Costs budgeting: how is it working?

There has been a noticeable rise in the number of unhappy clients challenging their solicitors’ bills, particularly in personal injury cases, at least to judge by various rulings from the county court right up to the Court of Appeal (Herbert v HH).

This has been pushed by a handful of law firms targeting this as a new area of work, and a recent survey of members of the Association of Costs Lawyers indicates that costs specialists do see this as a potential new avenue for work.

As regulated lawyers with rights to conduct litigation and of audience, Costs Lawyers are able to act directly for clients on these cases.

Some 59% of the 126 respondents to the survey said they saw opportunities in acting directly for clients in challenging bills. Fewer than half that number (28%) said they did not, while the rest were not sure.

Solicitors have only themselves to blame. It is now six years since the introduction of LASPO and we are still seeing personal injury lawyers struggling with having to deduct their success fee from clients’ damages, and others displaying sloppiness in some of their billing practices.

But while there are opportunities for Costs Lawyers in helping clients who feel they have been overcharged, we are also the answer to the problem – if law firms used a Costs Lawyer to ensure that their billing was on a solid footing in the first place, challenges would not get off the ground.

Our six-monthly survey – carried out at our national and regional conferences – proves a useful bellwether of changing attitudes and practices in costs. For example, one in six Costs Lawyers (17%) said the solicitors they dealt with now stick to their budgets, up from 10% last year and just 5% in 2017. However, 22% said solicitors always went over what was budgeted, and a further 54% said they sometimes went over.

Some 22% also reported more applications to revise budgets – but the same proportion said they had still never seen one.

The message about the need to stick to or revise budgets is getting through too slowly, and solicitors are putting themselves at risk if they have to take the route of convincing the judge on assessment that they had a ‘good reason’ to exceed the budget. This task is not proving easy in many cases, leaving solicitors out of pocket.

The survey showed that Costs Lawyers are becoming more comfortable with the electronic bill of costs – 57% said they were getting used to it, compared to 41% in 2018 – but 36% still think it is making things worse, and 24% described it as a “hard sell” to solicitors. Indeed, a mere 5% said solicitors were getting the hang of the electronic bill.

Some 72% of Costs Lawyers said the electronic bill had increased the costs of assessment, which is unsurprising as users get to grips with it.

The recent guidance provided by the Court of Appeal on the proportionality test will have been welcomed by members (the survey was carried out before the ruling in West & Demoupilied), with 57% saying that up until now “everyone has their own approach” to the test and 59% noting that it depended on which judge you were before. Nearly half (47%) also called for a comprehensive review of the costs provisions in the Solicitors Act 1974, a view shared by many in the costs world.

The survey showed too that the Costs Lawyer profession is in a largely positive state: 41% reported that their practice/department had grown over the previous year, 37% said it had stayed the same, and 16% (down from 27% last year) said it had shrunk. This meant that 27% of firms took on more staff.

However, the prospect of the fixed recoverable costs regime being expanded to cases worth up to £100,000 was a major shadow on the horizon for many Costs Lawyers, and 55% said it would be bad news from an access to justice perspective as well.

In a case last year, a costs judge chided a firm of solicitors for not treating the Costs Lawyer on the other side with “the same professional courtesy as a solicitor would expect”. Three-quarters (76%) of the Costs Lawyers surveyed said solicitors did treat them with appropriate professional respect and courtesy, but 21% said they did not.

So overall, our members’ businesses are in robust shape. The survey shows the continuing and important role that Costs Lawyers play in the legal market, and I am confident of our members’ ability to adapt given the ever more central role that costs play in the conduct of litigation.

Claire Green is Chair of the Association of Costs Lawyers

This article first appeared in the Thomson Reuters Dispute Resolution Blog on 26 September 2019

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Published date
27 Sep 2019

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