Legal costs

Meaning of legal costs and no win no fee

How is a personal injury solicitor paid?

June 3, 2010 in Explanation, Legal costs | No comments

How a personal injury solicitor is paid

There should be no mystery about how a personal injury solicitor is paid for the work carried out in your personal injury claim for compensation.

The basic cost is an hourly rate multiplied by the time spent on your case. Most personal injury solicitors will follow the Guideline Rates set by the Advisory Committee on Costs. These are based on the experience of your solicitor and the cost of practising in the various regions of the country, London being more expensive than Exeter.

A solicitor’s bill is made up of a charge for their time, plus VAT, and the expenses incurred on your behalf, known as disbursements. For these purposes I will put all those terms together and call them solicitors costs.

I will also talk about the costs of the other side, or the Defendant. That means the person or organisation against which you are claiming compensation.

Solicitors usually record their time in six minute units on computerised systems. The presumption of the time recording system is that nothing takes less than six minutes.

There are fixed costs rules in place for certain types of case, such as road traffic accidents with value below £10,000, and I will deal with these separately.

You will be told that the costs will be paid by the Defendant, the other side in your case, if the case is successful. The confusing part is that you sign up to a deal saying you are liable to pay your solicitor’s fees, and the reason is you must be liable to pay these costs for your solicitor to be paid by the other side. A costs award is based on the other side covering your liability to your own solicitor. If you are not liable to pay your personal injury solicitor, your solicitor cannot be paid. It is called the indemnity principle and must be carefully explained to you.

Even if you are represented on a no win no fee arrangement, properly called a conditional fee agreement, you are liable for your solicitors costs in the event of the case being successful. If you fail you do not pay for the solicitor’s time, but you are liable for your solicitor’s disbursements and the costs of the Defendant.

Some personal injury solicitors still follow the practice of insisting on being paid for every minute they spend on a case. The other side must pay on the basis of the work which was necessary, but your liability to your solicitor is based on the work which was reasonable and necessary. Some solicitors insist on you making up the difference between the time they have spent and the time they have been paid for by the other side. That can produce a nasty sting at the end of the case. It is vital to know how your personal injury solicitor will charge, and to be sure you will receive all of the compensation.

So hopefully that makes sense to this point. Your case has been successful, you receive the compensation and your solicitor is paid by the other side.

But what if you do not win, or do not win completely?

If your personal injury case is unsuccessful you will be responsible for your own solicitor’s fees, and those of the Defendant’s solicitor.

So how do you avoid the risk of paying your own personal injury solicitor if your case does not succeed?

The answer is an insurance policy provided in the form of trade union support, legal expenses insurance, or after the event insurance which supports a conditional fee agreement. All of these forms of insurance are designed to cover your liability to pay costs in a personal injury compensation claim.

Each form of protection will depend on its own terms, but in general the insurer has agreed your case has a reasonable chance of success, and will cover your liability for costs if the personal injury case goes wrong. As with any policy check the amount of cover you have as there is always an indemnity limit.

Please carefully note you have duties under these policies. You must be honest and cooperate with your solicitor. If your case fails because you were dishonest your insurance would not pay, so be honest.

Can I carry on with my case if the chances of winning are not good?

It is here where we see how these various types of legal cover actually work. The insurer must be satisfied at all times that the prospects of success are reasonable. If something changes, such as a witness no longer backs your story, the insurer can back out and refuse to continue to cover you. So you have an insurance policy, but it is a fluid insurance policy, as once the chances of success reduce below the required standard the insurer can pull out.

The most common reason for the insurer to review its position is when you are made an offer. You might be offered 50:50 on liability, which means you and the Defendant are equally to blame for your injury. You might be made a financial offer which the Defendant thinks is reasonable. When that offer is made you can accept it and the Defendant will pay your costs. You can refuse the offer and press on, but if the ultimate agreement or award is less than you were offered you will only get your costs to the date of that offer, and beyond that offer you are liable for the costs of both sides. In practice this is the greatest risk in a personal injury case and it is on this point you must be sure you have good insurance protection, as a straightforward case can go bad if a good offer is refused.

