Time to simplify absurdity of costs arrangements.

I am a late entrant to the legal profession, having spent most of my life doing a ‘proper job’. One thing that struck me on enrolment was the absurdity of the costs arrangements. 

If I go into a shop to buy a cauliflower the shopkeeper does not tell me I have a right of appeal to the national greengrocer’s association to determine whether his profit is legitimate, and whether the cost of storage was reasonably and necessarily incurred. And he doesn’t demand I submit a budget months in advance to tell him how much I intend to spend on green vegetables.

There is a real temptation to ‘pad out’ costs in litigation. On detailed assessment of costs on the standard basis, you know that you will only recover about 75% of your costs. This leaves the solicitor with the choice of taking the loss on the chin or having a very unhappy client. 

No matter how much you tell clients that you never recover all your costs, it is a bitter pill to swallow, having won a case and recovered your costs, if your solicitor then demands a ‘cut of the take’ as well. This unhappy fact of life is a direct invitation to a solicitor to put every single minute of time spent on a matter in the bill – on the basis that, if you do not ask for it you will not get it. The result is inflated bills. 

This practice is also justified on the basis that it gives you a stronger position in costs negotiations. It no doubt induces a certain cynicism in the judiciary when they see a bill that obviously contains irrecoverable items and where costs are out of all proportion to the matter in hand.

Then there is the disparity between different firms. I am frequently astonished by the amounts claimed by some firms for relatively minor amounts of work. On summary assessment you expect the judge to give you a haircut but some firms get repeatedly scalped. These firms do not seem to change their practice even though they must know that are never going to recover the sum claimed. 

One barrister, claiming £1,750 for a one-hour case management conference, admitted to the judge that he would be paid his fees in full even if the judge cut them down to a more modest £300, and therefore he did not really care what the judge allowed. One is therefore forced to ask: what on earth is the point of it all? 

There must be a better way to do this. Fixed fees certainly have their place but I hope we never reach the position where complex multi-party trust disputes have to be litigated on this basis. Budgeting might help a little although (to date at least) I am far from convinced that it will produce the hoped results. This has not prevented satellite litigation – budgeting has merely shifted it to before the trial. I fear for the sanity of the judiciary also; I have seen a judge’s eyes glaze over at the prospect of a costs management conference. Contingency fees are unlikely to satisfy successful litigants unless we are prepared to abandon the compensatory model of assessment.

Personally, I favour a very simple system. A solicitor acting in a contentious matter puts in a bill. His opponent may challenge it if he chooses and – if the challenger manages to reduce the bill by, say, 25% – nothing is payable and the solicitor responsible for the bill finds himself on the end of an automatic professional sanction for overcharging. If the bill is reduced by less than 25% then the paying party must pay double the amount claimed and also meet the real cost of the court’s time. Nobody would put in an inflated bill under those circumstances and no one would challenge unless they were certain of their grounds to do so.

The legal profession has created a costs monster – someone should slay it.

J Howard Shelley 
Bilston, West Midlands