The year 2013 was tough for the personal injury sector. A number of changes took place in so far as costs were concerned:
– Further fixed costs were implemented. The 65th update amended CPR 45 and introduced Pre-Action Protocols for Low Value RTA and EL/PL claims for claims up to a value of £25,000.00.
– Parties entering into CFAs post April 2013 who now take out ATE insurance to fund their litigation are now payable by the Claimants’ themselves and will be deducted from their damages.
– Success fees that were awarded to solicitors upon entering into a CFA in view of the considerable risk they were absorbing would now no longer be able to recover these from the paying party and would also be payable by the Claimant. That said, consumer protection legislation was introduced at the same time in the form of the Conditional Fee Agreements Order 2013 that puts a cap on the maximum sum the solicitor can charge a client in a personal injury claim by way of a success fee to 25% of the damages.
Suffice it to say, the government have hit hard recently at Claimant lawyers. That said, if you’ve made it until now, you clearly have some fight left in you!
It appears however, the battle is not over. This time, it is not the government and judiciary who are on the offensive, but is none other than our fellow solicitors!
As the famous Scottish scientist, Alexander Bell said ‘when one door closes, another opens’
A new species of solicitor has emerged. Instead of pursuing a career in compensating victims of injury, she is instead tracking Claimants who have had a deduction of their damages and assessing whether a refund is due.
When does this situation arise? Supposing you take on a low value claim and you enter into a CFA with a success fee of 100%. You then stipulate that you will deduct the success fee from the damages, but limit this to 25% of the damages.
Your claim then settles for £10,000.00 and what most practitioners appear to do is simply deduct 25% of the damages. This equates to £2,500.00.
This is flawed on two counts:
- It is not as agreed with the client. What you ought to have deducted is as follows:
|WIP||Success Fee (100%)||Deduction (25%)|
|£2,000.00||£2,000.00||£2,000.00 (Not £2,500.00)|
- Your deduction is based on a 100% success fee. For an RTA, for example, in accordance with old rules, the success fee was fixed at 12.5%. The deduction should arguably be as follows:
|WIP||Success Fee (12.5%)||Deduction (25%)|
|£2,000.00||£250.00||£250.00 (Not £2,500.00)|
Unfortunately however, there is support for this stance (albeit on a County Court level).
In A and M v Royal Mail Group  EW Misc B24 (CC), in a case involving two children who were victims in a road traffic accident, the claimant law firm charged a standard 100% success fee, to be capped at 25% of damages. The firm did not conduct a risk assessment of the case before assessing the success fee.
In a sharply worded judgment, DJ Lumb was quite clearly irritated with this approach.
DJ Lumb commented ‘it seems it has now become commonplace for solicitors to enter conditional fee agreements with clients with a stated success fee of 100%, even though the prospects of the claim being successful are virtually certain.’
In fact DJ Lumb went even further, citing one pre-Jackson case; Beal v Russell  SCCO in which the SCCO calculated the appropriate level of success fee in a rear-end shunt at just 5%.
What really incensed DJ Lamb, was the fact that the 100% success fee was simply applied without any risk assessment of the particular case whatsoever; ‘Indeed, if solicitors/litigation friends wish to justify proposed deductions from damages as being reasonable, then a risk assessment would be at least highly desirable as evidence in support of their arguments.’
This is all very well, but does the Judiciary fully appreciate the commercial realities of running a personal injury matter. Do the fixed costs alone allow for any profit margin? It is more likely that they merely cover the running costs.
DJ Lumb unfortunately had something to say about this too ‘The suggestion that solicitors would not undertake the work without the enhancement of a success fee in (at least in as much as it relates to simple and straightforward cases) is unfounded by the experience of the courts in dealing with the many thousands of these cases throughout the country,’ He added: ‘On the contrary, it seems there are many solicitors who are quite prepared to do the work without a success fee. There is no compulsion on solicitors to do the work. They may choose not to do so if it is uneconomic for their firm. Other firms will do that work instead.’
This is the signature case for this new offensive on Claimant solicitor firms.
In our view, this is a trend that will no doubt increase in the next few years and it is imperative that Claimant lawyers renew their ties with their cost draftsman, ready for combat.
Fortunately, here at MRN we have come up against a number of these cases and are fully equipped to defend the same.