Are you living a champagne lifestyle on a beer budget?
Have you noticed, over the last few years, that you are having to work harder in order to earn the same money? That’s the ever-increasing effect of the Jackson style rule changes and LASPO. Three major factors have taken much of the profit out of injury litigation – fixed costs in the fast track, the end of recoverability of additional liabilities and the new test of proportionality. Indeed, many claimant lawyers are now working so hard to stay at the level enjoyed pre-1st April 2013, that it could be said they’re ‘living a champagne lifestyle on a beer budget’. Ian Moxon reports.
Most of us can’t simply work harder (having got this far, many of us are almost burned out anyway!). From my perspective, as a Costs Lawyer, this is what I think claimant PI practitioners can do to make their businesses more profitable:
- Only take on the most profitable cases: Only take on those cases that you can win and which will pay the most costs and reject those that won’t pay. This, it seems to me, is where the battle is won and lost. There used to be a saying ‘crime don’t pay’ – and that is very true, criminal legal aid lawyers are typically very poorly paid. There could, perhaps, be a new similar saying for post-LASPO PI lawyers… My advice here is to ramp up your own marketing activities so that you have an almost constant procession of new leads coming in for your Risk Assessment front line to choose from. Doing that marketing work yourself will avoid many of the unwanted trappings of entering into contracts with claims farming organisations such as having to take on cases you know won’t be profitable, having to pay extortionate marketing/ referral fees for cases you don’t want and having to contend with substandard legal services providers (such as medical agencies).
- Know the law relating to between the parties costs recovery like the back of your hand: Seriously, there are potentially massive benefits from properly understanding Part 36, knowing when you can get out of the fixed costs regimes and understanding the best tactics behind costs budgeting etc. The benefits from understanding those costs tactics come whilst the case is still live, not once the file has been sent to Costs Lawyers. If you don’t have that knowledge, then bring in your Costs Lawyers whilst the case is still live.
- Extortionate Court issue fees: I would hope that, following the UNISON v Lord Chancellor victory, Court issue fees in civil money claims will come down. However, until then, unless your client qualifies for exemption or remission of Court fees, I recommend that PI lawyers make every effort to settle claims without having to issue proceedings. I know there are tactics on both sides in relation to this but from a cash-flow point of view, PI lawyers cannot afford to be investing up to £10,000.00 up front throughout their entire caseload. Also, don’t forget that if your client does qualify for exemption or remission of Court fees, you need to file a fresh EX160 form with every further Court fee, not just the initial issue fee. Try to keep up to date with your own client’s eligibility for exemption or remission of Court fees as the case progresses, as that may change (again, potentially saving you money).
- PI lawyers should not pay anyone, unless they really have to, until the costs are in: The gravy train of injury litigation flows a long distance from the practitioner’s office. Experts, barristers and legal services providers should all be brought into the same boat as their instructing lawyers if they want the post LASPO work. A PI lawyers’ business needs cash coming in, not out. Setting up deferred payment arrangements with experts, barristers and legal services providers is, therefore, vital to the continued success of the legal practice. Even better, ask barristers and legal service providers to take the rough with the smooth, with them agreeing to waive fees where cases are unsuccessful in return for a guaranteed flow of work. Do bear in mind, however, that expert witnesses (particularly medical experts) are slightly different in that respect and, indeed, I get the feeling some medical experts are more favourable to those firms who pay their fees straight away. Always avoid dealings with medical agencies like the plague because (1) their fees are usually too high, (2) not being in first-hand contact with your own medical experts is a hopeless situation, (3) expert evidence coming via medical agencies is often poor quality and (4) your costs in having to repeatedly chase up the medical agency won’t be recoverable at the end of the case (effectively wiping out any benefit gained from the deferred fees arrangement with the medical agency).
- Charge your own clients something: Now there are problems with this; the law does not want you to charge your own clients more than can be recovered between the parties (section 74(3) of the Solicitors Act 1974) and, of course, PI lawyers have a duty to act in their own client’s best financial interests – even if that means telling clients that a different law firm might be cheaper. Nevertheless, those hurdles are surmountable and, after all, it was the Government that ended the recoverability of additional liabilities, not PI lawyers. If you want to charge your own clients something by way of irrecoverable costs (and I recommend you do, unless the client is a child or a protected party), then you must inform your clients, at the very outset, that your own fees and disbursements might be more than they can recover from their opponents in county court litigation and that they agree to pay those costs regardless.
- J-Codes: We are all moving rapidly towards a world where robots and fancy technology will do us out of work (and so I’m probably shooting my own foot by giving this advice). There will soon be a new format Bill of Costs which can simply and cheaply be populated with data from the lawyer’s own computer time recording system – but only if that WIP system records time under ‘task’, ‘phase’ and ‘activity’ codes (J-codes or similar). For those PI lawyers who don’t have that J-Code data, it will be an exceedingly time-consuming job for their Costs Lawyers to input their times spent into the new format Bill of Costs (much more time consuming than is currently the case), but only a fraction of that time spent will be recoverable between the parties. Practitioners will, therefore, be able to save themselves quite a lot of money in irrecoverable Costs Lawyer’s fees by recording their times spent using J-Codes.
- Disbursement funding loans: Some PI lawyers are entering into credit agreements with their own clients in relation to payment of disbursements (disbursement funding loans). The idea is that the client agrees to pay the lawyer interest on disbursements the lawyer pays on the client’s behalf as the case progresses. The interest on such loans is then recoverable inter partes provided the same was reasonably incurred and is reasonable and proportionate in amount (see, for example, The Secretary of State for Energy and Climate Change v Jeffrey Jones and others). It seems to me that is a good idea, but there are potential pitfalls (especially surrounding the provision of financial services) and care is needed. Your Costs Lawyer can help with recovery of such interest by including the same in the final inter partes Bill of Costs in a special way.
- Work more efficiently: This is where many PI firms go wrong, particularly when it comes to delegation of work. I know of one firm in particular where even the most routine task sees input from partner, conducting fee earner and then junior fee earner at least, with duplication of effort ad infinitum – and, consequently, their costs recovery is terrible. It was observed in the case of Higgs v Camden & Islington Health Authority by The Honourable Mr Justice Fulford that:
“…Sight should not be lost of the fact that where a Partner does do the work it will tend to be done more efficiently and more quickly (and perhaps more cheaply) than if delegated…”
I am very much with Mr Fulford on that; delegation can bring great efficiency but only if it is done properly (ask your Costs Lawyer if delegation at your firm is working or not). It is also necessary for partners at firms of PI lawyers to know which of the firm’s fee earners (including themselves) are the most efficient and which are not. A good way to obtain objective knowledge about fee earner’s efficiency is to ask for your Costs Lawyer’s opinion. Hourly rates also need to be looked at carefully. I know of one fee earner in particular who is so efficient that recovery of even double the SCCO Guideline Grade A Rate leaves him and his firm short changed. District Judge Stocken explained at a detailed assessment hearing a very long time ago that the way to determine hourly rates in a Bill of Costs was simply to look at how efficiently the work had been done overall and, of course, she was right.
The SCCO Guideline Rates do not cast anything in stone and there are many fee earners out there who could be charging far higher rates than they realised were recoverable due to their supreme efficiency (although, having said that, there are quite a few others who ought to be charging a lot less – talk to your Costs Lawyer in confidence).
Are you living a champagne lifestyle on a beer budget? If you are, talk to your Costs Lawyer; they may be able to help.
Ian Moxon is a Costs Lawyer at PIC.
To contact him about any matter raised in this blog or any other costs matter, please click here.