The defendant costs specialists

Success fee cap problems

By on Nov 11, 2011 | 14 comments

Barrister Andrew Crouch, writing in Solicitors Journal Bar Focus supplement highlights an interesting problem that will apply equally to barristers and solicitors post-Jackson concerning the operation of the proposed 25% success fee cap based on general damages and past losses:

“lawyers in the post-Jackson reform world are also going to have to get used to asking their successful clients to pay them their success fees from their general damages (enhanced by ten per cent) and past losses. If the matter goes to court, such calculations should cause little difficulty, but surely it is only a matter of time, in a case that settles, before there is a dispute between a lawyer and his client as to the proportion of general damages and past or future losses in the sum agreed and the sum on which the lawyer is entitled to claim his success fee”

As to the related problem that I have raised in the past of whether the 25% cap includes or excludes VAT, Lord Justice Jackson has confirmed that in his view the 25% figure should include VAT. This means legal representatives will actually recover only 20.83%. Jackson LJ does not seem to have commented on whether the 25% cap (or rather 20.83%) should be split between the solicitor and barrister (or barristers) where both are instructed.

    14 Comments

  1. Asking successful clients to pay the success fees?

    Never going to happen.

    I’m aware of 3 firms at least that are fully intending to stick with the “you get 100% of your damages” advertising.

    And some CLT CPD courses are actually advising that if Solicitor A (wanting to charge shortfall) knows that Solicitor B down the road will not, then Sol A has a duty to explain that to the client even if it means he does not get the instructions.

    Market forces will mean that no solicitor in bulk injury work will ever get that shortfall.

    Barristers who don’t agree to the same just won’t get instructed at all.

    Paul Williams

    11th November 2011

  2. so solicitors get to fully shoulder the burden of having to fund a case, and take all the risk of a Defendant Insurer pulling all the tricks they currently do (plus add many more I’m sure) to evade the claim or undervalue it, for nothing?

    And on top, the referral fee ban will kill the work flow, or drive the payments underground again, so nothing is regulated (I have cornered the market in dodgy brown enveloes in antifcipation of this event)

    In what way exactly does this reprtesent the “Access to Justice” thast was promised to all?

    Anonymous

    11th November 2011

  3. That’s a helpful item. Thinking about it I can see that Jackson actually spells the end of success fees. Add to that the forthcoming radical reduction to fixed costs and we can see a significant chance that Claimant firms will contract or close down in significant numbers and lower level cases will simply uneconomic for solicitors to take on.

    Jonathan James

    11th November 2011

  4. It seems to me that Jonathan james is right. If so where will that leave defendant firms (and their costs lawyers!)?

    Anonymous

    11th November 2011

  5. How about not doing this and finding a way that actually works.

    Lets be honest some solicitors are going to challenge this until the cows come home.

    Another faux pas from another government not helping the economy or willing to look beyond the hype.

    Accident Management

    12th November 2011

  6. I recently went on a CLT course where the Access To Justice point was raised.

    Apparently Jackson has re-defined Access to Justice – not as being being that every person has access to justice, but only that there is a working justice system.

    The issue of needing a bit of cash or a funding arrangement to actually have access doesn’t seem to bother him at all.

    Paul Williams

    14th November 2011

  7. The first question to be asked is why should the State (i.e. the taxpayer) or insurance companies be expected to fund litigation? I wouldn`t expect them to fund me for a new car or house extension.

    The RAC is currently offering up to £100,000 legal costs cover for non-fault RTAs for just £20 a year.This modest premium also tells you all you need to know about the fairness of success fees.

    If people can afford alcohol, cigarettes, two cars, second homes, foreign holidays, 50in TVs, Sky TV, ipods, ipads, Olympic and football tickets etc etc etc then they can afford insurance.

    Cockney Rebel

    15th November 2011

  8. Is it me or did the government generally stopped funding litigation in 2000?

    And why should insurance companies fund litigation??? They accept the premium, invest it, make huge profits, pay fat dividends to shareholder and so they pay – full stop.

    Money comes in and money goes out. They still make their profit come what may

    People go to work to live and pay for items they deem worthy. They dont go to work to pay for litigation for righting a wrong.

