Tuesday, 5 March 2013

From DBAs to Turin

What do you think of DBAs?

If you're not a PI law practitioner, you might be forgiven for stumbling over the acronym. Is a DBA a new kind of Aston Martin, you might wonder, or perhaps the name of a new law firm?

It is neither. A DBA is a Damages-Based Agreement: a contract between the claimant and his or her solicitor, in which the solicitor agrees to be paid a percentage of the damages recovered in the case. DBAs are a constituent element of the welter of reform coming our way from 1 April this year, when the majority of Lord Justice Jackson's proposals become law.

No delay for DBAs

Some aspects of the Jackson reforms have been given a stay of execution. For example, last December the under Secretary of State for Justice, Mrs Helen Grant, issued a ministerial statement announcing that the provisions of the LASPO Act which would remove the recoverability of success fees and insurance premiums will not come into force for defamation and privacy claims until a "new regime of costs protection" has been introduced for these proceedings.

However, no such delay will apply to DBAs. The draft DBA Regulations have now been laid before both Houses of Parliament and their approval is a formality. It is important, therefore, that lawyers have a view on DBAs - not least so that they can explain them to clients.

DBAs are a variation of the 'no win, no fee' paradigm, in which lawyers have a financial stake in the outcome of claims and are therefore thought to be all the more motivated to secure the best result for the client. The key variation comes in the government's plan to introduce a 25% cap on the damages available for the lawyer (which, given the inclusion of VAT in the cap, amounts to a de facto cap of 20.8%). It is intended, too, that recovered costs will be included in the cap, meaning that in some cases the whole of the cap could be utilised for costs recovered from the other side. A number of other limitations apply to the cap. Counsel's fees, for example, are included, but the costs of experts' reports are not.

Problems with the cap

The purpose of the cap is to protect clients from overcharging and to provide sufficient flexibility for reasonable remuneration consistent with the commercial risk of conducting a claim. However, without going into the minutiae of DBAs and their expected operation, it is clear  they present a potential  problem. Their effect, in a great deal of litigation, will be to encourage solicitors to try to settle cases as early as possible, when to do so might not be in a client’s best interests. For example, a claim worth £10,000 will yield no more than £2,500 to a solicitor retained under a DBA; that which is worth £20,000 will net £5,000. This is one of the reasons perhaps why Lord Justice Jackson recommended that client's should be independently advised on whether to enter a DBA.

DBAs may need to be re-examined. The Civil Justice Council Working Party on DBAs, of which I was a member, were acutely aware of the limitation of the Ministry of Justice imposed timetable being too tight to allow us time to explore all issues in as much detail as we would have liked. I am therefore looking forward to attending a lunchtime seminar later today at Queen Mary University of London, in which DBAs will be debated. Professor Rachael Mulheron from Queen Mary’s kindly asked me to participate in the seminar, which is being hosted by the Practical Law Company.

To Turin for PEOPIL's RTA Conference

I will return to this topic in due course but meanwhile an overseas trip looms. Later this week I fly to Italy, where I will be speaking at the Pan-European Organisation of Personal Injury Lawyers (PEOPIL) RTA conference in Turin on 8 March. This takes place at the Golden Palace Hotel on the Via dell'Arcivescovado, in what I was interested to learn is Italy's fourth-largest city.

Although the main focus of the day is fatal accidents there will be time to deal with whiplash caused injury. As I have written on previous occasions, the backlash against whiplash in the UK is unjust and medically unsound. I have noted similar moves to curtail victims' rights to claim for whiplash in other jurisdictions. It will be fascinating to see how my European colleagues in PI law are dealing with what seems to be yet another attempt by at least some in the insurance industry to avoid  their obligation to pay all legitimate claims.