Revolutionary road
Date: 30 October 2009
Authors: Tony Walton
Issue: Vol 159, Issue 7391
Categories: Features, Costs
Ten short years ago, the Civil Procedure Rules introduced “proportionality” into the relationship between damages and costs. The hourly rate though, continued to rule largely unabated; the perversity that the longer the lawyer took to complete a claim, the more he got paid, remained.
But then the Fixed Recoverable Costs Scheme (“predictable costs”) followed. Something of a quiet revolution, it introduced fixed fees into motor claims settling up to £10,000 outside proceedings—the vast majority of such claims. It’s a revolution which has succeeded in deposing the hourly rate from the majority of those claims.
If all goes to plan, the next stage of the revolution begins next April. Assuming the Ministry of Justice’s (MoJ’s) recently published recommendations for costs in road traffic accidents (RTAs) are implemented, a new regime of much reduced staged fees will apply to the same category of claims-injuries worth up to £10,000 arising from RTAs settling before issue of proceedings.
Innovation
The MoJ proposals are innovative in procedure as well: the gentle pressure on insurers via the Pre-Action Protocol to deal with claims within a reasonable timescale (90 days to produce a view on liability) will be increased dramatically (15 days to produce the same response).
Claimants will get their damages more quickly and their solicitors’ cash-flow will improve. However, where there is no dispute over liability (save for a seatbelt issue) and quantum is agreed quickly, the new rules will limit the claimants’ solicitors’ base fees to a maximum of £1,200, unless there’s a hearing.
This equates to an average reduction of up to 50% in fees in some cases. There will therefore be acute pressures on both claimants and defendants, and yet the proposals have the support of both sides.
Fixing fees
It is pushing at an open door to say that fixed or staged fees have a role to play in litigation. They have existed in the small claims track and its predecessors for years and insurers pay them to their litigation panel solicitors as a matter of routine.
Fixing fees throughout the fast track is hardly a revolutionary question given that it was at the forefront of Lord Woolf’s analysis of civil litigation over a decade ago, and Lord Justice Jackson has, of course, already indicated strong support for the concept.
If you fix fees, you encourage the lawyer to complete the task as soon as possible; delay will cost the lawyer, not the opponent. In return, the insurer—ultimately paying its opponent’s fees—is offered something close to certainty about how much each claim’s legal fees will be and what such claims annually are likely to cost.
On the other hand, those same insurers will pay a high price for allowing cases to slip out of the new MoJ regime and into predictable costs and then full-blown litigation. There is, then, a great opportunity to reduce the overall cost of litigation and to make it more efficient. It is particularly frustrating that one huge part of that expense has not come from within the legal profession at all, but from claims management companies.
Their referral fees may in some cases be the greatest single overhead in running a claimant personal injury practice. Although those fees are not passed on directly to paying insurers, claimants’ solicitors need to pay them and all the other costs of running a practice and still make a profit.
The current revival of the debate over the propriety of this expense is a timely one. If it becomes clear that the new MoJ regime is successful in controlling the costs that solicitors can recover, then maybe the inflationary tide of increasing referral fees will reverse.
Thanks to a willingness among stakeholders to offer open-book clarity about the costs involved in dealing with injury claims, and to sound statistical analysis of such data, it’s no longer sustainable to suggest that fixed fees risk create unfairness or turn attractive, profitable work into something no lawyer will want to touch.
No: fixing fees creates a powerful market force which works in favour of efficiency; what was once contemptuously dismissed as de-skilling will be seen as streamlining processes and taking cost out of litigation. Economies of scale will encourage claimants’ solicitors to consolidate in a way in which they have conspicuously chosen not to do up to now. The resultant larger firms should be more efficient and provide a greater opportunity for improved, not reduced, client service.
The fixing of legal costs creates opportunities for greater reward for those willing to embrace change rather than resist it, while improving the litigation experience for claimants. Surely we should only pause briefly for breath after the MoJ reforms take effect before planning—having had the benefit of Lord Justice Jackson’s final recommendations—to expand applications to all fast track injury claims both pre and post-issue of proceedings?
Tony Walton, partner, Berrymans Lace Mawer LLP.
E-mail: tony.walton@blm-law.com
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