Ian’s Top Tip No. 5: Be A Profitable Fee Earner
As with my earlier top tips, this is aimed at those Claimant personal injury and clinical negligence fee earners, still standing up for the rights of victims of accidents (Noble Heroes), who are acting under CFAlites or similar retainers that limit the amount of costs they can charge their own clients.
Prior to the 1st April 2013 costs recoverable between the parties, on the standard basis, had to be (1) reasonably incurred and (2) reasonable and proportionate in amount. Whilst no one has yet explained precisely what “proportionate” means, the worst that could happen was that the “Lownds” test of necessity would be applied. On most, assessments of costs reasonableness and necessity were almost the same thing. And, with recoverability of success fees to also offset unrecoverable costs against, there was plenty of leeway in the time spent multiplied by an hourly rate system of costs.
Under the new standard basis of assessment (CPR 44.3(2)) costs which are disproportionate (whatever that might mean) can be reduced or disallowed even if they were reasonably or necessarily incurred (reversing the Lownds decision). And with recoverability of success fees gone, there is now little or no leeway in the system of inter partes costs.
In the fast track the proportionate costs for EL and PL claims have been fixed for accidents after July 2013 (and, of course, RTA costs have been fixed for some time). And, when those fixed costs are gone, they are gone, unless the case was exceptional (CPR 45.29J).
In the multi-track the costs are now effectively fixed overall by the new standard basis of assessment (proportionality trumps necessity) and, phase by phase, by any served Costs Budget, which creates a ceiling above which any final claim for costs cannot easily go above. See HHJ Seymour QC’s comments in Redfern v Corby Borough Council (2014) EWHC 4526 QB for example.
The painful plodder’s charter has (unfortunately) ended. Now is the time for speed and efficiency if you want to keep on making a living from an income of inter partes costs.
One difficulty for many, arising from those new costs rules, is being a profitable fee earner (as if life wasn’t already hard enough). Now that the leeway mentioned above has gone, there are many competent fee earners out there (i.e. fee earners who are able to successfully progress claims with a minimum of supervision) who will struggle to successfully conclude claims within the confines of the new standard basis of assessment, the fast track fixed costs or the costs fixed under a Costs Budget. For those fee earners, the challenge is now to increase their efficiency in order to once again become profitable members of staff.
Before moving on, let me just do some arithmetic. Imagine the average fixed costs for a portfolio of EL and PL fast claims is, say, £2500.00 and your annual salary is £50,000.00. If your firm expects you to bring into the practice three times your annual salary in fee income, how many claims do you need to successfully conclude each year? Answer – 60!
Interestingly, the relevance of the four different grades of fee earners and their hourly rates (commonly linked with the SCCO Guideline Rates for Summary Assessment) is diminished in the new era, especially where the costs are fixed.
When the recoverable costs are fixed, or effectively fixed (as is now the case in many multi-track claims), grades of fee earner and hourly rates have much less significance. If the claim is successfully concluded within the fixed costs or budget, the costs ought to be largely recoverable and vice versa. In the fast track (new, EL and PL) if the fixed recoverable profit costs for that claim are, say, £2500.00 and the whole matter takes you an hour then your hourly rate is £2500.00. If the same claim takes you 100 hours, then your hourly rate, regardless of your grade, is £25.00. Great news for the handful of Super-Paralegals out there who are able to work with considerable efficiency, but whose costs recovery and salaries were previously limited by their notional grade.
So, how do you transform yourself into an efficient personal injury or clinical negligence fee earner (fast or multi-track)? Here are a few top tips:
1) It’s time to stand on your own two feet. Analyse your own profitability at work (don’t wait for your boss to swing the axe). The amount of time you put onto the firm’s time computer is of no relevance – because only a fraction of that might be recoverable. Instead, find out how much money you actually bring into your firm. Make a prediction of your actual fee income for the coming twelve months (and expect your salary to be reflect that).
2) Hope that your firm’s front line risk assessment panel takes into consideration whether or not each new claim is likely to be worth the candle (some claims will simply not be economic to run – and your career will do well to avoid being allocated conduct of those claims like the plague).
3) At the outset of every new case, form a budgeted plan of action, aimed at taking the claim through to trial (if need be) with net base costs (net profit costs, disbursements and Counsel’s fees) not considerably exceeding the likely level of damages. This is time very well spent – See my earlier top tips about doing that.
4) Justice comes in many forms. Talk to your client about what they actually want from the claim (rather than making assumptions and/ or simply asking for a questionnaire to be completed).
5) Discuss your budgeted plan of action with your Supervisor (being sure that your Supervisor is indeed an efficient fee earner).
6) If the damages are likely to be low and the work required high, consider carefully, at the outset, what the main issues to be addressed are and how you can home in directly on those issues; possibility to the exclusion of minor points which might be uneconomic to bother with.
7) Most personal injury and clinical negligence claims have similarities and, from those similarities, most firms have formed standard procedures. Those standard procedures might not be of much benefit to your particular claim and/ or might not be the most efficient way of doing the work. Don’t be afraid to bypass those standard procedures if they don’t fit the claim.
8) If you are a Grade A or B fee earner, consider delegating routine tasks to Grade D fee earners (there is unlikely to be any costs saving by delegating work if you are a Grade C fee earner). The trick to delegating work is to avoid wasting too much time during the transition (duplication of time). Your Instructions to the Junior Fee Earner should be succinct and avoid the necessity for the Junior Fee Earner to incur reading in time. Classic examples of where delegation can save costs is obtaining medical records and interviewing Witnesses.
9) Make an early realistic Part 36 offer. If the Claimant beats his/her Part 36 offer, costs after the relevant period will be assessed on the indemnity basis, if an appropriate judgment is obtained (remember, the indemnity basis of costs assessment has no regard to proportionality). Even if no appropriate judgment is obtained the Claimant is likely to have a good case for costs higher than the fixed fast track costs (CPR 45.29J) or, in the multi-track, the paying party will have at least an uphill struggle to dispute the costs on grounds of proportionality. Of course the Part 36 offer must have teeth and must be made as early as possible.
10) Begin recording your time spent, in multi-track claims, under the costs budgeting phases. Details of your time, recorded in this way, are becoming increasing more useful. There is no need for fancy new computer software – simply form a set of new time codes to replace the traditional ones you are currently using.
11) Be very careful about spending money on Counsel – more on that next time.
12) Use ADR – more on that another time.