Not so fixed fees

I’m not sure if Lord Justice Jackson has recently started taking backhanders from the Association of Costs Lawyers but, if so, I’d be happy to start contributing to the payments. How else to explain his proposals for the extension of fixed fees?

Payments are to be linked to one of ten different phases with endless scope for arguing it was premature to undertake a particular phase (eg Witness Statements), full payment for each phase is subject to it being “completed” (what does “completed” mean?), or 50% payment if a phase has been “substantially started” (what does this mean?). It would not be difficult for a costs firm to set up a business model offering to maximise solicitors’ recovery based on these proposals and charging on a contingency fee basis.

The real problem with these proposals, I would suggest, it not a practical one but, rather at a more fundamental level. (And I do not simply mean whether it is realistic or fair to try to have fixed fees at all.)

There are two basic approaches to recovery of inter partes costs. The first is to have a fixed fee system where the fees are fixed by reference to the nature of the litigation, or the complexity of the case, or the value of the claim, or a combination of these elements. Under this system, the actual work undertaken is irrelevant.

The second approach is to have a system which attempts to set the level of fees payable based on the amount of work actually done. This is the existing (if imperfect) hourly rate system we currently have (for those cases not already subject to fixed fees). The more work (reasonably) undertaken, the greater the payment.

Jackson LJ’s proposals run the danger of conflating the two different systems.

If we are to have fixed fees, why should it matter whether a solicitor has, for example, completed work in relation to witness statements, or substantially started work in relation to witness statement, or, indeed, done any work concerning witness statements? What does a fixed fee system partially based on the work actually done add to the supposed benefits (certainty, end to costs budgeting, end to costs disputes) of fixed costs generally?

There are, of course, potential advantages and disadvantages to having staged fixed fees.
On the one hand, if fees are not staged there is an incentive for solicitors to settle the claim as quickly as possible to maximise their profits. Speedy settlement is a good thing for clients. On the other hand, if they are not staged there is a danger claimant solicitors will under-settle claims in their haste to conclude matters. That is a bad thing for claimants.

If fixed fees are not staged there may be a risk defendants will fight cases for longer, or to trial, knowing there is no additional cost consequence (other than increased own costs). Conversely, where fixed fees are staged, there will be a clear incentive for solicitors to press on to the next stage of the litigation and secure the further payment. (How many thousands of hours of judicial time have been wasted hearing arguments over “premature issue” in predictable fee cases because of the incentive in tipping the case into litigation and therefore potentially recovering greater costs?)

It is far from self-evident that the latest proposals have been put forward having properly considered the advantages or disadvantages of linking the fixed fees to the actual work undertaken.

6 thoughts on “Not so fixed fees

  1. Simon, the days of payment for “work actually done” disappeared long ago, with the advent of case management systems and standard times (or worse, draftsmans “estimates” because the standard time isn’t high enough).
    If anyone cared to analyse (and lets hope Jackson LJ doesn’t read your blog!) how little time a “fee earner” actually spent in pushing buttons to produce standard instructions, questionnaires, letters, schedules et al,then there would be much less wailing and gnashing of teeth about fees being fixed
    The really shameful part of all this, is that solicitors know they don’t spend the time

  2. A Lord Justice not thinking something through properly before saying it? I’m not having that…

  3. Excellent analysis Simon, anyone who knows a thing about costs will know what you say is 100% right, thinking of it outside the box, yeah the technical challenges to the current proposal could extend our stay of execution by about 12 months, go Jackson go for it!

    The worst idea under Laspo was the Precedent H, the second worst idea was directing parties to draw bills of costs like Precedent H’s, the latest idea is the worst of the lot fixed fees for the Precedent H stages.

    Where does the ACL stand with all this? they represent costs draftsmen yet they have done zip zero about this mess, ahhhh right it all makes sense now they compromised us then those responsible ran for cover to prevent the mutiny that was bound to happen.

    Good point anonymous 9:27am

  4. At Anonymous 9:27. Are you saying that all solicitors are dishonest? I have never inflated a bill in my career and nor have I ever worked with anybody who I believe has done so.

  5. I trust whichever CLs have been invited to the CJC to “discuss” fixed fees (see the Gazette) have the wherewithal to stand up and say fixed fees are wrong and don’t work, rather than play the simpering Yes men that sort of Jackson forum usually attracts

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