The 70% Costs Myth…..

Throughout the legal profession there is a ‘myth’ that a Receiving Party should expect to recover in the region of 70% of their costs on detailed assessment. Many lawyers advise their clients of this. In some instances this may be a reasonable estimate, but in my experience the figure is often arrived at without any consideration of the costs contained within the bill of costs.

The bill of costs is the absolute starting point in relation to the likely outcome on detailed assessment. If the hourly rates claimed in a bill of costs are in accordance with the SCCO Guideline Hourly Rates, the costs claimed are clearly proportionate and the time claimed is generally reasonable then one would expect any reductions on detailed assessment to be minimal. The recovery should therefore be way in excess of 70%.

However if, for example, the following issues relate to a bill of costs then one could expect the recovery to be much less than 70%:

1. the hourly rates are significantly above the SCCO Guideline Hourly Rates

2. the claim for costs is globally disproportionate

3. there is lots of duplication and solicitor/own client communications claimed

4. There has been a lack of delegation.

We recently prepared Points of Dispute (acting for the Paying Party) on a matter and following Provisional Assessment the bill of costs was reduced by 50%. This was mainly due to proportionality and VAT being incorrectly claimed.

When considering a claim for costs, lawyers should pay attention to the costs contained within the bill of costs when estimating the likely level of recovery. The 70% ‘myth’ should not be the starting point. Advising a client that 70% is the ‘norm’ could actually mean the client is paying more or receiving less than they should be. My advice is therefore to proceed with caution and shy away from relying on the 70% ‘costs myth’. This is now more important than ever in light of the new test for proportionality and the impact that this can have on summary or detailed assessment (Who Needs Fixed Costs and Proportionality continues to get tougher).

This blog was written by Andrew McAulay, who is a Partner at Clarion. He is the Head of the Costs and Litigation Funding team and can be contacted on 0113 336 3334 and andrew.mcaulay@clarionsolicitors.com

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