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Civil Litigation Section

Kerry Underwood: making fixed fees work

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Kerry Underwood gives some practical and frank advice on how to survive in the new world of fixed recoverable costs. At the right price, can they actually reward solicitors?

Certain sections of the Court of Appeal seem gripped by a Maoist need for permanent revolution when it comes to the conduct of civil litigation, especially the costs regime. 

This will not come as news to personal injury lawyers. But other civil litigators are now in the firing line, and I’d like give some general guidance on dealing with cases on a fixed recoverable costs basis.

I am hardly a member of the Lord Justice Jackson Appreciation Society – few are these days, given the almost total failure of his ill thought-out reforms, most notably costs budgeting, proportionality, QOCS, DBAs and relief from sanctions.

However, I believe that fixed recoverable costs do work (although Jackson cannot take credit – they are, in fact, an unimplemented Woolf Report reform) and they have improved the operation of personal injury work. The government proposes to raise fixed costs to cover cases where damages are £250,000 or less, a huge increase on the current limit of £25,000; it also intends to extend the fixed costs regime to cover all civil litigation work. At present, only personal injury falls within the regime, albeit with some exceptions.

Fixed recoverable cost are the final nail in the coffin of alternative business structures, factory firms and the loony tunes concept of online courts.

This proposal is not politically controversial. Few countries allow recoverability of open costs even in the largest of claims. Indeed, full recoverability is often known as the ‘English system’.

Consequently, all civil litigators need to assume that in the near future their fee will not be directly related to time spent on a case, but rather on the result and the stage of the case at which that result is reached. True, the later the stage reached, the higher the fee. But if two firms achieve the same result at the same stage, it is the firm which has done less work which achieves the greater profit.

This turns traditional concepts on their head. More time = more money? Not any longer. More time now means less profit. In fact, the concept of charging by the hour only goes back as recently as the late 1970s. Firms doing conveyancing, wills, family and employment work have learnt already how to operate on fixed costs or contingency fee bases.

Time recording is the biggest enemy of efficiency and profit, and it should stop now. Yes, work still needs to be recorded on the file, but borrowing against the mythical creature of ‘work in progress’ – in my mind, nothing more than an abstract, centrally-recorded time bank – is sheer lunacy. It appears as though every firm that has gone down this route has gone bust.

Start preparing all of your bills in-house. It is of crucial importance to understand how long each piece of work takes to do, and how you can cut times down without compromising the case. The first instinct of an employment lawyer working on a contingency fee is to phone the other side to discuss settlement, as every minute spent on the file costs money. Civil litigators being paid by the hour have no such incentive to resolve a case with little work done, as that means a smaller fee.

Look at each file as it closes, and ask yourself honestly: could we have done more to finish this with less work? Would a more experienced and expensive lawyer have achieved a more profitable outcome for the firm by achieving the same result with fewer, but more expensive, resources?

More time = more money? Not any longer. More time now means less profit. 

Do case management systems have any role in fixed costs cases? Probably not. Judgment, not routine units, is what earns you money once you move away from charging by the hour.

Look at your fee arrangement with your client. Costs can become the main reason for continuing litigation, both to avoid payment of the other side’s costs and to recover your own costs. That goes with fixed costs. Liability and potential recoverability will be limited, but certain. No-win, lower fee arrangements are the obvious answer.

This is just a general overview of the landscape, but based on over 40 years’ experience. Fixed costs, at the right level, reward talented lawyers. They are the final nail in the coffin of alternative business structures, factory firms and the loony tunes concept of online courts.

On this one, Lord Justice Jackson is right.

Kerry will be on tour around the UK this spring, with 22 dates throughout March, April and May 2016. He is offering separate courses on small claims, portals and fixed costs; and QUOCS, wasted and non-party costs orders. The fee is £200 plus VAT per course, and a free book by Kerry on the day’s subject is included. To find out more, click here.

To order copies of Kerry’s books, please click here (PDF).

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