Date success fee recoverability will end
One of the big issues concerning Jackson implementation is which date will be chosen for ending recoverability of success fees. Will it be by reference to the date of the accident date (as per the fixed RTA success fee regime) or the date the CFA was entered into (as per revocation of the CFA Regulations 2000)?
The Legal Aid, Sentencing and Punishment of Offenders Bill, as drafted, reads: “The amendment made [concerning ending recoverability] does not apply in relation to a success fee payable under a conditional fee agreement entered into before that subsection comes into force”.
With April 2013 likely to be the date of implementation, this would mean no recoverable success fee where the CFA is entered into after that date.
Well, at this point those of a claimant disposition may want to make sure they are sitting down before reading further. (If you think you look cool reading this on your ipad, standing up on the train, that image is likely to be shattered when you have to be helped up from the floor by your fellow passengers.)
Justice Minister Lord McNally has proposed an amendment that reads:
Page 30, line 30, leave out from “not” to end of line 32 and insert “prevent a costs order including provision in relation to a success fee payable by a person (“P”) under a conditional fee agreement entered into before the day on which that subsection comes into force (“the commencement day”) if –
(a) the agreement was entered into specifically for the purposes of the provision to P of advocacy or litigation services in connection with the matter that is the subject of the proceedings in which the costs order is made, or
(b) advocacy or litigation services were provided to P under the agreement in connection with that matter before the commencement day.”
Although this could have been worded considerably more clearly, commentators (including APIL) have read this to mean that unless a costs order is obtained before April 2013, no success fee will be recoverable regardless of the date of the CFA.
Let me spell that out. If this amendment is passed it will mean that a claimant who is currently pursuing a claim under a CFA (or who enters into a CFA between now and April 2013) will not be able to recover a success fee from the defendant unless the claim is settled and a costs order obtained before April 2013.
Now, whatever the serious flaws to the current system, to retrospectively end recoverability would be surprising to all concerned. This issue has only just arisen, but some quick initial thoughts:
A claimant who has already entered into a CFA, under the current rules, would have had little, if any, interest in the setting of the level of the success fee. This is because they would have expected the success fee to be recoverable from the other side. Retrospectively ending recoverability would mean the client becomes liable to pay the solicitor the success fee from the damages recovered. Indeed, with many cases the damages will not be remotely sufficient to cover the success fee leaving a successful claimant positively out of pocket (remember, there will be no damages cap on the level of success fee with an existing CFA). The client would have been denied any opportunity to make an informed decision to try to negotiate the level of success fee with the solicitors or find solicitors who would charge a lower success fee (a central element of Jackson’s vision).
Solicitors who have CFA Lites would be unable to recover any success fee. Having promised not to charge the client more than is recovered from the other side, if recoverability goes between the parties it must equally go as with the client.
Standard Law Society CFAs inform the client: “If you win your claim, you pay our basic charges, our disbursements and a success fee. You are entitled to seek recovery from your opponent of part or all of our … success fee”. This advice will be, retrospectively, untrue.
If a solicitor gives this information to a client when entering in a CFA at any point since this amendment was proposed (apparently 7 March 2012), and this amendment is then implemented, it would almost inevitably make any such advice negligent and almost certainly prevent the solicitor recovering the success fee from the client. Given APIL are aware of this proposed amendment (see Tweet), it is hard to envisage how any proper advice given to a client since 7 March 2012 that fails to spell out the possibility of this retrospective change being made would not be negligent.
Why would any defendant settle a claim between now and April 2013?
I am aware that there is some frantic lobbying going on in the background to stop this amendment being passed but the practical implications of this are such that I am giving this 0% chance of being accepted. That assumes, of course, that those voting have any understanding of what they are being asked to decide and what the implications are. On second thoughts, I’m revising this and giving it a 50% chance of becoming law.
Other good news for claimant lawyers includes the proposal by Labour peers to halve the fixed fees solicitors can claim from the low-value RTA Portal (and that no increases to the fees may be made without a vote and approval of both Houses of Parliament) and the confirmation from the MoJ that they will extend the value of claims in the portal from £10,000 to £25,000 from April 2013.