Insurers open new front in CFA battle

A blueprint for ending technical challenges to conditional fee agreements (CFAs) was agreed at a high-level forum last week - but liability insurers are warning that the hourly rates allowed by county courts could be the next costs issue subject to litigation.

At the Civil Justice Council's third costs forum, held in Oxfordshire, the Master of the Rolls, Lord Phillips of Worth Matravers, won agreement from all sides for his proposal to remove client protection provisions in the CFA regulations to either rule 15 of the Solicitors Practice Rules or a statutory instrument.

This would mean that any breach of the provisions would not render the CFA unenforceable, allowing the claimant solicitor to recover costs from the other side.

Lord Phillips said: 'The defence has no interest in [claimant] client protection and shouldn't be invoking those conditions...

a breach is not a costs matter.'

There was broad agreement that the provisions should be in rule 15 and that repeat offenders could be reported to the Office for the Supervision of Solicitors.

The forum was convened to discuss the government's consultation paper on simplifying CFAs in the wake of challenges to them, which allege at times highly technical breaches.

The Court of Appeal ruled in May that breaches will only render the CFA unenforceable where they materially affect the client or interests of justice (see [2003] Gazette, 30 May, 3).

However, Jason Rowley, president of the Forum of Insurance Lawyers, said defendant insurers are looking at how high the material test is, 'so there are bound to be challenges for a time'.

Meanwhile, solicitor Dominic Clayden, head of claims (legal) at Norwich Union and a key member of the liability insurers' negotiating team at the council, told the Gazette that insurers will continue to push what he described as the real issue - 'what is the correct level of remuneration for a claimant organisation in order to recover reasonable damages for an injured person?'.

He said: 'We are looking closely at whether to mount a challenge to the levels of hourly rates allowed in courts.

They are increasing at a level which is not sustainable.'

He called on the council to start looking at these rates so as 'to avoid the necessity of precedent litigation'.

Roger Charter, head of group technical claims at Churchill, added that the insurers also wanted the issue of different courts allowing different rates to be addressed.

Speaking at the forum, Russell Wallman, director of the Law Society's policy development unit, said: 'After the delinking of local court rates from legal aid, it is arguable there was no effective restraint on the ratcheting-up of rates, and that cannot be sustainable on an on-going basis.'

A spokesman for the Association of Personal Injury Lawyers said it was 'nonsense' to suggest that hourly rates - which are calculated to an accepted formula - have risen arbitrarily.

'It would be extremely unfortunate if the process of trying to make CFAs work were to be derailed by yet more satellite litigation about an issue which is already policed by the courts.'