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Continuing with our occasional series of responses to the Jackson Costs Review from the “great and the good” in the legal and costs world is Philip Hesketh. Philip is a Professional Mediator and former solicitor.
Like most commercial mediators I was eagerly anticipating Sir Rupert Jackson’s final report on his review of civil costs. Not because I thought it would be a cracking read (it wasn’t) but because I hoped finally our jurisdiction would receive the catalyst needed for mediation to move from esoteric mysticism into – to borrow Lord Clarke’s phrase – an integral part of the litigation toolkit. I wasn’t hoping for, or expecting, compulsory mediation but certainly strong encouragement that would lead to a significant increase in its use. I was to be largely disappointed. However there was one proposal which I felt was significant and that had the long term potential to do what I had hoped for – the proposal to allow contingency fees.
In paragraph 5 on page 133 Sir Rupert recommends :
“Both solicitors and counsel should be permitted to enter into contingency fee agreements with their clients. However, costs should be recoverable against opposing parties on the conventional basis and not by reference to the contingency fee.”
Contingency fees are only paid if the claim is successful. They are based on a percentage of the damages recovered. He suggests adopting the Ontario model (see paragraphs 61.2.5, 61.2.6, 61.4.3 and 61.4.4 of his preliminary report). The amount by which the contingency fee exceeds what would be chargeable under the ‘conventional basis’ would be borne by the successful litigant. The evidence from Canadian personal injury cases were that typical agreements allowed for costs to be charged at 20% of the damages. Costs awards against the paying party often amounted to around 15% of damages so the claimant would be losing about 5% of the damages. He says “This does not appear to be a source of general concern or complaint.”
The amount the solicitor receives would not be directly related to the amount of work done, although that would be relevant to the amount of costs recoverable from the paying party – the difference being made up by the client. It follows that an efficient solicitor will recover a better hourly rate. That rate will be not be fixed but calculated by the costs chargeable (lets say 20% of the damages) divided by the number of hours spent. The fewer hours it takes, the better the rate and profitability of the fee earner.
Why might this result in more work for mediators and coincidentally costs lawyers? One of the benefits of mediation for litigants is the way in which it can significantly shorten the time taken to resolve a legal dispute. I am often asked when is the right time to mediate and my answer is three questions. Do you want to settle? Are you ready to negotiate? Have other attempts to resolve the dispute failed? Answer all three in the affirmative and it’s time to try mediation. In other words if there are no more offers coming forward from either side the only conventional response is head down and prepare for trial and potentially a long wait for resolution. Mediating is a viable and often successful alternative. The client is happy because of the early settlement (not to mention the relief at not having to go court) and the solicitor’s hourly rate is not watered down by the extra hours that would have been spent in trial preparation. The old “Alarming Drop in Revenue” idea is reversed. Early settlement under a contingency fee agreement will increase profitability.
Of course this means claimants will be contributing to their lawyer’s fees so they will have an interest in costs recovered from their opponent. It is bound to lead to disputes on a solicitor and own client basis …