Remedies for clients but an apparent lack of remedies for the profession when things go wrong

Clients generally want money when they come to us. Naturally there are a number of different departments that also serve client needs, but that goes beyond the scope of this article. The point is that what our client wants is normally what they receive after our initial advice. The bulk of our clients walk away with a financial remedy (not 100% – we’re not perfect!)

The challenge we generally face is with the defendant’s representative. This is “par for the course” as we expect them to defend a claim and employ various defendant tactics. This is acceptable.

What is not acceptable are 2 other hurdles which impinge upon litigation.

(1) County Court staff; and

(2) Telephone hearing providers.

1. County Court Staff

The Courts make mistakes. An awfully high number of errors. This frequently results in telephone calls, letters and applications to get a claim back on track. Not all of these are recoverable from the defendant and it is unfair to bill the client.

Recourse to the Central Funds is hardly ever sought or received. Firms know it is a waste of their time. Sadly, there needs to be some form of Ombudsman to cover HMCTS errors of this nature. It is fair that complaints are dealt with by the Court manager (normally ending up with the highest ranking Judge). The common result is that the Court rectifies the mistake quickly. The financial remedy is rarely, if ever, addressed.

This is something that needs to be sorted out.

2. Telephone Hearing Providers

Too many telephone conferences experience technical faults and have to be relisted. This is generally through BT Legal Connect.

Their staff appear to be friendly Gloucester folk, and they are very civil and polite.

However their technical issues are too frequent. I am aware they will have a good argument to make that they cannot control other networks they connect to for the Court and 2 or more representatives.  I find it unconvincing as they are not dealing with mobiles in the wilderness. They are nearly always connecting landlines to Chambers (Judges and Counsels’ chambers).

When a conference is adjourned and re-listed then it incurs another brief fee or hourly rate(s) piece of work. Cost go up and you cannot recover this from the Court or the telephone provider.

If this happens, as it does so on too many occasions, there should be a report by the telephone service provider explaining the technical issues behind the call. If the fault is found to be due to “their end” then the costs of the relisted hearing should fall to them. They are taking around £40 + VAT for each hearing so it will cut into their profits but not wipe them out (they are making a packet). Once every 6 months these figures could be audited and reported back to the MOJ/other relevant parties who decide on panel service providers for telephone hearings.

Over and out.

Legal Orange.

Claims involving 2 protocols – que?

Apologies for the blog as it has been created on a phone as opposed to a laptop…

So we have a buildings claim that appears to straddle both:

1. The Construction and Engineering Pre-Action Protocol; and
2. The Prof. Neg. Pre-Action Protocol.

Expert evidence shows that the design calculations and general design (in light of Building Regs) by engineers and architects were pretty bad and this was made worse by the building works carried out by contractor tradesmen.

We have sought to engage all parties but it’s turning into a nightmare.

Architect and engineers both seem pretty nervous. They know that the design calculations and general compliance with building regs are not in their favour based on accepted practice. They are looking to get out of it as cheaply as possible (i.e. desktop assessment of their plans/numbers combined with validation of quantum).

The contractors however realise that there is far more subjectivity in assessing the standard of their works. Plus, although they won’t get home by placing blanket reliance on the design documents, they are aware that they are probably not our client’s chief target. I foresee a contribution of circa 20-33%.

The prof neg claim is going ok but the construction dispute is turning out to be a right pain. The contractual chain and factual matrix is beyond silly. And the number of 9% – 12% uplifts included for non-value added parts is staggering. The documents are almost swamping one of our secretaries. This was just voluntary disclosure as well; I hate to think how many disclosable documents exist.

Truthfully though, we need claims like these to avoid everything being placed into a portal. Thank goodness the MOJ will never truly understand contract and nuisance claims and try to put them into a fixed fee portal!

Over and out.

Legal Orange

2 Costs & Case Management Conferences – still no assessment of budgets

I won’t name the Court, but it has a football team that was in the Premier League during the 90’s and the Championship in the 2000’s.

Round 1

Claimant had a favourable expert report that had not been disclosed but the contents paraphrased to the 2 Defendants. First Defendant was main contractor and Second Defendant was their sub-contractor.

First Defendant was a party to the contract and had both advised on design and undertook some works. The Second Defendant purely carried out some works which fell short of a reasonable contractor (you’ve worked out by now my client is the Claimant).

Both Defendant solicitors tried to join forces but one clearly led the other. They wanted to get in their own expert and have my client’s expert report “kicked out” with costs.

We wanted to get mediation and a stay to try and spell out just how much their clients were in the hole.

Judge decided that 90 minutes was not long enough to go over cost budgets and directions.

Directions were all in line with ours, save for we agreed to disclose our client’s favourable report with both Defendants allowed to put questions to the expert.

Interim period

The expert batted away the questions put to him.

Despite repeated open and w/p letters inviting both Defendants to ADR, this was not taken up.

Round 2

The Judge was furious about both Defendants refusing ADR. They had to file witness statements within 14 days of the relisted hearing explaining why they were so intransigent.

Costs were parked AGAIN, and not discussed, due to the hearing length. By this stage we took the hint that the Judge didn’t want to discuss costs at all and the case should settle.

Directions were set down with very tight timeframes towards trial.

The First Defendant after the hearing started to realise the costs were reaching damages if it reached trial. They are likely to put forward an opening offer.

If it reaches Pre-Trial review, it will be interesting to see what the Judge has to say about there having been no assessment of costs budgets at the previous 2 hearings.

Over and out.

Legal Orange.

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.