My boring blog post on the Coventry decision

Ok, so lots of other commentators have passed their views. I think we all need to remind ourselves of the pertinent legal and political issues:

(1) The Lords / Supreme Court has never been very good on procedural issues; and
(2) If the uplift and ATE is irrecoverable, and parties have liberty against the government or receiving parties to recover historic payments, then it will open up a whole world of pain!

We also need to bear in mind that next year will be an election year and both the Attorney General and the Secretary of State for Justice have some very finely balanced decisions to make when writing to the Supreme Court regarding whether they are to consider the matter of incompatibility.

The decision in Coventry

I think Dominic Regan may be correct with his article giving his take on this one.

I would go further with my opinion that it’s disappointing to see “Law Lords” – a group of former barristers who are far removed from ground level (and were throughout their careers at the Bar) have decided to pass comment on costs in this case. I doubt they have ever been involved with funding arrangements with lay clients.

Furthermore, the time of their decision is almost laughable. It comes almost 18 months after success fees and ATE premiums fell to receiving parties. What they are concerning themselves with can be labelled as historic “runoff” cases.

Sadly those claimants who entered into CFAs/CCFAs and took out ATE funding are potentially now in a position to be penalised even though when they did so, the Access to Justice Act, was in their favour.

My prediction

I predict there will be a “fudging it” decision that causes some form of compromise.

If a bean counter in the government realises the potential exposure to the government of paying parties seeking to recover the success fee uplifts and ATE premiums then it could bring on a heart attack to the Tories.

Insurance companies would lead the way. All of those RTAs, clinical negligence, subrogated claims, credit hires, etc cases will come back to haunt the government.

As such, maybe the Supreme Court may decide it is not incompatible…

Keep your eyes peeled.

Over and out.

Legal Orange.

Direct Access

Barristers have a lot of work drying up, in line with the struggles faced by solicitors.

Criminal and family law is being squeezed by the government looking to make cutbacks on legal aid spending and civil practitioners are also facing difficulties as the government continues to be swayed by insurance companies (and the NHS litigation authority).

Overall, typical legal spend is down.

Counsel is therefore not being instructed for a number of hearings that used to be booked in with their clerks. The margins for solicitors are tight and they are not sharing the spoils.

Some barristers are going down the arbitration and mediation routes. This is not a bad career move. The types of damages involve in some of these claims are often in the millions. As such the parties will not blink at spending thousands on senior counsel to act as a mediator or arbitrator (particularly in shipping, construction and other high-value industries).

Some barristers are instead taking the Direct Access route. This tends to be towards the more junior end of the market.

Initially the problem appeared to be handling client money. This has since been overcome. The issues now facing some barristers I have spoken to is the sheer annoyance of dealing with lay clients and the completely inadequate papers they receive.

I have been advised by local barristers that their primary complaints are:

- having to use a form of case management system (whether it’s a file/folder in their laptop)
– clients are badgering them with emails and phone calls with unrealistic timeframes to respond
– their clerks have to act as a secretary/paralegal in getting the papers received into some type of order
– clients expect far more outside of the fixed fee and get annoyed when more fees are requested
– etc, etc, etc

These are all in line with the types of issues facing solicitors on a daily basis. We have to act as the middleman between the lay client and counsel. By removing us from the equation they realise why we tend to be so stressed out at having to liaise with lay clients.

Many of the barristers I have spoken to are starting to go off the idea of lay clients and are instead focussing upon small/medium size businesses. One of my barrister friends is having great success with a couple of commercial clients who have ex-LPC types working there and know how to prepare the papers in a way that nearly resemble a brief/instructions and are willing to be flexible with fees when the work begins to deviate from the initial agreement.

I foresee counsel targeting these types of clients going forward.

Over and out.

Legal Orange.

Non-fee earners

So I am now at a different firm. My initial observation is that the fee earner to non-fee earning employee could present a barrier to profits and general morale.

There are 3 distinct types of non-fee earners.

(1) Support staff involving in the delivery of legal services (e.g. legal secretary, paralegal without a billing target);
(2) Support staff that help with the indirect delivery of services (e.g. Human Resources, Finance, IT); and
(3) People with long job titles and undefined roles.

