Insurers claim firms have a ‘licence to print money’ after Appeal Court ruling

Crackdown on insurers gets boost as Lord Justice Brooke rules solicitors do not have to employ two-stage success fees

Viewers of the BBC Two documentary No Win, No Fee, about Manchester personal injury firm Amelans, will be pleased to learn that a recent ruling from the appeal judges has added to the good karma of resident costs expert Paul Kimber, aka ‘Buddha’.

The former UK judo champion is employed by the firm to take on their great adversary, the defendant insurance industry, and has become a celebrity in the world of legal costs for exposing the lengths insurers will go to avoid paying solicitors’ fees.

In the latest sortie in the costs war enveloping conditional fee arrangements – Ku v Liverpool City Council – Lord Justice Brooke ruled that solicitors did not have to employ two-stage success fees. This was an approach flagged up in Amelans’ landmark challenge Callery v Gray, which ended up in the House of Lords in 2001. The Court of Appeal ruled in Ku that those who use the two-stage fee would have the benefit of a high success fee for cases that do not settle early.

“It is going to cost the defendant insurers considerably more than they’ve been paying recently,” said Kimber, although he pointed out that the local courts had accepted the line taken by an earlier judgment in the case (then known as Ungi), which was followed by the appeal judges. “In essence, the argument was if you set a success fee at the outset, the court was not allowed to interfere and reduce it on the admission of liability,” he added.

Insurers have been wringing their hands since last month’s ruling and calling it “a licence to print money”. Kimber pointed out that it is true that many courts in the UK have not been following the Ungi line and so the judgment could cost some insurers dear. He said that there are wranglings between claimant lawyers and defendant insurers on 95 per cent of Amelans’ cases, although only 5 per cent end up in court.

Kimber’s boss, Andrew Twambley – the “real contender for the title of ‘The New David Brent'”, according to the Daily Mirror – is characteristically forthright. He dismissed the complaints of insurers as “complete and utter trash”. He added: “All it did was clarify exactly what the law was [and sorts out] a big discrepancy between that and what the judges were doing. They were misinterpreting Lord Woolf’s throwaway line in Callery five years ago when he said it was possible to have a split success fee.”

But Twambley said there has never been any provision to split the fee retrospectively “otherwise the whole system would fall down… because there is no benefit for people who take risks”.

The Ku case concerned a claim against Liverpool City Council by a four-year-old child, who had cut her leg after stepping in a hole in a grass verge. Terry Moran, of Liverpool firm Paul Crowley & Co, welcomed the ruling. “It gives us the clarity so that we know what we’re dealing with and, in particular, it clarifies the point that you can’t use hindsight [to cut the success fee].”

Lord Justice Brooke halved the 100 per cent success fee in the case, but Moran said that their uplift was halved on the facts of a particular case and the court did not suggest that was the appropriate success fee for other similar claims.

Rob Carter, head of the Forum of Insurance Lawyers’ special costs group, said the ruling cuts both ways. “It means you can’t, as the defendant, say that we’ve put our hands up at a certain point, admitted liability and the success fee should come right down, and from a claimant point of view that’s good,” he said. “But, by the same token, that has been balanced by the Court of Appeal agreeing the uplift at 50 per cent for a slip and trip case.” He added that it might be a licence to print money, “but it isn’t very good currency”.

So does Buddha’s martial arts background equip him for taking on the insurance industry? “The skills are quite transferable,” said Kimber. “The ability to concentrate and the preparation are similar, as is the patience, which is key to dealing with insurers.” But Kimber’s calm in the face of the old adversary is not the reason for his nickname. According to Buddha, it is a rather “unkind reference” to his size.