Picture the scene: a lawyer and a new client are in conference, discussing the client’s dispute with a neighbour over a shared boundary.
The lawyer gives general advice on their assessment of the client’s case, subject to more detailed consideration, and in their head assigns a ‘value figure’ to the claim of somewhere in the region of £50,000. The lawyer advises the client that in the event of the parties failing to settle the dispute through Alternative Dispute Resolution, an application would need to be made to the Court for a determination.
‘Ok’ says the client, ‘but how much will that cost?’.
The lawyer gives the best information possible on costs (which might include a clear estimate, perhaps even a fixed quote, for certain discrete pieces of work, along with a budget for the overall litigation project), but qualifies this by saying ‘but the actual costs of the case can be hard to predict’.
The lawyer goes on to reassure the client, however, that if they win a percentage of those costs can be recovered from the opposition party. Of course, if the client loses, they could also be liable for the other side’s costs.
Most lawyers have historically said that the amount of costs that can be recovered from the opponent is somewhere around two-thirds to three-quarters of the cost incurred.
However, from 1st October 2023, the extended scope of the Fixed Recoverable Costs rules enters the conversation.
The new FRCR that comes into force from 1st October is intended to capture (save for certain exceptions) cases for claims up to the value of £100,000, imposing drastic limits on the amount of recoverable costs at the conclusion of proceedings.
The FRCR imposes complexity bands which determine the ‘fixed’ amounts for recoverable costs. It also imposes rules for how cases are to be conducted depending on what ‘track’ they fall into. Amongst other things, there is track allocation criteria located under draft rule 26.13, and specific exclusions are particularised in draft rule 26.9(10).
Whilst the nuances of the FRCR are for careful consideration by the lawyer, and ought to form part of their assessment of how a case should be run, the client is less likely to be interested in ‘tracks’ or ‘bands’, and is only concerned with what it costs and what winning or losing their case looks like.
As long as a lawyer has the opportunity (and ability) to consider which ‘track’ (the easy part) and ‘band’ (the trickier, likely contentious part!) that their client’s case will fall into, that initial conversation and the advice about recoverable legal costs at the conclusion of a claim becomes dramatically more straight-forward and clear. This, hopefully, ensures that the client will be happier and more confident to proceed with litigation. What the FRFRC does not change, however, is the uncertainty around the work that the lawyer will need to put into the case, and therefore what their legal costs will be.
The FRCR arguably applies a ‘price for the job’ mentality to each stage of litigation, whereas law firms are unlikely able to offer clients fixed fees for civil litigation. Instead, they will need to add to the conversation on costs the expectation of a contribution from the client, as undoubtedly there will be some shortfall between what is awarded under the FRCR for recoverable costs and what the lawyer is owed for the job done.
Whilst lawyers ought to continue to take a uniform, comprehensive and ‘box-ticking’ approach to advising clients generally on legal costs, hourly rates, and funding litigation, the wise, costs-savvy lawyer will recognise that the FRCR will impose incredible pressure on the ‘time recorded’ versus the ‘money awarded’ for legal work undertaken. More than ever lawyers will now be faced with having to justify to clients the work undertaken and time spent on a case, which varies depending on the nature of the client, let alone on the category of claim.
As a consequence, the ‘Ok, but how much will that cost?’ conversation between lawyer and client has simultaneously become somewhat easier, yet plausibly more difficult.
If you wish to discuss any matters relating to this article – please contact Jessica Proctor on 01328 621326.
