The defendant costs specialists

Negotiating legal costs

By on Mar 27, 2013 | 25 comments

Negotiating legal costs is a complex and subtle skill that takes years of experience to perfect. But for younger readers I now offer a master class in cost negotiating.

The following is taken from a genuine exchange of emails with a very well known firm of claimant lawyers. The underlying claim related to a case of food poisoning during a package holiday. Following settlement of the claim the Claimant’s solicitors presented a schedule of costs totalling £30,661.60.

I made my opening offer:

Without Prejudice Save as to the Costs of Detailed Assessment Proceedings

Dear Sirs,

I write further to the above matter where I have been instructed to act on behalf of the Defendant in relation to your claim for costs.

The Defendant offers £9,000 in full and final settlement (to include interest, where payable, and assessment costs).

I look forward to hearing from you.

Yours faithfully,

Simon Gibbs

Note the detailed reasoning for the reductions proposed and the extensive references to costs case law.

The Claimant’s solicitors responded:

Dear Simon

Thank you for your email and apologies for not responding sooner. I have been on annual leave for the last four weeks.

I note that you are instructed to deal with the issue of costs on behalf of the Defendant. I confirm that the Defendant’s offer of £9,000 is rejected. However, I put forward a counter offer of £23,000 in a genuine attempt to bring the matter to a close.

This offer is inclusive of interest, VAT and assessment costs. The offer will remain open for 21 days.

I look forward to hearing from you.

Kind regards,
X

At this stage any general members of the public reading this might be surprised that a firm of solicitors is prepared to write-off a quarter of their fees on the back of an offer without any explanation being given as to why the amount sought was deemed unreasonable.

Obviously, negotiating costs is a two-way process. My initial offer was obviously just a speculative opener and now I will need to move from that:

Dear X,

I write further to the above matter and your email below.

You offer is rejected.

Given the difference between the parties it does not appear that this matter is capable of agreement and I await sight of your Bill.

Please note I am authorised to accept service of Part 8 proceedings.

Yours sincerely,

Simon Gibbs

The Claimant’s solicitor, no doubt generally used to dealing with costs muppets who drip feed their offers responds:

Dear Simon,

Thank you for your email.

I note that our previous offer of £23,000 has been rejected and that you have requested a formal Bill of Costs. Whilst I am prepared to forward a Bill upon preparation, I would like to discuss whether you have any further authority to increase on your offer of £9,000. I appreciate that you are unable to agree £23,000, however, if you could confirm whether you will come up on £9,000, I am confident that we can agree something as I have authority to go down on the offer of £23,000.

If it is easier, I can give you a call and we can have a discussion in relation to the same?

I look forward to hearing from you.

Kind regards,
X

To which there is only one real answer:

Dear X,

Based on the limited information provided in your schedule of costs you have the best offer the Defendant is prepared to make at this stage. It is possible, though unlikely, that the Defendant may revise its position upon sight of a detailed bill.

If you have authority to come down from £23,000 then I suggest you let me have your best offer and I will, of course, give it proper consideration.

Yours sincerely,

Simon Gibbs

The Claimant’s solicitor obliges:

Dear Simon,

My best offer on this offer is currently £16,000. However, if you can arrange for the cheque to be dispatched to us within 7 days, I can agree £14,000 in an attempt to bring the matter to a commercial close.

I look forward to hearing from you with your thoughts.

Kind regards,
X

The “best offer” is £16,000 but they will take £14,000?

Obviously, at this stage my negotiating tactics are failing and I need to change my approach:

Dear X,

I write further to the above matter and your email below.

Although I appreciate the movement on your part, even your conditional offer of £14,000 is still more than 50% above my own valuation. Your offers are therefore rejected and I await sight of your Bill.

Yours sincerely,

Simon Gibbs

Funnily, the “best offer” has not actually been made:

Dear Simon,

Thank you for your email.

Would you accept £11,000?

Kind regards,
X

Never let it be said I adopt an intransigent approach to negotiations:

Dear X,

I write further to your email below.

