Dickinson decision opens Pandora's box on costs

The recent decision of Dickinson v Rushmer that a client care letter and payment calculation can be disclosed to the defendant has opened a whole new 'Pandora's box' in the world of legal costs. Legal Costs consultant Jim Diamond tells Gareth Chadwick why in time he believes the whole structure of financing litigation will be accessible by the person liable to pay the costs...

Negotiating the recovery of costs incurred in litigation has come a long way since the Friday afternoon horse trading that used to see legal costs liabilities agreed over a quick pint in the pub.

Since Taxing Master Hurst (now Chief Costs Judge Hurst) issued Practice Direction No1 of 1991, stating that any points in dispute in relation to the claim for fees had to be submitted to the court, the process of recoverable costs has become one of convoluted arguments and case precedents. Add in CPR and arguments on success fees and insurance premiums and a form of satellite litigation is almost inevitable, even on the smallest cases. "The foundation of CPR [civil procedure rules] and the abolition of state funded legal assistance was based on commercial funding and claimant lawyers taking commercial risks. Clearly no one ever asked the defendants’ insurance world if they minded paying for it", says Jim Diamond, Legal Costs consultant.

The recent decision in Dickinson v. Rushmer ([2001] AllER (D) 369 (Dec)) has taken the recoverable costs issue a step further. In his decision, Justice Rimmer found that he could "see no good reason why the client care letter and the payment calculation could not have been disclosed to the defendant, since I have not been persuaded that they were privileged".

The logical next step, says Diamond, is for the paying party to demand, and be granted, access to the actual computer time records in relation to the costs being claimed. "Further down the line", he says, "I can see the paying party requesting disclosure of retainer letters to expert’s and counsel, in other words a form of Solicitors Act taxation before the inter partes process".

"With the rise in conditional in fee agreements (CFA), we’ve had a situation where if you are running a cases on a CFA basis and you don’t win fairly regularly, then you risk going out of business. So you can understand why parties want to keep their cards close to their chests on costs matters".

According to Diamond, over the past two years paying parties have started to question the whole foundation of CPR funding, courts have been blocked up with costs disputes on insurance premiums and success fees and the element of fair play has gone out the window. "It’s a war going on in relation to costs", he believes.

"There are human rights issues, too, in that everyone is entitled to a fair trial. How can you ensure a fair trial if you do not know what the funding arrangements are or what invoices are paid in relation to the claimant and the claimant’s lawyers?"

He says that in Dickinson, the judge has essentially said that he agrees with the concept of allowing disclosure of billing arrangements as being more important than the privilege of the client and his lawyer.

It won’t be very long, he believes, until the major cost negotiators start refusing to enter into negotiations until the costs schedule provided by the opposing party is supported by a copy of the computer time sheets. "Presuming the bill and schedule are correct, it is basically replicated information as the bill of costs now has so much detail on it anyway. Why shouldn’t there be disclosure of that information therefore in order to check the costs? It makes common sense. Of course it will be argued about and create more satellite litigation, but you’re not going to stop it now".

He continues: "It’s not just a can of worms, it’s a whole Pandora’s box that’s been opened with the Dickinson decision. Whether it gets appealed or overturned, I believe that the whole structure of financing litigation will sooner or later be accessible by the person who is liable to pay the costs".(06/02/02)

See also:

Recovering litigation insurance premiums

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