26 July 2018Print This Post

Court of Appeal to rule on 100% success fee model for low-value PI claims

Success fee: Court to consider whether individual risk assessment is needed

The Court of Appeal is to rule on the legality of what has become the industry model for handling low-value personal injury claims, with firms charging clients a 100% success fee as standard.

It was confirmed yesterday that the court has given permission for a second appeal in Herbert v HH Law.

In March, Mr Justice Soole ruled that solicitors still need to undertake individual risk assessments before setting the success fee, and needed their client’s “informed” consent to the figure proposed.

Claimant Nicky Herbert was advised by her Liverpool solicitors HH Law (better known as Hampson Hughes) to accept an offer of £3,400 for a rear-end shunt by a bus, of which £829 would be deducted as the firm’s success fee (25% of damages) and £349 for after-the-event (ATE) insurance, leaving her to bank £2,222.

She accepted the offer but subsequently instructed JG Solicitors, which has become infamous for its work challenging deductions from personal injury clients’ damages.

JG argued that HH had failed to conduct a risk assessment justifying the level of success fee and that the 100% uplift was out of step with the fixed success fee of 12.5% under the previous costs regime for RTA claims which settled before trial.

In its evidence, HH said that, like most of the market, it had changed its model as a result of LASPO to routinely charge a 100% success fee, capped at 25% of the damages.

HH director Craig Ralph said: “I can say that the model we have adopted, is that opted for by most of our competitors. It is routine that solicitors now make a solicitor client charge in the form of a success fee: I also know that many of our competitors charge success fees in the same way that we do.

“Our policy on success fees and the amount therefore reflects the ‘market rate’ for a person who wishes to instruct a solicitor will pay. Equally of course, clients are free to ‘shop around’ for a better rate, or lower success fee.”

At first instance, District Judge Bellamy cut the success fee to 15%, finding no clear evidence the claimant had approved the cost to be incurred “with full knowledge”, and that there was no risk assessment on the file to justify the 100%. Success fee

He found it difficult to say that a success fee of much more than 12.5% “could ever be justified” in a case of this nature.

Soole J upheld the decision, saying: “I do not accept that the ‘approval’ of the client is satisfied by the mere fact of the client’s consent to the relevant type or amount of cost to be incurred. The language of ‘approval’ evidently requires something more…

“I do not accept that the LASPO changes had the effect of removing risk assessment as a relevant factor when considering the success fee percentage increase on a solicitor-client assessment.

“Whilst LASPO excluded the success fee from the inter partes assessment, CPR 46.9(4) demonstrates that it did not do so for the purpose of a solicitor-client assessment.”

Soole J also upheld the district judge’s decision that Ms Herbert’s ATE insurance premium was a solicitor’s disbursement.

HH argued that the premium was a client disbursement, paid over to the insurer by the mere agency of the solicitor, which would have put it beyond the scope of a solicitor-client assessment.

Nick Bacon QC and Andrew Hogan are representing the appellant solicitors, with PJ Kirby QC and Robin Dunne for the respondent.

The issues raised in this case and what they mean for law firms are to be debated in detail at our PI Futures conference on 18 September in Liverpool. Click here for the programme and tickets.

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