What makes a reasonable succes fee?

Success fees in road traffic accidents, accidents at work and industrial disease claims are now fixed by virtue of CPR Part 45. However, the fixed success fees to not apply retrospectively and success fees in public liability claims and medical negligence claims are judged only on the basis of what is reasonable. In these circumstances, it is notoriously difficult to predict what success fee a court will allow and there has been relatively little reported case law on the issue, particularly when one considers that it is such a common dispute between parties.

The starting point when assessing the reasonableness of a success fee is Costs Practice Direction s11.8(1):

The first of these elements is commonly referred to as the risk element. It reflects the risk that the solicitor will not receive their fees in the event of a loss. The higher the risk of losing the case, and therefore receiving no fees, the higher the success fee. In calculating the risk element, one common methodology is to use the ‘ready reckoner’. This method was explained in the Law Society published Conditional Fees – A survival guide (2nd edition 2001) by Michale Napier, Fiona Bawdon and Gordon Wignall. Simply put, one considers the prospects of succeeding on the claim and this equates to a success fee based on this risk. This produces the following figures:

Prospects of Success %	Success Fee %
100	0
90	11
80	25
75	33.3
70	43
65	54
60	67
50	100

It was this methodology that was utilised in the recent case of Holliday v E C Realisations Ltd. (2008). The Claimant was a joiner employed by the Defendant from 1963 to 1982. During that time, he was exposed to asbestos and subsequently developed malignant mesothelioma. In June 2001, he instructed Irwin Mitchell Solicitors to bring a claim on his behalf, following a referral from a Macmillan nurse, and they agreed to act for him under a Conditional Fee Agreement (CFA). The CFA was entered into in June 2002 and a risk assessment was undertaken. The prospects of success were assessed at 60% and, following the ready reckoner, this equated to a 67% success fee. However, the CFA also stipulated that if the matter proceeded towards a trial, a 100% success fee would be payable if the matter settled up to 28 days before the trial date or actually proceeded to trial.

The claim commenced and tragically the Claimant died in July 2002. His widow continued the claim on behalf of the estate and as a dependent and entered into a fresh CFA with Irwin Mitchell in November 2002. Again, the success fee was set at 67% or 100% if the matter did not settle at least 28 days before trial.

Proceedings were issued in April 2005 and a Defence was filed in June 2005 denying liability and putting the Claimant to strict proof of the nature of the Claimant’s work and locations where he worked. It was denied that he had been exposed to asbestos in sufficient quantities to constitute an actionable case and it was further denied that the Defendant had been negligent or in breach of statutory duty.

The matter was allocated to the mesothelioma fast track and, in November 2005, judgement was entered for the Claimant with damages to be assessed. The matter was listed for an assessment of damages in December 2005 but the matter settled for £250,000 together with reasonable costs on the standard basis. A consent order in these terms was filed on the 15th December 2005.

The Claimant presented their costs for agreement in the sum of £58,946.95 and the matter came for assessment before Costs Officer Lambert who assessed the costs in the sum of £43,905.81 together with costs of assessment of £6,743.80. As part of the assessment, the Claimant’s success fee was allowed at the 67% claimed in the CFA. The Defendant appealed and the matter came before Master Gordon-Saker.

It was the Defendant’s case that this was a case with a high prospect of success, put at between 75% and 80%, and therefore the success fee should be no more than 27.5%. Of particular relevance was the issue of the potential difficulty of proving a claim against a particular Defendant where the Claimant had potentially been exposed to asbestos from a number of different sources. It was this issue that was considered by the House of Lords in the case of Fairchild v Glenhaven Funeral Services Ltd. (2003) wherein it was held that it was only necessary for a Claimant to establish that the exposure caused by the particular Defendant had materially contributed to causing mesothelioma in the Claimant and it was not necessary to prove that the Claimant would not have developed mesothelioma but for the Defendant’s breach of duty. Therefore, it was argued, that since judgement in this case was handed down on 20th June 2002, the potential difficulties of having to prove that the Defendant’s negligence had been the sole cause of the Claimant’s disease were no longer relevant at the time the risk assessment in this case was carried out and this should be reflected in the prospects of success and therefore the success fee.

The Claimant argued that, notwithstanding the Fairchild judgement, there were still significant risks in this case. Firstly, there was the issue of whether the claim would be met by the Defendant’s insurers. Reference was made to the initial response to the claim by AXA insurance who indicated that the co-ordinating insurer would be Norwich Union. However, it was not until August 2003 when Norwich Union confirmed that they would be acting as co-ordinating insurer in the matter and, by this time, the success fee was already set and therefore had to reflect the risk at the time is was assessed.

Furthermore, the Claimant referred to the risk of failing to beat a Part 36 offer. The CFA stated that the solicitor would not recover their basic charges or a success fee if the Claimant rejected a Part 36 offer on their advice and then subsequently failed to beat the offer at trial. This, it was argued, was a significant risk to the Claimant Solicitors and should be reflected in the level of the success fee. Reference was made to the cases of Smith Dock Limited v Edwards (2004) and Rugg v Harland & Wolff PLC (2005) in which success fees of 87% and 80% respectively were allowed for mesothelioma cases, primarily on the basis of the risks in relation to quantum.

The Master, in his judgement, referred to the judgement in another mesothelioma case, that of Edwards v Rolls Royce PLC (2006). In that case, Master Whitaker, who was in charge of the mesothelioma fast track list in the Queens Bench Division, commented that:

He therefore concluded that the Claimant Solicitor’s assessment of the prospects of success at 60% was too low. This was a case where the Claimant’s employment history was straightforward, the supporting medical evidence was strong and the overall prospects of success were good. In all of the circumstances, the prospects of success were more like 75% and, therefore, a reasonable success fee would be 33.3% (again by reference to the ready reckoner).

Whilst the judgement in this case is based on the individual facts of this case, it does give some good guidance in relation to mesothelioma cases in general. It also provides a helpful example of the methodology of assessing the risk of a claim and the associated success fee to be applied in cases generally. The risks of a case are partly based on a general assessment of risk based on the type of case generally and, furthermore, a consideration of the particular facts of that case. By looking at both of these elements, it should be possible to reach a good assessment of a reasonable success fee for any given case.

Cases Cited:

Holliday v E C Realisations Ltd. [2008] EWHC 90103 (Costs)
Fairchild v Glenhaven Funeral Services Ltd. [2003] 1 AC 32
Smith Dock Limited v Edwards [2004] EWHC 1116 (QB)
Rugg v Harland & Wolff PLC (2005) Unreported 12.9.05
Edwards v Rolls Royce PLC (2006) Unreported 9.3.06

Paul Jones
Technical Director
LCN