Supporting cap

John Hall's letter about the University of Westminster research on conditional fees (see [2001] Gazette, 24 May, 17) states that the new regulations ensure that clients are fully protected.

He argues that the former 25% cap on the proportion of damages taken as success fees is no longer necessary.

However, to assume that clients' interests are completely protected under the new regime over simplifies the position.

As Mr Hall acknowledges, the client remains liable to pay the proportion of the success fee relating to deferment of the payment of the solicitor's costs and any disbursements paid by the solicitor.

There is no set formula for calculating this subsidy element in the success fee.

Relevant factors are the expected costs, disbursements, and duration of the case, plus the annual cost of borrowing.

It is conceivable that in a lengthy but relatively low value case with high investigative costs and disbursements, the 25% cap could be breached.

Another important argument for re-instating the cap is that the method of calculating this element of the success fee is both complex and far from transparent.

The client depends on the solicitor accurately to estimate factors such as the expected duration of the case.

Solicitors are under no obligation to explain to the client how they arrive at this element of the success fee nor what interest rate they build into the calculation.It is also difficult for clients to compare the cost of borrowing from a disbursement loan scheme to that of the solicitor subsidising disbursements.

The former is usually expressed as an APR or percentage above base lending rates, while the latter is expressed as a percentage of the solicitors' costs.

Our research on conditional fees vividly demonstrated the imbalance of information between client and solicitor.

The new regime does not change this.

While it does provide greater protection for clients' damages, it is arguable that the Law Society's decision to jettison the voluntary cap was premature.

Pamela Abrams, principal lecturer, University of Westminster, London