APIL chief: most PI firms deducting the maximum 25% from damages

Evans: clarity is key

Most claimant personal injury firms have concluded that they have to charge the full 25% of damages “if they are to survive”, the chief executive of the Association of Personal Injury Lawyers has said.

Deborah Evans said that while many lawyers believe strongly that it is ethically wrong to take money from damages, “on the plus side, claimants actually take the news about deductions from damages relatively well as long as it is clearly explained”.

Writing recently, Ms Evans said the message gets more complex as the case progresses. “Lawyers will need to take care to translate offers from compensators as to what it means for the client… Clarity is key, and there are undoubtedly issues which have yet to surface as claims move through the various stages towards trial. It is early days yet.”

She said that the widespread decision to take 25% of damages undermined Lord Justice Jackson’s hope for competition on success fees.

“Our fears were always that more risky cases – those deserving but complex – may not get off the ground in an environment with capped success fees. In many cases, the cap on the success fee translates to a very real drop in income. Business models are being flexed accordingly, and risk assessment is being taken very seriously.

“Most firms will continue to take on more complex work but need to be careful to balance their caseload. In an area such as clinical negligence, where the success rate is lower simply because the prospects of success are difficult to determine at the start of a case, risk assessment becomes a survival tool. The harsh reality is that some injured people whose cases may have succeeded previously will struggle to find a lawyer to represent them…

“It is likely to impact a proportion of the most serious, high-value cases which will be vigorously defended. This is a small but real access to justice issue, and APIL plans to research the scale of the detriment over the next 12 months.”

Though it is too early “to pass informed comment on qualified one-way cost shifting (QOCS)”, Ms Evans expressed concern that the interplay between QOCS and part 36 has created a real financial risk against which claimants will want to insure – again dashing Jackson LJ’s hope that after-the-event insurance would no longer be needed.

“The current structure could drive the wrong behaviours. Certainly, the injured person benefits from a 10% increase in damages should the defendant make a bad call on a part 36 offer, but the alternative sanction should the claimant make the bad call seems extreme – he stands to potentially lose all his damages. He can win his case, but walk away with nothing. We have yet to see the reality of this inequality hitting home.”

The picture is similarly unclear over the uptake of ATE, she added.

Ms Evans was also sceptical about the impact of the referral fee ban. “The reality is that the market is alive and well, but has flexed to become compliant with the definition in the Act. Referrers have become introducers – the SRA permits ‘legitimate introductions’ – and it is now the client who gets in touch with the law firm as the result of a recommendation, rather than the claims management company contacting the firm direct.”