We are now four months into the new era of costs and potential problems continue to come to light. For example, an area in which the new Regulations are far from clear is that of Damages Based Agreements (DBAs).
Section 45 LASPO 2012 amends section 58AA of the Courts and Legal Services Act 1990 to permit the use of DBAs in all contentious work where previously they were only permitted in employment matters. A cap is placed on percentage level of the contingency fee - for example, in personal injury and clinical negligence claims, the fee is capped at 25% of the total recovered by the Claimant in respect of general damages and damages for pecuniary loss other than future pecuniary loss.
Sadly, as seems to be the case in many of the new Regulations, in an attempt to rush the new rules through, their interpretation and implications do not appear to have been properly considered. So which issues fail to have been addressed? Consider the following:
- Can the contingency fee be recovered from a losing Defendant? Yes, but only inasmuch as the Claimant’s recoverable costs are assessed as reasonable. Any shortfall must be paid out of the Claimant’s damages;
- Are hybrid or partial DBAs permitted? It had been hoped that solicitors would be able to have in place agreements whereby their clients paid a reduced hourly rate, with allowance for a contingency fee in addition, to be paid following a successful outcome. Regulation 4 of the Damages Based Agreement Regulations 2013 appears not to allow for such agreements, stating that “..... a Damages-Based Agreement must not require an amount to be paid by the client other than the payment.....” which is capped, and non-counsel disbursements. Therefore, if the Regulations preclude partial DBAs, in circumstances where the client is unsuccessful the solicitor’s only entitlement is to non-counsel disbursements.
- On what basis is the contingency fee calculated if the offer of damages which is finally agreed is made as a global figure and does not stipulate what proportion relates to future pecuniary loss?
- How will the claimant’s recoverable costs be assessed if there is no agreement which outlines an hourly rate? If there is no retainer outlining the solicitor’s hourly rate, there is no such rate to rely on when calculating reasonable costs under the Indemnity Principle.
We wait to see if anyone is brave enough to enter into such Agreements and for the results of any subsequent assessments.....
I am a Practice Manager of a long established firm of Legal Costs Consultants in Cheshire.
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