The last category is a problem.

What’s the problem?

Employees involved in buzzwords such as “change management” and “excellence” are essentially only needed as long as there is a project to work on. Consequently this results in numerous projects as people seek to justify their existence at the firm.

Having attended a couple of meetings this week it was clear that the following is taking place:

- ongoing merger and acquisition activity (notwithstanding a number of mergers in the last 2 years).
– constant facility changes even though all the offices are suitable and either owned or leased on favourable rates.
– excessive internal system changes on IT. This may not seem an issue, but it is when I inform you that the case management system for file handling looks like it remains in the 1980’s, but the intranet and linked systems could rival Facebook! The priorities are all wrong.
– demands for management information and marketing data from departments who are aiming to invite your long standing clients to central events without your knowledge (we received a call about a key client being invited to a golf event when he hates golf – and we had to apologise and then berate the marketing assistant who failed to give us advance warning of invites).

What can be done?

Sadly, not very much. These people are well versed in justifying their job and overhyping the need to keep them around.

What will be done eventually?

Profits will be affected. The partners will then investigate and find out the lopsided fee earner to non-fee earner ration. The support staff will then need to be shredded.

Will I still be there at this time? Unlikely. It is probably 3-5 years away.

By this time, the ABS experiment will be a distant memory and a number of small niche firms will have been established (think on a chambers model) that have a high number of fee earners to support staff. The IT, compliance, etc will be outsourced and a number of people will rent small office space for most of the week and then work remotely from home on Fridays.

Word of warning – if you cannot explain your job in 1 or 2 words then it means you are probably one of the support staff I am complaining about.

Over and out.

Legal Orange

How do hourly rates convert?

So the hourly rate saga has all been a massive let down…

The rates need to increase. Incrementally is fine. In order to fend off those “self-serving” accusations, it is important for people to understand where these hourly rates go to; particularly in civil litigation practices.

But I thought all lawyers were loaded and get hundreds of pounds an hour?…

The majority of solicitors receive a fraction of the rate they are billed out. I imagine most will be in the region of £10 – £30 per hour. The issue is that people fail to realise the following points:

(i) A lot of firms work on CCFAs, and do not look to the lay client to make up any shortfall;
(ii) Success fee uplifts are in palliative health/runoff. The ability to subsidise is about to finish;
(iii) The money that eventually makes it through the door is apportioned to many things.

Where does the money go?

Profit costs, VAT and disbursements is the easy answer. However, it is important to see what the profit costs cover.

These end up being apportioned but there is still an outdated theory of the rule of thumb using the 1/3 – 1/3/ – 1/3 split. i.e. 33% goes to the partners, 33% to the fee earner and 33% overheads.

This no longer reflects where the money goes.

Profit costs need to cover:

- tax liabilities of the firm (this is more important than you realise);
– debt repayments / financing of the firm;
– PII cover;
– lease / mortgage payment;
– managing agent fees;
– insurance;
– security, including alarm systems;
– fee earner’s salary;
– maintenance of IT systems, including payments for licenses on case management software;
– support staff salaries;
– administrative overheads such as printing, scanning, telephones, fax, email systems, networks, electronic storage, physical file storage and archive;
– childcare voucher contributions (another expensive but little known payment);
– cleaners;
– training (including CPD, SRA training such as compliance, etc)
– non-fee earning activities in general such as conflict checks, compliance, risks, financial issues;
– client entertainment and travel;
– time on clients that you cannot recover such as putting on free training sessions;
– sponsorship and charity events that you are obliged to pay to give off a “we are not scumbags” image to the public;
– etc, etc

While a number of those listed apply to most businesses, a number of the more expensive costs are limited to law firms. People underestimate the tax that a firm pays on work in progress (“WIP”) which can cause it to drop into its overdraft a couple of times a year.

What the hourly rate now goes towards is the partners and overheads, with some left over for the fee earner. Overheads are increasing and financing of the firm is where things have changed.

So why does the hourly rate need to increase?

Because almost everything else has gone up since the rates were last approved.

