“THE LOAF OF BREAD PRINCIPLE”
At the major, Solicitors Costs Conference in London in
November 1999, I was asked to present my
views on the future of Legal Costs, presumably as I was a critic of the
CPR from a legal costs prospective (see Lawyer 10th January 1999)
The panel included 3 Judges and a past President of the Law Society and I
believe I was viewed as having a slightly radical view point and as someone
prepared to “shoot from the hip.”
I was given the last slot of the day, to present my theory
of the future of Legal Costs as “The Loaf Of Bread Principle.” My presentation,
to which I exhibited a Mighty White loaf, was that both Joe Publicand Joe
Public PLC, are not interested in the rules and regulations on legal costs,
whether it is the Civil Procedure Rules or whatever. What they are interested
in is a product/service that they can see value for, at a price which not only
will they pay but they will pay for again and again.
I went on further to state that legal services will become
more and more price sensitive with budget based billing becoming the norm. This
theory was basesd purely on self-interest of law firms aiming to reduce the
burden of the “Armageddon of cash flow” and the necessity to reduce fixed costs
of running their practices by the decrease in numbers of expensive and
unnecessary support staff.
Two years after the introduction of the Civil Procedure
Rules and the new Rule 15 on legal cost – which makes it compulsiry for clients
to receive information on costs budgets and funding, failure to do so can
possibly see the reduction of the solicitor’s costs to zero – we are nowhere
near convincing Joe Public or Joe Public Plc of the certainty of the price of
legal services. Consequently my view of the market is as follows.
Small legal practices will struggle to survive the
CFA/no-win- no fee culture, unless they change both work methods and culture.
To actually prosper these practices should look to reduce their major fixed
costs of office and full time staff. (See Smith
Graham (a firm) –v-the Lord Chancellor NLJ 1st October, 1999 p1443, in which a Judge allowed an
external enquiry agent (not employed by the solicitor, but being paid a set
fee) doing fee earner work to recover Grade 3 hourly rates. With over 30,000
full time law students in England and Wales, the small firms have a bottomless
pit of ad hoc resources for the bulk of paralegal and other such work.
In relation to Solicitor and client costs I do not believe
there is a great deal of relevance in most of the rules, regulations or case
law presently in force. The Solicitors Act 1974, Section 67, for example states
disbursements should be marked paid or unpaid, what possible relevance does
this have at the start of 21st Century? Rule 15 letters are getting longer and
more complex. In American, however in-house counsel for the past decade has
been producing their own service contracts, to such an extent that the American
Lawyer magazine published a book on the subject. At a presentation I gave to a
major US bank, the in-house counsel nearly fell off her chair, to discover that
not only was one of their competitors doing these types of service contracts,
but the contract was reproduced in this book.
The process of recoverable costs for commercial cases is
generally too complex, too slow and too expensive. I believe it should be totally reformed, by introducing a sliding
fixed recoverable scale. This may not
be a perfect, solution, but will make it far easier to explain to Joe
Public/Joe Public PLC on what the “bottom line will/could/should be!”
JIM DIAMOND F.A.L.CD. is an Independent Legal Costs
Consultant and founder of www.legalbudgets.com
web site
