Future is fixed billing - Neuberger
Master of the rolls Lord Neuberger has warned that alternative business structures may sound the ‘death knell’ for hourly billing.
Speaking at the Association of Costs Lawyers conference today, Neuberger said clients were increasingly put off by hourly billing and attracted by fixed fees. As well as ABSs, he said the economic climate and the advance of legal comparison websites make fixed - and mostly lower - fees inevitable.
But Neuberger told lawyers they should not fear for their business or expect worse pay as a result of changes to the market.
‘If litigation is cheaper, elementary economics suggests that there will be more of it,’ he said.
‘Rather than charging high in a few cases, and driving away those with valid claims from the courts, lawyers should be able to charge realistic fees, and encourage many more clients to instruct them to fight their case. So, significantly lower legal costs should not lead to less money for lawyers, but it should lead to better value for money, and should give to our citizens what so many are currently denied, namely access to justice.’
Neuberger claimed that excess legal costs had ‘disfigured’ the civil justice system for too long and praised Lord Justice Jackson for the ‘boldest attempt to cure our costs problem yet attempted’. If the Jackson proposals fail to reduce costs, he said, the UK would have to adopt either a US-style costs rule or German-style fixed-costs regime.
Neuberger also revealed that all judges will be sent for a day’s training to accustom themselves to the new era of costs post-Jackson. ‘I appreciate you will not get judges to have a brilliant understanding of costs management from one day’s training,’ he said.
‘Judges will make mistakes and not get the point but the only way they will learn is by doing that.’
- Read Rachel Rothwell's blog on fixed fees
Comments
Fixed fees
Neuberger's comments seem confused: I wonder how many fixed fee cases he did during his time at the Bar.
"If litigation is cheaper...there will be more of it". Is that supposed to be a good thing, then? I thought the whole thrust of the Protocols, etc, was to discourage litigation. The notion that fixed fees will provide access to justice is surely nonsense, because even the fixed fee is not going to be affordable to most people - a bit like the fixed-price dinner at the Ritz...
One day's training? Clearly woefully inadequate, especially when one remembers that most judges are barristers, who have no experience of how difficult it can be to keep costs under control.
I doubt many of the new
I doubt many of the new entrants will be opting for the risk of litigation. They will stick to the safer options of LPAs, wills, conveyancing, trusts, compromise agreements, divorce where it is easier to quantify the amount of time and come up with a fixed price.
Fixed Fees
Odd that he makes no reference to the substantial increases in the cost of litigation caused by the front loading which is now a requirement of both the CPR and the FPR.
Judges, like everyone else nowadays are looking for something for nothing. They expect the highest standards of case preparation and put more and more pressure on litigators to be prepared for any eventuality then wonder why it all costs so much.
I started in the law 45 years ago. Trials lasting more than two days were a rarity, similarly trial bundles were never more than a couple of hundred pages. Most cases settled before the trial preparation began and it was during that preparation that the costs were ramped up. Nowadays the only significant avoidable cost in the weeks before trial is the brief fee, the solicitors work having been done before or shortly after proceedings were issued. That change is entirely the result of judicial interference either in court or in the writing of the rules. Add to that the burden of PI risk and it is not surprising litigation costs have rocketed.
The only way costs can be reduced is by changing the law of PI to allow us to offer work done to a Ford Ka rather than Rolls Royce standard. Is that what Neuberger wants?
Quite. Rather than castigate
Quite.
Rather than castigate the profession, Neuberger should direct his criticism at his "esteemed" former colleague, and supposed intellectual, Lord Woolf-whose reforms have been catastrophic.
Fixed Fees
Fixed fees sound attractive if you say it quickly but the profession has tried this already with conveyancing. The result - massive pressure on profit margins, reduced ability to used qualified staff and huge increases in indemnity premiums, and this is for a product which has some degree of predictability.
I suspect that the drive towards fixed fees is part of the larger aim to reduce the number of smaller firms in the market and create a much smaller number of considerably larger entities.
Neuberger is WRONG
The current price of a litigation case for almost all personal injury Claimants is current zero - not a fixed price.
If the Claimant is funding the claim via a CFA lite with an ATE insurance policy, then the cost to the Claimant is zero, whether he wins or loses.
If the Claimant is using pre-purchased costs insurance (BTE), the cost of the litigation is again zero.
The problems with fixed costs are plenty - square pegs for round holes etc.
I always find it hilarious when High Court Judges attempt to speak knowledgeably about the subject of costs (particularly to a conference of Costs Lawyers). They clearly do not have the experience or expertise to confidently address the issues.
I too have been in the profession for a long time. The gentleman above is entirely correct - before Lod Woolf became involved, the costs of litigation (especially personal injury claims) was far less. It was the "Woolf reforms" and then the CFA fiasco which caused costs to esculate to todays' high levels. Why don't we just go back to 1996 when everything worked ok?
"Lod Woolf" -whilst obviously
"Lod Woolf" -whilst obviously a typo, it is almost correct-as Clod Woolf!
The reason we will not go back is the inability of our leaders to admit they got it totally wrong. And as you say judges pontificate about costs, but in reality have hardly any experience of them. Presumably this is a result of judges being mainly from the Bar-where the fees are sorted out by somebody else.
