Fixed fees deal struck

A framework deal for fixed fees in road traffic accident cases that settle without proceedings was hammered out last weekend at the Civil Justice Council's costs forum, with claimant solicitors sacrificing their current level of fees for predictability and speed of payment.

The high-level forum, to which the Gazette and its sister publication Litigation Funding had exclusive access, also heard details of plans to limit the indemnity principle in relation to some conditional fee agreements (CFAs), and of a government consultation that aims to simplify the whole CFA regime.

Representatives from the Association of Personal Injury Lawyers (APIL), the Motor Accident Solicitors Society, the Law Society and liability insurers agreed on a costs regime for cases which settle pre-issue for 10,000 or less.

It would see claimant solicitors receiving base costs of 800 plus 20% of the damages up to 5,000.

The costs figure would rise to 15% of the damages awarded from 5,000 to 10,000.

This would mean a solicitor receiving 1,000 in a case which settles for 1,000, 1,200 for a case that settles for 2,000, 1,950 for a 6,000 case and 2,550 for a 10,000 case.

Interim findings from research carried out for the forum by academics Paul Fenn and Neil Rickman found that the average case settles for around 3,000, with base costs of approximately 2,000.

Under the proposals, the base costs will fall to 1,400.

There was agreement in principle for London weighting, subject to possible abuses being closed off, such as non-London firms setting up PO boxes in the capital as a way to claim the higher fee.

There will be measures to ensure that solicitors do not issue proceedings just to escape the regime.

Work on the detail also will concentrate on cutting out the risk of satellite litigation.

The interim findings found that base costs have risen around 50% in non-litigated cases in the 18 months to December 2001, with disbursements rising 25%.

Many attributed this largely to the front-loading of costs under the Woolf civil justice reforms.

The figures will be fed back to the Civil Justice Council to frame recommendations for the Lord Chancellor's Department (LCD).

The scheme will be subject to review after two years.

Although the liability insurers initially said they would only agree to a pre-issue scheme on the basis that it would lead to fixed costs post-issue as well, this was not in the deal.

Dominic Clayden, head of claims (legal) at Norwich Union, said he was happy to have a measure of agreement which would build confidence in the concept and between the two sides.

APIL president Patrick Allen said: 'Post-issue is not on the agenda.' He added that although the fees were 'less than the going rate', it was a compromise he was able to recommend to APIL members because of the predictability and speed of payment it would bring.

'This is a very big prize,' he said.

Russell Wallman, the Law Society's director of policy, described the deal as the best achievable.

John Peysner, chairman of the council's predictable costs working party, said he was delighted by the result.

'It looks like we will have peace by Christmas,' he said.

On the indemnity principle, the council's chairman, the Master of the Rolls, Lord Phillips of Worth Matravers, told delegates that an addition to the Civil Procedure Rules and a new statutory instrument would allow solicitors working under a CFA to tell clients that they will not have to pay more than is recovered from the other side.

Such CFAs would be simplified by disapplying many of the technical requirements currently contained in the CFA Regulations 2000.

These changes will be effected 'as soon as practicable', according to the LCD.

Some delegates complained that since the Court of Appeal ruling in Halloran v Delaney, which set success fees at 5% for simple cases that settle pre-issue, they have had to demand money from their clients.

The LCD consultation comes in the wake of a host of technical challenges to CFAs and will focus on the 'right level of consumer protection' and the 'right balance' between all the parties.

Among the options for change will be limiting disclosure of the CFA, removing the client care provisions, and making the consequences of non-compliance with the regulations subject to the discretion of the court, or to some test of materiality.

The LCD's provisional timetable envisages the consultation in late spring with new regulations coming into effect in early autumn.

See Editorial, page 10 (see [2002] Gazette, 19 December, 10)

Neil Rose