A good policy and a good personal injury solicitor are your protection in a personal injury case.

Inquest representation and public funding

May 17, 2010 in Fatal accident, Legal costs | No comments

A very useful article appeared in the Law Society Gazette on Monday 17 May 2010 by Azmina Gulamhusein

The charitable organisation INQUEST has criticised the current inquest system because ‘there is no equity of arms in terms of legal funding’. While public or commercial bodies involved in an inquest invariably have legal representation, bereaved families can only obtain funding from the Legal Services Commission (that means legal aid) to cover advocacy at the hearing in exceptional cases. This leads to an unfair disparity between the parties, which was highlighted in the recent case of R (on the application of Humberstone) v Legal Services Commission.

Although the Coroners and Justice Act 2009 will extend the future scope of public funding, it does not introduce any automatic right to non-means tested legal aid for families as proposed by INQUEST. The Ministry of Justice has just announced that the families of those killed in the London bombings will now be granted funding for representation at the inquests and the means test will be waived due to the exceptional circumstances. This decision was made following complaints about the LSC’s lengthy application process and ‘intrusive’ financial assessment forms.

The funding rules

If they satisfy the financial and other eligibility criteria, bereaved families can obtain funding under the ‘Legal Help’ scheme to cover the initial preparatory work for an inquest, but this excludes advocacy services at inquest proceedings from the general legal aid scheme. The government’s justification is that an inquest is a relatively informal and inquisitorial rather than adversarial process. Its purpose is to establish how the deceased died and not to decide questions of civil or criminal liability. Yet, the practical effect of the public funding rules is that grieving families may qualify for initial assistance, but be left without legal representation during the actual proceedings when they are in most need of support.

With effect from 1 November 2001, the Lord Chancellor issued an Authorisation to bring representation at limited categories of inquests within the scope of public funding. If requested to do so by the LSC, the Lord Chancellor can also authorise the commission to fund representation in individual cases. The Funding Code sets out the following alternative grounds of granting this ‘exceptional funding’ on an individual basis:

• There is a significant wider public interest in the applicant being legally represented at the inquest; or

• Funded representation for the family of the deceased is likely to be necessary to enable the Coroner to carry out an effective investigation into the death, as required by article 2 of the European Convention on Human Rights (the right to life).

These tests are very difficult to satisfy. According to statistics published by the Legal Services Commission, 45 out of 52 exceptional funding applications relating to ‘out-of-scope inquests’ decided in 2008/09 were unsuccessful.

In the Humberstone case in April 2010, the High Court decided a judicial review application relating to a refusal to grant exceptional funding for representation at an inquest. R (on the application of Humberstone) v Legal Services Commission involved a claimant whose 10-year-old son died in hospital after suffering an asthma attack. Following her son’s death, the claimant was arrested on suspicion of gross negligence manslaughter due to concerns that she may have failed to supervise his asthma medication properly. In the event, no charges were brought against the claimant but the local coroner decided to hold an inquest into the circumstances of her son’s death.

The claimant applied to the LSC for exceptional funding to cover legal representation at the inquest. Her application was accompanied by a letter in support from the Coroner. When the LSC refused the claimant’s initial application for funding, the Coroner wrote a further letter emphasising that she was ‘effectively facing an enquiry at the inquest into whether or not her actions or failures led to the death of her child’. He also expressed the following serious concerns:

• Although the coroner would try to assist someone in the claimant’s position, his role was not to represent her interests and he could not advise her on what to say to avoid self-incrimination.

• The inquest was estimated to last for five days and causation was a major issue. It was therefore likely to involve ‘nuances of technical medical information’ that the claimant would struggle to understand.

• There was an apparent inequality of arms because the ambulance service, hospital authority and individual doctors and nurses involved were all legally represented (some or all at public expense).

In spite of the Coroner’s forceful arguments, the LSC maintained its refusal to recommend the claimant’s case for exceptional funding. This was on the basis that article 2 of the European Convention on Human Rights was not engaged or, even if it was, the coroner could carry out an effective investigation into the child’s death without the claimant being granted public funding. The claimant applied for a judicial review of the LSC’s decision. Judicial review is an application to a Court complaining that a public body has not exercised its discretion correctly. It is not a complaint about the decision, it is a complaint that the decision was not made within the law.

