Source: http://dev.gwslaw.co.uk/tag/cfas/
Timestamp: 2019-04-18 13:23:40+00:00

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Arguably, Lord Justice Jackson’s most significant recommendation, in his Final Report, is an end to recovery between the parties of success fees.
This proposal will lead to obvious and huge savings to defendants. Those who think that current political uncertainty will lead to much of the Report being shelved should think again. Whichever party is in power after the general election, there will be a pressing need to control public expenditure. In terms of the money paid out by the NHSLA alone, and ignoring all the other areas where the public purse pays for litigation, this will be a compelling reason to adopt this recommendation. This is great news for defendants but really bad news for claimant lawyers.
Heavy advertising in recent years telling potential claimants that they will keep 100% of their damages will make it very unattractive for claimant solicitors to now start taking a cut of their clients’ damages. There will be enough firms who decide to take the hit themselves that others will be forced to follow. Success fees in personal injury claims are likely to disappear. For the lower-end RTA claims, the loss of the 12.5% success fee will not be dramatic but it will come straight from solicitors’ profit margins. It is likely to discourage some claims from being pushed to trial where the incentive of the automatic 100% success fee will disappear. On the other hand, the removal of the 100% threat will encourage defendants to take more cases to court, especially in relation to quantum disputes.
Even if firms do feel able to charge success fees, Jackson LJ’s proposed cap will limit to a large extent the amount that can be charged. Not only is a cap of 25% of damages recommended, but Jackson LJ’s master-stroke is that this cap will exclude damages referable to future loss. The element of damages that claimants will be required to pay as success fee will be limited to the general damages and past losses. In heavy litigation, and in particular catastrophic injury and clinical negligence claims, the cap is going to bite significantly in a high proportion of claims. This will have a big impact on profit margins for some firms.
The claimant lobby has been arguing that this proposal will reduce access to justice. This argument fails for a number of reasons. These proposals largely revert the position to the one that existed prior to the Access to Justice Act 1999. As Jackson LJ happily notes: “During 1996 APIL confirmed that those arrangements provided access to justice for personal injury claimants and that those arrangements were satisfactory”. He further notes: “In this regard, it is significant that in Scotland personal injury cases are conducted satisfactorily on CFAs, despite the fact that success fees are not recoverable”. Until recently, most BTE work and trade union work was conducted on unwritten speccing arrangements. It is not obvious that recoverability of success fees brought about an increase in the kind of claim that was pursued. The same kind of claim will still be run but the profit margins will shrink.
The Jackson package, and in particular this recommendation, is designed, at least in relation to personal injury work, to reduce legal costs at the expense of claimant lawyers. And that can be no bad thing.
In Various Claimants v Gower Chemicals (Cardiff County Court, 28/2/07) the paying party sought to argue that a failure to prepare a statement of reasons in accordance with Regulation 5(1) rendered the retainer invalid and all costs should therefore be disallowed. That argument was rejected on the basis that “the natural and ordinary meaning of the regulation is that there must be a provision in a CCFA that complies with the specification set out in the regulation. Regulation 5(1) does not additionally require that the prescribed provision must be performed”.
Is that an end to the story? Not quite. The ever ingenious Gibbs Wyatt Stone recently acted for the Defendant in an EL claim (Middleton v Mainland Market Deliveries Ltd (Southampton CC, 20/10/09)). The Claimant’s Bill claimed a 100% success fee on the basis that the fixed EL success fees had been applied to the case when the claim was accepted under the CCFA and the matter had settled at trial. In fact, the date of the accident was such that it did not fall within the fixed success fee regime. The judge accepted that fixed success fees did not apply as a matter of law and that the Court could not simply adopt the fixed success fee figures when assessing the success fee in this case (see Atack v Lee  EWCA Civ 1712).
The Claimant in this case had served a document, prepared at the time the case was accepted, that gave a detailed analysis of the various strengths and weaknesses of this case and then stating that the success fee would be 27.5% if the claim settled pre-trial of 100% if settled at trial.
