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Lord Justice Jackson blames Stewarts Law for 'grotesque' success fee

20 December 2010

Lord Justice Jackson has accused litigation specialists Stewarts Law of claiming a “grotesque” success fee of £100,000 from the damages of an accident victim for a risk “which simply did not exist”.

The government is currently consulting on Jackson LJ’s report on civil costs, which would end the recoverability of success fees and ATE insurance premiums.

Delivering the leading judgment in Pankhurst v White and MIB [2010] EWCA Civ 1445, Jackson LJ said the CFA signed by James Pankhurst entitled the firm to a 22.5 per cent success fee if the case settled before trial or 100 per cent if it went to trial.

“In the circumstances of this case there was no risk whatsoever that the claimant’s solicitors would not be paid their base costs in full,” Jackson LJ said.

“Yet the solicitors were charging a ‘success fee’ on top of their base costs for running a non-existent risk. This makes a mockery of what is said to be the justification for the present conditional fee agreement regime.”

The court heard that Pankhurst was cycling along a country lane in Devon when he was hit by a vehicle driven by Lee White, an uninsured driver.

Pankhurst made a part 36 offer to accept £3.4m from the MIB in 2006, but his offer was rejected. Two years later, the High Court rejected the MIB’s arguments of contributory negligence. The MIB later offered Pankhurst, again under part 36, an award of £3m plus periodical payments of £260,000 a year.

Mr Justice MacDuff later awarded him £2.3m plus periodical payments of £260,000. Both parties could argue that they had beaten the other’s part 36 offer.

MacDuff J granted the claimants’ costs on the standard basis up to 2006, and on an indemnity basis between 2006 and 2008. The claimant appealed against his decision not to award interest.

“I regret to say that I regard the arrangements made by the claimant’s solicitors in this case as grotesque,” Jackson LJ said.

“In addition to their base costs (i.e. their proper costs for conducting the litigation) they are extracting from MIB a ‘success fee’ of some £100,000 for running a risk which simply did not exist.”

Jackson LJ said that even though the quantum trial was “in any real sense a failure”, the solicitors required a further £100,000 from the claimant’s damages.

However, he admitted that following circulation of the current judgment in draft, the MIB had agreed to pay the success fee.

Lord Justice Jackson said the claimant’s “grotesque” CFA arrangements were “highly relevant” to MacDuff J’s decision to reject the claim for interest. He dismissed the appeal.

Sir Andrew Morritt, chancellor of the High Court, agreed with Jackson LJ’s decision and comments on conditional fees.

“The facts of this case appear to show that access to justice for one party may well lead to a substantial denial of justice to the other,” Sir Andrew said.

Lord Justice Leveson agreed that the appeal should be dismissed.

Stuart Dench, partner at Stewarts Law, said the CFA criticised by Lord Justice Jackson was identical to the standard form agreement developed by claimant and defendant bodies at events organised by the Civil Justice Council.

“Underpinning these standard agreements in road accident cases is the understanding that ‘the winners must pay for the losers’,” Dench said.

“The model has been used in countless claims and it is widely accepted that it has had a significant moderating effect on success fees and in more general terms has enabled claimants to bring cases from a position of equality against defendants with often far greater resources.”

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Costs Conveyancing