The High Court allowed the claimant’s application for judicial review and quashed the LSC’s decision not to recommend her case for exceptional funding. Although there was as yet no real evidence of any wrongdoing on the part of the medical professionals that could amount to more than simple negligence, the Court held that article 2 of the European Convention on Human Rights was engaged. It was clear from case law that the state may have a duty to hold an investigation into a death (or support a mechanism for an investigation), even if there is no reason to believe that state agents have breached their primary duty under article 2 to preserve life.

The Funding Code lists some factors that must be taken into account, but each case ultimately depends on its own particular facts and the following additional guidance should be considered:

• Although one factor may be determinative in a specific case, it is not correct or lawful to make a particular factor (such as the complexity of the law or facts) determinative in all cases.

• The coroner’s own views about whether he can carry out an effective investigation into a death without a particular interested party being represented is a matter for special consideration. These views are not binding on the LSC, but it can only rationally reject them if there are cogent reasons for doing so.

• One factor that is not relevant to a funding decision is the absence of (or restrictions on) available public funds.

• The LSC has a wide discretion when recommending cases for exceptional funding, but it must adopt a lawful approach to the decision and properly take all material considerations into account.

Having outlined the above guidelines, the High Court applied them to the facts of the case. It ruled that the LSC had – contrary to the Funding Code – failed to have proper regard to the nature and seriousness of the allegations faced by the claimant at the inquest. The Funding Code also requires the LSC to consider whether a bereaved family can participate in an inquest without funded legal representation. In this case, the claimant was a woman of ‘limited faculties and experience’, who was suffering from depression exacerbated by her son’s death. The coroner had listed specific difficulties that would arise if she was not legally represented. In all the circumstances, the LSC’s funding decision was therefore unlawful.

So the case was successful, but only after a very long and upsetting fight.

The Coroners and Justice Act 2009 received royal assent on 12 November 2009 and sets out some much-needed future reforms to the funding system. As from a future date to be appointed, means-tested public funding will be extended to cover advocacy at inquests into the deaths of:

• persons who die while in state custody;

• persons who die in the course of arrest or other action by the police; and

• military service personnel who die while on active service.

Although the LSC has welcomed the ‘clearer framework’ to be introduced by the Coroners and Justice Act 2009, there are concerns about whether its provisions are extensive enough to overcome the weaknesses in the funding process.

While the Coroners and Justice Act 2009 will improve access to justice in specific categories of inquests, a problem with ‘equality of arms’ will remain in other cases. For example, if an individual is killed during an accident in the workplace, the employer is likely to have expensive legal representation at the inquest funded by its insurers. By contrast, the deceased’s family may be forced to attend the inquest involving upsetting evidence from the pathologist and complex technical details about workplace machinery without any representation. The new act does not contain any measures to improve this type of situation, which would heighten the distress of a family already at their most vulnerable and may lead to health and safety issues not being fully explored. Until the government provides wider access to funded representation at inquests and ensures that the parties are in an equal position, it cannot achieve the objective of placing bereaved families at the heart of the coroner system.

Expert evidence

September 28, 2009 in Compensation, Explanation, Legal costs | No comments

Only experts can give opinion in a compensation case, and the opinion must be limited to the field of expertise.

A medical expert is the usual expert, but again the medical expert must keep to their own area of expertise. Accident compensation cases sometimes need the help of a reconstruction expert, an engineer, an occupational or employment expert, or an accountant. Wherever the Court needs expertise to assist in coming to a decision you will be allowed to instruct an expert. The Courts can be restrictive, and have the power to limit the evidence overall to the evidence necessary to prove the case. The lower the value of the likely compensation, the less likely you are to be able to rely on experts.

