The Lawyer 24th September 2001 The
Callery Count
In 1986, the then, new costs rules introduced a system, in
which lawyers could claim, costs on a discretionary basis, by utilising an
hourly expense rate supported by a reasonable mark up. It took 3 years for the
first influential case Finley –v-Glaxo to be decided, this however only had the
weight of a QBD unreported case. It took another 3 years for Johnson –v- Reed
Corrugated Cases (1992, 1 All ER 169) to be decided. In simple terms “Johnson”
stated mark up’s for run of the mill cases should start at 50% and to claim
rates of 100% or higher the claims needed to be exceptional. This case stood
the test of time of the remaining 7-year history of the old costs rules.
I believe it would be to easy to criticise the decision of CG
as a “fudge” of the main issues affecting the 100,000 odd cases awaiting it’s
decision and the implications of legal costs over the next 3-5 years. I think I
would rather be more positive and suggest what CG has attempted to do, is to
establish a basic framework, for this to grow organically to encompass all but
big-ticket commercial litigation within the next couple of years.
Claimant PI lawyer’s
who have traditionally been at the bottom of the litigation food chain, now
have far greater opportunity to be successful.
Analogy 1:
Grade 2 fee earner guideline hourly rates in the SW of England,
are averaging out at £135.00, add success fees of 20%, using a benchmark of 100
chargeable hours per month, then by deducting the approximately 15% for loss on
assessment or negotiation, Grade 2 fee earners should be able to generate £165,000.00*
income p.a. ( * This analogy is based on 100% success rate on the basis that
the filter process conducted by the Grade 1 fee earners is so good that Grade 2
fee earners will find it difficult to lose cases. The profit element of this
figure will be entirely due to the percentage of Grade 1 fee earners to Grade 2
fee earners)
Commercial litigators will probably brush aside CG on the basis
that this case is purely for the PI lawyers.
This I believe is a big mistake as not only was the vast majority of
case law on mark up, in the old system, PI related, the present economic
climate will see far more commercial clients shopping around for better/best
deals. If “Johnson” used mark up
figures of 50% for run of the mill cases and 100% for exceptional cases, with
the Costs Masters in my experience in the early 90’s allowing mark up’s as high
as 200%, it would not be that unreasonable to suggest ratio’s for commercial
litigation being claimed at between 1:2 - 1:4 on the CG figure of 20% for
success fees.
Analogy 2:
Grade 1 fee earners
guideline hourly rates in The City of London are £325.00; add success fees of 50%-100%, using a benchmark of 2000
chargeable hours per year, add two quality Grade 2 fee earners (£235.00 per
hour guideline rates) a couple of paralegal’s (£110.00 per hour guideline
rates) Then this small 5 man/woman commercial litigation team has therefore the
potential to generate between £3m-£4m income p.a. It also has the potential to
earn nothing.
