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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