Call for return of 25% cap on CFAs

By Neil RoseSolicitors are overly pessimistic in assessing the prospects of conditional fee cases and so charge disproportionately high success fees, new research has claimed.As a result, the old voluntary 25% cap on damages that could be taken as the success fee should be reinstated to protect clients, the report from Westminster University said.The research followed 197 personal injury cases first profiled in a 1997 Policy Studies Institute report.

Of the 111 cases from 34 firms of which it obtained details, 93% were successful however in only 39% of the cases was the chance of success initially estimated at 80% or more.The outcome of the cases shows that solicitors were over-pessimistic in their assessments, the report said.Although the average success fee was set at 41%, firms eventually charged only 29%.

Despite this reduction, the mean success fee taken was still higher than the very high success rates would suggest were appropriate, the report said.In 85% of cases, damages were less than 10,000.

The mean basic costs charged by solicitors was 2,419; the mean success fee was 696.Overall, clients only lost 15% of their damages and the report noted that the cap was not used often, which indicates that success fees were moderate.However, it still criticised success fees on several grounds, such as the complexity of conditional fee agreements and the intrinsic conflict of interest in the method of calculating the success fee, saying it is in solicitors interest to overestimate the risk so to justify a higher success fee.It concluded: The 25% cap should be reinstated in order to protect clients, particularly in view of the lack of transparency in how it is calculated.The cap was abolished when recoverability of success fees was introduced last year; however, recoverability is to be challenged in the Court of Appeal soon.Noting the limited scope of the research, which related to cases started before the Civil Procedure Rules, a Law Society spokeswoman said the cases would have a better chance of settling now and so probably be judged as less risky.

She added that pressure from defendant insurers meant the level of success fees is self-policing.

Leading CFA exponent Kerry Underwood of Hertfordshire firm Underwoods said that given recoverability, reintroduction of the cap was completely unnecessary to protect liability insurers.

Unlike some individuals, they are more than prepared to challenge solicitors fees, he said.