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Solicitors on costs management: ‘Better the devil you know’

Perceived client preference for fixed recoverable costs splits PI and commercial practitioner opinion

11 April 2017

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Solicitors believe the costs management process has had a negative impact on litigation, yet still prefer it to fixed recoverable costs as it is ‘better the devil you know’, a new study has revealed.

The latest costs management survey found 65 per cent of personal injury solicitors and 60 per cent of commercial litigators believe the costs management process has had a negative impact on litigation.

The survey was completed by 146 PI and 155 commercial litigators from the UK’s top 200 firms. However, despite their misgivings, nine out of ten PI lawyers and eight in ten commercial solicitors prefer costs management to fixed recoverable costs.

‘Lawyers are trapped in a marriage of convenience with the costs management process,’ said Phil Bradbury, head of costs management at Just Costs Solicitors. ‘There’s no love or affection for the process, but it’s better the devil you know and they won’t be filing for divorce any time soon.’

Bradbury continued that most solicitors feel there is a lack of consistency in the judicial approach towards costs management: ‘The lack of guidance as to what proportionate costs means and the fact many judges are still unclear on what basis they are supposed to review the parties’ budgets only serves to heighten their concerns.

‘The introduction of costs management has only increased the cost of litigation in some litigators’ eyes. The need to comply with deadlines, or having to apply for an extension before the deadline expires, is seen as an accumulation to the cost of litigation, especially when the principal claim remains their main focus of litigation.’

Responses to 2017’s costs survey also showed that PI solicitors and commercial litigators have differing views on whether their clients would prefer costs management or fixed recoverable costs.

Just over two-thirds of PI practitioners believe their clients would prefer costs management, while the majority (57 per cent) of commercial litigators believe clients prefer fixed recoverable costs.

‘There is a difference of opinion here,’ said Bradbury. ‘Litigators feel their commercial clients would like to know the risk of financial exposure through involvement in a dispute and potential litigation, whether claiming or defending the matter.

‘The knowledge of a fixed fee would provide clarity and reassurance within the litigation and dispute resolution process, enabling them to make a decision about the best way ahead from the outset.’

Speaking at 2016’s IPA annual lecture, Lord Justice Jackson revealed his recommendations to extend fixed costs to all civil claims, including PI cases up to a value of £250,000, irrespective of complexity.

Commercial litigators say this could lead to large corporations spending money at a rate beyond that which is recoverable on disputes with smaller businesses, whose costs are fixed at a lesser rate.

There is also the possibility that a complex case, though low in value, would require a significantly greater amount of work to conduct than is allowed by its allocated cost band. This may result in an aversion among law firms to take on such cases, preventing legitimate claims from being pursued.

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