A worrying legal costs development

The decision in Crane v Canons Leisure [2007] EWCA Civ 1352 means that solicitors can outsource work but then charge for this work as though they had done it themselves (with a higher hourly rate than that paid to the agent) and claim a success fee on top.  Therefore, in the case of detailed assessments, solicitors can outsource the bill drafting and advocacy at a rate of, for example, £100 but then claim a rate of, for example, £130 plus a success fee of up to 100%.

Lord Justice Jackson’s preliminary report on his Review of Civil Litigation Costs quoted the view of FOIL that this decision was “iniquitous and further increasing costs”.  Jackson LJ viewed the decision as an example of the rules creating “windfalls for claimant lawyers” and raised the possibility of reversing this decision through primary legislation.

It is therefore unfortunate that news emerges of a change to the way barristers’ fees can be treated.  According to a recent report in the Law Gazette, solicitors will for the first time be able to profit from instructing barristers following rule changes agreed last month by the Bar Standards Board.  It will enable a relationship with solicitors that will allow the solicitor’s firm to treat the barrister’s fee as a cost that they can mark up when billing the client to generate a profit (and therefore, equally, an unsuccessful defendant).  Previously a barrister’s fee was treated as a disbursement.

Traditionally, outsourcing certain work to barristers has been one of the few factors that works to limit the level of legal costs incurred.  It is not uncommon to see a barrister in a claim charging an hourly rate of, say, £150 while the instructing solicitor is charging £250 per hour plus a 100% success fee (ie £500 per hour).  If it becomes common practice for counsels’ fees to have a mark-up added this will be a worrying legal costs development.  Just as others are looking to reduce the disproportionate level of legal costs incurred in litigation, so the Bar has taken a step in the other direction.  This looks likely to lead to the next round of the costs war.

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