Jackson reforms will spark rise in solicitor/own client disputes, costs specialists warn

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By Legal Futures

25 June 2012

Stark: law firms could find their costs at risk more than ever before

The Jackson reforms will lead to a rise in the number of costs disputes between solicitors and their clients, as well as demand for help with costs management, specialist costs lawyers have predicted.

A survey of members of the Association of Costs Lawyers also showed that many are planning to re-engineer their practices as a result of the shifting costs landscape.

With the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ending the recoverability of success fees from next April – meaning the client will have to pay them from their damages – clients operating under conditional fee agreements will for the first time in over a decade have a direct interest in what their lawyer is charging. As a result, 69% of the 137 Costs Lawyers surveyed saw an increase in solicitor/own client disputes as a major impact of the reforms.

Some 54% thought they will discourage solicitors from taking on more complex cases, while 42% believe the changes will tilt the playing field in favour of defendants. Four in ten costs lawyers predicted that fierce competition between law firms will drive down the level of success fees.

More than a third (37%) of costs lawyers said the demand for help with costs budgeting had grown over the past year, while 79% expect it to rise over the next 12 months – 27% of them “significantly”.

Respondents were split on the impact the reforms would have on their own practices, with nearly half (47%) saying they are going to change as a result of the Jackson reforms and legal aid cuts. Most of those who said this are planning to diversify into other areas (82%), while 46% intend to increase their marketing activity and 29% want to undertake more advocacy.

The survey also uncovered common mistakes and misunderstandings by solicitors when dealing with costs. Failing to keep thorough records was the main complaint, followed by “they think they can do it themselves”. Using unqualified costs draftsmen and only calling costs lawyers in when things have gone wrong were also cited.

Ian Stark, chairman of the ACL, said: “The Jackson reforms will challenge the business models of solicitors and Costs Lawyers alike. It is inevitable that solicitor/own client disputes will re-emerge post-LASPO, while the judiciary is emphasising how central costs management will be in the future, with a recent case proving that the courts will reject an overspend on an agreed budget.

“Law firms could find their costs at risk more than ever before, and dealing with these and other Jackson-related issues is going to require specialist advice and skills. The truth is that many solicitors have neither the time nor experience to maximise the recovery of their own costs, and this is only going to become more difficult post Jackson.”

  • The ACL is canvassing views from claimant personal injury lawyers on the impact of the Jackson reforms. To take part in a short survey, click here.


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