I am not against a new category to cover paralegals. The trick they have missed is a failure to distinguish between paralegals. It could be a higher rate for paralegals with a post-graduate qualification and a lower rate for those who do not. If they want to really get into the details then there could be sub-categories of grade E that has rates for ILEX members (level 3 and/or 6).

What those setting the rates will not realise is that firms will always work around it. If they are limited to £75 per hour for paralegals then a firm will:

- hire a paralegal without a target;
– get the grade A/B/C fee earners to start a document and then log out after saving it;
– the paralegal will then log in and complete the document;
– the higher rate fee earner will finalise and approve the document;
– this work is then billed out at the higher rate;
– the paralegal has their performance measured on quality rather than fee income.

Yes it all seems wrong, but it is likely that the above is just one example of how firms will work around it. This is particularly likely in the paralegal factories.

Over and out.

Legal Orange.

A reminder of the need for good client reporting

One of the first thoughts on this topic may be “the clients don’t know what’s best for them -we do!”

You may be one of the rare 1% who this applies to. For the rest of us, we need to ensure our clients receive appropriate reports in order for us to take instructions.

The basics

  1. Know your client – if you don’t then take steps to know them!!  Once you have established what they want to achieve from their claim you can frame your reports towards this. Their eyes will be searching for the words that let them know: (i) where they are now; (ii) whether their end-goal is achievable; (iii) the steps they need to take to either reach meet their objective or accept it is not possible; and (iv) how much it is all going to cost and the approximate timescales involved.
  2. Use limited “legalese”. If you have a talented support staff member then ask them to apply their soft skills to the report. They may ask you the question to reword the report that a client may be too afraid to ask for fear of looking stupid.
  3. Explain the other side’s position in neutral terms. Just because the client is paying your bill, you are not obliged to take their side over everything.
  4. Remain consistent. Do not over-promise anything you cannot deliver.  This is a frequent problem for solicitors who are constant “pleasers” but always end up letting their client down. Tough love is never a weakness if your client needs to be told some realities. Managing expectations is key.
  5. Alert your client ASAP if they are likely to be liable, particularly in reference to the potential damages and costs exposure,  and identify a reserve that covers EVERYTHING. The breakdown of your final amount needs to show the science behind your calculations.
  6. Always mention funding and costs. This requires a separate section in your report. Do not dump them with a large bill at the end of the claim. You’re not a mechanic or a vet!!!
  7. Make recommendations and explain the reasons for this. Your client does not want to pay someone who sits on the fence. Treat the money as if it is your own. The client can normally work out what their options are, but they need to know what is most likely to succeed in Court, and whether it is worth it.
  8. Paraphrase wording where appropriate, but avoid the temptation to simply cut-and-paste Counsel’s opinion into a report and charge lots of money for this duplication.
  9. Enclose copies of documents such as Directions, applications, statements of case, etc.  It is surprising how many people will still provide an overview of a document as opposed to enclosing the same. It may surprise you what your client may pick up due to their intimate knowledge of their claim.
  10. End the report with an offer to discuss the report in more detail and invite any questions. Go a step further and record any dates of your unavailability and provide an alternative contact in the event they need to make urgent contact with your office.

The above seems like common sense, does it not?

Probably. You would be surprised how frequently it is not followed.

Get your templates in order. Frequently the preliminary report has a standardised format, such as the following headings:

  • summary
  • fact pattern or facts & evidence
  • liability or legal position
  • evidence
  • funding
  • recommendations or strategy/tactics

It is normally the interim update reports that lack a formal structure. It is worth updating your standardised documents to ensure there is consideration to all the relevant points to be addressed throughout the life of a claim. If your firm is wealthy enough to have Knowledge Management types of PSL’s then I would push this non-fee earning work in their direction.

What do you gain from client reporting?

When it is done correctly it can act as your roadmap to drive a claim forwards. It can provide you with direction to identify the key issues relevant to a claim. Remember to keep focus – it’s always easy to go off-piste during a claim that covers many years!

Over and out.

Legal Orange.

Denton appeals, etc – a return to Unless Orders

So we have all had our wrists slapped with Denton et al.

