Success fee deductions from damages
In this matter the conducting solicitor found themselves on the naughty list.
Following the changes introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2013 Solicitors acting under a Conditional Fee Agreement were unable to recover the success fee from their opponent, but instead would be able to deduct up to 25% of the damages recovered (excluding costs relating to future care/treatment and other expenses).
There is a common misconception that the success fee level in post-LASPO CFAs is 25%. This is not the case, the success fee is still set at the relevant level up to a maximum of 100% of the profit costs. This is then capped to 25% of the damages recovered.
This case considered the level that the success fee had been set in the CFA. HH Law had set the level at 100%. At the appeal they argued that the level was set as part of their business model to combat the challenging market that LASPO had created.
Upon considering the solicitor/client assessment the Court found that the setting of success fee was unusual in both nature and amount. The Court of Appeal set out that the basis for setting a success fee is based on the risks of success taken by the solicitor when entering into the CFA. The argument regarding the automatic setting of the success fee of 100% was dismissed.
It is therefore essential to always consider and prepare a reasonable risk assessment when entering into a CFA.
The full judgment can be read here.