We are well aware that the issue of legal costs is often as important as successfully achieving the desired outcome. It is for this reason we have dedicated a large part of this website to this issue.
How Legal Costs Are Calculated
This section is aimed at those fortunate enough not to have previously required legal advice and assistance in a contentious matter and who may be unfamiliar with how legal costs are calculated.
Introduction to Legal Costs
You may find yourself in a situation when it becomes necessary to ask a solicitor to give you advice on your legal position and the most appropriate course of action. It may be that you wish to go one step further and ask that solicitor to act on your behalf in the pursuit or defence of a legal claim.
If so, the solicitor will usually send you an invoice at the end of every month in which he / she has provided you with advice and assistance. In addition to the solicitor’s charge, the invoice will incorporate VAT and any disbursements. The solicitor’s charge, VAT and disbursements are generally referred to as ‘legal costs’.
Solicitors generally calculate their charge by applying their hourly rate to the amount of time they have spent advising you and acting on your behalf.
There are various factors that affect the amount of time a solicitor spends on a client’s case so it can be difficult for the solicitor to accurately predict his / her total charge for pursuing / defending a claim on your behalf. However, an experienced solicitor with some familiarity of the facts of your case should be able to provide you with a fair prediction or a reasonable ‘range’.
To complicate matters, however, it may be uncertain as to whether a case will proceed all the way to a final determination such as a Court Trial or a Land Registry Adjudication – it may be that the case is capable of settlement before then. Even if a case is capable of settlement, it may be difficult to predict ‘when’ the case will settle. Some cases are settled without the need to commence formal proceedings and so at a very early stage. Other cases are settled ‘on the doors of the court’ i.e. immediately before the final determination. The longer a case remains active, the more time the solicitor will spend on the case and, therefore, the greater his / her charge.
In light of the uncertainty as to how long a solicitor will ultimately spend advising you and acting on your behalf, it is worth considering the legal cost benefits of instructing a law firm with specialist expertise. Click here for information regarding those benefits.
A solicitor’s hourly rate tends to be the only factor that is fixed and certain (although you should note that some solicitors reserve the right to increase their hourly rate before their clients’ cases have concluded).
Hourly rates vary greatly depending upon the solicitor’s geographical location, experience and type of firm in which he / she works. For example, a solicitor practicing in a top-tier law firm in the City of London will have a higher hourly rate than a solicitor having the same experience and same level of specialist expertise practicing in a second-tier law firm in Manchester.
Guideline Hourly Rates
The Supreme Court Costs Office (‘SCCO’) issues guidelines as to appropriate hourly rates for different levels of ‘fee earner’ in different parts of the country.
The SCCO guidelines cover the following grades:
|Grade A||Solicitors with over 8 year’s post-qualification experience including, at least, 8 years litigation experience.|
|Grade B||Solicitors and legal executives with over 4 year’s post-qualification experience including, at least, 4 years litigation experience.|
|Grade C||Other solicitors, legal executives and fee earners of equivalent experience.|
|Grade D||Trainee solicitors, paralegals and fee earners of equivalent experience.|
The guidelines also cover different geographical areas:
|London||City of London||EC1, EC2, EC3 and EC4|
|Central London||W1 WC1, WC2 and SW1|
|Outer London||All other London postcodes|
|Outside London||Band 1||e.g. Manchester (Central) and Newcastle (City Centre)|
|Band 2||e.g. Manchester (Outer) and Sheffield|
|Band 3||e.g. South and West Wales|
A fresh version of the SCCO guidelines was published in June 2010. The table below shows the guideline rates for grade A and grade B solicitors:
|Grade A||Grade B|
|London||City of London||£409||£296|
|Outer London||£229 – £267||£172 – £229|
|Outside London||Band 1||£217||£192|
(Our standard hourly rates for a Grade A solicitor operating outside London and in a Band 2 location are less than the SCCO’s guideline rate of £201).
Some solicitors may apply a discounted hourly rate to the amount of time they spend advising you and acting on your behalf. These solicitors may apply their discounted rate to the entire case or just certain parts of the case.
Some solicitors may apply their hourly rate to the amount of time they spend advising you and acting on your behalf but their total charge is subject to an agreed cap that will not be exceeded. These solicitors may apply the cap to the entire case or just certain parts of the case.
