High Court rejects challenge to fixed fee scheme

The fixed-fees scheme for road traffic claims survived its first major legal challenge last week after the High Court ruled that costs and success fees are payable even if the claimant solicitor’s conditional fee agreement (CFA) is defective.



Mr Justice Simon’s judgment in Nizami v Butt [2006] EWHC 159 (QB) – upholding a ruling by Master O’Hare – is seen as vital in ensuring the proper working of the scheme that applies to road traffic personal injury cases worth less than £10,000 that settle before issue.



It also potentially resolves the wider debate over whether primary legislation is required to abolish the indemnity principle. The judge decided that the Civil Procedure Rules successfully disapplied the indemnity principle in relation to the scheme, supporting those who see the rule committee as the avenue to abolition.



In any case, he found no overriding need in such cases for the paying party to satisfy itself that a CFA is compliant – in this case, whether there had been adequate checks on before-the-event cover.



‘This may result in some non-compliant agreements having effect,’ he conceded, ‘but will avoid wasteful arguments about whether there has or has not been substantial non-compliance in what is required in these straightforward types of cases.’



Unusually, the judgment named the two assessors sitting with Mr Justice Simon: Senior Costs Judge Peter Hurst and Jason Rowley, a former president of the Forum of Insurance Lawyers.



The claimant’s solicitor, David Abraham, a partner at London firm Colman Coyle, said he was very pleased, and particularly with the emphasis put on proportionality.



Costs expert Tony Girling said it was important in light of recent district judge decisions to the contrary, but predicted there could yet be challenges over disbursements, which are not part of the fixed-fees scheme and to which the indemnity principle applies.



Welcoming the ruling, a Law Society spokesman said: ‘It is an important step towards ensuring that issues about costs are dealt with on their merits, rather than as a result of complex arguments about the enforceability of CFAs.’



Rob Carter, a consultant to specialist costs firm McCullagh & Co in Peterborough, which acted for the defendant insurer, said it was ‘an interesting judgment which we’re considering very closely’. No decision on an appeal has been taken.



See Editorial