Posted by Chris McClure, regional manager at Litigation Futures Associate John M Hayes
At a time when fixed costs reforms are moving with the same disregard and intent as a North Korean missile (and, it would appear, with the potential to do as much damage to the world of legal costs as we know it), solicitors in small and even, perhaps, medium-sized outfits must ask themselves this question: “Is there a safe place to hide?”
Where, to continue the metaphor, is the shelter of refuge?
For some, the sad reality is that there simply isn’t one. Those who are unable (or unwilling, as the case may be) to fundamentally consider and reconsider the way their practice operates will no longer be able to practise as profitably – or even profitably per se.
As the Court of Appeal in Broadhurst v Tan recently reminded us, fixed costs are conceptually different from assessed costs. Whereas the latter are awarded by reference to the work actually undertaken on behalf of the client, fixed costs are granted essentially without regard to the amount of work undertaken by the solicitor.
Profitability therefore becomes synonymous with economy and efficiency. The current fixed costs regimes can and, for many, do work. But as the fixed costs net widens and increasing numbers of solicitors are thereby subject to working under a given system, it will become increasingly important for fee-earners to make the system work for them as the stream of hourly rates billable work, essential to supplementing – or even creating – profit margins, becomes increasingly narrow.
Perhaps, however, in a strange but rewarding way, those solicitors who have traditionally worked at something of a regular undervalue may yet find themselves in the proverbial bunker. Whilst some legal aid work has, at least since 2007, been subject to fixed costs, publicly funded civil cases remain exempt and, as far as we are aware, there are no plans to change that.
But the point goes further than this. Courts have discretion to award a publicly funded party their inter partes costs on either the standard or indemnity basis. In such situations, the indemnity principle is disapplied and the publicly funded receiving party, who thereby enjoys costs protection, is now entitled, via their solicitor, to recover costs from their opponent at inter partes rates.
Thus civil legal aid practitioners who are adept at securing costs awards for their clients may yet glean the best of both worlds (or whatever is left of them post-Jackson) in the sense that, firstly, publicly funded civil work is unlikely to become subject to fixed costs; and secondly, there is always the potential to secure hourly rate costs at the higher inter partes rate.