‘Jackson Panic’ coming to the fore – Part Two

We are almost six months on since LASPO and the Jackson costs reforms came into effect and so more and more cases straddling the cut-off in respect of recovering additional liabilities between the parties are being settled, such that the costs of those claims are falling to be agreed/assessed. I’ve previously aired some thoughts on the proliferation of seemingly unnecessary, very late and enormously expensive insurance premiums (which only continues to be seen and will be seen for some time yet); now I am seeing more and more of another item of costs of similar, unsavoury nature.

This week alone I have seen around a dozen fee notes of barristers in connection with various low-value personal injury claims, and many more such fee notes in recent weeks, which have all read, in identical or approximate terms, as follows (i.e. only the dates have varied by a few days):

18/03/13 Perusing papers & advising on CFA – £50.00 plus VAT
18/03/13 Success fee 100% – £50.00 plus VAT

It hasn’t mattered what sort of personal injury claim such fee notes have appeared in; the fee is the same and the success fee is the same. Very few but some such cases seen thus far have also involved subsequent fees of counsel, such as in one case there was also claimed a £200.00 (base/net) fee for an infant approval hearing (‘IAH’ – in July, four months after the first piece of ‘work’).

All bar one of the cases featuring such barristers’ fees I have dealt with recently simply did not, nor ever would, reasonably need the input of counsel. Even the IAH case aforementioned didn’t need the input of counsel. Note the absence of mention above of a ‘middle’ fee for an advice on quantum: the claim was very straightforward, of entirely modest value and the claimant’s solicitors (quite rightly) were happy enough to present their own advice/recommendation on quantum to the District Judge – albeit via a junior barrister because the IAH was to be convened at a distant (to the solicitors, not the claimant/litigation friend) county court.

But there was a further twist to that IAH brief fee. The ‘CFA barrister’ too was some distance away from the county court in question such that he, no doubt, didn’t relish the trek in return for a fee of £200.00 (even with, potentially at least, a success fee on top – albeit a success fee nothing like 100% given that liability had been admitted long before the date of that CFA). So instead, the claimant’s solicitors briefed a local barrister on traditional/private terms!

Those very few other cases with a subsequent and brief advice on quantum were in the context of low-value personal injury claims it must be remembered and, with just one, arguable exception, did not, in my humble view, need a barrister to opine as to whether the defendant’s valuation of, say, £5,000.00 was ‘there or thereabouts’ when measured against the claimant’s solicitors’ own valuation of, say, £7,000.00. Those figures are taken from one of the cases – you’ll have guessed the figure at which the claim was subsequently, and promptly, compromised.

And then there was the employers’ liability claim in which on 18/03/13 a CFA was entered into with counsel, just as above (just as above indeed – 100% success fee too). The letter of claim arrived in August 2012 and liability was admitted within a couple of weeks – the defendant employer, having anticipated a claim being made, had submitted an early notification to its insurer meaning that their investigations were largely complete when the letter of claim arrived. That, and certainly the subsequent, chronology was of the archetypal simplicity both sides of the litigation fence wish for and which no doubt is behind the new EL/PL Portal fixed costs; copy wage slips were requested/sent, medical records were obtained and in early-March 2013 the claimant’s brief medico-legal report arrived. On 15/03/13, the defendant’s insurers made an offer of £4,000.00 (plus very modest, agreed financial losses) and on 22/03/13, the claimant accepted the defendant’s (first) offer – four days after counsel’s ‘advice’ and CFA and without having to trouble counsel any further.

You (well, I) would have thought that the claimant’s solicitors / costs draftsmen might on this occasion have left out counsel’s ’50/50′ fee (as I’ve labelled such fees – for both the obvious reason and their speculative nature), if for no other reason than to not draw attention to how ridiculous it was. No doubt counsel and his clerk were not really expecting to ever see that £100.00, I mean £62.50 as it was an EL claim of course; they are seemingly nothing more than some kind of loss leader, ‘spent’ in the hope that some such cases might one day over the next few years bear fruit in the form of success fees which would otherwise no longer be recoverable between the parties. Not that success fees have been banned of course but asking for a (potentially 100%) success fee is no doubt a less awkward question when an insurance company, not a client, is ultimately facing the bill.

So why did these CFAs/fees ever come about? Panic, amongst other reasons, I am sure. I can only imagine the thought process(es) at solicitors’ team/partner meetings in early/mid-March 2013.