The role of the expert is to provide a report to the Court. That is the first and foremost duty of the expert. Even though your solicitor may instruct and pay the expert, the expert is not “yours.” This was designed to get over the old problem of each side using an expert they will know supports them, and the trial of the case being a decision between the two opinions. The duty to the Court was introduced to prevent the expert feeling obliged to please the party paying them, the worst examples being referred to as ‘hired guns.’

The Court manages the use of experts to ensure costs are not increased unnecessarily. The Court may impose a single joint expert. This will reduce costs, but solicitors still like the opportunity to instruct an expert they see as theirs, in the hope the expert will support their case.

When a client is going to see a medical expert, I am often asked how should the client behave. The answer is always the same. Treat the examination as you would any medical examination. Answer questions honestly and openly, and do not be embarrassed to explain the problems the injury has caused. We are often too British when we are asked about problems, as we feel we should not complain. Once the examination is over it is a bit late to complain no mention is made of a problem.

If you have had similar injury, or problems in the past, volunteer that information. Otherwise, once discovered, you will look as though you are hiding relevant history. Your medical records are usually available to a medical expert. That means all of your medical records. If you are bringing an action saying someone has injured you, there is a right to see your medical history to ensure there is no other cause. That is fair enough, and with the exception of problems of the highest sensitivity, your medical records have to be available to an expert, and to all parties to a case.

Experts can be asked questions. If there is more than one expert in a case, they will usually be ordered to undertake a discussion with other experts, the aim being to advise the Court where they are in agreement, and where they are not. The Court can then decide what evidence it needs to hear to decide the case. The process saves time and cost.

I want to change solicitor

September 28, 2009 in Explanation, Legal costs | No comments

Do you need to change your solicitor?

I do take over cases from other solicitors. This does not mean the current solicitor is poor, it usually means a client is not receiving the time and attention they deserve. Working with a solicitor is a personal experience, and it should be personal.

It is easier to change solicitor than you may think.

I rarely find location a problem. My office is in Exeter but I have clients in Leeds, Southampton and Hayle in deepest Cornwall. You will not need to see me every five minutes, so it is time to dedicate to you and your case which is most important. When we need to meet I will travel to you.

Many people do not choose their solicitor. You may have been referred to solicitors by your insurance company, your broker, or some other agency.

The most common problem we hear about is that clients are not happy with the way they are dealt with.

Solicitors are often set up to deal with high volumes of cases. They are heavily computerised, and sometimes give the impression of being a call centre, rather than your personal adviser. There are sound business reasons for handling cases in this way, but if your case needs a more personal approach, you are perfectly entitled to change solicitors.

You only have one chance to get things right, so best be sure the case is in safe hands.

As ever, please feel free to discuss a case with me without obligation.

You are liable to pay your own solicitors fees and disbursements, but almost all will wait until the case is completed. It is usually understood that costs and disbursements will be recovered from the other side at the end of the case, so there should not be a problem.

Your new solicitor will have to agree the basis of transfer, and the term “lien” will be used. The first solicitor owns its file until it is paid, so we can agree to preserve their “lien,” or ownership, of these papers.

Do not be concerned, as transferring papers between solicitors is not unusual. A solicitor might welcome the chance to transfer the file of a client falling outside their systematic approach, or will see transfer as preferable to handling a complaint.

Contact Mark Thompson now for help.

Recovering costs

August 10, 2009 in Explanation, Legal costs | No comments

Recovering costs from the other side.

It might surprise you to learn there is no automatic rule which says if you win your case your costs will be paid by the losing side. It happens in the vast majority of cases, but it is not an absolute rule. The practice comes from the affordability of the costs to the losing party, as that party is usually either insured or a trade union member. If there is such financial backing behind a losing party then it is very very likely a costs order will be made against them.

As has been explained elsewhere, not all of your costs may be payable by the other side. If they have agreed to pay costs, or are ordered to pay your costs, they are effectively covering your liability to pay your own solicitor.

Disbursements are subject to a test of reasonableness, and the hourly rate and the time spent are subject to a test of reasonable necessity.