Apparently we didn’t understand the Mitchell decision and took tactical advantage of slips by our opponents, which clogged up the courts. It therefore interfered with the County and High Court Judges who were busy playing golf and moaning about the cuts to their pensions.

When I say the courts I of course mean the County Court in [location]. This rebranding being needed so that people will not realise their local court has closed during the next year or two as it will no longer be “[location] County Court”.

Enough musings, crack on with Unless Orders

Enough has been written about the Denton appeal. What needs to be established is how we are going to find the new way to gain an advantage over defaulting opponents.

Sadly, the new way means going back to the old way.

Unless Orders never really went away – they just went out of fashion with litigators.

Why should we go back to the old way?

Quite simply, to lay a trap.

A single breach of directions is unlikely to attract a strong penalty such as strike out.

LJ Jackson made clear in his Fred Perry judgment that it would take a number of defaults before sanctions kick in. Think of it like a 3-strikes-and-you’re-out approach. It is unlikely you will get a yellow and red card system (no more sport references please – Ed).

The way forward

(1) As soon as a breach occurs, make an application for an unless order. It is unlikely that you will need to focus too much on giving notice; the Directions Order is clear.
(2) Offer to handle your Unless Order application by consent – always do this! I repeat, ALWAYS do this.
(3) Get the consent order sealed for an Unless Order as quickly as possible. Harass the Court staff and ensure it is sealed immediately to get your 7/14 days clock ticking.
(4) If the opponent is in breach then assert their claim is struck out, as an automatic sanction built into the Order.
(5) If they then apply for relief from sanction, there will have been 2 breaches on their part, and their endorsement of the consent order will go against them. After all, you placed reliance on their consent and they should not have agreed to something they could not comply with.
(6) Should your opponent comply then at least you will have got some costs and set down a trap for future defaults. It is a points scoring opportunity after all.
(7) All of the above is in your client’s best interests. Should you win, then you maximise their costs recovery; and in the event you lose there is a strong chance of minimising their exposure to costs based on non-compliance arguments.

Over and out.

Legal Orange.

File Audits

Here is a little known fact for the general public, but is well known amongst solicitor firms.

File audits are a joke.

Unfortunately these purported file audits fail to conduct the sort of auditing one would expect.

Clients expect a file to be handled in a timely manner, with a proactive and commercial approach, pursued according to the correct law and CPR, that complies with both internal policies/procedures and aligns with industry practice.

Sadly the bulk of file audits involve a non-lawyer selecting an array of random files and then comparing the handling with a Service Level Agreement (with an insurer client) or the internal file handling process/procedure of the firm.

This can result in the most negligent lawyer passing a file audit.

How?

Even though the person may be wrong in law and horribly negligent, they may have done the following on the file:

- acknowledged instructions within 24 hours
– completed an initial report within 5 working days
– prepared the retainer or other funding arrangement on the file at the earliest opportunity
– taken instructions in a timely manner
– sent a letter of claim within X days
– etc, etc, (you get the drift)

These file audits do not identify where a lawyer has been negligent in law. I have seen examples of this where bog standard negligence and nuisance has been poorly pleaded when a Defective Premises Act claim was clearly available.

Further, they just record that a witness statement or proof of evidence has been taken and placed on file. It does not assess the strength of the evidence and relevance to the case. It just matters to the auditor that something has been placed on file.

Likewise, proactivity is assessed based on there being different types of telephone calls, emails and letters with the opposing side. It matters not one whit that you could be talking nonsense. It just needs a trail of paperwork to show endeavours to settle the claim are on file.

This seems wrong…

It is wrong. Unfortunately clients need to be aware that they are entitled to their file of papers upon payment of the bill (please do not argue with me over liens). They can then realise how some of their claims are handled.

The solution

Senior lawyers should be used to carry out file audits. Their experience would be invaluable. Those considering retirement or wanting to have a part-time gig would be well placed to assess the law and the handling of files. Sadly, the file audit companies have gone the same pathway of other businesses of hiring cheap youngsters who lack experience, when the job needs to be done by a wise old head.

Over and out.

Legal Orange.