Fixed Costs – what’s all the fuss about?

2 February 2016

So he’s back with a bang, Sir Rupert that is, now wanting to fix costs across all multi-track cases up to £250,000. This time it isn’t just Legal Aid & personal injury getting it in the neck (pardon the pun Mr. Osborne) but it is all litigation. Is it such a bad thing?

What do most clients hate about lawyers? Hourly rates and the fact that, certainly in litigation, they never really know how much it is going to cost them. As such I could make a case for the client welcoming the suggestion of a fixed fee matrix. The obvious question a client would ask is;

…if those are the fixed costs you can get back why should I pay more?…’

Not the easiest question for the lawyer to tackle, the obvious answer is;

‘…ah, well your case is very complicated …etc’

The honest answer may be;

‘…I can’t work to that budget within this firm…’

But the truth is you can, or certainly it is possible with good project and time management skills being applied and appropriate delegation of tasks to the right level of lawyers as well as expectation management with the client. As someone said during a debate I was involved in during the Jackson Review;

‘…you can get from London to Edinburgh in a Mini, but if you want to travel in a Rolls Royce you pay for it…’

There are a number of other potential positives as I see it;

  • Avoiding costs disputes
  • Encouraging early neutral evaluation
  • A disincentive to engage in long drawn out litigation and an incentive to try and settle
  • No more costs budgets in all but the very biggest cases
  • An increased use of technology in case and time management  for the benefit of clients

However the garden is not simply a bed of roses and I do have some concerns.

The fixing of recoverable costs from opponents may appear to be a good thing but it could create an inequality of arms where one party has very deep pockets and adopts a ‘…whatever it takes …’ approach to a case.  Where will the safeguards be and will they work?

We are told there is already a significant unmet legal need within the SME sector, particularly concerning commercial disputes and this is primarily due to funding problems. My concern is this could make it worse as potential funders see their ability to recover their monies eroded.

Time will tell as to whether these proposals become a reality but recent history tells us that what Sir Rupert says often goes, so my recommendation would be to start thinking about how your business models would cope with this fixed fee regime and not spend too long waving the access to justice banner.