Kerry Underwood

RECOVERABLE SUCCESS FEES AND MYSTIC MEG: 20% WHEN LIABILITY ADMITTED

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In NJL v PTE [2018] EWHC 3570 (QB) (20 December 2018)

a High Court Judge held that in a pre-April 2013 Conditional Fee Agreement,where the success fee remains recoverable, the appropriate success fee where liability has been admitted will generally be 20%.

This decision only applies where the success fee is recoverable, and I set out below where that remains the case, and does not govern solicitor and own client success fees, although clearly there is a risk that courts will wrongly use it as guidance in Solicitors Act 1974 assessments.

In this case the claimant’s solicitor had specified a 100% success fee, but before the District Judge had argued for a 67% success fee and the District Judge had allowed 65%.

Here, the High Court reduced it to 20% as a matter of principle, but then reduced it to 12.5% being the fixed recoverable success fee in a road traffic matter under the old CPR 45.19.

There were complex provisions where claims exceeded £500,000 and it is not necessary to go in to them in detail here, but basically the court had a discretion to award a higher success fee in such cases, but if the court determined the success fee at 20% or less, it dropped to the fixed statutory 12.5% covering all road traffic matters valued at less than £500,000.

The High Court indicated that a 100% success fee can never be justified where liability has already been admitted, and when there is no Part 36 offer.

The court said that as far as Part 36 was concerned a key issue was the timing of an anticipated Part 36 offer as the timing of any such offer determined the proportion of the costs at risk, as only costs incurred from 21 days after the making of a Part 36 offer are at risk and costs incurred before that date are secure, and recoverable if reasonably incurred, and therefore the risk in respect of those costs is zero.

Of course the success fee attaches to all costs, including those not at risk, and the court said that the whole process of setting success fees centres on an informing calculated analysis of risk, which courts expect experienced solicitors to get right.

Having said that, the High Court said that it is not a precise science and if solicitors can demonstrate an attempt to form a judgment then the courts will give them considerable leeway.

Here, the District Judge’s assessment could not stand as the District Judge had made no analysis of the risks which the claimant should have taken into account when fixing the success fee and had given no reason for rejecting what might, since the case of

C v W [2008] EWCA Civ 1459

 

be considered as the standard or usual success fee of around 20% where liability has been admitted.

As well as applying to pre 1 April 2013 Conditional Fee Agreements, these principles also apply to Conditional Fee Agreements entered into after that date and those fields of law where the success fee remained recoverable.

Mesothelioma Claims

The success fee remains recoverable in mesothelioma claims and there is no proposal to alter that position.

Defamation and Privacy

The success fee remains recoverable in defamation and privacy cases but that is about to be scrapped and the statement by the Lord Chancellor states that this “provision will come into force for new cases on 6 April 2019.”

It is not clear whether this date relates to the entering into of the Conditional Fee Agreement, as was the case in 2013, and in 2016, or the date of the cause of action. Presumably it will be the date of the Conditional Fee Agreement.

Insolvency

Recoverability of success fees continued in insolvency proceedings in relation to any Conditional Fee Agreement entered into on or before 5 April 2016.  

 

Comment

So part of a solicitor’s risk assessment is meant to include guessing when the other side will make a Part 36 offer and how much it will be for.

Obviously if we knew that there would not need to be any litigation.

Maybe the senior judiciary should make up its mind what particular combination of Mystic Meg and Artificial Intelligence we are meant to deploy.

The decision also relies on the wholly discredited, entirely non-statutory Ready Reckoner approach to success fees.

I cannot see the error of law that the District Judge is meant to have made.

This is such a poor and irrational decision that it should be considered as per incuriam – wrongly decided – and not binding.

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Written by kerryunderwood

January 3, 2019 at 2:40 pm

Posted in Uncategorized

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