So what if all time spent by your solicitor is not recovered from the other side? Do you have an agreement the solicitor will accept what can be recovered from the other side, or are you liable for the difference. That could be several thousand pounds in a long running case. Some solicitors do believe they are entitled to be paid for every minute they spend on a case, so the promise that you will get all of your compensation might be true, but your solicitor might want some of it back. Ask the question, and ask it this way – you are a professional and know what costs are recoverable, and which are not. As you are the professional will you please manage my case so that all costs and disbursements are recoverable from the other side. Having this conversation will avoid any nasty surprises at the end of the case.

One problem on recoverability of costs is the concept of proportionality. This is a very sensible concept in theory, but in practice a little naïve. The basic idea is that you should not be spending £5,000 in costs to recover £200. Fair enough you might say as what is the point in that. The trouble is that the legal costs actually reflect the time spent gathering and presenting the evidence in a case. Just because the case is not worth much does not mean this work on the evidence will be straightforward. The concept affects the amount of costs the other side will be ordered to pay, and the use of the concept to date has been inconsistent, so it is difficult to give you guidance. Again your solicitor is in a better position to judge proportionality than you, so have the discussion, and ask “what happens if not all of my costs are recoverable through an unfavourable imposition of the proportionality principle?”

You are asked to take much for granted when you are told, “of course we will recover our costs from the other side”, but there are problems which may have to be faced, and best the answer is known beforehand. Best to use an experienced solicitor you trust.

Conditional fee agreement

August 10, 2009 in Explanation, Legal costs | No comments

Conditional fee agreement

Conditional fee agreement is the proper name for “no win no fee.” It means your own solicitors fees are only payable by you in the event of success. Success is defined in the agreement, but in compensation cases it usually means recovering a compensation payment in your favour.

If we set up a conditional fee agreement you are liable to pay my hourly rate only in the event of success. If we do not succeed I am paid nothing. Regardless of success you are liable for the disbursements I incur, and the costs and disbursements of the other side if we lose. To cover that risk I will advise you to take out insurance, called after the event insurance.

After the event insurance covers your risk of paying your own solicitor’s disbursements, and the costs and disbursements of the other side in return for a premium. The insurer is banking on your own solicitor’s judgment. Surely they would not be running the case if it is not going to succeed? Well that is usually the outcome, but the odd one goes wrong, and you will be glad the insurance was taken out. The premium for this insurance can be recovered from the other side if the case succeeds, and as many after the event insurers will wait until the end of he case to be paid, there is no good reason not to take out this insurance. The only reason why this insurance is not complete is that the level of cover can be limited. An indemnity level will be set at the outcome, say £25,000, and that is the maximum the insurer will be liable to pay. This level can sometimes be increased, but there is no guarantee and an increase can be expensive, and not necessarily recoverable from the other side. Best you get the level of cover right in the first place. Once you have the policy the cover is reviewed. The insurer must always be satisfied the case has reasonable prospects of success, so if the balance tilts away from you, the insurer may pull out. Rather like insuring a car, but having to phone your insurer if the weather forecast is bad. On balance you ought to have this insurance, on the basis the why not argument is stronger.

The purpose of this arrangement is straightforward, but the agreement and the insurance make it feel rather complicated. It does require patience and experience to walk you through this arrangement, and it is not something to sign up to after only a quick chat on the telephone.

If you have legal expenses insurance that is a simpler alternative. If you are a trade union member then follow that route. The same protection can be put in place with a conditional fee agreement, but it does need proper explanation.

Success fee

A success fee can be sought by a solicitor acting under a conditional fee agreement. This is the incentive offered when legal aid was replaced. It allows a bonus fee in successful cases to make up for those which lose.

You will only be liable for the success fee in the event of success, and a reasonable success fee should be recoverable from the other side.

At the outset of the case you will be told about the risk assessment which sets the success fee at a maximum of 100 per cent. There are rules which dictate how much of this success fee can be recovered from the other side, so do make sure you understand what is going to happen with the difference.

Many solicitors will set up the arrangement to allow maximum recovery from the other side, with no intention that you will actually pay anything. However if they do not recover as much as they wanted they can turn to their client and ask that they pay the difference. A promise that you will receive 100 per cent of your compensation does not help you here, as you are receiving 100% of your compensation plus a bill.

