Has it really been that bad?
I am meant to state how obviously terrible it has been since the success fee uplift has effectively been removed. The loss to a firm overall is notable, but to individual fee earners it has not been felt as much.
There is still a possibility of the success fee being paid by the client, rather than the opponent, but as soon as firms started offering to take on claims with a 0% success fee the market was forced to follow by matching this.
How it used to be:
The effects of its loss can only really be measured by looking at how the success fee uplift was accounted for.
Certain firms allowed the fee earners to receive the success fee on top of their base costs for the file. This went towards their overall costs target for the year. The loss therefore is gutting. It means you can only take on likely winners, but the either-way cases may not be pursued.
Other firms had a separate success fee account where it was apportioned to a non-fee earner (i.e. Mr. or Mrs. Success Fee) for year-end figures. It was a good tool for getting fees in, but without having to reward Mr./Mrs. Success Fee with a bonus (or holidays, dental plan, NI contributions, etc).
The way it is now:
If you take away the overall costs aspect (i.e. final figure of cash “in”), it has removed an awful lot of arguments for costs draftsman.
The bulk of disputes would rest on the success fee.
Strangely enough Claimants wanted 100%, whereas Defendants considered every claim to be a “slam dunk” and offered 12.5%-25%. It normally saw a compromise in the 25%-50% region. Why run the risk before a Judge who could often set a success fee based on whichever side of bed he got out of that morning.
The draftsmen are now limited to more straightforward arguments:
- Hourly rates (i.e.. grades A-D, and whether London or National 1 – 2 banding)
- Time on documents;
- Time on activities; and
Most of these can be compromised. The time dumping is easy to establish, there is normally common ground reached over grades and nearest Court, and the disbursements tend to have enough case law to steer you on recoverability.
The success fee, which frequently resulted in deadlock, is now removed from the equation. It allows some firms to deal with cases in-house rather than use external draftsman on cases. This provides a faster agreement on costs and reduces WIP from being tied up (“locked in”) which can be released and converted into profit.
How to position your firm to make profits without success fee uplifts
- Tell your larger clients about it and explain how you cannot take the hits on bad claims as you can no longer make up for it with the uplift.
- Validate all claims when they come through the door. ONLY PICK WINNERS. If you have either-way cases then allocate them to fee earners that are not “on the clock” (trainees and support-staff paralegals). They can conduct further enquiries and evidence capture which you can then have a further review. You then take it on or abandon it without incurring costs. You avoid accumulating WIP on bad files which you have to write-off and may have to pay tax upon.
- Charge your clients. For example, provide a capped fee whereby they pay the first £500-£2,500 (depending on claim value and complexity). If the evidence is not there, then they have paid for the enquiries and early engagement of the claim. If the claim has 51% prospects, then you can take it on a CFA and (hopefully) recover the costs from your opponent. This method may see your clients filtering out the claims they send you as they realise that you need to accept good claims, and they do not want to pay your fees too often.
I have other strategies in this area, but if you want to know them, you’re going to have to pay for it!
Over and out.