However it was argued for the Defendant that this document did not properly comply with the requirements of 5(1)(c). That section required “the reasons, by reference to the risk assessment [emphasis added], for setting the percentage increase at that level”. Because the solicitors had simply adopted the fixed success fees, they had not undertaken the “risk assessment” required by 5(1)(a). Regulation 5 is a 3-stage process. To comply with 5(1)(c) requires the earlier steps to have also been undertaken. As such, it was argued there was a breach of CPD 32.5(1)(b) and that, by virtue of CPR 44.3B(1)(d)(i), the success fee was therefore not recoverable.
This was a different argument to the one run in Gower Chemicals. That argument was based on there being a breach of the CCFA Regulations which rendered the whole retainer invalid and all costs being irrecoverable. The argument advanced in this case was not that there was a breach of the Regulations, but that there was a breach of the detailed assessment disclosure requirements and the success fee alone was irrecoverable.
The judge accepted the Defendant’s submissions and disallowed the success fee.
If this decision were to be followed by other judges, a very large number of other cases would potentially be affected. A large number of “risk assessments” prepared in CCFA cases do not strictly follow the 3-stage process. Interestingly, there is a possible argument that the requirement to comply would have existed even if this was a fixed success fee case. The CCFA in place pre-dated the revocation of the Regulations (as most still do). There is nothing in CPD 32.5(1)(b) that disapplies the rule in fixed success fee cases. Although Lamont v Burton  EWCA Civ 429 and Kilby v Gawith EWCA Civ 812 are authority for the proposition that the courts have no discretion as to whether to allow fixed success fees, does this extend as far as overriding the disclosure or notification requirements? If a party fails to comply with CPD 19.4(1), for example, surely they can’t recover the success fee notwithstanding that it is a fixed fee case. Does this also apply to CPD 32.5(1)(b) in its current form?
In the same case, Counsel had entered into his CFA after liability had been admitted. The CFA did not put Counsel at risk in relation to Part 36 offers (despite his risk assessment being prepared on the mistaken basis that it did). Nevertheless, the fixed success fee figures had also been applied producing a claim for 100% as the matter proceeded to trial. The judge accepted that the success fee should be reduced to the 5% figure suggested in paragraph paragraph 24 of C v W  EWCA Civ 1459.
Who says that legal costs isn’t exciting?
In a previous posting (read here) I discussed the old rules relating to providing information about the funding of a claim. The latest update to the Civil Procedure Rules has made important amendments which came into force on 1st October 2009.
(e) any insurance premium where that party has failed to provide information about the insurance policy in question by the time required by a rule, practice direction or court order.
1. The wording “in the proceedings” is deleted and the reference to the new wording of the Practice Direction (Pre Action Conduct) makes it clear that notice must now be given pre-proceedings.
2. The insurance premium provision deals with the consequence of not giving the information discussed below.
3. The addition of the new wording “unless the court orders otherwise” is perhaps surprising. It was previously clear that failure to comply with the notification provision produced an automatic sanction in that the additional liability was not recoverable (in the absence of a successful application for relief from sanctions). It now appears to be in the general discretion of the court as to whether to allow the additional liability despite the breach, although the starting point is obviously non-recoverability. What is strange is that the new wording is followed by the same note that previously appeared: “Rule 3.9 sets out the circumstances the court will consider on an application for relief from a sanction for failure to comply with any rule, practice direction or court order”. If the court now has a general discretion there would be no need to formally make an application for relief from sanctions. Or, is the wording “unless the court orders otherwise” meant to refer to the situation where a successful application has indeed been made, but not otherwise? We’ll no doubt have to wait for the first decisions on the correct interpretation.
4. The word “he” is replaced by the non-sexist “that party” (so as not to upset any chicks reading).
For the reasons I gave in the previous posting on this subject, I am of the view that these changes clarify, rather than change, the requirements concerning pre-proceedings notification (although the corresponding transitional provisions might suggest the contrary).
This finally formalises the guidance given by the Court of Appeal in Rogers v Merthyr Tydfil CBC  EWCA Civ 1134.
