Legal Costs – All Change

I have been a Solicitor for 20 years and have worked on countless commercial disputes in that time, of varying values and complexity. Later this year we are likely to see the biggest practical change to that area of law since I qualified. As the change relates to costs recovery in legal cases, it will have a huge impact on clients as well as law firms.

There is already a fixed recoverable costs regime in place for the majority of personal injury claims, but no such cap is in place for most commercial disputes. The general rule is that the winner of a case gets most – rarely all – of their legal costs paid by the loser, based on what the court thinks is reasonable.

It is often an unwelcome discovery for a client to find that the legal costs they have to spend on legal representation end up being surprisingly high. I often warn clients that if they aren’t careful, the issue of costs will become more important than the dispute itself. The level of costs in a dispute can be a step into the unknown.

This may be about to change. Fixed recoverable legal costs are to be introduced for a wide range of commercial disputes, expected to take effect from October 2022. Whereas now you start a case not knowing what will happen in respect of your legal costs at the end, in future the amount of legal costs that the winner can recover from the loser will be fixed in advance by court rules and will depend on the stage of legal proceedings you were at when the dispute settled, and the complexity and value of the case.

Fixed recoverable costs will offer certainty on the costs a client could hope to recover – or pay out – in a case. It is expected it will help a client to better understand the financial worth of pursuing or defending a case.

It will be interesting though to see how the new costs regime impacts on the costs the client pays to its lawyer. The new system is designed to apply to cases with a value of up to £100,000 (described as “simpler cases”, rather surprisingly to this provincial, simple solicitor).

The fact is that some cases, whatever their financial value, are not simple cases at all. The fixed recoverable costs regime will probably work well in cases which are genuinely simple but in more complex cases fixed recoverable costs won’t scratch the surface of the work that will need to be carried out.  The client and lawyer will have to be very clear from the off where they stand on costs.