The whole profession needs to address “out of control” legal costs, a major new report has concluded, but costs lawyers have a significant role to play in exerting downward pressure on them.
It said strengthening the position of costs lawyers as “independent actors in the sector” could help reduce costs, as well as bring other benefits like making costs advice more directly accessible to clients through innovative services.
The report by Hook Tangaza said the six-month review, as well as supporting reform of the costs lawyer profession, provided “a starting point for a much more profound sector-wide debate on how to improve the approach to the entire system of legal costs in England and Wales”.
It was commissioned by the Costs Lawyer Standards Board (CLSB), the profession’s regulator.
Last year, the CLSB received a £58,000 grant from the government’s Regulators Pioneer Fund to research whether, if regulation or legislation were different, costs lawyers could help reduce the cost of legal services.
The report concluded that action undertaken through civil justice reforms over the past two decades “has yet to successfully address the challenges of ever-rising costs”.
Hook Tangaza said: “Many commentators and stakeholders in the system believe is out of control. Terms such as ‘Wild West’, tales of shocking behaviour by claimant lawyers effectively gambling away proposed settlements for their clients on litigation and reports of judges pleading to litigation funders for help to bring costs under control, were all part of the evidence that was given to us in the production of this report”.
The message from users and suppliers of costs law services was “not only that many stakeholders do not feel that the Jackson reforms are working as they were intended to do, but also that they do not believe that further civil litigation reform is the answer (or at least the whole answer)”.
Rather, there was more for regulators to do to support better control of costs earlier in the process – even before costs budgeting – not least in the form of better pricing/valuation services for clients and transparency about potential costs in a much more comprehensive way.
An international comparison showed that other jurisdictions have “much stricter conduct obligations on lawyers in relation to the fees they charge their clients and their control on the costs process, coupled with stronger roles for neutral costs assessors/adjudicators within their systems which avoid the need for expensive costs litigation”.
In England and Wales, by contrast, “the burden of appropriate checks and balances on costs is carried by limited and scattergun instruments such as client care letters and price transparency obligations, with possible recourse to [Legal Ombudsman] (for own solicitor costs) or otherwise to costs litigation.”
It continued: “There is also no holistic, integrated approach to doing what can be done at the earliest possible stage to inform consumers about costs, nor a process for working systematically through different steps to resolve issues over solicitor-own costs before potential litigation.”
The report said the CLSB “could (should?) initiate a sector-wide discussion on the current shortcomings of the costs market in England and Wales”, highlighting to other legal regulators that “there is collaborative work to be done in areas like training, ethical codes, communication with clients etc”.
The CLSB should also be advocating for the Legal Services Board to take a broader approach to costs than simply focusing on specific points relating to consumers.
The report, which said there was an “under-awareness” of the benefits of using costs lawyers, found the profession already helped control costs, rather than simply shifting liability for who paid them.
But there was “a great deal of evidence” that they have the potential to have a much bigger impact.
The research highlighted “a need for a more visible and assertive costs profession – one which recognises that there are different potential modes in which a costs lawyer could operate: as the agent of a solicitor (as at present), as an independent counsel or as a direct access lawyer for consumers”.
Hook Tangaza stressed that the advantages of a world in which costs lawyers felt “more empowered to act as independent agents” – akin to barristers – were compelling”.
This could mean changes in the regulatory framework for costs lawyers – which the report said was “ripe for review” – by making a stronger distinction between the interests of instructing solicitors and the ultimate client.
The report suggested that costs lawyers were often too focused on the former, rather than the latter.
Another way to strengthen the position of costs lawyers might be by regulating entities rather than just individual practitioners, the report said. Entity regulation could also play a role in encouraging innovation and the CLSB said it would investigate whether this was feasible.
The CLSB could also “strengthen the perception of the distinctiveness (not to mention the existence) of the costs lawyers’ profession” by raising its own profile and collaborating, where appropriate, with the Association of Costs Lawyers, the representative body.
CLSB chief executive Kate Wellington said: “The report highlights a need for all legal services regulators to focus on how legal costs can be better controlled, and the CLSB will play its part in that.
“We will now take forward the findings in a programme of work that aims to bring the maximum benefits to end users of legal services.”
Jack Ridgway, chair of the Association of Costs Lawyers, said the report “validates the opportunities we see for our members to expand the services they offer beyond traditional bill drafting and ultimately help clients control their costs more effectively than now”.
He continued: “More than a decade on from the Jackson review, there is clearly a growing clamour from the courts and clients to get an even greater grip on costs, and our members have the training and experience to be at the heart of that push.
“It is encouraging that the report found costs lawyers have a positive impact on the level of costs, rather than just moving them between the parties.
“The report sets both the ACL and the CLSB, as well as the wider legal profession, some significant challenges if we are to increase this impact, however.
“We need to do more to make solicitors understand the value we add to the litigation process from the start, and not just at the end, while the current work of ACL Training to update the Costs Lawyer qualification next year will be critical in ensuring our profession is ready for the future.
“The report’s recommendations for a greater focus on the ultimate client, rather than just the professional client, and to stress our role as independent, trained and regulated specialists, set costs lawyers in an exciting direction. Our skills have never been more needed.
“It is up to the ACL and its members, in partnership with our regulator, to make sure we deliver.”
Business minister Lord Callanan commented: “This project by the CLSB could help bring benefits to British businesses by reducing legal costs while helping keep the UK at the cutting-edge of innovation.”