Brooke: 5% success fee has limits

ROAD TRAFFIC ACCIDENTS: Court of Appeal says Halloran ruling has been given an overly broad interpretation

The two-stage 5%/100% success fee for simple road traffic accident (RTA) cases set by the Court of Appeal last year has been misunderstood and taken to have broader application than was intended, the court said last week.

Adding a statement to his ruling in the Claims Direct test cases, Lord Justice Brooke admitted that he should have expressed himself 'with greater clarity' in the surprise statement he tagged to the end of Halloran v Delaney (see [2002] Gazette, 12 September, 1).

He said he was only referring to those cases where the prospects of success 'are virtually 100%'.

Some insurers have claimed it should apply to all RTA cases.

In such simple cases, solicitors should set a two-stage success fee of 5% if the case settles pre-issue, and 100% if proceedings are then issued, the judge said, adding: 'The two-step fee is apt to allow a solicitor in such a case to cater for the wholly unexpected risk lurking below the limpid waters of the simplest of claims.'

Lord Justice Brooke was criticised at the time for springing the guidelines on solicitors without having taken any evidence on the issue during the Halloran case, which was about whether conditional fee agreements extended to cover costs-only proceedings.

He explained: 'It did not require any research evidence or submissions from other parties in the industry to persuade the court that in this type of extremely simple claim, a success fee of over 5% was no longer tenable in all the circumstances.

'The guidance given in [Halloran] was not intended to have any wider application.'

The judge made no reference to complaints that he was wrong to backdate the Halloran ruling to the court's decision in Callery v Gray a year before.

In the substantive ruling, the Court of Appeal upheld the decision of the Senior Costs Judge, Peter Hurst, that only 621.13 of the 1,250 Claims Direct premium is recoverable - although Lord Justice Brooke said he reached the same conclusion 'by a somewhat different route'.

Meanwhile, in a ruling this week in Pirie v Ayling, Chief Master Hurst has struck down an after-the-event premium that was set at 20% of damages recovered - in this case, 13,000 was recovered after a payment into court, leading to a 2,600 premium.

While finding that such an agreement was not champertous, he said it was 'inherently flawed'.

He said: 'A premium of 20% of damages, whatever they may be, is likely to be unreasonable in all simple road traffic cases in which the compensation payable exceeds about 2,000.'

He allowed a premium of 350 plus insurance premium tax, the amount approved by the Court of Appeal in Callery.

Neil Rose