dilemma
If such costs were retrospectively reclassified as incurred costs for the purposes of the updated budget, it would be possible to exceed the budgeted figures under the original budget with impunity, knowing that by filing an updated budget , such costs would become reclassified as “incurred” and, owing to the operation of PD3E 7.4 , would now be removed from the purview (and censure) of the Judge undertaking the budgeting exercise. The same would then fall for scrutiny on detailed assessment.
Equally, by filing an updated budget as late as possible in the litigation process it might be possible to render all previous budgeting effectively otiose by shifting the great majority of costs into the incurred section.
On the other hand, it could be argued that PD3E 7.4 requiresa reclassification of the costs for the intervening period in this manner by stating:
“As part of the costs management process, the court may not approve costs incurred before the date of any costs management hearing”
The Court “may not” approve the costs for the intervening period as they have been “incurred before the date of [the second] costs management hearing” whatever the undesirable ramifications.
This latter approach was preferred by Warby J in Yeo v Times Newspapers Ltd [2015] EWHC 2132 (QB) stating that “PD3E 7.6 is not an apt vehicle for obtaining the courts approval for costs incurred before the budget” at [47].
The Resolution
Happily this ambiguity appears to have been largely resolved by subsequent amendments to the Rules introduced under the Civil Procedure (Amendment) Rules 2017 (SI 2017/95) with effect from 6 April 2017. The same amended the terminology used at CPR 3.15 (1), introducing the term “budgeted costs” in preference for the term “budget” to clarify exactly those costs which are within the Judge’s purview during the budgeting exercise.
The notes accompanying CPR 3.12 in the current White book at 3.12.3 state that the term budgeted costs refers to the costs parties place in the columns headed incurred costs in the first budget they submit in compliance with r 3 13 (1). The term budgeted costs should now be understood to refer to the costs the parties place in the columns headed estimated costs in that budget.
Any ambiguity is further addressed as the notes continue:
“If after the approval of that budget, the party submits a revised budget seeking an increase in respect of any part of it, the costs previously shown in the incurred costs column should remain the same; unless and until the court approves any revision, the costs previously approved in the estimated columns (the budgeted costs) should remain in the estimated columns even if substantial amounts of them have now been incurred”
Although not a source of law, the guidance notes in the White Book offer an extremely persuasive provenance for any Judge dealing with Costs Management.
And on that basis it can be surmised that costs incurred between the date of the initial and updated budget should remain in the columns for future costs and not be re classified as “incurred.”
For further assistance on any costs related issue including costs budgets, please call us today on 0370 300 3780. Marc Barnyard works from our Cardiff Office and can be contacted on This email address is being protected from spambots. You need JavaScript enabled to view it. .
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Case Law Update: Choice of Law and Forum Shopping in Asbestos Litigation - Andrew Forsyth, Brodies LLP
29/03/18. An Opinion issued by Lord Tyre in the Court of Session this week provides that the applicable law for an asbestos related claim is the law of the country where the “injury occurred”, as opposed to the country of exposure to asbestos dust. Due to the higher damages awards in fatal cases, and because plaques are compensatable in Scotland, the Opinion in Docherty v Secretary of State, the most recent chapter in a long-running case, will have significance for those involved in the defence of disease claims, particularly asbestos litigation.
With the law differing significantly between Scotland and England in asbestos litigation, we often require to advise clients on whether Scots or another law (typically English law) applies to a particular claim. Under Scots law, pleural plaques claims are actionable, and the damages regime is much more generous for fatal claims. This often leads to a clamour amongst claimants to have Scots law apply to their asbestos related cases. This update is not the place for a full exploration on conflict of laws and jurisdiction, but it is important to keep in mind two things: (i) applicable jurisdiction is distinct from applicable law. Just because a defendant can be sued in Scotland, it does not necessarily follow that Scots law applies to that defendant; (ii) the legislation and conventions relating to applicable law for personal injury cases are not retrospective and, for asbestos claims, applicable law will be determined in relation to the common law; and (iii) in multi-defendant cases, different laws can apply to different defendants.
We have defended a number of cases on the basis that...
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Four Seasons Holdings Incorporated v Brownlie [2017] UKSC 80: Jurisdiction in Personal Injury Claims Which Occur in Countries Outside of the EU - Paul McClorry, Hudgell Solicitors
27/03/18. The Judgment in the recent decision (19th December 2017) of the Supreme Court in Four Seasons Holdings Incorporated v Brownlie ([2017] UKSC 80),is a must-read for all lawyers dealing with claims (particularly tortious claims) with a cross-border element. It is a fascinating decision with fundamentally important comments concerning jurisdictional issues which affect personal injury incidents that occur in countries outside of the EU.
