Ian’s Top Ten Tips No. 10: Get Ready for the Race to the Bottom

Ian Moxon – Costs Lawyer

Ian’s top tip No. 10

Get ready for the race to the bottom

In my previous articles and seminars, I have stated that “proportionality is king”. Well, I was wrong. Actually, the consumer is king, proportionality is the queen and we are their servants.

A race to the bottom

The Jackson style reforms aren’t a conspiracy to save Defendants and the government money and they weren’t devised to simply upset Solicitors either. Their purpose has been to put some power back into the hands of the consumers of litigation legal services in terms of cost (price). The term “race to the bottom” has come from the fact that soon consumers of litigation legal services will be able to compare the market. Which firm of Solicitors will give me, the consumer, the best deal?

In the world of Claimant injury litigation, most claims used to funded under CFAlites (no-win no-fee agreements, where the client had no effective liability to pay his lawyers anything; win, lose or draw). Now that additional liabilities are no longer recoverable for the vast majority of such claims (and taking a lot of the profit out of such work), Claimant injury Solicitors are now charging their own clients those additional liabilities (usually capped at 25% etc) and any base costs which can’t be recovered inter partes. Consequently, those injured consumers of litigation legal services are now paying for that service to some extent – and this is where the competition starts.

Client feedback and consumer choice

It is inevitable that, soon enough, there will be publicity which highlights to the public what to look out for when choosing a firm of injury Solicitors. Indeed, I’m surprised Martin Lewis or some Watch-Dog style TV article hasn’t done so already. Additionally, it is only a matter of time before we get a Tripadvisor style website comparing one firm of injury Solicitors against another on price and service. Indeed, there will probably soon be a whole host of publicity fuelling the race to the bottom. There was no point having such publicity when most injury claims were funded via CFAlites, but now the situation has changed (the consumer is king).

Referral fee ban

The idea of banning referral fees was to help free up consumer choice and put power back into the hands of the consumers. I’m not sure that ban is working, as nothing much has changed. Isn’t it just the case now that all concerned refer to referral fees as “joint marketing fees”? Anyway, it’s still my advice that a client brought in by your own reputation and marketing efforts is worth twice as much as a client who comes from a referral.

Get ready to compete for business

So we have some fixed fees in injury litigation and more are on the way. The closer you can operate, at a profit, to the fixed costs, the better placed you will be when the race to the bottom begins. In other words, now is the time to be streamlining your procedures so that your business is profitable from an income of fixed inter partes costs only (with any costs coming from your own client being a bonus).

The race to the bottom could kick off quite quickly (following a Martin Lewis exposé etc). So you need to be ready. But better still, why not start the race to the bottom yourself, on your own terms?

Ian Moxon

Costs Lawyer

May 2016