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I am grateful to Kerry Underwood for highlighting one unresolved aspect of Jackson implementation.
Lord Justice Jackson recommended that, with an end to recoverability of success fees from paying parties, in personal injury cases there should a cap on the amount of damages that may be taken as a success fee from the client. He recommended a cap set at 25% of the damages other than those for future care and loss. The government has accepted that recommendation.
However, does the 25% figure include or exclude VAT? This does not appear to have been clarified.
As Kerry explains, if VAT is on top then the true rate as far as the client is concerned is 30% (25% plus a further 20% VAT).
On the other hand, if the 25% includes VAT then to the solicitor the actual maximum percentage “take” is 20.83% (25% less 20% VAT).
Either clients or solicitors are going to be more out of pocket than the headline figures suggest.
Kerry also points out that it is crucial to remember that the 25% cap is only on the success fee and thus the claimant’s solicitor is still entitled to charge solicitor and own client costs on top, thus potentially taking far more than 25% of the damages. Whether the claimant personal injury market will bear this remains to be seen.
Kerry’s further thoughts on Jackson implementation can be read here.
I’ll look at the issue of how the cap will apply to success fees on counsels’ fees on another day.