No cap in non-PI cases
We’ve been exploring some of the problems with the Legal Aid, Sentencing and Punishment of Offenders Bill and how this may reduce claimants’ damages by rather more than 25% in personal injury cases.
The situation becomes even more dire for non-personal injury claims. In relation to a professional negligence claim against, for example, an architect, there will be no cap on the success fee. Such claims are often strongly defended and it would not be surprising if any solicitor or barrister accepting such a case on a CFA basis would expect a 100% success fee. The costs of such claims can be significant and one would not be surprised to see base costs of a solicitor coming in at £100,000 if such a claim progressed to trial and, say, another £20,000 for counsel. That would leave the client with a potential success fee, to come out of any damages recovered, of £120,000 (plus VAT of £24,000). The claim would have to be worth at least £144,000 for the client to do no more than break even where the claim succeeds. In reality, if their damages are £144,000 they would be out of pocket to the tune of £144,000, even where the claim succeeds, as the recovered damages would disappear entirely paying the success fee. Indeed, the success fee payable may be far more than the damages recovered.
Worse, in non-personal injury claims, although LJ Jackson suggested that qualified one-way costs shifting might be introduced, the government currently intends to implement this only for personal injury claims. That would mean that as well as facing an unlimited deduction from damages by way of success fee if the case is won, claimants will also face the prospect of an adverse costs order if the case is lost. In the past this could be dealt with by way of an ATE policy, the cost of which was recoverable from the defendant. In future, this will not be recoverable from the defendant. Claimants will therefore have to fund this potentially significant cost themselves.
The alternative funding method that will, in future, be available for all types of claim is a contingency fee agreement (damages-based agreement). However, again, it will only be in personal injury claims that a 25% cap applies. It might, in theory, be possible for claimants to negotiate a cap of, say, 25%. However, in reality, will solicitors or counsel be prepared to act on this basis? Taking the above example (£120,000 base costs), currently the solicitors and counsel might expect to recover legal costs of £240,000 (plus VAT) if the case is won once a 100% success fee is taken into account. Would they now be prepared to accept the case with a 25% cap if the expected damages were, for example, £100,000? Recovering legal costs of £25,000 (inclusive or exclusive of VAT) as against £240,000 (plus VAT) is not an attractive proposition.