ALCD seeks to ban Jeremy Morgan QC from costs proceedings

Further to my post yesterday about becoming a Fellow of the Association of Law Costs Draftsmen, I want to write about a far bigger challenge facing the ALCD and others working in the field of legal costs.  For those not working in costs, look away now as this will be of little interest.

What I have to say should be put in the context that I recently joined the ALCD, undertook the Fellowship examinations and have paid for the Costs Lawyer training course in May.

Since being granted authorised body status, which enables the ALCD to grant rights of audience and the right to conduct costs litigation to Costs Lawyers, it is now subject to and regulated under the Legal Services Act 2007.  Forthcoming changes being brought in by the Legal Services Board mean the ALCD will have to fundamentally restructure itself and undertake significant regulatory obligations.  All of this will cost money and membership fees will rise significantly.  The current fee for Fellow membership is £250 per year.  The rough estimate done by the ALCD suggests fees will have to rise to between about £600-£650 in light of any changes.  These estimates look somewhat low to me.  The estimated cost of a full time Chairman looks too low, certainly once national insurance and pension are taking into account.  I also suspect that very quickly there would be a call for another full time administrator/secretary to assist.  I would be very surprised if the cost of membership didn’t rise very quickly to somewhere in the region of £1,000.

If the ALCD does not discharge its duties under the Legal Services Act 2007 it will cease to be an authorised body and will no longer be able to grant rights of audience and the right to conduct costs litigation. 

The ALCD, or at least the Council, has proposed seeking protected body status (more of which later) and fulfilling its duties under the act.  This issue will be discussed at the ALCD AGM on 20 March 2010.  However, these proposals have had no real debate in advance and this is a very big topic for both members and non-members alike.

Why this is important for non-members, who obviously will have no right to vote on these proposals, and arguably more important for non-members than members, is the proposal to seek protected body status.  In the words of the ALCD this: “would mean that only approved members of the ALCD could represent parties in costs proceedings.  Effectively, this would require the unregulated part of our profession to either join the ALCD or be precluded from participating in costs proceedings”.

The ALCD recognises “success in this regard would by no means be guaranteed”.  You don’t say?

Lets analysis this further: “only approved members of the ALCD could represent parties in costs proceedings”.  So, poor Jeremy Morgan QC will no longer be able to attend detailed assessments or costs appeal.  Those firms of solicitors that specialise in costs, or have in-house costs departments, will no longer be able to act in costs matters unless the individual staff dealing with costs are also members of the ALCD.  Solicitors and FILEX will no longer be able to deal with recovery of the own costs in costs proceedings but will be forced to instruct ALCD members. 

This is self-evidently not going to happen and I am sure the ALCD does not mean literally what it has said.  It is somewhat more plausible that the law might be changed so only members of regulated bodies (eg the Bar, ALCD, Law Society) would be able to take part in costs proceedings.  But once that is recognised, the whole purpose of trying to obtain protected body status is shown to be somewhat empty.  It would not be membership of the ALCD per se that makes its members appropriate to conduct costs litigation.  Rather, it would be that the individual is regulated by a professional body that was the important factor.  Hold that thought.

Even if this more limited protected status was achieved, what would that mean in practical terms?  It would certainly not mean, at least in the way suggested, that non-members could not participate in costs proceedings.  The majority of RTA personal injury claims are probably now handled by unregulated paralegals.  By that, I mean large numbers of unqualified unregulated staff who work in solicitors’ offices overseen by a regulated solicitor. 

If the ALCD obtained protected body status it would make little or no difference to who handled much costs work.  Costs work generally falls into two broad categories.  The first category is the drafting of bills of costs, points of dispute and negotiation of costs.  The second is advocacy at detailed assessment.  There would be nothing to stop a firm of volume costs muppets employing one ALCD member who simply signed everything off in their name in relation to the first category, even if the work was conducted by non-members.  Much the same would happen in relation to advocacy.  Only a very small proportion of costs matters proceed to detailed assessment and even quite large firms could easily manage with only one or two who were authorised to do that work.  

It is this aspect of what would happen in reality that is the worrying part of this proposal.  I suspect the ALCD anticipates that gaining protected body status will bring new members rushing to join the ALCD and potentially reduce the cost per head of membership as there became more members to spread the cost.  I fear the exact opposite may happen.  At the moment a number of law costs drafting firms have a policy of having all their fee earning staff as members of the ALCD.  While the membership fees are relatively modest, this makes some sense.  If the fees rise significantly, even if only to the level anticipated by the ALCD, this will become far less attractive.  In addition to the direct membership fees are the further costs of Continuing Professional Development.  A number of firms are likely to reduce the number of fee earners who are members of the ALCD and keep the minimum number as members that they consider necessary to undertaken any advocacy work.  The burden of the cost of being regulated may fall on a smaller number of surviving members.  This would potentially push membership fees north of £1,000.

Examined more carefully, the idea of getting protected body status is remote because of what it would actually mean.  Costs draftsmen, costs consultants, costs negotiators, costs muppets and others currently appear before the courts on detailed assessment because they are either employed directly by a firm of solicitors, and therefore have the same right to appear in hearings in chambers as any other solicitors’ employee, or because they are treated as being temporary employees of the solicitors for the purpose of the hearing.  That was the position before the ALCD gained the right to grant rights of audience and remains, normally, the position now.  The fact that Costs Lawyers also have independent rights of audience is of limited practical significance.  The only exception to this is on appeals to a higher court.  However, in reality, even this extra “right” is of limited importance.  I appear on a routine basis at appeals at Circuit Judge or High Court level.  The instructing solicitor writes to the court asking for permission and I have yet to have it refused.  On occasion, the Court of Appeal has granted permission for costs draftsmen, and not necessarily ones who are even members of the ALCD, to appear before them.

