High legal costs in Ireland might be reduced under a system of non-binding guidelines with “significantly enhanced” transparency measures, according to an independent report prepared for the Department of Justice.
The transparency measures proposed by consultants Indecon include a requirement for all clients to be informed in advance of guideline costs and of any factors that could lead to a divergence.
Lawyers would be required to give details to the Office of the Legal Costs Adjudicators (OLCA) of any such divergence. Such measures, according to the report, could enhance competition for legal services and assist people in making more informed choices when hiring lawyers.
The report also suggests consideration be given to introducing binding maximum litigation costs for non-complex personal injury cases below a value of €30,000.
Responding to the report, the Alliance for Insurance Reform, which represents 46 civic and business organisations, said it was concerned that non-binding guidelines “will simply not be robust enough to lead to any meaningful change in current practise”.
“The positive impact intended by the proposed ‘transparency measures’ may well have merit but they do not fill us with confidence that any meaningful curtailment in excessive legal fees will be forthcoming,” a spokesman said.
Tracy Sheridan, owner of Kidspace play centres in Rathfarnham and Rathcoole, and a member of the alliance’s board, said non-binding guidelines “are a non-starter if we really are serious” about addressing legal costs.
“It is an access-to-justice issue as well as a crippling expense for businesses and others in terms of their insurance premiums,” she said.
The report, published last week by the department, highlights a lack of adequate information about legal costs in Ireland and notes the limited data available shows wide variations in costs.
Legal costs in motor insurance claims are described as “significant”, amounting to 8 per cent to 14 per cent where a direct settlement is made and up to 31 per cent to 34 per cent where cases are litigated. This contrasts with costs of between 2 per cent and 4 per cent in cases dealt with by the Personal Injuries Resolution Board.
Legal costs in employment liability claims showed a similar pattern, accounting for an average of 33 per cent of the settlement of litigated claims.
Data from the Institute of Legal Costs Accountants (ILCA) concerning costs for 16 different personal injury cases settled in 2019 showed that the legal costs of a case involving a €900,000 award amounted to some €212,000.
In two separate cases, both listed as involving 45 days work, the legal costs differed considerably. In one case, where an award of €85,000 was made, the legal costs were €23,964. The costs in the second case, involving an award of €65,000, were €45,085.
The department asked Indecon to examine possible models to control Irish legal costs after the Minister for Justice received the 2020 report of the civil justice review group, which contained 90 recommendations for improving access to civil justice.
The review group was divided on the most effective way of reducing legal costs, with the majority favouring non-binding guidelines on costs levels and the minority, including the group’s chair, Mr Justice Peter Kelly, recommending that a table of maximum cost levels be set by a new Litigation Costs Committee.
In his foreword to the group’s report, Mr Justice Kelly said he believed “more radical measures” than non-binding guidelines were necessary.
In submissions to Indecon, the Law Society and the Bar of Ireland favoured non-binding guidelines. The Competition and Consumer Protection Commission said non-binding guidelines would not involve a significant change, but cautioned that introducing binding maximum costs tables might present a greater risk of detriment caused by “collusive behaviour”. It favoured transparency measures and ones that would best enhance competition in legal services.
In its report, Indecon said “major gaps” in information on the costs of litigation still existed, particularly about the detailed components of legal costs and variations between different legal service providers.
The report said the resultant lack of transparency exacerbated challenges faced by consumers of legal services.