Managing the risk of costs assessments
Law practices, like any business in a service industry, rely on charging appropriate fees for services performed. However, driven by social perception and negative media, costs have become one of the most heavily regulated aspects of the legal industry, writes Charles Galayini.
As a result, complex laws have been developed and frequently amended, leading to a seemingly impossible system to navigate without error.
The intent of the costs assessment process, in essence, is to protect both parties of a costs agreement. For clients, it encourages solicitors to be open and transparent about costs through the running of a matter. For solicitors, it is an avenue to pursue unpaid bills.
Unfortunately, in practice, the costs assessment process is often not used for either of these reasons. Rather, due to the interpretation of the process by the courts and costs assessors, the costs assessment process is now decidedly one-sided.
Solicitors are in fear of the process, knowing that a client-led costs assessment will definitely result in an administrative process that will be costly and time-consuming. Case law indicates that in all likelihood they will face a reduction in their bill as a result of nitpicking minor details that should not be in question.
And solicitor-led assessments? There are not many who would take the risk because inevitably the bill will then become disputed, leading to the same issues just discussed.
In fact, solicitors are being advised by their relevant law societies to avoid costs assessment and try to negotiate their own bill reduction to avoid the dispute process. Many firms are just ignoring unpaid costs altogether: is that a fair and equitable system?
To make matters more difficult for firms, judges are now frequently allowing matters to be heard that fall outside the 12-month time window in which a dispute is supposed to be lodged. In a recent case, a judge advised she ordered costs against a defending lawyer because he wasted time and money attempting to challenge a dispute that was out of time.
With little indication that the law will change, and with increasing awareness of the costs assessment process, one thing is certain: law firms must be prepared for costs assessments and have a plan for how they will deal with a dispute should it arise. This may include:
- Knowing who to call for assistance or outsourcing;
- Having a plan to negotiate a reduction in your bill without a costs assessment;
- Making arrangements with a debt collection agency; or
- Looking at an insurance solution such as Costs Cover.
Charles Galayini is a business development and retention manager at GSA Insurance Brokers, which is the distributor of Costs Cover.