The decision in Belsner v Cam Legal Services Ltd  EWHC 2755 (QB) will have sent a shiver down the spine of many claimant solicitors in the personal injury field, although the decision may well have wider implications.
The case concerned a solicitor/own client assessment.
The underlying matter concerned a low value RTA being pursued in the RTA portal. The costs recoverable from the opponent to the RTA claim were limited to fixed costs plus disbursements.
The client’s solicitors sought to charge their client the costs recovered from the opponent plus 25% of the damages recovered.
Section 74(3) of the Solicitors Act 1974 provides:
“The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in the county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.”
Although the claim itself settled prior to proceedings being issued, it was not disputed that this section applied to the case.
CPR 46.9(2) provides, in relation to the detailed assessment of solicitor and client costs:
“Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.”
The issue for the court was whether a solicitor seeking to rely on CPR 46.9(2) has to show that the client gave informed consent to the payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.
The terms of the CFA, which governed the costs payable between the solicitors and the client, contained standard Law Society wording:
“Normally, you can claim part or all of our basic charges and our expenses and disbursements from your opponent. You provide us with your irrevocable agreement to pursue such a claim on your behalf. However, you cannot claim from your opponent the success fees or the premium of any insurance policy you take out.
If we and your opponent cannot agree the amount, the court will decide how much you can recover. If the amount agreed or allowed by the court does not cover all our basic charges and our expenses and disbursements, then you pay the difference.”
Elsewhere, the Client Care Letter advised the client she would be able to recover “some” of her costs from the opponent and she would have to bear “a proportion” of her costs herself.
It was clear that the solicitors disclosed to the client that the agreement between them permitted payment to the solicitors of an amount of costs greater than that which the client could have recovered from another party to the proceedings. In particular, the solicitors disclosed that:
(1) if she won her claim, the client would pay the success fee and could not recover it from her opponent; and
(2) the client would pay the difference between the solicitors’ basic charges, expenses and disbursements and the amount agreed or allowed by the Court in respect thereof.
The client had also been given an estimate of costs of £2,500 plus VAT and disbursements.
Crucially, the client was not informed that, based on the likely value of the claim and the point the matter would probably settle, the recoverable fixed costs from the other side would be limited to £500-£550 plus VAT plus disbursements.
The solicitors argued that the information provides to the client was sufficient to displace the requirement under CPR 46.9(2) because it “expressly permitted” them to charge more than could be recovered from the opponent.
The Court rejected this argument.
The Court concluded:
“A solicitor who wishes to rely on CPR 46.9(2) must not only point to a written agreement which meets the requirements of the rule, as the Defendant did, but must also show that his client gave informed consent to that agreement insofar as it permitted payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings. For this purpose, the solicitor must show that he made sufficient disclosure to the client.
It seems to me that I have to consider whether this is material information, in the sense that it may have affected the Claimant’s consent to the agreement between them insofar as it permitted payment to the Defendant of an amount of costs greater than that which the Claimant could have recovered from another party to the proceedings.
If it had been pointed out to the Claimant that, while the Defendant’s estimate of costs was £2,500 plus VAT, she might recover only £500 or £550 plus VAT from the Insurers, then that may have affected the Claimant’s consent to the agreement between them insofar as it permitted payment to the Defendant of an amount of costs greater than that which the Claimant could have recovered from the Insurers. It may, for instance, have led the Claimant to ask whether her liability could be capped, or to approach a different firm of solicitors, who would cap her liability. Prima facie, therefore, it ought to have been disclosed.
Each case has to be decided on its own facts. In this case, it is a very striking feature of the agreement being proposed to the Claimant by the Defendant that the Defendant’s estimated basic charges were five times the amount which the Claimant might be entitled to recover from the Insurers if her claim settled for less than £10,000 at Stage 2 in the Protocol and that, in that event, she might have to pay the first £3,200 of her damages to the Defendant. This was so striking that it ought, in my judgment, to have been brought specifically to the Claimant’s attention, if she was to give informed consent to the agreement insofar as it permitted payment to the Defendant of an amount of costs greater than that which the Claimant could have recovered from the Insurers, that, while the Defendant’s estimate of costs was £2,500 plus VAT, she might recover only £500 or £550 plus VAT from the Insurers.
I conclude that the Claimant did not give her informed consent to the agreement and the Defendant cannot rely on it for the purposes of CPR 49(2).”
In his submissions to the Court on behalf of the solicitors, Nicholas Bacon QC argued: “Allowing the Claimant’s appeal would result in a wholesale change of the basis on which solicitors advise their clients in fixed costs cases. The Law Society’s Model CFA would be insufficient to meet the threshold proposed by the Claimant”. This is no doubt correct.
Robin Dunne, who acted with PJ Kirby QC for the client, commented in a briefing note on this case: “The implications of this judgment are very significant. There are huge numbers of cases where deductions have been made from damages where the cap in 46.9(2) would result in a repayment to the client. Indeed, the number of retainers signed where informed consent has been given is likely to be very small.”
Although this case was concerned with a fixed fee matter where the recoverable costs were likely to be relatively easy to predict, this may well lead to many more solicitor/own client disputes where there is a shortfall in costs recovery. It may not be sufficient to simply advise of the fact there is a likelihood of a shortfall.
Gibbs Wyatt Stone specialise in drafting CFAs and advising solicitors on retainer issues.