As reported in a recent edition of the Law Society Gazette, “professional negligence claims against solicitors are soaring with one firm reporting a 158% surge in cases over the past 12 months. Experts are warning that worse may be to come in the downturn as solicitors are moved to areas with which they are unfamiliar”.
Healys (Robert Johnson and Carolyn Wilson) specialise in acting for claimants in professional negligence claims against solicitors and other professionals including accountants, valuers, surveyors, barristers, architects and financial advisors.
Our experience is similar to that reported in the Law Society Gazette. We have seen a marked increase (although not quite as high as 158%) in the number of clients seeking to pursue claims to recover losses from their previous solicitors. We have also seen similar increases in claims against other professions.
As is to be expected, we receive far more enquiries about potential professional negligence claims than those on which we agree to act. This is because not all potential professional negligence claims have merit, or at least sufficient merit to enable this firm to act on a “no win no fee” basis or on a number of other funding options available as an alternative to the traditional privately funded basis which is calculated by reference to hourly rates. Indeed, at the outset of an instruction we carry out a thorough assessment of the merit of any professional negligence claim in order to enable us to advise properly and act appropriately. It is not in our, or our clients’, interests to pursue a claim that is not likely to be successful and, in our experience, a thorough assessment helps to minimise that possibility.
While this firm (along with a number of other firms) acts (in appropriate cases) on a “no win no fee” basis, otherwise known as Conditional Fee Agreements, we also act (in appropriate cases) on what is known as a hybrid Conditional Fee Agreement. In this type of arrangement, a proportion of the work carried out (e.g. 50%) will be charged in accordance with our usual retainer terms (i.e. paid on an hourly basis and at the end of each month) and the balance will be subject to a conditional fee (i.e. only charged if we win). By way of example, on the basis that we carry out work at a discount of 50% of our standard charge out rate of £200 per hour (i.e. £100 per hour):
(a) At the end of each month, the client will receive a fee note for the work carried out in that month of (say) £1,000 (i.e. 10 hours at £100 per hour) for 12 months (i.e. £10,000 in total).
(b) If the claim lasts for 12 months, and the same amount is billed each month, total billed would be £12,000 (i.e. 1,200 hours @ £100 per hour).
(c) After 12 months, the claim is successfully and finally determined and an adverse costs order awarded against the Defendant. We would then seek to recover from the Defendant:
(i) £24,000 representing the time incurred in the 12-month period (i.e. £120 hours) at our standard hourly rate (£200).
(ii) £12,000 representing our uplift of 50% and which is reflective of the discount applied to our standard hourly rate.
In our experience, the hybrid CFA is becoming increasingly popular amongst our clients. It certainly has a number of attractive features to include:
(a) The sharing of risk between the client and legal advisors. In a privately funded case, the risk of litigation falls totally upon the client. In a full CFA, the risk in litigation falls to a very large extent upon the legal advisor. The hybrid CFA strikes a good balance on risk and that leads to a good and constructive relationship between client and legal advisor.
(b) It can put pressure on the other party because (i) it will make them think that there is merit in the case because the legal advisor will not act on a hybrid CFA unless there is merit and (ii) it will increase their risk on costs because if they are not successful they will have to pay the success fee. In some circumstances this can double the cost that they will have to pay.
(c) It tends to inspire confidence in the legal advisor by the client because, to use the vernacular, we are putting our money where our mouth is.
