A leading price consultancy has said the collapse of a costs firm highlights the struggles faced by suppliers to the legal profession. Just Costs Limited folded last week after failing to overcome what were described by owners as ‘substantial historical financial liabilities’.
The business was acquired through a pre-pack administration led by Just Costs Solicitors Limited, a new company fronted by former director Paul Shenton and solicitors Jodi Booth and Adam Quinn.
While the future of almost 50 staff members was secured through the deal, the pressures on the costs law sector – along with other providers to the legal profession – remain acute, according to Martyn Jennings, chief executive of national legal pricing and costs consultants Burcher Jennings.
‘These latest developments affecting costs firms are just the canary in the mine for much broader cashflow issues in the legal sector,’ said Jennings.
‘Many law firms can’t pay the expenses they incur through litigation until they’ve been paid at the end of the case.
‘Others choose not to do so as a conscious cashflow strategy. As a result, many costs firms – particularly those undertaking personal injury type work – are accumulating vast debts.’
Jennings said his firm has brought together law firms, costs firms and a funding provider to smooth unsustainable payment delays and debt accruals that could cause problems for many costs firms.
He added: ‘The costs market is still viable, but new ways of ensuring worsening cashflow issues and risks are shared or better mitigated are required.’
Meanwhile, Shenton, managing director of Just Costs Solicitors, said that the deal satisfies statutory insolvency rules and ensures that 46 jobs are saved.
‘This transaction enables the new company to focus on providing their hundreds of solicitor and institutional clients with the market-leading service they have come to expect over the last 11 years,’ he said. ‘There will no longer be the burden of substantial historical financial liabilities.’
The acquired business had been forced to enter a company voluntary arrangement last October, which required it to make 24 monthly voluntary contributions of at least £33,412 during the term of the arrangement.