Background
In January 2010, Lady Brownlie and her husband, Sir Ian Brownlie QC, were on holiday in Egypt, staying at the Four Seasons Hotel Cairo at Nile Plaza. On a previous trip to the hotel, Lady Brownlie had picked up a hotel leaflet advertising safari tours in Egypt. Before travelling to Egypt in January 2010, Lady Brownlie telephoned (from England) the hotel and booked the excursion with the hotel concierge (an excursion contract not regulated by the Package Travel (etc) Regulations 1992).
On 3rd January 2010, the Brownlies started the excursion in Cairo in a chauffeur driven car. Tragically, the car crashed, killing Sir Ian Brownlie and injuring Lady Brownlie.
Lady Brownlie commenced Court proceedings in England for damages for personal injury in her own right, damages in her capacity as Sir Ian Brownlie’s executrix (pursuant to the Law Reform (Miscellaneous Provisions) Act 1934), and damages for bereavement and loss of dependency in her capacity as her late husband’s widow (pursuant to the Fatal Accidents Act 1976).
As the claim was brought against a Canadian company, permission of the Court was required to serve the Claim Form out of the jurisdiction. Crucially, before permission can be given for service of a Claim Form out of the jurisdiction, it is necessary for the Claimant to establish that...
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Be Warned: Your Advice May Require a Warning! - Martyn Griffiths, Hardwicke
26/03/18. When should a solicitor provide a warning to their client that the advice they are giving may not be correct? That question was addressed by the Court of Appeal in the case of Barker v Baxendale Walker.
The case concerned the tax planning advice given by Baxendale Walker Solicitors (“BWS”) who held themselves out as tax specialists. Following an investigation by HMRC, Mr Barker on advice from his solicitors (no longer BWS) settled with HMRC for £11,296,477.24. Mr Barker then issued proceedings against BWS alleging professional negligence.
At trial, Roth J agreed with BWS’s construction the legislation. That notwithstanding, he also found that BWS had acted in breach of duty in failing to provide a general health warning that, because Mr Barker was entering into a tax avoidance scheme, there was a possibility that it would be challenged by HMRC and that, if this happened, it would be necessary to defend the arrangement in legal proceedings. This finding did not found a successful claim for Mr Barker as the Judge determined that such a general health warning would not have prevented Mr Barker entering into the scheme; only what the Judge called a “high level warning” about the alternative interpretation of the relevant statutory provisions would have deterred Mr Barker. Roth J held that there was no breach of duty in not giving a high level warning as “I find it difficult to see that solicitors whose interpretation is likely to be correct are nonetheless in breach of duty for failing to warn the client that they might be wrong. That may perhaps be the position where the argument is finely balanced, so that any reasonably careful lawyer (of appropriate expertise) should have been alert to the significant possibility of a contrary view”.
On appeal Mr Barker did not allege that the statutory interpretation arrived at by BWS was negligent, but contended that their negligence lay in the failure to provide the high level warning that this interpretation might not be correct. The high level warning is referred to in the appeal judgment as a “specific warning”.
The appeal judgments considered the proper interpretation of the tax legislation in substantial detail, ultimately disagreeing with Roth J’s interpretation and accepting the interpretation advanced on behalf of Mr Barker. However, there is also detailed consideration and discussion of when a solicitor’s failure to warn their client of the risk that they may be wrong will amount to negligence.
Following consideration of previous authority, the Court of Appeal held that a warning should be given where there is a “significant risk” about the construction of the provision. Asplin LJ considered that the following principles could be discerned in such cases:
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The question of whether a failure to explain the risk that a court may come to a different conclusion to the solicitor is highly fact sensitive.
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If the construction of the provision is clear, it is very likely that the threshold of “significant risk” will not be met and no warning will be required.
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A solicitor can be correct about the construction of a provision, or at least not negligent, but nevertheless be under a duty to caveat their advice with a warning of the risk of being incorrect.
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It is more likely that a reasonably competent solicitor would advise as to that risk if litigation is already on foot or the point has already been taken.
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The issue cannot be reduced to percentages and is more nuanced than whether the constructions are “finely balanced”.
