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Costs at disposal – how to avoid the success fee trap

It has come to our attention that some claimant solicitors are refusing to negotiate with insurers prior to disposal hearings.

It has come to our attention that some claimant solicitors are refusing to negotiate with insurers prior to disposal hearings. As you will know, some claims are listed for disposal, typically in Liverpool and Birkenhead, with a time estimate of 10 minutes.

Previously, it was usually possible to negotiate settlement at the door of court, thereby reducing the success fee from 100% to 12.5%. However, we have seen an increasing number of cases where an insurer has made a Part 36 offer, we have been instructed just prior to the disposal and it is clear that the Part 36 is not sufficient to give protection for costs. We are unable to make a further valid Part 36 due to time constraints and are therefore without costs protection.

Although some claimant solicitors are still willing to negotiate, we have recently found that some indicate that they will not settle the claim unless the defendant agrees to pay a 50% success fee, despite the fact they are not technically entitled to the same.

The alternative to accepting such a settlement is to attend the disposal with no protection on costs, have the court make an award and then the claimant solicitors will be awarded a 100% uplift on their profit costs and counsel’s fees.

Although a defendant can then try to argue that the claimant has failed to negotiate and should not therefore receive full costs, the court is likely to say that the defendant should have made their best offer and that, if they were willing to settle at a higher sum, then that offer should have been made as soon as possible. The court may express displeasure at the claimant’s failure to negotiate and reduce their costs to show this, such a reduction is only likely to be in the region of 10% and is going to be more than wiped out by the success fee.

Obviously we cannot force the claimant solicitors to negotiate with us and it can be financially advantageous for them if there is an insufficient Part 36 on the table. Therefore the only real way to gain protection for both the defendant’s costs and against tactics such as these is to ensure that a robust Part 36 is made at an early stage in the proceedings. Failure to do so could have significant financial consequences as, in such cases, the costs end up being more than the claim itself.