A large amount of advocacy in the lower courts, ignoring costs proceedings, is undertaken by fee earners whose right to be heard arises only through their status as solicitors’ employee.  How likely is it that the law will be changed to end the general right of solicitors’ employees to appear at hearings heard in chambers?  No chance.  What good reason would there therefore be to treat costs proceedings as such a special category that solicitors’ employees should be expressly excluded from acting?  This is in the context where it is inevitable that barristers, solicitors and FILEX would also be allowed to partake.  

Even on their own estimated figures, the ALCD admits: “the costs of compliance with the Act will probably be disproportionate to the direct benefits gained by LSB regulation in terms of the exercise section 27 and 28 rights by Costs Lawyers”.  Protected body status will not happen, or at least not in the way suggested by the ALCD. 

So what would ALCD members get for their money if not the Holy Grail of a “closed shop”? 

In the same breath as saying the costs of compliance will probably not be proportionate to the direct benefits, they say that losing the ability to grant rights of audience and the right to conduct litigation to Costs Lawyers “would have a significant impact for Costs Lawyers, those who aspire to become Costs Lawyers and the ALCD as a whole”.   Why?  If an increased membership fee of even only a further £350-£400 is not proportionate to the direct benefit, what is the “significant impact” that the loss would create? 

What extra work has been generated for costs draftsmen who have attained Costs Lawyer status?  What extra work is there in the system generated by the powers the ALCD now has compared with before 2007?  It may be that the ability to conduct costs litigation and take over some of the routine tasks has generated some small extra fees in volume work but we are now heading into post-Jackson territory.  Once fixed fee are introduced for fast-track personal injury claims the ability to conduct costs litigation becomes a tiny element of the remaining work handling multi-track claims.

The point the ALCD makes in support of the supposed benefits of LSB regulation is that “the wider benefits of status and recognition in the legal profession must not, however, be underestimated”.  I am far from convinced that such status or recognition exists.  In all the years I have been working in costs I cannot remember a single legal client, potential or otherwise, ever asking if I was a member of the ALCD, let alone a Costs Lawyer.  It is not a factor that has, in my experience, ever influenced solicitors when instructing costs draftsmen.  This may, in part, be because few solicitors probably even realise the current role of the ALCD or understand the distinction between regulated ALCD members and non-regulated costs draftsmen.   It is not so much a matter of “underestimating” the benefits of status and recognition, rather it is a question of identifying what these benefits actually are.

Wendy Popplewell, writing in Costs Lawyer magazine, states that the LSB’s rules are “intended to reform and modernise the legal services market place in the interests of the consumer”.  This is the crucial issue and what any changes to the ALCD should be focused on.  Professionals such as doctors, accountants and solicitors are regulated to protect the public consumer.  We are a relatively unique profession (although arguably similar in this respect to the Bar) in that the vast majority of the work we do is done for other lawyers or insurers (even if there is a member of the public behind them).  The consumer protection purpose of regulation is almost entirely absent from what we do.  Solicitors or insurers should be sophisticated enough to make an informed decision about the costs professionals they instruct without an expensive regulatory system in the background.  If they believe that ALCD membership provides an indication of professional standards then they can choose to use or employ only costs draftsmen who are members.  If they are content to use non-members then they are surely sufficiently informed to make that decision.

The only exception to this is where costs draftsmen act for litigants-in-person.  However, for practical purposes, the CPD 52.1 is drafted narrowly enough to limit the likelihood of non-ALCD members undertaking this type of work. 

I am certainly not aware of any clamour, either from consumer organisations or the judiciary, for a clampdown on unregulated costs draftsmen exploiting litigants-in-person. 

The proposed increases to membership fees may currently seem manageable, if disproportionate to the benefits.  However, they are based on a current understanding of what regulation will require. As Popplewell notes: “at the time of applying for authorised body status, we did not know and could not have known the implications of the act”.  Precisely.  In the highly unlikely event that the ALCD did acquire protected body status, there would then be no way to go back.  The ALCD would not be able to decide at some future date that the benefits no longer justified the costs and simply unregulate itself.  Once regulated under the Act, there is no way of knowing what may be demanded in the future.  Only a moment’s thought will reveal the LSB might demand almost anything at some future date.  Does the ALCD really want to lock itself into a regulatory system over which it would have no control?

The ALCD has found itself in an invidious position.  Having finally obtained proper recognition as a profession it is now faced with the choice of abandoning all it has worked so hard to acquire or go down an expensive and demanding regulatory road.  The ALCD Council, no doubt trying to act in the best interests of its members, wants to take the second route.  I think it has made the wrong call. 

Popplewell writes that their proposal will: “allow us to seek further opportunities for members, including providing training for judges, barristers and solicitors in relation to costs and to represent parties in costs proceedings and in the budgeting, quantification and assessment of legal costs”.  Which of these were members of the ALCD unable to provide before 2007?  The proposals add nothing to what we can now provide.  All they promise is increased cost for the small benefit of the section 27 and 28 rights and the highly remote possibility of achieving protected body status.

Moving into the post-Jackson world, costs professionals are going to have to up their game spectacularly to even stay in the game.  Now is not the time to start getting caught up in bureaucracy and red-tape.  The ALCD should take the far bolder step of walking away from approved body status and walking into the costs future with a confident stride focused on supporting and promoting its members. 

I will be voting against these proposals.  Others can comment here, in public, or over at the ALCD Forum, in private.