Advising on success fees

Advising clients on the level of success fee that might be allowed in any given case is an inherently difficult task given the unpredictability of the courts. Another reason why it is difficult to advise is due to the method by which success fee are normally calculated. The courts generally accept, as a starting point, the "Ready Reckoner" (see for example paragraph 4 of Atack v Lee [2004] EWCA Civ 1712). This allows for a calculation that, based on the prospects of success fee in any given case, produces the correct level of success fee to reflect that risk. The difficulty with the figures produced by this method is that a tiny change in the prospects of success can produce a radically different success fee. For example, a case with a 50% chance of success produces a 100% success fee. A case with a 60% chance of success produces only a 67% success fee. Therefore even a very small difference in a judge's assessment of the prospects of success can radically alter the amount that can be allowed on a bill. How can one accurately advise a client as to what a judge is likely to allow?

Gibbs Wyatt Stone were instructed in relation to a case concerning a claimant who had tripped over a defective paving stone. This type of claim is generally recognised as not being straightforward due to the availability of a s58 statutory defence. However, the typical difficulty still arose as to what figure to recommend in relation to the level of success fee. In the event, GWS advised that the Defendant's offer of £14,500, made prior to a formal Bill being served, provided reasonable protection. A formal Bill was served and the matter proceeded to detailed assessment in the Supreme Court Costs Office. The matter was heard by Principal Costs Officer Lambert. He assessed the prospects of success at 65% and, using the "Ready Reckoner", allowed a success fee of 55%. Taken together with the other reductions made, the Bill of Costs was reduced from £35,150.50 to £13,991.83. The Defendant therefore succeeded on its offer and was awarded the costs of the detailed assessment proceedings.

The Claimant was unhappy with the success fee allowed and appealed to a Costs Judge. An odd aspect of appeals from a Costs Officer to a Costs Judge, in addition to there being an automatic right of appeal, is that such an appeal is by way of a complete rehearing rather than a straight appeal. This means that the Costs Judge will consider the matter afresh rather than simply decide whether to uphold or overturn the Costs Officer's decision.

The "appeal" was heard by Master O'Hare who decided not only that the Costs Officer's assessment of the prospects of success had not been unduly low but had actually been too high. He assessed the prospects of success at 67% and, based on the "Ready Reckoner", this reduced the success fee to 50%, which was what he allowed. The Claimant's appeal therefore not only failed but resulted in a further reduction to the amount which had originally been awarded. The Defendant was awarded the costs of the appeal.

Until fixed success fees are introduced for this type of case, costs draftsmen and other costs professionals will continue to struggle to advise their clients in these claims.