The limit of my authority is £10,000. Please treat that as a Part 47.19 offer.

Yours sincerely,

Simon Gibbs

And finally:

Dear Simon

I accept your Part 47.19 offer of £10,000 to settle.

I look forward to receiving your client’s cheque for this amount within the next 21 days so that we can close our file of papers accordingly.

Kind regards,
X

How can a firm that has genuinely incurred costs of £30,661.60 (including paid disbursements) drop to £10,000 and still make a profit?

Of course, the negotiating stance adopted in this case will not be suitable for all matters. It’s often a case of horses for courses and “knowing your enemy”.

Equally, the real skill here, I would suggest, is not down to any clever negotiating tactics adopted but rather knowing the true value of the claim, making a sensible offer at the outset that would give good protection should the other side have prepared a bill and issued Part 8 proceedings as invited, and being confident enough to run the case to detailed assessment if necessary.

    25 Comments

  1. I would have settled for £8,500.00 if you had pushed a bit harder. You were obviously swayed by my signing off every letter with a kiss.

    Yours truly

    X

    Anonymous

    27th March 2013

  2. Did they come back to you with detailed assessment costs?

    In between jobs

    27th March 2013

  3. Your reputation is obviously preceding you Simon. As a side note, your original letter should have been signed Gibbs Wyatt Stone. Just saying…

    Truly Eminent Costs Professional

    27th March 2013

  4. Oh dear!!

    Anonymous

    27th March 2013

  5. Hmm good point, but you never see a firm of solicitors signing off a letter with the solicitors name – no names are ever included its always

    Dear Sirs

    Yours faithfully

    Joe Bloggs Ltd

    Ps. Trust me, one day you might be truly eminent as well!

    Truly Eminent Costs Professional

    27th March 2013

  6. I should have clarified – the letter i refer to is a formal letter to the solicitors’ opponent. Of course a letter to the client for example will be

    Dear client

    Yours sincerely

    Joe Bloggs

    Truly Eminent Costs Professional

    27th March 2013

  7. The distinction is that a firm of solicitors has a status of its own in proceedings. The firm will go on record as acting (not the individual solicitor). However, with Costs Lawyers there is no entity regulation. I go on record in my name, rather than my firms. On that basis it probably is correct to sign letters off in my own name where there is not already a firm of solicitors on record.

    Simon Gibbs

    27th March 2013

  8. Interesting point re DA costs.

    I am aware of the two schools of thought on this as to whether or not they are payable on non-ligated claims – whats the general concensus here?

    annon

    27th March 2013

  9. I stand corrected.

    On the assessment costs: I have issued Part 8 in the SCCO on the basis of assessment costs only and these were recovered on an indemnity basis.

    Truly Eminent Costs Professional

    27th March 2013

  10. The value of this mystery claim has not been shown. Nor has the funding method.

    That is a large reduction certainly, but I am guessing that the schedule has a high success fee and claims partner rates (perhaps for a more expensive area too), and that both sides realise that the simple nature of the claim only needed a Grade C and a modest success fee.

    I’d wager that by far the largest reductions were in rate and success fee and the actual time spent was relatively unaffected.

    Dropping Grade A down to C and the success fee coming down from 100% to say 30% would cause such a reduction.

    Sounds to me like the claimant solicitor drafted his schedule in accordance with the terms in his retainer (as he should), while fully appreciating the likely awards for rate & SF at assessment.

    While the paying party is no doubt pleased at the reduction from the total claimed, the example is more about the sensible pragmatism of the claimant’s solicitor.

    Paul Williams

    27th March 2013

  11. I always thought if you end a letter Yours faithfully then you put Mr S Gibbs as the letter is formal. If you are sending a nice letter (Unlikely!) then its Yours sincerely Simon Gibbs!

    You are so good at your job Simon. You must be the only Costs Lawyer who achieves these great savings. Your clients must be so proud!! I wonder how many Defendant costs firms are still charging percentage of savings! remember Ahmed and Powell! oh happy days. Lets all hit them with Part 18 requests relating to their retainers to establish if they have any locus standi!

