How to increase profit costs by 12.5%

In an article in the Association of Law Costs Draftsman’s Journal for December, Andrew Hogan considered the decision in Kilby v Gawith of his Honour Judge Stewart QC in the Liverpool County Court on 14 August 2007. A single judge of the Court of Appeal has expressed the view that the decision involved a point of considerable importance and has granted permission to appeal. It was a low value motor accident claim in respect of which the claimant had legal expenses insurance, but nevertheless entered into a conditional fee agreement with his solicitors. The defendants contended that although they were precluded from making a challenge under the indemnity principle by the decision in Butt v Nizami [2006] EWHC 159 (QB), this did not preclude a challenge on the grounds of simple reasonableness and the Court had the power to disallow the success fee on this ground. The judge held there was no discretion in CPR rule 45.11(1) to disallow a success fee once the claimant has entered into a CFA of the types specified in rule 43.2(k)(i). There was a clear policy underlying sII of part 45 to provide an agreed scheme of recovery, which was certain and easily calculated, which provided fixed levels of remuneration, which might over-reward in some cases and under-reward in others, but which were regarded as fair when taken as a whole. Mr Hogan said that if the construction given to the rule by the judge was correct, the overall costs of motor claims litigation could easily rise by 12.5%. Even though the uplift in individual cases would be relatively small, the total costs of the insurance industry would be enormous.