CJC backs 25 per cent cap for contingency fees in personal injury cases

Personal injury lawyers should not be able to charge contingency fees of more than 25 per cent, the Civil Justice Council has recommended. This follows Lord Justice Jackson’s recommendation in his final report, which has been backed by he MoJ.

A CLC working party, chaired by former Law Society president Mike Napier, advised that the existing cap of 35 per cent on contingency fees in employment cases should remain, along with freedom to negotiate any cap in commercial matters.

The working party agreed with Lord Justice Jackson that the kind of contingency fees introduced in April 2013, along with the rest of his reforms, should be the ‘Ontario model’.

This requires costs shifting to apply, which it will do when QOCS is introduced in April. The successful client recovers base costs from the other side, which are deducted from the damages along with enough money to make up the contingency fee.

The working party said that, under Section 5 of the Damages Based Agreements Regulations 2012, the cap on employment cases was already limited to 35 per cent.

The working party said it could see “no reason to interfere” with the existing statutory control on contingency fees in that area.

Nor did it seek to change the absence of a cap on contingency fees in commercial cases, though it did suggest a possible 50 per cent cap in cases involving ‘micro-businesses’ (less than ten workers and a turnover of less than two million euros).

However, some members were “cautious” about limiting the cap to 25 per cent in personal injury cases without certainty about what would be included.

After “very careful consideration” the working party recommended that the contingency fee, excluding disbursements and any ATE premium, should be capped at 25 per cent.

It also said that the damages from which the contingency fee is taken should not be limited in any way.

The working party called for consistency in approach in the regulation of contingency and conditional fees allowing for the “basic differences” in the systems.

Its proposals sought to “studiously avoid the risk of repeating the so-called costs wars” which followed the arrival of the regulatory regime for conditional fees in 2000.

The working party added some “cautionary words” about the cap, warning that in order to implement the Ontario model, the personal injury cap would have to be defined in more detail than for employment matters.

Napier said the introduction of contingency fees would be “an important addition to the menu of options for funding civil cases” when the new costs regime was introduced in April 2013.

“But it is not an easy subject and this was a tough piece of work for the working party which had little time to cover much complex, and at times contentious, ground.

“We considered a wide range of material – including the experience of damages-based agreements in Ontario and the employment tribunals here.

“Above all we drew on the expertise of our members, who represent a cross-section of sometimes competing interests.”