    Anonymous

    27th March 2013

  12. at TEP, I agree

    but there was also a decision in Jones v ALCOM which a certain firm likes to quote

    annon

    27th March 2013

  13. If you don’t know the name of the recipient…

    Use: “Yours faithfully”. It is used when the recipient is not addressed by name, as in a letter with a “Dear Sir” salutation.

    When you do know the name of the recipient…

    Use: “Yours sincerely”

    Simon Gibbs

    27th March 2013

  14. That is very similar to this situation, which happens an awful lot to me:

    D – ‘We note your Bill of £10k and offer £5k’

    Me – ‘We will accept £8.5k all-in’

    D – ‘We will offer £6k’

    Me – ‘Rejected’

    D – ‘We will offer £7k’

    Me – ‘Rejected’

    D – ‘Why will you not negotiate?’

    Me – ‘We have, we offered £8.5k’

    D – ‘We offer £7.5k’

    Me – ‘Rejected’

    D – ‘We will draw your conduct to the attention of the Court. You are supposed to negotiate’

    Me – ‘We have done’

    D – ‘We offer £8k by way of a Part 47 offer’

    Me ‘Agreed. Interest and DA costs are £500, shall we just call it £8.5k all in?’

    D – ‘Agreed’

    Pete B

    27th March 2013

  15. We did one were costs claimed £600,000.00. Settled £60,000. There was a good reason for the reduction. We all have success stories. Tell us one that you lost big time Simon. You cant be that good and never lost!!!

    Anonymous

    27th March 2013

  16. It’s a shame that this negotiation masterclass in legal costs will most likely be redundant in 12 months time after the effects of fixed costs on the fast track are fully observed, much like 90% of people employed in the industry.

    Anon

    27th March 2013

  17. Simon,

    whats your position on the DA costs – what’s your authority that says not entitled to recover?

    annon

    27th March 2013

  18. Without proceedings in the substantive matter and without Part 8 costs proceedings there are no “detailed assessment” costs as such as detailed assessment proceedings have not been commenced. In the absence of an express agreement that the defendant will pay the costs of those costs negotiations, at the time as settling the origianl costs, where does the right arise? You can’t issue Part 8 on the back of the original agreement that the Defendant will pay the Claimant’s costs as that related to the costs of the substantive matter. If you did issue Part 8 and those were (under the current rules) opposed, the claim would be struck out. What contractual agreement would there be to issue Part 7 on?

    This is no different to parties to a substantive claim settling the claim but the agreement being silent as to costs. The court has no power to impose a costs order one way or the other. It’s none of their business.

    Simon Gibbs

    27th March 2013

  19. Typical paying party bias Simon.

    You can only include the cost of preparing the bill in the bill of costs. All other costs such as costs negotiation incurred after the substantive work has finished cannot be included.

    Are you seriously suggesting that all work pertaining to costs negotiation is irrecoverable?!

    Truly Eminent Costs Professional

    27th March 2013

  20. It’s perfectly recoverable if the paying party (defendant or claimant) has agreed to pay it. If not, what route is there for recovery? A court not ceased of the dispute, because there are no proceedings, cannot adjudicate on the issue of what the parties should (and could) have agreed.

    Simon Gibbs

    27th March 2013

  21. Well in that case, do you agree, that once Part 8 has been issued all the costs negotiation work will be recovered on the standard basis post service of the bill?

    Truly Eminent Costs Professional

    27th March 2013

  22. Where Part 8 is issued, all work done dealing with costs post-settlement of the substantive case is to be treated as part of the costs of the detailed assessment proceedings. Where the parties are unable to agree liability for such costs, it is a matter of discretion for the court as to which party (if any) should be awarded such costs – as per Crosbie v Munroe. And for the court to decide whether such costs should be paid on the standard or indemnity basis.

    Simon Gibbs

    27th March 2013

  23. Longman v Feather & Black explores the issue rather well (though only County Court level).

    Rob Pettitt

    27th March 2013

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