The
new Civil Procedure Rules (Woolf Reforms) came into effect on 26 April
1999. A key aim of the reforms is to
provide a system of resolving disputes which is more affordable and which makes
the costs of litigation more predictable for parties. Although the Woolf reforms leave the finer details of costs'
arrangements between solicitor and client to be decided by the parties, recent
case law has significantly widened the options of payment of costs.
We
set out below an example of a hypothetical billing and funding arrangement
entered into between solicitor and client.
Swann
Limited and its solicitors, Jones Smith & Partners, entered into a billing
and funding arrangement which both were satisfied dealt fairly and reasonably with the structure and
payment of legal costs in this piece of litigation.
The
arrangement worked as follows:
Ê No bills were rendered
throughout the litigation. A statement
of costs was produced in the form shown on conclusion of the matter.
Ë A detailed budget was produced at the start of the
matter. The total budget amounted to
£95,000. The anticipated duration of
the litigation was ten months. Swann
Limited agreed to pay Jones Smith & Partners £9,500 per month on the first
of each month.
(Successful
litigants will not only have the benefit of a budget but should recover the
cost of the preparation of the budget document in the litigation itself: Rule
43)
Ì The actual work in progress figures are
included in the statement.
Í A 'budget
success and failure' formula was agreed in that:
(a)
If the actual cost
figure comes in at less than 50% of budget figure a success uplift of 25% is to
be applied;
(b)
If the actual costs
figure exceeds the budget figure, the budget figure caps the fee chargeable
Î The position
in relation to the client recovering his own internal costs is somewhat
unclear. Rule 48.6 states 'Companies
can be litigants in person and as such can recover costs'. What and how much will undoubtedly be
decided in future case law. Swann
Limited in this case agree to pay Jones Smith & Partners a success fee
based on 25% of any of their internal costs recovered.
- If appropriate consider capping the number of
hours a day/month that the firm can bill;
- Ask for regular estimates of costs at various
stages of the matter; eg, in litigation, request an estimate up to the
discovery;
- For matters that are likely to continue for a
long time, ask for regular monthly bills;
- Ask for a detailed narrative to accompany the
bill, describing exactly what actions have been taken and by whom during
the relevant billing period;
- Check all disbursements carefully; and
- Always query anything which you do not understand
or disagree with on the bill.
Above
we review a hypothetical billing and funding arrangement entered into between
solicitor and client.
