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Kerry Underwood

Senior partner , Underwoods Solicitors

Costs comeback

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Costs comeback

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Kerry Underwood considers how the costs landscape appears set to change in the coming months

Solicitors Journal and I have had more comebacks with each other than Dame Nellie Melba. I’m back. Again.

Winding back the clock, my first column appeared on 6 September 1996 and was entitled, How To Profit From Conditional Fees. I wrote: “The success fee can be challenged on taxation under Ord 62.r 15A of the Rules of the Supreme Court and the same provisions apply in the County Court by virtue of the County Court Rules Ord 38, R21(4a).”

Today, after 24 years the names of the rules have changed but the issues have not. So what are the likely hot topics over the next 18 months? The current problems have introduced the legal system to Zoom and remote hearings and meetings; and some of these apparently temporary provisions will stay. Expensive advocates appearing in court to argue points of law, as compared with cross-examining witnesses and so on, could become a thing of the past.

Fixed recoverable costs

Fixed recoverable costs in all civil litigation are set to increase to £100,000. Personal injury lawyers are well used to fixed recoverable costs; general civil litigators are not – and for them, this is likely to be the biggest practical change in their working lives. And although the initial damages limit will be £100,000, this is likely to soon increase to £250,000. I believe that all civil work will eventually be subject to fixed recoverable costs.

There is already a capped costs pilot in the Business and Property Courts for claims up to £250,000, and the first reported cases on procedure and costs in that pilot are coming through. Following covid-19, businesses large and small will be short of cash and the pressure for reduced, and certain, legal costs will increase and so we can expect the pilot schemes to spread. No change is likely before October 2021 and is likely to be retrospective in the sense that it will apply to all unissued cases. Those may be cases in your filing cabinet or on your computer now.

Personal injury

The extension of fixed recoverable costs causes no conceptual difficulties for personal injury lawyers, long used to such a system, but it will reduce the recovered fees in multi-track work up to £100,000. The big change for personal injury lawyers is the increase in the small claims limit from £1,000 to £5,000 for road traffic accident matters; and from £1,000 to £2,000 in all other personal injury work. These changes have constantly been put off; the earliest implementation date is now April 2021, but October 2021 looks more likely.

The issue of a whiplash tariff remains government policy, and it is this massive reduction in damages in most personal injury cases, rather than the increase in the small claims limit, which will be the biggest problem for the profitability of personal injury firms.

Offshoring

As chairman of an offshoring company, I have a vested interest in this subject, but it seems obvious to me that the combination of fixed fees and the ability to work remotely (which we have all now learned works) will lead to some legal work being done in cheaper jurisdictions. In my firm, the benefit of earning in pounds but paying in South African Rand is a key business driver. The losers here are likely to be the factory firms who do not see their clients and have no personal history or relationship with them. That work will go abroad.

Firms who see their clients and have built up relationships with them, their families, friends, local businesses and in the community, may benefit from an increased sense of community and localism as a result of coronavirus.

The case of Bott & Co Solicitors Ltd v Ryanair [2019] EWCA Civ 143 (in which I have been advising Bott & Co Solicitors) goes to the Supreme Court in October. The key issue is whether airlines and other such organisations can pay a client direct to avoid the solicitor taking their costs from the client’s damages. Each month I will look at funding and costs developments and look at practical ways to successfully deal with the forthcoming changes.

It is good to be back.  

Kerry Underwood Kerry Underwood is senior partner at Underwoods Solicitors underwoods-solicitors.co.uk. He also runs a consultant service at kerryunderwood.co.uk

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