    Why should they pay for litigation when they have done nothing wrong and have to be out of pocket. There can never be justice on that basis. Or is the legal expenses premium going to be a new head of loss too?

    As to BTE are we suggesting that RAC actually pays its panel firms fees??? or are they limited to what they can recover from the other side? What about the imposition (now challenged in the courts) of panel firms over freedom of choice.

    The restrictions imposed by BTE insurers are ardious at best. I would choose CFA any day of the week. However to do so in the near future would cost me money when all I did, for example, was to have the misfortune to be run over by a speeding and careless driver

    Also what about the significant volume of cases for which BTE is not suitable? there are cases when dibs alone will top standard indemnity level. These are not the norm granted but they are the ones whereby the client will suffer most.

    annon

    16th November 2011

  9. Re Cockney Rebel’s post:

    I fully expect the cost of BTE to the public to rise dramatically post ban on referrals. The true cost of BTE is premium to public PLUS referral fee which is roughly the same as an ATE premium

    Graham

    16th November 2011

  10. I suppose the point here is whether litigation funding should be “special” and ring fenced from any other walk of life. My feeling is that a person`s view in the matter will probably be influenced by their politics rather than a rational consideration of the options.

    My property and car are covered by insurance. I find it equally logical to have BTE insurance.For people who cannot afford cover (because they are retired, disabled or cannot or will not work)I believe some form of CFA sysyem should be allowed. However, there must be some attempt to halt what is currently a runaway train, say fixed success fees for all claims and a ceiling on costs recovery linked to damages say times three.

    Annon says what about the significant volume of cases for which BTE is not suitable? I say what about the significant volume of genuine cases which are rejected by CFA solicitors as being too risky to take on? Is that justice?

    Cockney Rebel

    16th November 2011

  11. You pay for insurance on your car and property. That protects you when you have no one to blame. That puts you in a good position. Not everyone has that option.

    If however someone is to blame then you sue them and they will pay and not the insurer. We seem to be mixing our indemnity insurance with our legal expenses insurance.

    Quite simply my opinion is that people should not have to pay to right a wrong when someone else is at fault and there is a paymaster

    I agree control was needed – the judges had to accept responsability for that. They failed to exercise all of their case management powers.

    Equally the Defendant’s had to accept responsability for extra costs incurred to. In cases they refused to deal with matters or defended to the hilt and then settling last minute

    As to

    “Annon says what about the significant volume of cases for which BTE is not suitable? I say what about the significant volume of genuine cases which are rejected by CFA solicitors as being too risky to take on? Is that justice?”

    Quite frankly if a solicitor is not willing to accept such a case on a CFA then there is not a cat in hells chance that it would be accepted on a legal aid basis, BTE basis, third party funding basis, etc.

    Such a case is more likely to be funded by a CFA but if solicitors wont accept such a case then there are simply only ever two options, 1 private paying or 2 benefactor.

    The CFA regime provides that more cases will be funded than under previous regimes but not all. There were always be some cases whereby the only options are the two above

    annon

    17th November 2011

  12. Any body who argues about Access to Justice should spend their time attacking the Legal Aid cuts.

    When Jackson came out the judiciary came out in full support.

    Why as a profession has nothing been done. There has been no real attempt being made to consider a CLAF or other alternatives. It should not be a case of one indicvidual or party funding or am I being daft by saying it is a duty of all of us as the big society. A CLAF needs seed money any proposals?

    Kevin Hassey

    17th November 2011

  13. A CLAF would still need a merits test

    A CLAF would not be necessary if CFA regime was not being attacked under a cloud of spin and propaganda

    annon

    17th November 2011

  14. Whatever your views as to CFAs where is an indusrty’s reaction to the business. We have seen Solicitors reacting to ABS. Why no alternative from Solicitors, Law Society , yes and insurers. Is it CFAs, Legal Aid, BTE or nothing. Jackson did float the issue of CLAFs. No one wants to see a system which encourages unmeritorious claims or even fraudulen ones. Cannot a whole industry not come up withj a viable alternative. Too late now but maybe efforts should have ben made elsewhere rather than sticking head in sand

    Kevin Hassey

    18th November 2011

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