PI lawyers and insurers thrash out 12.5 per cent success fee

Is the ‘costs war’ set to become a cold war, or is compromise the name of the game? asks Jon Robins

After hours of tough negotiating, 20 leading claimant and defendant personal injury (PI) lawyers, together with representatives from the insurance industry, finally struck a deal in the early hours of the morning of Saturday 4 October on the level of success fee payable in road traffic cases.

Let us all rejoice, then, that the so-called ‘costs war’, which has effectively seen non-stop legal challenges on ‘no-win, no-fee’ cases jam up the courts for the last three years, is now over.

“It was a hell of a mediation,” related one of the lawyers involved. “Unsurpri-singly, everyone had strong views on just about everything. There was a lot of cajoling and some not-so-gentle persuasion to get everyone to the same point.”

The session, run by the Civil Justice Council and chaired by Master of the Rolls Lord Phillips of Worth Matravers, began on Thursday evening and finally wound up at 1.30am on Saturday morning. Of course, there was a lot to play for. The agreement that was thrashed out will affect in the region of half-a-million cases and remove a huge chunk of the satellite litigation that has been such a blight upon the post-Access to Justice world.

After much bashing of heads, the two formerly irreconcilable defence and claimant mindsets came up with the magic figure of 12.5 per cent for the level of success fee for all successful cases that are settled pre or post-issue at court.

One imagines that the extra 0.5 per cent was the source of much anguish. Cases that go to trial will attract a 100 per cent success fee. The deal now goes to the rule committee, which will sort out the fine detail, and is expected to come into force early in the New Year. It also coincides with the new fixed recoverable costs regime for road traffic accidents (RTAs), which came into force last week.

According to David Marshall, president of the Association of Personal Injury Lawyers, last weekend’s agreement is “a very fair conclusion to a protracted series of negotiations, and reflects the reality that no road traffic claim is risk-free”.

“Everyone’s had to give something up to get to the deal that had to be done,” commented his opposite number Jason Rowley, the president of the Forum of Insurance Lawyers.

The figures were arrived at following new research by academics Paul Fenn and Neil Rickman, who were previously commissioned by the Criminal Justice Council to look into the practicalities of a fixed costs regime.

Rowley said: “It seemed fairly clear this 12.5 per cent was the sort of level that would keep solicitors in business and hopefully keep the Access to Justice policy working.”

The mediation was also supposed to cover employer’s liability and public liability cases. Apparently, it quickly became evident during the mediation that not only was the statistical information available not up to such ana-lysis, but also the differences of opinion concerning RTAs were more than enough to keep people busy. That negotiation, then, will be saved for another time. As Rowley put it: “The mediation is a bit like running the marathon. You can only do this kind of thing every so often.”

Clearly, claimant solicitors are not going to be jumping for joy, but nor did they expect to. This time last year it was a different story. Lord Justice Brooke sent shockwaves through the profession when he appeared to endorse a two-stage success fee in Halloran v Delaney. Basically, the idea was that there would be a 5 per cent success fee if the case settled pre-issue and a 100 per cent fee if it went to trial. Panic was averted when the judge admitted in the Claims Direct test cases that he should have expressed himself “with greater clarity” – apparently, he was only referring to those cases where the prospects of success were virtually 100 per cent.

Given that controversy, how does the profession feel about 12.5 per cent?

“There will be winners and losers, but if solicitors are taking on cases with proper risk assessment, this is a workable regime,” commented Richard Langton, chairman of Russell Jones & Walker’s (RJW) PI department. RJW is, of course, the firm behind New Claims Direct. “Although far from generous,” he said, “most lawyers will want the certainty of being paid, as opposed to suffering from the satellite litigation that’s dogged the system over the last three years.”

“To make it work you’re going to have to be able to do the work very efficiently,” reckons Andrew Twambley, a partner at Manchester firm Amelans, who attended last weekend’s mediation. The firm is behind Injury Lawyers 4U, the PI marketing network that now has more than 200 firms on board. “If you’re a traditional high street firm used to being paid for letters written and time spent win or lose, then you might have problems,” he added. “But if you streamline your practice, you can make it work and provide access to justice.”

Twambley reckons that the new deal will, in one fell swoop, deliver a crippling blow to two major irritants of the post-Access to Justice world. First, the costs negotiators, or “costs muppets”, as the solicitor delights in calling them, will have little work to do on RTAs in this new consensual era. As he explains, it is also bad news for the claims companies.

“Now that the profits have been shaved on these cases so dramatically, it would be suicidal for those solicitors that have foolishly and blindly been paying claims farmers £400 or £600 for claims to carry on doing so,” said Twambley.

That aside, claimant lawyers are just happy at the prospect of an end to what they see as bloody-minded and pointless legal challenges.

As Langton said: “The last thing we would have wanted was another three years of debating what the correct success fee is, and if this brings an end to the costs wars then all claimant lawyers will be absolutely delighted, if sceptical.”