Maxey: Firm offers good value to clients
A senior district judge has criticised the approach of a leading personal injury (PI) firm in racking up costs in a low-value claim, which he suggested might be to guarantee the maximum success fee recovery..
District Judge Richard Lumb, a former president of the Association of District Judges, warned solicitors against billing so much as a tactic to ensure clients could not end the retainer early.
He was ruling in an infant approval hearing for the deduction of £900 by Manchester firm Express Solicitors for the success fee and £336 for the after-the-event insurance (ATE) premium.
The judge had previously approved a £3,600 settlement of the claim, which involved a child of almost three who was injured in an accident at the defendant’s premises
At the hearing, he accepted that there were some risks in the case which would justify a success fee of 20%, as opposed to 100% stated in the conditional fee agreement (CFA).
The judge said he had been concerned by the witness statement of the claimant’s litigation friend, his mother, which said she had confirmed verbally over the phone with Express that she was aware it would “deduct 25%” – the maximum allowed for success fees in PI cases – and the cost of the ATE from the damages.
“The concern is that how did the solicitors know at the time of instruction that the success fee would be 25% of SJ’s damages? The correct measure of any success fee would be the appropriate percentage of the profit costs capped at 25% of the damages…
“To express the success fee as automatically 25% of the damages would be an unlawful contingency fee.”
Of “further concern” was the nearly £30,000 incurred in costs, made up of nearly 90 hours work done by 14 different fee-earners “all at hourly rates which were very significantly higher than the SCCO guideline hourly rates for Manchester”.
This was “all the more striking” given that the fixed costs recoverable from the defendant were £1,860.
DJ Lumb said: “[I]t would appear that the solicitors were prepared to undertake tens of thousands of pounds worth of work for which they were not going to be paid. Any objective observer would consider that to be a very odd way for solicitors to conduct business.
“It automatically raises a suspicion that the costs purported to have been incurred were artificially inflated to ensure that the 25% cap was always reached.”
This suspicion was “fortified” by what Express’s representative had told SJ’s mother.
“The justification, if it is one at all, may be that under the terms of the CFA if the client ceased to instruct the solicitors before the conclusion of the case, then she would have been liable for the basic costs incurred to date.
“Given the huge level of costs said to have been incurred this would have operated as a powerful incentive to the client to see the case through to the end with Express Solicitors and effectively trapped her into doing so.
“In that event, that process might have attracted the attention of the Solicitors Regulatory Authority and any solicitor operating such terms of business may be wise to exercise caution in doing so.”
The judge explained that, because of all this, he had decided to carry out a detailed assessment on the papers to ensure the costs were reasonable.
“The file reveals a considerable amount of duplication of work both by individual and other fee-earners. There is also a considerable amount of non-progressive work undertaken that could properly be characterised as ‘costs padding’.
“That said, even on a broadbrush approach I am satisfied that the amount of work reasonably incurred and reasonable in amount would inevitably have exceeded £5,000 of profit costs.”
This would mean the £900 success fee was deductible and so it was not necessary to complete the assessment.
He also found the ATE premium a reasonable expense to incur to insure against the risk of having to pay out disbursements of £1,620.
James Maxey, chief executive of Express Solicitors, commented: “I am not aware of any solicitors who can process this type of claim within the fixed costs regime at a profit and run a viable business and give high-quality service to clients.
“What we do, in common with many other solicitors, is confirm the maximum amount by way of a percentage deduction that clients will ever have to pay so that they know that the bulk of their compensation is safe and will pay at most a certain percentage regardless of how much work we do.
“We offer an effectively unlimited amount of work to claimants if they need, for example, more time to have things re-explained to them or to go over things.
“This case is an example of where an awful lot of work was done but the contract limited the total charges to the client to an amount which ultimately the judge approved.”
Mr Maxey said he was “entirely confident” that Express offered good value to claimants and was clear about charges, going through all the contractual details with clients orally and in writing, and keeping them updated throughout their case.
“My understanding is that there is no complaint here at all from the litigation friend in this case,” he said, noting that Express had strongly opposed the changes introduced by the Conservative government in 2013 to end recoverability of success fees and ATE premiums from defendants.
In recent months, DJ Lumb has also criticised the approach of another leading PI firm, Winn Solicitors, in how it handles credit hire claims.
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