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Time to ditch 100% success fee model, costs expert says

Bedford: The less you claim, the more you’ll earn

Law firms should abandon business models for low-value personal injury claims based on blanket 100% success fees, a leading costs specialist has argued.

Erica Bedford, a barrister at Kings Chambers, said law firms should re-engineer their procedures to avoid becoming “easy targets” for legal action by firms specialising in claims against solicitors.

Speaking at this week’s PI Futures conference in Liverpool, Ms Bedford said that the 25% cap on costs as a proportion of damages meant there was often a gap in what lawyers could obtain with a 100% success fee.

“You don’t actually have to charge a 100% success fee to get to where you want to go.

“The less you claim, the more you’ll earn. The more you claim the more you will be a target. Keep your head beneath the parapet. Sometimes the best way to win the war is to be perceived as losing the battle.”

Ms Bedford said she did not expect the Court of Appeal to overturn the judgment earlier this year [1] of Mr Justice Soole in Herbert v HH Law, who ruled that individual risk assessments or the client’s informed consent were needed before setting success fees.

“We live in an age of consumer protection,” Ms Bedford said. “The Court of Appeal will have the desire to protect the client rather than the 100% success fee.”

The barrister said the case had been listed for March 2019. “The effect is, of course, that everything will be stayed until then.”

She advised law firms to do risk assessment and obtain the informed consent of clients for success fees, in case either approach failed.

Ms Bedford said negligence actions against law firms previously tended to be brought by a “one-off disgruntled client”, usually because of a “fall-out in the relationship”.

Instead, there now seemed to be an “organised, mobilised market” for negligence claims with solicitors “firmly in its cross-hairs”.

Steve Cornforth, founder of the Steve Cornforth Consultancy and formerly senior partner of EAD Solicitors – which was last week acquired by Simpson Millar – said his message to solicitors was “don’t panic”.

He said that, in the Herbert case, there had been no risk assessment and very little communication with the client. “It may well be that in your particular case, you have just about got across the bar.

“The way to avoid being stung is to do your risk assessment and communicate with your client.”

Mr Cornforth said he had carried out his own Twitter poll on the issue, which indicated that around 50% of claimant lawyers thought it was OK to charge a standard success fee of 100%.

“My fear is that there is a shedload of claimant lawyers out there who are blissfully ignorant and still think there is some sort of standard 25% deduction from damages.”

Mark Carlisle, director of checkmylegalfees.com – one of the most prominent businesses acting for clients on these claims – told delegates that overcharging through success fees was a “real concern” of many clients, who wanted to have faith in solicitors and in being charged reasonably at the outset.

“A large number of people who come to me are disgruntled, not necessarily in the work that has been done but in the way they’ve been charged.”

Mr Carlisle said the “vast majority” of his work came in by word of mouth, from his website or online comments.

He said Lord Justice Jackson hoped that LASPO would reduce success fees but that had not happened, the 100% success fee model had been introduced and there was no competition.

Mr Carlisle blamed law firms for making negotiation difficult through “defensiveness” and failure to release documents and until that happened negotiation or mediation was “impossible”.

He said that in one recent case where files had not been released, the law firm was charging out a paralegal at £350 per hour and charging a 100% success fee.

“It doesn’t help anyone to be defensive and not disclose documents because the inevitable consequence is that proceedings will be issued, giving us an automatic entitlement to documents.

“You could avoid proceedings being issued by being open at the outset.”