Negotiating legal costs is a complex and subtle skill that takes years of experience to perfect. But for younger readers I now offer a master class in cost negotiating.
The following is taken from a genuine exchange of emails with a very well known firm of claimant lawyers. The underlying claim related to a case of food poisoning during a package holiday. Following settlement of the claim the Claimant’s solicitors presented a schedule of costs totalling £30,661.60.
I made my opening offer:
Without Prejudice Save as to the Costs of Detailed Assessment Proceedings
Dear Sirs,
I write further to the above matter where I have been instructed to act on behalf of the Defendant in relation to your claim for costs.
The Defendant offers £9,000 in full and final settlement (to include interest, where payable, and assessment costs).
I look forward to hearing from you.
Yours faithfully,
Simon Gibbs
Note the detailed reasoning for the reductions proposed and the extensive references to costs case law.
The Claimant’s solicitors responded:
Dear Simon
Thank you for your email and apologies for not responding sooner. I have been on annual leave for the last four weeks.
I note that you are instructed to deal with the issue of costs on behalf of the Defendant. I confirm that the Defendant’s offer of £9,000 is rejected. However, I put forward a counter offer of £23,000 in a genuine attempt to bring the matter to a close.
This offer is inclusive of interest, VAT and assessment costs. The offer will remain open for 21 days.
I look forward to hearing from you.
Kind regards,
X
At this stage any general members of the public reading this might be surprised that a firm of solicitors is prepared to write-off a quarter of their fees on the back of an offer without any explanation being given as to why the amount sought was deemed unreasonable.
Obviously, negotiating costs is a two-way process. My initial offer was obviously just a speculative opener and now I will need to move from that:
Dear X,
I write further to the above matter and your email below.
You offer is rejected.
Given the difference between the parties it does not appear that this matter is capable of agreement and I await sight of your Bill.
Please note I am authorised to accept service of Part 8 proceedings.
Yours sincerely,
Simon Gibbs
The Claimant’s solicitor, no doubt generally used to dealing with costs muppets who drip feed their offers responds:
Dear Simon,
Thank you for your email.
I note that our previous offer of £23,000 has been rejected and that you have requested a formal Bill of Costs. Whilst I am prepared to forward a Bill upon preparation, I would like to discuss whether you have any further authority to increase on your offer of £9,000. I appreciate that you are unable to agree £23,000, however, if you could confirm whether you will come up on £9,000, I am confident that we can agree something as I have authority to go down on the offer of £23,000.
If it is easier, I can give you a call and we can have a discussion in relation to the same?
I look forward to hearing from you.
Kind regards,
X
To which there is only one real answer:
Dear X,
Based on the limited information provided in your schedule of costs you have the best offer the Defendant is prepared to make at this stage. It is possible, though unlikely, that the Defendant may revise its position upon sight of a detailed bill.
If you have authority to come down from £23,000 then I suggest you let me have your best offer and I will, of course, give it proper consideration.
Yours sincerely,
Simon Gibbs
The Claimant’s solicitor obliges:
Dear Simon,
My best offer on this offer is currently £16,000. However, if you can arrange for the cheque to be dispatched to us within 7 days, I can agree £14,000 in an attempt to bring the matter to a commercial close.
I look forward to hearing from you with your thoughts.
Kind regards,
X
The “best offer” is £16,000 but they will take £14,000?
Obviously, at this stage my negotiating tactics are failing and I need to change my approach:
Dear X,
I write further to the above matter and your email below.
Although I appreciate the movement on your part, even your conditional offer of £14,000 is still more than 50% above my own valuation. Your offers are therefore rejected and I await sight of your Bill.
Yours sincerely,
Simon Gibbs
Funnily, the “best offer” has not actually been made:
Dear Simon,
Thank you for your email.
Would you accept £11,000?
Kind regards,
X
Never let it be said I adopt an intransigent approach to negotiations:
Dear X,
I write further to your email below.
The limit of my authority is £10,000. Please treat that as a Part 47.19 offer.
Yours sincerely,
Simon Gibbs
And finally:
Dear Simon
I accept your Part 47.19 offer of £10,000 to settle.
I look forward to receiving your client’s cheque for this amount within the next 21 days so that we can close our file of papers accordingly.
Kind regards,
X
How can a firm that has genuinely incurred costs of £30,661.60 (including paid disbursements) drop to £10,000 and still make a profit?
Of course, the negotiating stance adopted in this case will not be suitable for all matters. It’s often a case of horses for courses and “knowing your enemy”.
Equally, the real skill here, I would suggest, is not down to any clever negotiating tactics adopted but rather knowing the true value of the claim, making a sensible offer at the outset that would give good protection should the other side have prepared a bill and issued Part 8 proceedings as invited, and being confident enough to run the case to detailed assessment if necessary.