A survey of Association of Costs Lawyers members has highlighted that only a small number of members are at ease with Jackson’s proposed fixed fee reforms.
155 members took part in the Survey and most of those felt that fixed fee reforms were the main threat to the future of costs firms but were confident they would ‘weather’ the changes.[i]
However, it was clear that the majority also had a desire to see the Government limit the fixed fee reforms to the fast-track with 52% saying this would be ‘fair enough’.
These results come, despite the recent announcement earlier this month that costs firm, Just Costs Limited entered into administration as a direct result of the Government’s announcement to adopt Jackson’s proposals for fixed fees.
In a document outlining the administrator’s proposals, filed on Companies House, it is revealed that the company is being bought by a new company called Just Costs Solicitors. Interestingly, Paul Shenton, a director of the failed, Just Costs Limited is also a director of Just Costs Solicitors. As a result of this purchase, creditors, which are owed £1.75million are now unlikely to receive anything.
The document outlines the main reasons for the firm’s decline which included:
- The business would have benefited from a stronger board and governance.
- The Jackson Report in 2013 significantly impacted the types and profit of work in the marketplace which saw average cash collection periods of what has been substantially ‘case-end’ (payment upon conclusion of the case) work typically from around 90 days to in excess of 12 months.
- Controls over acceptance of new engagements were not robust, resulting in take on of non-profitable and/or long cash cycle work that should with hindsight have been turned down.
- Insufficient focus on cash management.
It remains to be seen whether other costs law practices will follow suit.
The Survey also revealed some interesting statistics regarding the use of budgets. Just 5% of costs lawyers said their clients always stuck to their budgets and 65% said they sometimes went over. Meanwhile, 38% of participants stated that they had never seen an application to update a budget.
ACL chairman Iain Stark said:
‘Costs lawyers know better than anyone that budgeting is becoming embedded in civil litigation and it will only keep on improving. It is true that many solicitors still need guidance but, with judges now far more confident in exercising their costs management powers, we are positive that it will make a real difference in controlling costs. That being the case, do we really need the upheaval and satellite litigation that fixed costs would cause as lawyers push for the highest fee available?’