Traditionally, solicitors have not offered their services on fixed fees for a variety of reasons. However, some solicitors sufficiently experienced in their practice areas to determine a fair fee can increasingly be found offering fixed fees to provide their clients with financial certainty and help with legal cost budgeting. These solicitors may offer fixed fees for certain parts of a case and, in some instances, the entire case.
Legal Charges Are Like Mortgages So Shop Around
References have been made to different hourly rates, discounted charges, capped charges and fixed charges applicable to either the entire case or just certain parts of the case. All of this makes solicitors’ charges sound similar to mortgages so treat solicitors’ charges in the same way and shop around for a legal charge that suits you.
There are other reasons to shop around – individual solicitors vary in terms of geographical location, experience, degree of specialist expertise and type of firm in which they work. Solicitors also vary in terms of their style, language, personality, etc. Solicitors also vary in competence. It is crucial to find a solicitor that you are confident suits you and your case. In effect, treat the solicitor / client relationship as a ‘partnership’ and find a solicitor you can work with and who is as committed as you to a successful outcome.
Why A Specialist Law Firm Means Lower Legal Costs
There are a number of benefits that flow from instructing a law firm with specialist expertise.
The legal cost benefit arises out of the fact that the amount of time a solicitor spends on a case forms the basis of his / her charge and so the more time spent on the case, the greater the solicitor’s charge.
More time will be spent on a case when:
- It requires greater skill and specialised knowledge; and / or
- It is particular complex, difficult or novel.
But a specialist solicitor (i.e. one that practises exclusively in a limited number of discreet practice areas) will already possess the greater skill and specialised knowledge and is less likely to find a case in those practice areas as complex, difficult or novel. In the circumstances, the specialist solicitor will provide his / her advice, and carry out tasks on your behalf, in less time and so his / her overall charge will be less than that of another, less specialist solicitor having the same hourly rate.
Our Approach To Legal Costs
The way we operate means that at the outset of every case our clients’ objectives are clearly identified. We discuss all the legal, evidential, procedural and strategic issues. We also examine the advantages and disadvantages of all the available options for achieving our clients’ objectives.
The discussion also focuses on all the ‘commercial’ issues. Legal costs are obviously one of those issues and so we provide our clients with the best possible information about the likely overall legal costs for each of the available options (including likely disbursements). We also explore ‘discounted’, ‘capped’ and ‘fixed’ charges for certain parts of the case and, in some instances, the entire case.
An individual legal service is then tailor-made that accommodates our clients’ specific needs. This process involves us giving our clients:
- A clear explanation of every likely stage of the agreed course of action.
- An estimate of the likely legal costs for each of those stages.
- A proposed legal cost budget that specifically deals with those stages likely to result in higher, and lower, legal costs so that legal costs can be spread evenly over the duration of the agreed course of action.
After this initial stage, we are acutely aware of the need to monitor and control legal costs. It is for this reason that we issue monthly reports:
- Confirming the stages of the agreed course of action that have been completed and the actual legal costs for each of those stages.
- Comparing the actual legal costs incurred against the initial estimate / legal cost budget to check, and confirm, that actual legal costs fall within the initial estimate / legal cost budget.
- Reviewing the likely stages of the agreed course of action that have not yet been completed and our initial estimate of the likely legal costs for each of those stages.
We believe that clear and accurate information about legal costs, both at the outset and at regular intervals throughout the duration of your case, is essential to enable you to make better decisions about if, and how, your matter should proceed.
Recoverability Of Your Legal Cost From The Other Side
The general rule is that the ‘winner’ recovers his / her legal costs for the ‘loser’ at the final determination of a case (e.g. a Court Trial or Land Registry Adjudication).
There are certain dispute resolution forums, however, where the general rule does not apply at all (e.g. County Court Small Claims).
And in those forums where the general rule does apply, there are some exceptions to the general rule so you should make every attempt not to fall within any of them (e.g. not complying with a ‘pre-action protocol’).
There are also strategic steps that can be taken to maximise your chances of recovering legal costs even if you are not entirely successful in achieving your objectives and to protect you against the risk of having to pay the other side’s legal costs.
If your case settles before its final determination, the recovery of your legal costs will depend on whether the other side agreed to pay your legal costs as part of the settlement. Persuading the other side to do so depends on a number of factors such as:
- The amount of your legal costs.
- The strength of your case.
- The way in which your case has been presented and conducted.
- The strategic steps that have been taken.
- Your determination to recover legal costs and the risks you are prepared to take to recover them.