- Litigation Futures - https://www.litigationfutures.com -

Beware the deal that is too good to be true

Guest post by Tony Hannington, a partner and head of Lime Solicitors

Hannington: Growing market in professional negligence claims

When the April 2013 reforms were enacted and success fees became irrecoverable from defendants – the payment of which by the claimant themselves was apparently meant to be counter-balanced by a miserly 10% increase in general damages – many firms feared a race to the bottom on the commercial offering to any prospective client and offer zero success fees across the board.

When considering a new enquiry, a firm should

The concern that the vast majority of firms would offer zero success fees across the board to undercut the market has thankfully not been borne out.

I know of firms that did do so, and some that offered to pay the after-the-event (ATE) insurance premium as well, but many have had to leave the market or simply gone under, as such action is likely to be loss making.

Where firms do this, it may lead clients to question how they can keep costs down and provide top-level service when the fixed fees on successful cases – especially in the portals (e.g. £500 + VAT for an RTA) – are low and firms obviously do not get paid on failed cases.

A client of mine was recommended to me when he had become exasperated by the firm he had instructed to deal with what, on its face, was a relatively simple RTA where liability ultimately was not in issue by the time I was involved.

He had been lured by a CFA providing for no deductions of either success fee or ATE cover – funding for disbursements or adverse costs had not even been considered or discussed – and after medical evidence was being urged to accept a part 36 offer of £11,000 for his claim.

He felt he was not being listened to as regards his concerns that his career prospects had been adversely affected by his injuries, and that he was simply being urged to accept the first offer that came in to get his claim in and out as quickly as possible.

The claim for future losses that we presented was hotly contested and required a lot of legwork in corroboration from contempories of his who had become highly successful in their field – in this instance motor racing.

Ultimately, my client settled his claim, with a three-day trial looming, for £650,000.

As it happened, due to the admission of liability, I agreed to waive any success fee but had he approached me at the outset I no doubt would have assessed the low risk and set a low success fee to reflect that risk.

As I often say to prospective clients, 90% of a high damages award is better than 100% of a low one.

There has been growing concern that some firms have adopted a ‘pile it high, sell its cheap’ mentality to pursuing low-value personal injury claims and there is a growing market in professional negligence claims against them.

These can be either for under-settlement of a claim or even worse letting claims lapse altogether.

Michael Young from our professional negligence team says: “We are seeing more and more referrals where, in an effort to realise fees, firms are pressurising and looking to push through settlements with clients at the first opportunity, or encourage offers to try and force settlement, where there is little to no analysis of what the claim may in reality may be worth.

“Or worse still, they do have an idea on value but are more concerned with ensuring month-end fees as opposed to properly advising on the true merits and values of a claim. It is quite common for heads of loss to be skirted around – for instance there may have been a loss of income or opportunity that needs to be considered, or provision for future care – and this is looked past simply because the process is wanted to be kept as short as possible.

“Where CFAs are in place, firms can also apply pressure by suggestions that if the client disagrees, the CFA position cannot continue; in reality the firm can dictate the settlement decision and the client does not make a ‘clean’ choice.”

Some firms have gone the other way. To make taking on cases more profitable, they set the maximum success fee (100 % of based costs capped at 25% of general damages and past losses) without any assessment of risk.

This was roundly condemned by the Court of Appeal in Herbert v HH Law [1] – the claimant had suffered injuries when she suffered a rear end shunt by a bus. A maximum 100% success fee was contained in the CFA and the firm argues that post LASPO there was no need for individual assessment. The success fee was reduced to 15%.

The court did, however, advise that it was OK for a firm to charge a success fee not based on risk but on commerciality so as to provide a quality but profitable service to their clients, so long as it was made clear to the claimant that this was the reason and as such they had given informed consent.

As my case demonstrates, this may well be the best choice for a claimant to make, rather than simply ringing round trying to find the lowest success fee.