Project1_Layout 1 07/05/2013 CONTRACTS IN FOCUS
Construction lawyers: why are
they so expensive
(and what can be done about it?)
In our regular monthly column, David Jackson, solicitor and founder of the National Legal Consortium, talks to RCI about why lawyers are so
expensive and what a construction company can do to minimise costs and potential pay-outs
I have advised on construction disputes for
over 20 years. I get phone calls every week
from companies seeking advice on contracts
or on payment disputes. Unfortunately, many
clients contact me when its just too late to do
anything other than fight when, had we spoken
earlier, a dispute may have been avoided.
The reason why clients leave it until the last
possible time to contact lawyers is obvious −
they know that lawyers are very expensive.
Another reason is that they often cannot
find a construction specialist − but that is for
Although clients accept that a specialist
lawyer can help resolve disputes and obtain
payment of sums that are due to them, they
take the view that the sums they will have to
pay do not justify their involvement and prefer
to deal with the disputes themselves. After all,
you don’t treat a gunshot by opening an artery.
Too often they have paid out substantial sums to
achieve very little.
If adjudication is going to cost £5,000 that
you can never recover (because you can’t claim
back your costs in adjudication even if you win)
− why not settle for a discount of £4,000?
If going to court for £12,000 is going to take
a year, cost £15,000 and expose a company to a
claim for costs if it loses, then why not settle for
£5,000 and be done with it?
Lawyers often charge £200 plus an hour with
no guarantee of success. Taking a large claim
to court will often cost more than £50,000,
and even adjudication, which is the cheap-andcheerful
option often costs more than £5,000.
Lawyers have high salaries to pay, pay
expensive insurances, run expensive offices,
undertake expensive training every year, and
pay for expensive annual certificates to allow
them to practise. Like all businesses they need
to cover costs and make a profit − so their fees
Nothing new in any of that. But what can a
company do to limit its exposure to legal costs?
There are several options that a company can
1. Work undertaken on a Conditional Fee
Agreement (CFA). Some lawyers will
undertake work on a “no win no fee” basis.
Generally, they will only do so when they
believe you have very good prospects of
success and will charge enhanced fees should
they succeed. Those fees should be recovered
from your opponent. The CFA system can be
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“Many clients contact me when it’s just too late to do anything
other than fight when, had we spoken earlier, a dispute may
useful, but it will not help if the arguments
are evenly balanced, or if your lawyer is not
convinced that you can win, or if the lawyer’s
view of your prospects change during the
course of the case.
2. Legal expense insurance. Some commercial
insurances contain legal expense cover. This
can be very helpful as it pays your lawyer’s
fees if you need to make a claim or are sued.
The insurance cover is strictly limited by
the scope of the insurance and cover is often
limited to circumstances in which the insurer’s
solicitors assess your prospects as good. The
use of the cover may increase future premiums
and you may not be able to send chasing
letters for unpaid invoices or to get advice on
3. After the Event Insurance. This insurance
is purchased after proceedings are started,
usually by the company making the claim.
The insurance pays the opponent’s legal
fees should you lose in an action that you
commence. The insurance depends on you
having good prospects of success. There is
no premium to pay unless you win when the
insurer generally charges 10–15% of the sums
recovered. If you lose, the insurer pays your
opponent’s legal costs, although you will have
to pay your own legal costs.
4. Litigation funding: It is now possible to obtain
funding to pay legal costs as actions progress.
Funding is usually obtained for larger cases
and usually attracts charges and interest
payable to the funder from sums obtained in
the proceedings. The funder will want paying
if you lose the case and may require security
for its investment.
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have been avoided”