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Personal injury solicitors urged to combat 'desperate' tactics of firms targeting success fee refunds in RTA claims...

12/03/20. Personal injury solicitors are being urged to combat the “desperate” tactics of firms targeting success fee refunds in RTA claims - by a Costs Lawyer specialising in the sector.

Reports in the national media suggest more than two million people could have valid claims against no-win, no-fee law firms.

Checkmylegalfees.com (recently acquired by Manchester practice Clear Legal Limited, which has a minority share in PI firm Clear Law LLP) purport to be the leading firm specialising in the area of solicitor overcharging. In particular, Checkmylegalfees.com has targeted the RTA fixed costs arena capitalising on the Court of Appeal’s so called “landmark” decision last April in Herbert v H H Law Ltd [2019] EWCA Civ 527.

Nick McDonnell, Director and Costs Lawyer at Kain Knight, says his practice has successfully repelled a significant number of challenges on behalf of personal injury law firms.

“The firms bringing these challenges are seeking to capitalise on the fact that most conditional fee agreements position success fees as being a function of the case’s risk - as opposed to a non-risk-based flat charge. Where the maximum success fee is charged these firms argue that there has been an overcharge,” explained Nick.

“Challenges are usually brought by way of detailed assessment proceedings pursuant to the Solicitors Act 1974 and it is crucial that, in order to defend such challenges, the defending firm has a detailed knowledge of this specialist area; both in respect of the legislation and the case law.

“The firms bringing these challenges are desperate as part of their business model to commence proceedings - either by way of an application for an order for delivery-up of the file of papers pursuant to Section 68 or detailed assessment pursuant to Section 70, or both often providing tight, unrealistic deadlines to firms before issuing proceedings. This is where they are making their money.

“By bringing such proceedings they can often obtain an order for their costs. On an assessment in particular, all a Claimant is required to do is achieve a reduction to the sum deducted by 20% or more to obtain not only a refund for their client reflecting any overcharge but also a costs order reflecting their client’s costs of assessment. The result can be very expensive for a firm on the receiving end of one of these challenges.

“By seeking expert assistance early, a firm’s exposure to such challenges can often be significantly reduced or even removed altogether in some cases. The tactics employed to achieve this objective does, however, require a solid understanding of the legal procedure as to the delivery of statute bills, the delivery-up of files and the detailed assessment process. Recognising early on where a firm may be on risk and making protective offers where applicable is crucial as well as offering to resolve any disputes by way of ADR including mediation.”

Nick goes on to say: “Above all, solicitor firms facing these challenges must do what they can to avoid being on the receiving end of proceedings; that is where their financial exposure can begin to increase rapidly.”

One of the many Jackson Reforms implemented in April 2013 saw the abolition of the recovery of success fees from a losing party in a successful claim (save in limited circumstances). To offset this, solicitors are permitted to charge their client’s a percentage increase of up to 100% of their basic charges. But where the solicitor’s charges arise out of a personal injury claim, legislation was introduced capping the chargeable success fee at 25% of the general damages and pecuniary losses with such sum to include VAT.

The Court of Appeal in Herbert identified the issue as being one which requires a solicitor to obtain “informed consent” from their client, something, it is argued, is not often done. The issue central to the case went as follows:

· Historically, a ‘success fee’ under a no-win-no-fee agreement has been a function of the risk faced by a firm of not being paid its fees in the event their client’s claim is unsuccessful.

· Assuming success fees continue to reflect the risks of a firm not being paid in the event of a lost claim, that risk is often very low in RTA claims where the majority of claims succeed.

· Notwithstanding those low risks, following April 2013 some firms have been routinely charging the maximum percentage increase of 100% (essentially reflecting a 50/50 risk) with the success fee in most cases reaching the 25% damages cap.

· The effect of this is that, in many cases, a solicitor’s client will have been overcharged.

The Court in Herbert helpfully clarified that, in effect, a solicitor firm can approach a success fee charge in one of two ways:

(i) A risk-based success fee – where the success fee is a function of the specific risks of each case. In such circumstances it is necessary to carry out a risk assessment to ensure an appropriate success fee is identified; or

(ii) A non-risk-based success fee – where the success fee is based on a flat percentage increase (which could be 100% of basic charges) but where the success fee bears no relationship to the risk of losing in each case. Whilst such a success fee is permitted, it is crucial that a solicitor provides very clear advice to their client in this regard.

In respect of a non-risk-based success fee, the Court of Appeal on the second appeal endorsed Mr Justice Soole’s views on the first appeal when he said:

“Putting the point another way, if and insofar as HH took no account of the risk in the individual case and provided for a 100% uplift (subject to the 25% cap) in all cases by reason of its particular post-LASPO business model, I consider that informed approval would require this to be clearly explained to the client before she entered the agreement.” [47] (emphasis added)

As the longest established independent firm of Costs Lawyers (over forty years) Kain Knight have an intimate knowledge of the Solicitors Act 1974 detailed assessment process. In particular, over recent years, Kain Knight have successfully acted for firms of solicitors in the low value RTA personal injury space assisting them significantly mitigating, and even removing entirely in some cases, their exposure to such challenges.

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