This final point is an express rejection of Roth J’s conclusion that where a solicitor’s interpretation of a provision is likely to be correct there would be no duty to warn unless the arguments were finely balanced. Asplin and Patten LJJ agreed in their judgments that whilst the question of significant risk “turns in substantial part” on the arguments in favour of the competing interpretations the broader circumstances are also an important factor in the assessment.
Specifically, in relation to Mr Barker’s case, whether there was a significant risk was a product of both the likely construction of the statutory provision (on which the Court of Appeal disagreed with Roth J) and on the factual circumstances. The relevant factual circumstances in this case included that this was an aggressive tax avoidance scheme that if successful would result in a very large payment of tax being avoided. Asplin LJ concluded that this meant that there was always a likelihood of a dispute which should have been taken into consideration. Notwithstanding the fact that the point had not been taken elsewhere at the time of the advice being given “it would have been obvious to any reasonably competent solicitor practising in this area that there was a real risk that HMRC would take the … point at some stage and if necessary, would pursue it through the tribunal and court system”. Patten LJ added that “A careful and competent assessment of the rival arguments on construction (which was never undertaken) would in my view have disclosed that there was at the very least a significant possibility that [the alternative construction would be held to be correct]”. He also agreed with Asplin LJ that the degree of risk also required consideration of the likelihood of challenge by HMRC and the degree of judicial and other scrutiny that the scheme would receive.
Asplin LJ also made clear that the situation in such cases differs from the situation of a doctor discussing risks with a patient as considered in Montgomery v Lanarkshire Health Board. Whereas a doctor discussing risks with a patient is not determined by medical learning, and therefore falls to be considered separately to the duty to diagnose and treat the patient, the legal advice is “the very service which was being provided and which was being relied upon. There can be no separation between the advice and any appropriate caveats as to risk. They are one and the same.” As such the question falls to be considered under the Bolam test of the standard of a reasonably competent professional acting in accordance with a responsible body of opinion rather than the Montgomery test of the materiality of risk.
At first instance Roth J had found assistance in the fact that a “series of tax specialists” had not arrived at the interpretation advance on behalf of Mr Barker. However, this approach was criticised by Asplin LJ. The series of advisers “who considered the EBT for different purposes and at different times were at best an unrepresentative group. Even if it had been relevant to consider the standards applied by a body of expert professional opinion, they were not such a body.” On the facts of the case it was also noted that such an approach failed to take into account the opinions of other professionals received by Mr Barker who agreed with the interpretation advanced on his behalf at trial. It was also noted that there was no expert evidence before the court.
Conclusion
This case provides important clarification on when it will be negligent for a solicitor not to provide a warning that their advice on a point might be wrong. Critically, the circumstances where a warning will be required cannot be reduced to cases where the prospects of an interpretation being correct fall below an arbitrary threshold. Rather, broader circumstances must be taken into account. These will include the likelihood and consequences of a dispute arising.
Further, even where the advice is ultimately correct it can be negligent not to have provided a warning. This has important consequences that can be demonstrated by imagining slightly different facts to those of the instant case. Had BWS’s interpretation been correct and Mr Barker succeeded against HMRC at trial he would still have had a good claim against BWS for any irrecoverable costs incurred against HMRC if – as Roth J found as a fact – a specific warning would have resulted in him taking a different course.
It is also of interest that the Court of Appeal distinguished between clinical negligence cases to which Montgomery would apply from cases concerning solicitors. Although the Court of Appeal expressly did not comment on other professions in the course of the judgment, for most professionals the relevant risks will be closely related to the advice being given and will be a matter of the professional skill of the practitioner rather than any broader consideration. It would therefore seem that professionals outside of the medical sphere will not have advice on risks considered on materiality of risk under Montgomery but under the normal Bolam test. Montgomery has been referred to in a recent first instance decisions concerning a solicitor’s advisory obligations to a client entering into a transaction and the duty of a bank to explain the financial implications of a decision to change from borrowing on a variable interest rate to a fixed rate. It will be interesting to see whether Montgomery will come to be confined to clinical negligence cases or whether a distinction will be drawn based on the type of advice being given.
When advising clients, professionals would be wise to err on the side of setting out the sort of careful and competent assessment of the rival arguments referred to by Patten LJ. This will provide clients with full advice and, when coupled with an assessment of the consequences of the alternatives being correct, the information with which to make informed decisions.