What is not 100% clear is what the consequence would be of failing to give notification of the fact the policy is staged or to give the trigger points. Would the receiving party lose all premiums or would they still be able to recover the first stage premium (on the basis that the paying party can be no worse off in respect of this first premium even if they were not notified of the staging; the prejudice comes from not having the opportunity to settle the claim before the subsequent premiums become payable)? More test litigation ahead for costs draftsmen and other costs professionals.
It should be pointed out that none of these changes affect those acting under discounted CFAs\CCFAs without a success fee (usually defendants). There is no need to provide notice of funding in this situation because the full hourly rate payable in the event of a win is not treated as being an additional liability (see Gloucestershire CC v Evans  EWCA Civ 21).
There are also important changes to the rules concerning ATE premiums in publication proceedings although, frankly, if you work in that niche area you should already be more than aware of those changes.
“A.1 Where a person enters into a funding arrangement within the meaning of rule 43.2(1)(k) he should inform other potential parties to the claim that he has done so.
A.2 Paragraph 4A.1 applies to all proceedings whether proceedings to which a pre action protocol applies or otherwise.
“Where a party enters into a funding arrangement within the meaning of rule 43.2(1)(k), that party should inform the other parties about this arrangement as soon as possible.
These sections have, surprisingly, caused problems. This has been due to a conflicting interpretation as to how the word “should” ought to be understood. Is it meant to be a mandatory provision or simply a “recommendation”?
Master Campbell reached the same decision again in Cullen v Chopra  EWHC 90093 (Costs).
The word “must” is hardly ever used in the Pre-Action Protocols. The word “should” is usually used. For example: “Some solicitors choose to obtain medical reports through medical agencies, rather than directly from a specific doctor or hospital. The defendant’s prior consent to the action should be sought and, if the defendant so requests, the agency should be asked to provide in advance the names of the doctor(s) whom they are considering instructing”; “The parties should consider whether some form of alternative dispute resolution procedure would be more suitable than litigation”; “The defendant should reply within 21 calendar days of the date of posting of the letter identifying the insurer”. I would suggest that it would be absurd if a party failed to comply with any of these steps but could then claim to have complied 100% with the relevant Protocol on the basis that these were meant to be no more than “recommended” steps.
Although these comments were clearly obiter, it would be extremely strange for the Court of Appeal to go out of its way to comment on the interpretation of a Practice Direction if failure to follow that Practice Direction had no consequences. If there were no consequences, what were the “difficulties” that the Court of Appeal was referring to?
Applying this reasoning, the note immediately following the section details a specific sanction and the word “should” is therefore surely intended to be mandatory on this occasion with the consequences of non-compliance being spelt out. The alternative interpretation produces the bizarre outcome that the PDP details a sanction that only applies to a breach of a totally different rule and not anything contained within the PDP itself. If this were correct, it would be unique within the PDP or Pre Action Protocols for a sanction to be listed totally detached from the relevant rule.
Any confusion that existed under the previous rules has now been removed by the latest update to the Civil Procedure Rules. I’ll be posting details of these changes in the next few days on the Legal Costs Blog.
Most Conditional Fee Agreement (CFA) challenges follow a well-trodden path. However, occasionally a new variation arises where there is no authority directly on all fours. This happened in the recent case of Smith v Carpetright plc, heard by Regional Cost Judge Sparrow in Norwich County Court.
The Claimant had entered into a CFA with Godfrey Morgan solicitors. It was a condition of the, now revoked, CFA Regulations 2000 that for a CFA to be valid the solicitor must advise the client, before the CFA is entered into, whether they recommend a particular method of funding the claim and if they recommend a particular ATE insurance policy their reasons for doing so.
The CFA in question recommended an ATE policy with Amicus. Witness evidence was served during the detailed assessment proceedings that stated that this was the policy that was also orally recommended to the client. However, the CFA itself then went on discuss an Accident Line Protect insurance policy and stated that such policies are “only made available to you by Solicitors who have joined the Accident Line Protect Scheme”.
