Fixed fees fight goes beyond pre-issue

Solicitors could find themselves embroiled in a new wave of hostility and test litigation over costs if there is no progress on extending fixed fees to post-issue.

The warning comes as the government begins work on introducing the deal reached in December at the high-powered Civil Justice Council (CJC) costs forum for pre-issue fixed fees in low-value road traffic accident (RTA) cases.

It has also emerged that both claimant lawyers and the liability insurers have begun a mediation process relating to success fees.

In a further development, the Court of Appeal has clarified the level of success fees in simple RTA cases (see [2003] Gazette, 20 February, page 3).

Speaking to the Gazette's sister publication, Litigation Funding, Dominic Clayden, head of claims (legal) at Norwich Union and part of the liability insurers' negotiating team at the forum, said insurers would be pushing to introduce fixed fees post-issue, and for 10,000-plus cases, employer's and public liability cases.

Mr Clayden said that if post-issue costs are not dealt with, 'it will inevitably lead to further conflict and further test litigation'.

Initially, the insurers had said there could be no deal on pre-issue without a commitment to move to post-issue, but this was dropped at the forum.

Mr Clayden said the process had been 'hugely important' and 'all about confidence building', but said the concerns insurers have on pre-issue cases apply equally to the others.

'Problems are still manifest in other areas.

The percentage increase in costs is untenable,' he said.

Mr Clayden said insurers were not prepared to wait for the two-year review of the pre-issue scheme, as that would mean changes taking three or more years.

'The process should start sooner rather than later to explore [the issues],' he said.

Both sides will be watching for behaviour changes - the insurers will look to see whether claimant solicitors will issuing proceedings to escape fixed fees, while claimant solicitors fear insurers will abuse the scheme by stringing out cases.

Association of Personal Injury Lawyers (APIL) president Patrick Allen said his group does not support any extension of fixed costs, while Ian Shovlin, chairman of the Motor Accident Solicitors Society (MASS), said this would be 'premature' before 'an adequate and effective review of predictable costs pre-issue'.

Russell Wallman, Law Society director of policy and an observer at the forum negotiations, said the Society recognised that if fixed costs are shown to work pre-issue, 'there will be a good argument for extending them to other areas incrementally on a case-by-case basis'.

Professor John Peysner, chairman of the CJC's predictable costs working party, said that while he personally supports post-issue fixed costs, the working party will not address them until the pre-issue regime beds down and can be evaluated.

The CJC rubber-stamped the pre-issue deal earlier this month, and Robert Musgrove, secretary to the CJC, said it would now go to the government, 'who are preparing for its implementation' through the rules committee.

The pre-issue scheme would see claimant solicitors receive base costs of 800 plus 20% of the damages up to 5,000.

They would then receive 15% of any damages from 5,000 to 10,000.

It would include a 5% success fee but not the after-the-event insurance premium, disbursements or counsel's fees.

Following consultation with its members, APIL has raised concerns that it should only apply to cases of 5,000 or less, as higher-value cases can be more complex.

MASS has called for a specific RTA pre-action protocol, and for success fees to be excluded from the deal.

The CJC has acknowledged that the deal is not clear on success fees and this will be considered further.

However, Mr Musgrove said there was no room otherwise to renegotiate.

An APIL spokeswoman said: 'As far as we are aware, there is still considerable detail to be worked out and plenty of time to do so.'

However, Mr Shovlin said he understood that the principles of the deal are not open to renegotiation.

The details of the new mediation are confidential, although Mr Musgrove said that APIL and the liability insurers approached the CJC to conduct it.

It is understood to be looking at the levels of success fees, and not just in cases of 10,000 or less.

l A statutory instrument modifying the indemnity principle is set to be introduced in April or May.

It will allow solicitors working under a conditional fee agreement to tell clients that they will not have to pay more in costs than is recovered.

See Editorial, page 14 (see [2003] Gazette, 20 February)

Neil Rose