In October this year, civil litigators will be introduced to fixed recoverable costs in virtually all civil claims valued at £100,000 or less, and this is likely to be the biggest culture change in their careers.
My view is that we should expect £100,000 to become £250,000 within five years.
In my recent experience many non-personal injury lawyers are blissfully unaware of this impending, major change, which presents opportunities as well as challenges.
Throw away your time recording system; forget work in progress, forget cost budgeting, and forget assessment proceedings.
Embrace contingent and conditional fees and get to grips with Part 36.
These are the lessons to be learnt from the field of personal injury where fixed recoverable costs have been in for 20 years.
The key points are that recoverable fees are the same irrespective of the level of the fee earner, solicitor or counsel, and irrespective of whether, or when, liability has been admitted.
There will be fixed costs if the matter settles pre-issue, and an entitlement to those costs without contractual agreement and assessment.
Thus, the moment you write that initial letter to the other side, you have created a potential adverse cost liability for your client.
This does not arise in personal injury cases, due to the system of Qualified One-Way Costs Shifting (QOCS), which does not apply in other civil work at present, but is likely to spread.
Match or beat your Part 36 offer and you get a straight 35% increase in fees. Even if you are lucky enough to have a profit margin of 35%, this doubles your profit; if your profit margin is 17.5%, it trebles your profit.
There is much more to it than this; fixed recoverable costs will be the biggest change in the working lives of most civil litigators.
Budgeting – to be scrapped?
Budgeting does not apply in fixed recoverable costs cases, and the Master of the Rolls has questioned the value of costs budgeting in any case.
I would expect it to be curtailed, if not scrapped.
Will costs continue to follow the event?
The Master of the Rolls has queried the justification for the general policy in England and Wales that costs should follow the event.
They do not do so in family work or employment tribunal work, or indeed in most tribunal work.
Few jurisdictions have the uncapped costs following the event rule that England and Wales has.
Watch this space.
Will location continue to affect hourly rates?
The Guideline Hourly Rates were reviewed in 2021, after an 11-year gap, but are already under review again at the order of the Master of the Rolls to consider, among other things, whether location should have any bearing on recoverable hourly rates.
London offices have been shut for much of the last two years; work has gone on from where the lawyers live, that is Hemel Hempstead or Reading or Kent or wherever, and will continue do so, at least in part.
Now lawyers and everyone else should be free to have offices wherever they want, but how can there be any justification now for a paying party to pay for very expensive London rents and salaries?
To put this in context, for a Grade A lawyer the Central London recoverable rate is more than double that for National Band 2, which is where many of those lawyers live, and are now working.
Do the paying clients care which location the lawyer is in? Of course not. Remote working has been brought into sharp focus by COVID-19, but it existed before then.
Suppose a Central London firm has at any one time half of its staff working from home, and so has half the rent, half the rates, half the fuel bills for example, although of course not half the salary bill.
Should the hybrid situation not be reflected in a lower hourly rate? This is really only a refinement of the principle set out in Wraith v Sheffield Forgemasters Ltd.
Most of the staff of Underwoods Solicitors work in Wellington in the Western Cape of the Republic of South Africa. That is where our secretarial work is done, our phones answered, and much of our routine legal work is done. I was there for most of 2021.
Our overheads are lower; our operation is more efficient as we have qualified typists doing the typing.
Arguably, we should get extra for our innovative approach, not less.
We have people studying in Wellington to qualify as Chartered Legal Executives, and no doubt, in due course, solicitors of England and Wales.
What will the Guideline Hourly Rates be for such people?
Will an entirely unqualified person in England and Wales be able to recover more for their work than a fully qualified solicitor who happens to be based in South Africa?
What about me personally?
Am I suddenly worth less because I am sitting in an office in Wellington in the Western Cape rather than in Hemel Hempstead?
What hourly rates do I charge for my colleagues sitting with me in the office in South Africa?
If I am working on a file and I travel from Hemel Hempstead to the Western Cape via Qatar, as I do, do I charge different rates depending on where I happen to be?
Do I have a break when the plane is flying over Central Africa as I would get really low hourly rates there?
You have the regulators in their usual way saying that in matters such as conveyancing, clients should look to instruct solicitors hundreds of miles away if the clients live in the south of England, so as to save money because fees are lower elsewhere.
The end game of that is to instruct English qualified lawyers in South Africa or India or wherever.
Will we shortly see a Costs Master sharply cutting the hourly rate for 100 hours of document review in Central London, on the basis that it could have been done at a third of the price in South Africa by lawyers qualified in England and Wales? If not, why not?
I mentioned above remote working, but 19 people in an office in Wellington does not feel like remote working; it is just economic common sense – saving on the cost of delivering the service.
Why should the legal profession be any different?
2022 is the Chinese year of the tiger, an animal attributed with courage and leadership.
How appropriate.
