On red alert

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Claims of overcharging are an increasing risk for claimant firms, says Mickaela Fox

Since the 2013 Jackson reforms introduced new rules for how litigation is funded, claimant firms have looked to their clients to meet the shortfall between the cost of pursuing a claim and what can be recouped from the opposing party. As a consequence, the claimant has become a real stakeholder in terms of their own solicitor’s costs.

As with any big shift in the status quo, some firms have been slow to recognise the risks associated with these changes. As a result, they are vulnerable to legal action from clients who claim they have been overcharged.

This risk is exacerbated by the fact that claims management companies have been quick to identify claimant law firms as a lucrative source of new business. Websites such as checkmylegalfees.com offer advice on how to challenge overcharging, inviting users to click on a link if they have had legal fees deducted from any damages they have been awarded through a successful personal injury claim.

Firms who make a reasonable charge for the work they carry out and ensure clients are provided with adequate information about their charges have little to fear. Yet, as the post-2013 costs regime is increasingly tested, how many firms are truly sitting comfortably?

Conditional Fee Agreements Order 2013

The Conditional Fee Agreements (CFA) order 2013 introduced changes to the recoverability of success fees under CFAs and ATE Premiums from 1 April 2013.

Prior to this, success fees under CFAs and ATE premiums were recoverable from an opponent if the case was successful. By and large this meant that if the claim succeeded, claimants in personal injury cases would receive 100% of their damages and give little thought to what sums were being expended by their solicitor in pursuit of victory.

Now, in the post-Jackson world, we have a regime of fixed recoverable costs for personal injury claims valued at up to £25,000. Claimant firms say that for this work to remain economically viable they need to look to their client to meet the shortfall between the cost expended on pursuing the claim and the amount recovered from the opposing party. In addition, save for a few exceptions, success fee and ATE premiums are no longer recoverable from the opposing party. Therefore, if a claim is funded by a CFA with a success fee and/or if ATE insurance was taken out, those additional liabilities fall to be paid by the claimant at the conclusion of the case.

Claimant clients now have much more skin in the game in terms of the legal costs associated with pursuing a claim and being encouraged to challenge these fees by claiming against their solicitors.

Getting it right

By changing the approach they take to client care and billing, law firms can considerably reduce the likelihood that their costs will be challenged or that a challenge will be upheld on assessment.

Making sure that the right information is provided to the client at the right time, so that they can fully understand what they will pay at the outset of their instruction, and throughout their retainer, is a simple step to take. This will involve reviewing client care letters, CFAs and other documents explaining how costs are calculated to ensure that they are transparent and are easy for a lay person to understand.

Similarly, firms must ensure that bills containing the appropriate information are delivered to the client.

It is a breach of the Solicitors’ Account Rules 2011 to take payment of fees from money held for a client without first sending a bill or written notification of costs. Furthermore, the delivery of the bill marks the start of a limited amount of time in which the client can raise a challenge or, apart from in exceptional circumstances, request an assessment.

If an application for assessment is made within one month of the delivery of the bill, the client is entitled to an automatic right of detailed assessment by the court. If that application is not made within the first month but within the first 12 months of delivery of the bill the court is still able to order a detailed assessment but may require certain conditions to be met, for example, a payment into court by the client.

In circumstances where either the bill has already been paid, or more than 12 months has passed since delivery, a court will only order assessment in special circumstances.

 

overcharging

Mickaela Fox is a partner and compliance specialist at Weightmans

 

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