Seemingly no real thought was given to the likelihood of reasonably needing the input of counsel; seemingly no real thought was given to the possibility of instructing counsel (should that reasonable need arise) on a private basis (such fees perhaps being covered under those late ATE LEI premiums!); seemingly no real thought was given to the position/nature of individual cases (see the EL case above which settled days after such a CFA) and seemingly no real thought was given to the fact that the clients’ costs were, in principle at least, being increased, at twice the base cost of course, for no apparent reason.

An even more curious, however unlikely, potential issue occurs to me. While the cases involving such CFAs that I have seen and settled to date have also involved earlier CFAs between solicitor and client who knows, there may even be pre-litigation, privately-funded, or BTELEI-funded, personal injury cases dealt with in the same fashion, where CFAs with counsel have been rushed through in the run up to 01/04/13. If such cases exist, and it isn’t particularly difficult to imagine that they do (panic is panic, after all), will proper thought have been given to the effect such CFAs will have on those would-be claimants in respect of the Simmons -v- Castle 10% uplift and/or the benefit of qualified one-way costs shifting?

Little wonder certain chambers were tweeting and telling anyone willing to listen how they had signed up hundreds of thousands of CFAs in March of this year alone! But what percentage of those CFAs are essentially identical to those described above? How many of those CFAs are really worth the paper they are printed on? How many trees?!

You may be thinking about now ‘why all the fuss’ over £50.00, even £100.00 or £120.00 to include the (maximum permissible) success fee and VAT. That ‘fuss’ is to be found in the previous paragraph – hundreds of thousands of CFAs were purportedly entered into amidst the Jackson panic. There is no real or immediate way of analysing how many CFAs were entered into in such circumstances or are of a nature similar, even identical, to those examples above nor of reaching a conclusion with any degree of certainty. For present, thought-provoking purposes however, let’s assume a total of ‘just’ 100,000 CFAs (although one set alone purports to have signed more CFAs than that and in March 2013 alone) and that ‘just’ 10% of those CFAs will be of a nature similar to the examples above (even though I would be very surprised if not each and every such CFA will give rise to the ’50/50′ fee whether or not they also give rise to additional work/fees). That results in total fees of £1.2 million potentially being sought from defendants and/or their insurers and for what? Setting up funding arrangements and funding arrangements designed to maximise potential revenue is about the most favourable description I can conjure.

I accept in principle the possibility, even probability, that there will be some cases, cases involving reasonably foreseeable issues and sizeable sums, in which it might have been reasonable to enter into a pre-commencement CFA with counsel and notwithstanding that there was no ‘imminent’ need to instruct counsel. But that would have to have been done on merit and after proper consideration, not simply out of what appears to be blind panic and rushing to chambers to sign a CFA in each and every personal injury claim irrespective of its value, nature, stage etc..

There is only so far one might stretch the argument, that such action would (might) minimise the erosion of a claimant’s damages, before it snaps.

But if all that wasn’t bad enough, and even putting aside for the moment the ‘chicken and egg’ conundrum (i.e. which came first: the CFA or the advice on that CFA?), those ’50/50′ fees have been claimed between the parties. Even if it was reasonable to so retain a barrister, when that barrister did nothing but “peruse papers and advise on CFA“, those fees unequivocally relate to funding and nothing else. Must one keep referring to Motto when it is now just a couple of weeks shy of its second anniversary? Must one continue to spend time (and client’s money) arguing over such fees? I am sure that those who have argued for such fees with me in recent weeks have been glad that the ‘argument’ was by email or telephone rather than face-to-face, so that they didn’t have to try to force a straight face (particularly in the aforementioned IAH case).

It will get worse before it gets better.

An easily foreseeable example of things to come (perhaps an extreme example but you will also, I am sure, be able to envisage a sliding scale of such situations): should a success fee reasonably be payable by a paying party on a receiving party’s barrister’s fee for settling particulars of claim in February 2016 when he/she has had no prior involvement in the case save to sign a ‘maybe one day’, ’50/50′ CFA on or around 18/03/13?

And all these ‘Jackson Panic’ CFAs (and ATE LEI premiums of course) will continue to affect insurers’ reserves for a goodly number of years to come. Until such time as those cases are resolved and paid, including in respect of costs and even costs of the costs, perhaps we shouldn’t expect to see our premiums tumbling any time soon.