Martyn Griffiths
Hardwicke
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What Are The Top Tips For Successful Negotiation? - Justin Patten, Human Law
Described by one training organisation as the “skill that transcends all others”, negotiation, once mastered can help you achieve improved results in many different business and social situations.
For lawyers and their clients in a dispute situation effective negotiation skills and techniques can be invaluable in reaching a settlement whilst also keeping legal costs under control.
Here are some Do and Don’t tips for anyone involved in a negotiation. Follow this approach and your next negotiation could be a pleasurable experience, resulting in success.
Be prepared This may sound obvious but on a number of occasions I have conducted mediations as either a mediator or a solicitor and come across parties who have not really understood what is involved. By considering the following points you can make sure you are prepared for an effective negotiation:
Goals: what do you want to get out of the negotiation? What do you think the other person wants? Negotiating points: What do you and the other person have that you can trade? What do you each have that the other wants? What are you comfortable giving away? Options: if you don’t reach agreement with the other person, what alternatives do you have? Are these good or bad? How much does it matter if you do not reach agreement? And what alternatives might the other person have?
Relationships: what is the history of the relationship? Will there be any hidden issues that may influence the negotiation? How will you handle these?
The consequences: what are the consequences for you of winning or losing this negotiation? What are the consequences for the other person?
Power: who has what power in the relationship? Who stands to lose the most if agreement isn’t reached?
Possible solutions: based on all of the considerations, what possible compromises might there be? Bring the right people: only those who have confidence in the process or inadequate knowledge of the dispute are useful. Anyone else could harm your chances of getting the deal done. Keep reviewing the strength of your case: Whilst you are at the mediation or negotiation, keep assessing the strength of your case and seeing how the interaction is going.
Be realistic Assess your strengths and weaknesses in the case. Your position in the negotiation will be advanced if you have an understanding of your "Best Alternative to a Negotiated Settlement."(BATNA) This represents what you will do if an agreement is not reached in a negotiation. Consider consequences of a failed mediation or negotiation. No matter how good a mediator is or how effective a negotiator you are, there is always the risk of a failed mediation. If you have considered your bottom line with thought, you can walk away without regrets.
Identify your legal and other costs Before entering into any negotiation you need to gather the facts – but one crucial fact that is often neglected is the level of legal and other costs incurred. This is essential in helping to put a value on the case and bring a sense of perspective to the situation. In mediation the mediator will almost always get the parties to think about the level of legal costs incurred on the case, as a way of assisting a party in valuing a case. When putting a value on the case it’s important to consider the intangible consequences, such as loss of business opportunities that inevitably accompany the process of conducting litigation. If you can, make first offers There has been a fair amount of discussion on this but in my experience a party who makes a strong but realistic first offer is in a better position than one who does not. An aggressive first offer can work in your favour as one of the most effective ways to getting the most from your opponent. The main advantage is that it allows you to offer concessions and still reach an agreement that’s much better than your alternative agreement.
Do a risk assessment Case analysis or what can be termed risk analysis is very important in a negotiation as it provides a framework within which one can negotiate a case. Without good case analysis, the negotiator does not have a compass and he or she will be ineffective. This is where legal skills can come to the fore and having a lawyer present is very useful. Have the right attitude to the negotiation The way that you interact with the other side will impact how they interact with you. Remember the greatest impediment to settlement is the view that the case will not settle. Instead try to think of well-thought out proposals which can reach agreement. What to avoid when negotiating Don't treat a negotiation like a Court case
One of the biggest criticisms that I can level at lawyers during mediation and in fact in any negotiation is they often focus just on the law and they neglect the other dynamics of the situation. Whilst the law is important a point not to neglect is that you are attempting to reach a deal with another party not convince a 3rd party (namely a judge) of the merits of your case. In a negotiation you need to bring in empathy with the other party, consider reasonableness and bear in mind that you are looking for a win, win solution, not a win, lose one.
Don't be aggressive The nature of the English legal system encourages one to be adversarial. Whilst it’s important to be firm in one's position, do not be so aggressive that you upset the other side so much that you jeopardize the chances of a deal being reached.
All too often the reason a negotiation fails is that the parties are far too macho, they want to be right or score points, which all serves to wind the other side up and reduce the likelihood of an agreement being reached.
Read more about successful negotiation which is covered in two chapters on mediation in 'A Practical Guide to Elderly Law.'
Justin Patten
Human Law
Image ©iStockphoto.com/webphotographeer
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