SERVICIO INFOVÍA PLUS BÁSICO

7.1 Government policy: abolish recoverability of success fees; allow success fees to be charged to the claimant.

7.2 Government‟s policy objective:

Reduce costs

Give claimant a take in costs decisions Deters weak cases

7.3 Problems:

Loss of access to justice Costs deterrent for claimant

No funding for difficult but meritorious cases Reduces risk spread for difficult cases

Pressure on base costs No deterrent to weak cases

7.4 A better way:

Minimise disruption to the system Maintains access to justice

Minimises uncertainties for the claimant Gives claimant a stake in costs decisions

Provides sufficient resources for more difficult meritorious cases Fixed, staged success fees

Equal shared recoverability

No recoverability for early admissions No recoverability for costs proceedings No success fee after part 36 failure Reduce overall costs

7.5 Without recoverable success fees, access to justice for claimants will inevitablyreduce. We have set out the reasons for this in section 5 of this paper.

7.6 The Jackson review and the Green Paper worked on the erroneous assumption that “success” in this context is defined by the issue of liability on a case by case basis, on the grounds that any costs risk in the particular case is eliminated (with

34 some exceptions) once liability is resolved, and the sole purpose of the success fee is to reward the claimant’s solicitors for the result in the individual case.

7.7 When recoverability of success fees was introduced as part of the replacement for legal aid in personal injury matters, one of the principal purposes of the success fee was to generate a financial cushion drawn from the winning cases to

compensate claimants‟ solicitors for those more difficult cases they took on,

which either could not otherwise proceed after investigation as they were insufficiently robust, or would otherwise take too much work to investigate before a decision could be made, or were pursued but ultimately failed. In other words, the concept was not linked in principle to an individual case, but to the overall caseload of the solicitor concerned, even if the fee was calculated from the base costs in the individual case. It is the basis on which most firms will take on more problematic cases, balancing the “losers” against the “winners”.

7.8 Recoverability was part of the system because this spread the overall cost of the legal aid replacement (previously paid by the taxpayer) as widely as possible

across society through the insurance industry, rather than causing an individual claimant to bear what would be an unfair share of supporting another unrelated claimant.

7.9 It would be iniquitous to expect a single winning claimant to underwrite the

consequences for another losing claimant of the costs of that loss, especially in

the context of the more complex litigation not currently covered by fixed fees. This burden rightly more fairly ought to lie with insurers who are in a better position to spread this risk.

7.10 One additional advantage of preserving some form of recoverability of success

fees (and ATE premiums) is that it might be possible to implement such changes withoutprimary legislation, which will be needed for complete abolition.

7.11 Removing recoverability will inevitably bring pressures on base hourly rate

costs. It would also not compensate for the high risks of, say, a clinical negligence case proceeding to full trial on liability, for example. Staged, fixed recoverable success fees are a more appropriate way of reflecting the contingent risks in different types of case at different stages. The rates could be set to reflect this.

7.12 Dealing firstly with the pre action protocol period, AJAG accepts (subject to the definition of a defendant’s acceptance of liability) the proposition that an early

admission by the defendant should lead to no recoverable success fee from that

defendant. This will incentivise defendants to take early decisions and thus reduce costs overall, though this should also recognise the consequences may be that access to justice for more complex cases will be constrained as a result.

7.13 This assumes a clear defendant’s admission. Causation or contributory

35 example, if causation is in issue, an admission on liability often does not take the case much further, disease cases being cases in point. Similar problems apply to contributory negligence allegations, for example in EL cases. Considerable risk remains in both examples, as the case will require full investigation, the costs of which can be high and may end up not being recoverable as base costs, depending on the outcome of the claim.

7.14 We agree that there should be no success fee recoverability linked to detailed costs assessment proceedings, on the assumption that the only issue is the quantum of the costs involved, not matters of law of wider application or other principles of entitlement.

7.15 Fixed recoverable success fees have worked well, as the Government

previously accepted, in the Green Paper. Indeed, they have only recently formed part of the comprehensive agreed package for RTA cases in the portal system. We see no merit in interfering with a system that is running well, is seen to be fair and based on consensus, and was only recently introduced after a long and difficult genesis. We do not see the advantage in unstitching this agreement, which could destabilise it.

7.16 There is clear scope for extending fixed success fees, through a matrix

system, and this is proposed in the MoJ consultation on solving disputes in the county court for fast track cases. There is little data available to establish a norm for complex matters, including EL disease and clinical negligence. This will need a significantly larger statistical data base on which to base such an assessment. The key question is how and at what percentage success fees would be fixed, to determine whether this would provide sufficient cushion to enable the loss of riskier but worthwhile cases to be underwritten by success fees in winning cases, though this is dependent on recoverability.

7.17 The maximum success fee (recoverable or otherwise) should be 100%,

though normally it will be a lot less, especially as fixed and staged success fees become more common, with the percentage being lower or higher, weighted to reflect the lower or higher risks in the case. These levels of success fees normally

only occur in cases that proceed to full trial, or close to trial, before conclusion. They are high risk for the claimant’s solicitors, and late settlement or a court judgment against a defendant are the consequences of that defendant’s own decisions.

7.18 One of the main policy objectives behind the proposed abolition of recoverability is to give the claimant a stake in the costs of litigation, on the assumption that this will strengthen the market; provide an incentive to the claimant to keep costs down; and deter weak cases.

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7.19 In fact, this will be a major barrier to access to justice, as explained elsewhere in this paper and clearly confirmed by our consumer survey. This shows the biggest deterrent to bringing a claim is fear over legal costs, especially if that liability is uncertain. The major element in costs is base costs, not success fees, so this has little impact on reducing costs; and for the reasons argued elsewhere, there is no benefit to anyone pursuing a weak case under the present system (though there will be under the Government’s plan for QOCS).

7.20 Nevertheless, if the Government wish to proceed on the basis of requiring the claimant to pay, there are better ways of doing so.

7.21 A sensible compromise option would be to permit shared recoverability, with the fixed success fee uplift charge split equally between claimant and defendant. This would achieve the objective more effectively of strengthening the market, especially in RTA claims including those in the portal scheme. It would be less of a deterrent to claimants, yet would give them a stake in the litigation costs decisions.

7.22 If this is capped at 25% of damages, then the claimant would face a deduction of 12.5% maximum deduction, which would be more in line with the proposed 10% uplift on general damages.

7.23 This compromise enables the original intention of recoverability, to spread the risk more widely to continue; whilst also giving the claimant a more direct interest in the success criteria for his own case, which brings into play wider considerations, from the claimant’s perspective.

7.24 The individual claimant is likely to judge success on several criteria. Whether he wins or loses (the liability issue) is of course the most important. But also important to the claimant is the amount he recovers as against his expectations (hopefully on an informed basis founded on his solicitor’s advice), the length of time it takes to conclude the case, and what if anything it costs him, by way of solicitor’s and other fees. It would not be unreasonable as part of this suggested compromise for the shared success fee to be chargeable to the client if realistic agreed objectives set at the start of the case are achieved.

7.25 For this reason, we agree that there should be no success fee, recoverable or otherwise, if a defendant‟s part 36 offer is not beaten on solicitor’s advice, in relation to base costs incurred after the part 36 offer.

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