We will explain how the costs of personal injury and accident cases are recovered from the other side, and that will help clear the picture.

Legal aid

August 10, 2009 in Explanation, Legal costs | No comments

Legal aid

It is a thing of the past in most personal injury cases. It was a system set up for the right reasons, to allow those who could not afford a solicitor, to use one. It became expensive so the Government changed the rules, made conditional fee arrangements possible, and gave  an incentive to solicitors to take on less than straightforward cases by allowing an enhanced fee in the event of success.

Legal expenses insurance

August 10, 2009 in Explanation, Legal costs | 2 comments

Legal expenses insurance

Lots of people have this insurance as part of policies on their car or house, or might buy it as a stand alone policy. The policy will allow you to pursue a compensation case, and cover your liability to pay your own solicitor’s costs and disbursements, and those of the other side if your case fails.

Your legal expenses insurer must be satisfied the case has reasonable prospects of success, and this is necessary all through the case. Just like the after the event insurance the insurer can pull out if those prospects are no longer reasonable.

The policy will have an indemnity level, which is the maximum the legal expenses insurer will pay. You cannot increase the amount of this indemnity, so if the risk in your case is greater than the amount of the policy indemnity you may be advised to use after the event insurance to cover the remaining risk.

Some legal expense insurers will insist you use solicitors they nominate. They may have a trusted panel of solicitors, or more likely they will receive payment from the solicitor to whom they refer the case, a referral fee. The insurer is not entitled to insist you use their panel case, particularly if your case is not run of the mill. Do ask your insurer about the financial arrangements they have with their panel solicitors. You should be sure the solicitors will be committed to your case, and not be too worried about presenting a bill to the legal expenses insurer.

No win no fee

August 10, 2009 in Explanation, Legal costs | No comments

No win no fee

No win no fee is not an accurate term, and it does not tell you the whole story. The whole story might be boring, but until you have heard it you will not understand. Your only question is “Will it cost me anything?” to which the answer will be “It depends.” So read the whole story and understand.

In our compensation the successful claimant usually receives compensation and has their legal costs paid by the other side. The other side is usually insured. Having your costs paid is not an automatic right. It is either build into any settlement you reach, or it is at the discretion of the trial Judge. There is no guarantee, but usually costs follow the event, which means the loser pays.

The amount of the costs you can recover depends on what is called the indemnity principle. The party paying costs will be reimbursing you for the amount you are contractually bound to pay to your solicitor. Your solicitor cannot just present a bill and expect a cheque. So you must be liable to pay your solicitor, as without that liability you cannot be indemnified by the other side. They cannot cover your bill if one does not exist.

So when you sign up to a “no win no fee” agreement you will be signing a document which says you will pay £X per hour plus VAT in the event that the case succeeds. You become liable to pay when your case succeeds, and the other side will effectively pick up your bill.

What about the possibility that your case fails. The “no fee” bit only covers your own solicitors hourly rate, and any success fee. What about your own disbursements, and the costs and disbursements of the other side. A very clever form of insurance was created to deal with this problem called after the event insurance. It insures this risk in return for a premium, and is banking on your own solicitor’s judgment. Surely they would not be running the case if it is not going to succeed? Well that is usually the outcome, but the odd one goes wrong, and you will be glad the insurance was taken out. The premium for this insurance can be recovered from the other side if the case succeeds, and as many insurers will wait until the end of he case to be paid, there is no good reason not to take out this insurance. The only reason why this insurance is not so grand is that the cover it provides can be limited. An indemnity level will be set at the outcome, say £25,000, and that is the maximum the insurer will be liable to pay. This level can sometimes be increased, but there is no guarantee and an increase can be expensive, and not necessarily recoverable from the other side. Best you get the level of cover right in the first place. Once you have the policy the cover is reviewed. The insurer must always be satisfied the case has reasonable prospects of success, so if the balance tilts away from you, the insurer may pull out. Rather like insuring a car, but having to phone your insurer if the weather forecast is bad. On balance you ought to have this insurance, on the basis the why not argument is stronger.

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