Appeal court slashes success fees to 5%

Claimant personal injury lawyers may have to introduce two-stage success fees after the Court of Appeal reduced to just 5% the success fee in simple cases which settle before proceedings.

There was also anger that the unexpected ruling was backdated to 1 August 2001.

In July 2001, the court in Callery v Gray had decided that it was too early for two-stage success fees and set the level for simple settled cases at 20%.

Tagging on a general statement to the end of Halloran v Delaney, the court revived the two-stage idea floated by the Lord Chief Justice, Lord Woolf, in Callery.

The uplift might be agreed at 100%, he said then, but reduced to 5% if the claim settled within the protocol period.

In Halloran, the court first dismissed the insurer's appeal that costs-only proceedings were not covered by conditional fee agreements (CFAs) and so could not attract a success fee.

It then added it was 'now time to re-appraise the appropriate level of success fee' in simple claims settled pre-proceedings, saying that judges should only agree to a higher uplift than 5% on costs - including the costs of any costs-only proceedings - if 'appropriate in the particular circumstances of the case'.

It said this should apply to all CFAs signed on or after 1 August 2001, when Callery was published and 'the main uncertainties about costs recovery had been removed'.

A Law Society spokeswoman said: 'We are concerned that the court appears to have amended the guidance on success fees given by Callery without giving a proper opportunity for arguments.

'If the courts fail to allow realistic success fees the consequence will be that claimants find it harder to pursue their rights to compensation.

Uncertainties in the law on costs recovery have not been resolved.

Recent events and cases suggest the position is still extremely volatile.'

David Marshall, vice-president of the Association of Personal Injury Lawyers, said it was clear from Callery that a two-stage success fee would be introduced at some point, but he criticised as 'absurd' the decision to backdate it to just after Callery.

He questioned whether any information had emerged since Callery to justify the change, but said he would now look closely at whether to introduce a two-stage success fee.

Andrew Twambley, a partner at Manchester firm Amelans - which acted in Callery - said his firm is now signing all clients on a two-stage, 100%/5% CFA, adding that if cases do not settle within the protocol period - as rarely happens - solicitors could issue proceedings and claim a higher success fee.

Jason Rowley, vice-president of the Forum of Insurance Lawyers, hailed the ruling as an 'unexpected victory'.

He said that claimant lawyers may be disappointed by the level, but would welcome the certainty.

Neil Rose