Gibbs Wyatt Stone acted for the Defendant and argued that there had been a breach of the Regulations in that it was inherently confusing as to which policy was being recommended (whether an Amicus policy or an Accident Line Protect policy) and that there had been a total failure to explain why the Amicus policy was being recommended, if it was, given the only details given had related to the Accident Line Protect policy.
The Judge held that there was real confusion in the written CFA as to what was being recommended and the likelihood was that anybody reading the CFA would consider that Amicus and Accident Line Protect were one and the same. Regardless of whether or not clear oral advice had been given, the Regulations required the advice concerning the ATE recommendation to be in writing and this had not been clearly done. This amounted to a breach which undermined consumer protection and was therefore a material breach. The CFA was held to be invalid and costs of over £90,000 were disallowed.
The Claimant is appealing this decision.
1. Is this success rate not a reflection of the quality of the lawyers who work for this firm but rather a reflection of how risk adverse they are? Do they only take on cases they consider to be dead certs and wouldn’t touch with a ten-foot barge pole anything that looks as if it has the slightest chance of failure?
2. If this level of success is even remotely typical of personal injury firms, where on earth did the fixed success fee figures come from? The ready-reckoner produces a success fee of 2% where the prospects of success are 98%, but the fixed success fee for even straightforward RTAs that settle pre-trial is 12.5%.
3. For non-fixed success fee claims, what level of success fee does this firm claim? What do they argue on detailed assessment to support their success fees? Do they claim an average success fee of 2% to reflect their success rate? If any readers of the Legal Costs Blog have any recent experience, let us know.
Advising clients on the level of success fee that might be allowed in any given case is an inherently difficult task given the unpredictability of the courts. Another reason why it is difficult to advise is due to the method by which success fee are normally calculated. The courts generally accept, as a starting point, the “Ready Reckoner” (see for example paragraph 4 of Atack v Lee  EWCA Civ 1712). This allows for a calculation that, based on the prospects of success fee in any given case, produces the correct level of success fee to reflect that risk. The difficulty with the figures produced by this method is that a tiny change in the prospects of success can produce a radically different success fee. For example, a case with a 50% chance of success produces a 100% success fee. A case with a 60% chance of success produces only a 67% success fee. Therefore even a very small difference in a judge’s assessment of the prospects of success can radically alter the amount that can be allowed on a bill. How can one accurately advise a client as to what a judge is likely to allow?
Gibbs Wyatt Stone were instructed in relation to a case concerning a claimant who had tripped over a defective paving stone. This type of claim is generally recognised as not being straightforward due to the availability of a s58 statutory defence. However, the typical difficulty still arose as to what figure to recommend in relation to the level of success fee. In the event, GWS advised that the Defendant’s offer of £14,500, made prior to a formal Bill being served, provided reasonable protection. A formal Bill was served and the matter proceeded to detailed assessment in the Supreme Court Costs Office. The matter was heard by Principal Costs Officer Lambert. He assessed the prospects of success at 65% and, using the “Ready Reckoner”, allowed a success fee of 55%. Taken together with the other reductions made, the Bill of Costs was reduced from £35,150.50 to £13,991.83. The Defendant therefore succeeded on its offer and was awarded the costs of the detailed assessment proceedings.
The Claimant was unhappy with the success fee allowed and appealed to a Costs Judge. An odd aspect of appeals from a Costs Officer to a Costs Judge, in addition to there being an automatic right of appeal, is that such an appeal is by way of a complete rehearing rather than a straight appeal. This means that the Costs Judge will consider the matter afresh rather than simply decide whether to uphold or overturn the Costs Officer’s decision.
The “appeal” was heard by Master O’Hare who decided not only that the Costs Officer’s assessment of the prospects of success had not been unduly low but had actually been too high. He assessed the prospects of success at 67% and, based on the “Ready Reckoner”, this reduced the success fee to 50%, which was what he allowed. The Claimant’s appeal therefore not only failed but resulted in a further reduction to the amount which had originally been awarded. The Defendant was awarded the costs of the appeal.
Until fixed success fees are introduced for this type of case, costs draftsmen and other costs professionals will continue to struggle to advise their clients in these claims.

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