Measured success

Andrew Morgan on the rethinking of success fees. This article first appeared in the New Law Journal on 6 November 2009. In brief: the current costs regime provides no comfort for asbestos disease victims - The Jackson Review reminds us to focus on access to justice.

Lord Woolf, in Callery v Gray, called for an evidence-based assessment of conditional fee agreements (CFAs). The Civil Justice Council (CJC) commissioned research to calculate suitable success fees.

The rules committee set fixed success fees in different varieties of personal injury claims.

Fixed success fees were agreed by reference to evidence from a variety of sources but the claimants team was deeply concerned that, in relation to asbestos diseases alone, in the past insurers had enthusiastically run "generic" arguments going beyond the confines of individual cases. The insurers were continuing to run "generic" arguments regularly and as a matter of course the fundamental basis for launching any asbestos disease claim was therefore constantly under threat.

The claimant side was reassured by three things: the two sides reached agreement as to the "headline figures; a shared commitment to review the success fees periodically; and the quality and breadth of the underlying figures. But the claimant side saw a glaring flaw in looking at historic data to assess success fees for the future when asbestos cases were expected to face increasingly serious challenges from insurers. And what was predicted has come to pass.

The Fairchild principle was overturned by the House of Lords in Barker. Without statutory reversal asbestos claimants would now have intractable difficulties in securing full damages. In the trigger issue litigation insurers now challenge the claimants right to enforce a judgment against an insurer. Claimants will go uncompensated where the employer has ceased to trade and has no assets. Pending appeals, a vast swathe of mesothelioma claims is poisoned by an uncertainty that simply did not exist at the time of the "Success Fee" mediation.

The fixed success fee of 27.5% for asbestos disease claims arises from the high rate of recovering only some compensation in pleural plaques claims but in Rothwell the House of Lords ruled that such injuries are not compensatable at all.

Risk & hazard

The CJC research assumes that the past serves as a good guide to the future. In asbestos disease claims, uniquely, the insurance industry has rendered that assumption false. Expert practitioners assess the hazards in asbestos disease claims using years of experience. We often perceive considerable risk which may be reflected in a discount as to damages. This (subjective) risk is the measure used by counsel when advising clients and funding insurers, but it is not the basis upon which the "fixed success fees" were arrived at.

The dissonance between the fixed success fees and practitioners expert assessments of the overall risks is a running sore that urgently needs lancing. The underlying principle is that, on average, claimant lawyers will be paid the full rate for all their work. The function of the success fee is to ensure that claimant lawyers are paid for the work they do in unsuccessful cases, which are subsidised by the successful cases.

A consequence of this basic principle is that claimant lawyers must be paid for the work done in the pleural plaques cases, win or lose. Only an increased success fee in the same basket of cases asbestos disease claimscan achieve this end. The underlying figures must be revisited if pleural plaques claims are excluded in the future, but also there must be an additional substantial enhancement to reflect the work done in the past in thousands of pleural plaques claims adjudged uncompensatable by their lordships.

The issue of unpredictability

The fundamental principle underpinning CFAs is that, on average, the success fees in successful claims covers the fees lost in unsuccessful claims. Fixed success fees in asbestos disease claims do not work: the Barker attack, the trigger issue litigation and the pleural plaques issue all show that for asbestos claims there is no objective evidence-based process that can measure future risks, not while insurers have a free hand to redraw the landscape of litigation. Lord Woolf's mechanism does not work when the assumptions of predictability on the large scale and uniformity over time are invalid.

Uniquely in asbestos disease claims those assumptions are demonstrably false. As a result we should revert to the common law position, where success fees can be judicially assessed at Detailed Assessment.

Fixed success fees have been shown not to work. They should be removed from the CPR without delay to protect access to justice for asbestos claimants. Such access now hangs by a thread, simultaneously precarious and precious.

Andrew Morgan is a partner in our asbestos claims department. For more information or if you believe you may have an asbestos related claim please contact Andrew on 020 7861 4036 or email andrew.morgan@ffw.com