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The concept of linking legal costs to the amount of compensation recovered has one fundamental, and potentially very unjust, consequence: what happens when a case involves very complex issues yet the compensation recovered is relatively low?

The traditional, common sense, approach was to assess legal costs based on what was fair and reasonable – if work had to be carried out to properly run the case then it was generally recoverable.  This obviously makes perfect sense – a high value case could actually be straightforward if liability is admitted early on and reasonable settlement offers are made promptly whereas a low value case could be defended all the way to trial, and medical or financial evidence hotly disputed, resulting in far greater work.

The perverse consequence of linking costs to damages is that unnecessary work in higher value cases becomes easier to recover, and necessary work in lower value cases becomes harder to recover.

The biggest losers are likely to be people who have suffered either less serious clinical negligence injuries or industrial disease injuries as those cases are often unnecessarily hard fought by defendants and often involve complex issues involving expert evidence.  The loss of recoverable success fees from the defendant, plus the capping of client success fees at 25%, has already led to a number of law firms ending their industrial disease practices, and many questioning whether it is economically viable to run clinical negligence cases, but if costs are reduced on top of that I can foresee a situation in which law firms will have to turn down strong cases on the basis they will not be able to run the case at a profit.

The other possibility is that law firms will not be able to take such cases on a no-win-no-fee basis because of the risk.

An example of the present problems faced is reported in the Law Gazette today. Law firm Simpson Millar succeeded in a disputed clinical negligence case in which the claimant recovered £3,500. Costs judge Master O’Hare rejected their arguments the matter was complex, and disallowed part of their costs for obtaining expert evidence. He reduced their bill by two thirds. Simpson Millar contend the case was very complex and that a number of experts had to be instructed. Without knowing details of the matter it is difficult to comment further but I remain concerned about the concept of linking recoverable costs to the amount of compensation received as this will often lead to unfair outcomes.

Many people outside of the legal profession may be asking themselves why law firms have to charge so much, and whether it is fair for the tax payer, via national insurance, or private insurance, contributions to pay for these.

The problem many claimant solicitors have is that cases such as clinical negligence or industrial disease often require expert evidence as defendants in these cases appear reluctant to settle cases early on and prefer to prolong the matter, most often into court proceedings.  Exactly why they prefer to do this remains unknown – it could be a deliberate tactic of “sending a message” to claimant solicitors that such cases will be difficult, in order to deter them from taking more in the future, or it may be because they lack the expertise to recognise which cases place them at risk, or it may be because they are aware it will be difficult for claimant law firms to recover all of their costs under the new system and so deliberately prolonging the matter could make such cases not economically viable.

When claimant solicitors have to obtain specialist expert evidence it typically costs thousands of pounds (tens of thousands in particularly specialist cases). The other problem is that court fees have now risen to excessively high levels. Therefore, a claimant law firm that is forced by the defendant to incur thousands of pounds in expenditure in expert evidence, and then thousands more in court fees, takes great financial risk in progressing the claim, not to mention the huge amounts of time the solicitors have to put into the case.

In order to run such cases on a no-win-no-fee basis law firms must be able to recover a fair amount of costs for those cases that succeed, to cover those that do not.

Insurance companies and the NHS Litigation Authority are presently pressuring the Government to introduced fixed costs into both industrial disease and clinical negligence cases, which will further reduce the costs claimant solicitors can recover. Many in the profession believe this could lead to the end of no-win-no-fee agreements for such cases as they could become no longer economically viable to run, particularly in cases where the injuries are less serious, or it may be that law firms have to ask the client to pay for the expert evidence and court fees, but at the present rates set it is difficult to imagine many people being able to afford these.

Shockingly, there remains no investigation or enquiry into why both the NHS Litigation Authority and insurance companies are prolonging cases so unnecessarily, at both policyholders’ and tax payers’ expense.

My view is that we need to face up to the facts – if we want a legal system in which a person’s ability to seek justice is not determined by their financial status then no-win-no-fee law must not only remain profitable but rewarding enough to ensure skilled lawyers remain prepared to work that way.

I fear the combination of reduced legal fees, fixed costs, reduced success fees, difficulties of success fees in infant cases, costs being linked to compensation values, and more, will end up leading to a Victorian-era-style legal system in which only the wealthy can use a solicitor.

If you would like to know more please feel free to contact Aston Knight Solicitors, Bury on 0161 399 1231 or info@astonknightsolicitors.co.uk.

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