Post-LASPO Success Fee Still Requires Risk Assessment: Herbert v HH Law [2019] EWCA Civ 527

At the Court of Appeal this week, a claimant successfully challenged the ‘routine’ charge of a 100% success fee, in Herbert v HH Law [2019] EWCA Civ 527.[i]

The case regarded a post-Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) 2012 road-traffic accident (RTA) claim, which settled for £3,400.

The claimant’s solicitors (the defendant) sought to recover a £830 success fee, as the conditional fee agreement (CFA) provided for a 100% fee capped at 25% of damages.

However, new solicitors were instructed to conduct an assessment of the success fee, under the Solicitors Act, on the basis that the 100% fee was an inaccurate reflection of the risk of pursuing such a ‘straightforward’ claim.

Should the success fee have been more modest?

The defendant submitted that post-LASPO, it was presumed unnecessary for firms to individually risk assess claims to generate bespoke success fees, as the claimant was protected by the 25% cap. It further relied on the wording of CPR 46.9(3)(a) and (b).

7.png

On appeal, the Master of the Rolls, Sir Terence Etherton, upheld the 1st and 2nd instance decisions to rebut this presumption and reduced the success fee to 15%.

The Court reasoned that the wording of CPR 46.9(4) prioritises risk as a primary factor on assessment of the uplift payable to a claimant solicitor:

‘... it was envisaged that a success fee would be related to risk’.

8.png

Accepting the importance of conducting a risk assessment, both parties agreed that it was necessary for clients to ‘approve’ the success fee after having been given a ‘full and fair explanation’. The burden of proving that this level of ‘informed consent’ had been satisfied was placed on the defendant.

The fact that other claimant firms had applied the same CFA models did not allow the defendant to discharge its burden of authenticating ‘informed consent’:

‘I do not consider that either HH’s justification for its charging model or the 25% cap answer the point that in this country, in the context of a conditional fee agreement, the amount of a success fee is traditionally related to litigation risk, as reasonably perceived by the solicitor or counsel at the time the agreement was made. Across the broad range of litigation, it would be unusual for it not to be. It continues to be the case in those limited areas, such as publication and privacy proceedings and mesothelioma claims, where success fees are still recoverable from the losing party’ [paragraph 53].

Full text judgment can be accessed here.

What does this decision mean for claimant solicitors?

Defendant counsel, PJ Kirby QC and Robin Dunne, of Hardwicke Chambers, believe that the consequences of Herbert will be ‘profound’:

‘Since LASPO, many firms have used the same model as HH Law in modest claims where the individual risk was low.  Unless (which is unlikely) they have advised their client when the CFA was signed that the success fee was not set on the basis of the risks of the case, the client will be able to reduce the success fee on a Solicitors Act assessment.

There are likely to be huge numbers of clients who have the ability to do so, even if they have to rely on special circumstances’.[ii]

Moving forward, claimant solicitors will need to make sure that ‘informed consent’ is provided before seeking to recover success fees. They could move away from more ‘straightforward’ claims, in order to increase the risk of claims handling, warranting higher percentage uplift.

If there is, as forecasted, an upsurge of Herbert-esque claims, this could be financially damaging to claimant personal injury (PI) firms, especially those with an RTA-focus, given the squeezing influence of looming Civil Liability Act reforms.

Firms may have to cut their marketing spend in order to save costs.

 

[i] Neil Rose, ‘CA upholds challenge to routine 100% success fee in low-value PI’ (3 April 2019 Litigation Futures) <https://www.litigationfutures.com/news/ca-upholds-challenge-to-routine-100-success-fee-in-low-value-pi> accessed 5 April 2019.

[ii] PJ Kirby and Robin Dunne, ‘Important new Court of Appeal guidance on recovery success fees and ATE post LAPSO: Herbert v HH Law [2019] EWCA Civ 527’ (3 April 2019 Hardwicke Chambers) <https://hardwicke.co.uk/important-new-court-of-appeal-guidance-on-recovery-success-fees-and-ate-post-lapso-herbert-v-hh-law-2019-ewca-civ-527/> accessed 5 April 2019.