Legal Costs: Another Stealth Tax?
To understand the continuing disputes over claimants'
costs in personal injury cases, you need to appreciate where
the true cost will fall, argues Andrew Parker. Ultimately the
premium paying public will foot the bill for any excesses.
Meanwhile the drive for CFA compliance (and for transparency in
dealings with the client) still needs to be heeded.
England expects...
There is another perspective on the so called "costs
war" between the claimant personal injury lawyers and
liability insurers. Rather like Nelson, Patrick Allen has put
his telescope to the wrong eye ("Practice trends: personal
injury", published 22nd April 2008). Although
liability insurers did not like the inflationary effect of
recoverable success fees and after the event (ATE) insurance
premiums under CFAs and although, inevitably, the early
scuffles centred on levels of success fees and premiums, the
real problem with CFAs is the removal of any control of the
costs as a whole. This much was foreseen by the House of Lords
in the first appeal case considered on CFAs: Callery v
Gray [2002] UKHL28, especially by Lord Bingham of
Cornhill:
"5. Even if these contingencies did not occur, the
new funding regime was obviously open to abuse in a number of
ways. One possible abuse was that lawyers would be willing to
act for claimants on a Conditional Fee basis, but would charge
excessive fees for their basic costs, knowing that their client
would not have to pay them and that the burden would in all
probability fall on the defendant or his liability
insurers"
The abuse predicted by Lord Bingham six years ago is now
readily apparent: the CFA client is faced with ever-increasing
charging rates (which he will not pay) and has little interest
in how much work is done or money is spent on his behalf.
Compare this with the paying client on the defendant side, who
has for some years negotiated fixed fees and competitive rates
well below those allowed by the court. This is not about
discount for volume business: it is about driving efficiencies
in file handling and ensuring that low value claims are handled
at the right level.
Risk of abuse...
The term "abuse" is apt. The excesses go well
beyond the usual arguments as to whether time has been
reasonably spent. At the end of April 2008, Regional Costs
Judge Duerden in Bury County Court ruled that five exaggerated
costs schedules in low value PI claims could be considered in
open Court, even though they were marked "without
prejudice". The lawyer concerned attempted to describe
those schedules as an "opening gambit" in
negotiations, but the Judge rightly rejected this assertion,
holding that such approach created an uneven playing field and
stating that "claiming work which has not been done is
dishonest".
Those cases were only brought by the defendant insurers
because of the perceived dishonesty, something that should have
no place in the conduct of any solicitor. The result of the
ruling was that the solicitor in question immediately withdrew
all the claims for costs, repaid any interim payments and
agreed to pay the defendant's costs himself on an indemnity
basis...
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