Another point recently made is that the indemnity principle will apply to DBAs and the Ministry of Justice has stated that this means that if portal fees or FRC costs (as the case maybe) exceed those that would have been recoverable under the DBA (thinking of the amount under the DBA as pure base costs) then costs are limited to the DBA fee. I have assumed this means base costs recoverable from the Defendant are limited to the DBA amount with VAT and disbursements on top. So if you've entered into a DBA it could bite back later.
Also, in a further dilution of the importance of DBAs for personal injury work, it has to be remembered that according to the Ministry of Justice, future losses such as future loss of earnings and future care are excluded from the calculation for the fees payable under a DBA. The point here is that the recoverable rate of 25% against damages is, if we assume VAT of 20%, in reality 20.8% recovery for profit costs and so it only equates to anything like standard basis costs if the claim is of a substantial size. Claims of a substantial size, including even the bigger fast track cases where DBAs might otherwise be of assistance to the claimant personal injury lawyer, often include a claim for future losses of this sort. As a result, in precisely the sorts of cases where DBAs might help, this exclusion will reduce the number of claims where they will. I have assumed for the purposes of this article for simplicity that the figures below do not include claims for future losses, although in reality they might do.
RTA claim settled for £3,000 whilst inside the portal at stage 2
Remember though that if part of the claim of £20,000 is for future losses this has to be deducted from the damages figure for the purposes of calculating the fees under the DBA.
RTA claim settled for £3,000 after issuing but before allocation
The indemnity principle means that costs have to be limited to the DBA amount, meaning that whilst the lawyer would have recovered £1,760 in base costs under the FRC as they entered into a DBA they are limited to that amount of £750 instead.
Remember though that if part of the claim of £24,000 is for future losses this has to be deducted from the damages figure for the purposes of calculating the fees under the DBA.
The operation of the indemnity principle also means that some of the time having a DBA could actually be detrimental as your recoverable costs will be limited by the amount payable by the DBA. As a result if you are confident that the case will settle early and expected quantum is a high fast track claim it might be a good idea to have a DBA. For example, a high fast track RTA that stays in the portal might be a good bet for a DBA. Otherwise, I think personal injury practitioners dealing with fast track or portal RTA, EL or PL cases can just forget about DBAs.