Fixing flexibility
This is a brilliant take on fees from a popular point of view but how do you fix flexibility and what kind of side effects would this have? Not all kinds of disputes can pass through the same template whereas a strightforward dispute which goes to litigation in the end may take fixed costs what happens in complex contractual disputes which go to litigation for example? One thing is certain though and this is that lawyers will not take such disputes on unless their fees will be paid and since they will not be paid by the other party simply becasue they are fixed by a parctice direction for example the relevant fees will end up being paid by the client. But if it is a discrepancy between the complexity of the matter and the likely level of fees which do not qualify as being recoverable then such action may or if the client has financial difficulties will not be pursued and the side effect of cost fixing is...limiting the access to justice. If the second template from above is applied to a commercial dispute then it can be seen as a reality.
I do not see a solution in shorting up the bundles or any statements of case or saving on any presentation expense especially since from my humble experience most judges rightly expect extensive detail and the fear from a potential uncontrolable claim in negligence should over-ride the fear from a claim of over-charging which is controlable as far as informing the client and explaining what work will be done and why is concerned.
I am not saying that this will happen but what I am saying is that I am interested to see how the balance is struck.
Fixed Fees
Some 20 years ago, I instructed a Leading QC to represent my Client in a House of Lords case; his fee was £20,000 for 3 days. Within a couple of years the same QC became a Judge and subsequently criticised the cost of Litigation. I assume that Neuberger, Jackson and Clarke have operated at the top of the Profession before being elevated to their present posts. I would invite them to disclose their historical fee notes, so we can all see exactly how much money they made from the Profession, they now wish to decimate. I am sure this will be of comfort to the thousands of part qualified Solicitors who are being spewed out of The College of Law; and will end up working on the Checkout at Tesco
Oh yes, Neuberger was
Oh yes, Neuberger was extremely expensive!
He was also very good and his opinions were models of logic. Amazing how counsel changes when they become judges. Logic? err-nul points; but, of course, their remuneration now depends on pleasing their latest clients-our (and their) political masters.
Neuberger needs an economics lesson
This is how I see the chain of causation:
fixed fees --> more litigation but similar profits --> more work for lawyers
Essentially, then, under a fixed fees system lawyers will be doing more work for the same wage. How wonderful for them.
If Neuberger is going to argue along the lines of "elementary economics" then he needs a better understanding of the subject.
Uproar and debate
Hourly billing will remain, despite what the Master of the Rolls, the owner of my local cafe or Dave from down the pub says. Yes there will be experiments with fixed fees, contingency fees, third party funding etc. However they will be the exception not the norm.
Woolf gave the mass public greater access to justice, at the cost of cutting large insurance companies' profits. I commend him on a job well (if not brilliantly) done.
The coalition has reversed this. Thanks to Mr D Cameron and Mr N Clegg, those insurance companies will enjoy greater profit margins than in recent years.
However hourly rate billing, just like death and taxes, will remain.
Brief fee
£20,000 brief fee for leader for a three-day case in the House of Lords? That sounds cheap to me. Judges tend to convenienty overlook that a very large chunk of costs are attributable to counsel's fees, which can be little short of outrageous.
fixed fees
Happy to do litigation on a fixed fee - but are we then going to find ourselves priced out of the m,arket like conveyancing ?
We have been encouraged to do cheap conveyancing and this has resulted in factory firms with the massive claims - we would have been better to keep to the old scale fees - will Lord N suggest a scale for the litiagation which will mean that you can do a job properly and be properly remunerated? Presumably also he is attacking plumbers and car mechanics who also charge by the hour?
Fixed Costs
In reply to "Me". The average yearly salary in 1992 was £20000 so the Client did not find the Brief Fee cheap but I take the point. Are we just going to sit here and let this happen without a fight ?
Costs, what costs?
With the way things are going, the litigant in person will be both the applicant and the defendant/respondent in most cases, thus knocking any need for the 'costs' rules, calculations and debates on the proverbial head! (from a Troll!)
costs
At last we see someone who has viewed what happens in the real world, people are sick of getting screwed by huge bills when they can ill afford to run their daily lives comfortably. Things in the world have changed , solicitors also need to wake up and stop ripping people apart and causing more poverty.
Its not just high flying companies that are litigating but small guys like me that have a flavour for Court procedures and arguments but we still rely on experts. More people are taking on the role of LIP and taking Mckenzie or litigation friends along. I have appeared many times in a role where I have ended up with the Court's permission fighting for the rigths of those getting screwed in cases costing vast amounts of money and before any offer of mediation.
My view is mediate more and before thousands are spent, keep costs reasonable and offer a quality service based on reality of what can be afforded by the masses. I would imagine more cases can be dealt with without huge crazy telephone numbers being thrown around by those living on mars.
Costs
Fair enough, the cost of litigation has got beyond the pocket of the ordinary citizen but don't blame the lawyers who do the work. The problem is no in the hourly rate - general inflation accounts for the differences there - but in the hours lawyers are expected to spend in case preparation compared with the position just a few years ago.