21 May 2001
19 August 2002
12 October 2009
8 April 2002
6 February 2012
20 September 2010
At the Solicitors Costs Conference in London in November 1999, I was asked to present my views on the future of legal costs, presumably as I was a critic of the Civil Procedure Rules (CPR) from a legal costs perspective (The Lawyer, 10 January 1999). The panel included three judges and a past president of the Law Society, and I believe I was viewed as having a slightly radical viewpoint and as someone prepared to “shoot from the hip”.
I was given the last slot of the day to present my theory on the future of legal costs as “The Loaf of Bread Principle”. My presentation, at which I exhibited a Mighty White loaf, was that both Joe Public and Joe Public Plc are not interested in the rules and regulations of legal costs, be they CPR or anything else. What they are interested in is a product or service in which they can see value for money, at a price that they will not only pay, but one which they will pay again and again.
I went on to say that legal services will become more and more price sensitive, with budget-based billing becoming the norm. This theory was based purely on the self-interest of law firms aiming to reduce the burden of the “armageddon of cash flow” and the necessity to reduce the fixed costs of running their practices by the decrease in numbers of expensive and unnecessary support staff.
Two years after the introduction of the CPR and the new Rule 15 on legal costs, which makes it compulsory for clients to receive information on costs, budgets and funding, failure to do so can possibly see the reduction of the solicitor’s costs to zero. We are nowhere near convincing Joe Public or Joe Public Plc of the certainty of the price of legal services. Consequently, my view of the market is as follows.
Small legal practices will struggle to survive the CFA/no-win, no-fee culture, unless they change both work methods and culture. To actually prosper, these practices should look to reduce their major fixed costs of office and full-time staff. (See Smith Graham (a firm) v the Lord Chancellor NLJ, 1 October 1999, p1443, in which a judge allowed an external enquiry agent - not employed by the solicitor, but being paid a set fee - to do fee-earner work to recover Grade 3 hourly rates.) With more than 30,000 full-time law students in England and Wales, the small firms have a bottomless pit of ad hoc resources for the bulk of paralegal and other such work.
In relation to solicitor and client costs, I do not believe that there is a great deal of relevance in most of the rules, regulations or case law presently in force. The Solicitors Act 1974 Section 67, for example, states disbursements should be marked paid or unpaid. What possible relevance does this have at the beginning of the 21st century? Rule 15 letters are becoming longer and more complex. In the US, however, in-house counsel for the past decade have been producing their own service contracts, to such an extent that The American Lawyer magazine published a book on the subject. At a presentation I gave to a major US bank, the in-house counsel nearly fell off her chair, to discover that not only was one of their competitors doing these types of service contracts, but that the contract was reproduced in this book.
The process of recoverable costs for commercial cases is generally too complex, too slow and too expensive. It should be totally reformed, by introducing a sliding fixed recoverable scale. This may not be a perfect solution, but it will make it far easier to explain to Joe Public or Joe Public Plc what the bottom line will, could or should be.
Jim Diamond is an independent legal costs consultant and founder of www.legalbudgets.com