Kerry Underwood

SUCCESS FEE AND RISK

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In Herbert v HH Law Limited [2018] EWHC 580 (QB)

the Queen’s Bench Division of the High Court upheld the decision of DJ Bellamy whereby he reduced the success fee in a road traffic accident case from 100% to 15% on a solicitor and own client assessment.

The court also upheld a finding that an After-the-Event insurance premium was a solicitor’s disbursement.

The Court of Appeal has now given leave to appeal against the High Court’s findings.

The District Judge accepted the defendant’s submission that CPR 46.9 “places the burden on the client to prove the charges are unreasonable. It also significantly restricts the scope of the court’s discretion to interfere with contractually agreed amounts through the mechanism of the presumptions.”

The District Judge took into account that the solicitors never met the client and “had little or no direct contact with the client.”

Paragraph 20 of the judgment quoting paragraph 12 of the District Judge’s judgment:

 

“The Claimant appears to have been referred to the solicitors (details unclear from the file) and the solicitors take instructions on the telephone. There is no face-to-face meeting subsequent to that discussion but there followed significant correspondence, terms and conditions, and documentation in relation to the CFA. There is no evidence on the file of any formal risk assessment, nor note of any discussion in relation to the success fee. Whilst accepting the retainer between solicitor and client is contractual in nature, the reality is that litigation funding of itself is complex, risk assessments and success fees add a further level of complication, as does the charging arrangement of the solicitors. This is an unsophisticated client dealing, by referral, with a claim for damages arising out of a road traffic incident, the circumstances of which appear from the file note relatively straightforward, it being a rear end collision with the claimant’s stationary car. It seems to me not a difficult hurdle in those circumstances for a Claimant to overcome to rebut the presumption of reasonableness in CPR 46.9(3). There is no clear evidence the Claimant approved either expressly or impliedly, with full knowledge, the cost to be incurred, and more particularly, a success fee of 100% could easily be said to be unusual both in nature and amount given the circumstances of the claim that were known to the solicitors at the time. Further, there is no risk assessment on the file that would in any event justify as being reasonable, a success fee of 100%’.”

 

The High Court held that approval required informed consent by the client and that “the simple refrain of freedom of contract establishes neither the presumptions nor the reasonableness of the success fee in the particular case.”

The High Court also held that risk was likely to be the primary factor in fixing the success fee (Paragraph 44).

The key paragraphs are 46 and 47:

 

46. Like the Judge, I accept that 46.9(4) is not free-standing and that CPR 46.9 must be read as a whole. Thus if a client applies for a reduction in the success fee, he may be met by evidence that he gave his informed approval to the percentage identified in the CFA. If so, the presumption in 46.9(3)(a) and/or (b) is likely to be satisfied and will be difficult to dislodge. Alternatively, if the presumption is not established, the costs judge will proceed to the assessment and hence the reasonableness of the success fee percentage.

  1. Putting the point another way, if and insofar as HH took no account of the risk in the individual case and provided for a 100% uplift (subject to the 25% cap) in all cases by reason of its particular post-LASPO business model, I consider that informed approval would require this to be clearly explained to the client before she entered the agreement.”

 

This leaves open the question of whether a solicitor who has met the client and explained everything in the manner recommended in

 

Vilvarajah v West London Law Ltd [2017] EWHC B23 (Costs)

 

is safe from attack on the success fee.

 

 

Comment

This decision is all over the place, but it is not clear here what the basis of the charge to the client was.

The actual costs charged to the client was £691 plus VAT, being 25% of the damages.

The claim was an ex-portal RTA claim which settled for £3,400 after proceedings had been issued and, although it is not clear from the judgment, I am assuming that post-issue pre-listing fixed costs applied and if that is the case the recoverable costs are £1,840 being 20% of the damages plus £1,160 as per CPR 45.29 Table 6 B.

Here the solicitor and own client basis of charging was £118 an hour with 22 hours work done giving a total £2,596.

Thus the unrecovered solicitor and own client costs are as follows:

£

  • solicitor and own client costs 2,596

 

  • less recovered costs 1,840

Total                                                                                         756

 

These are costs net of VAT, and as we have seen the actual charge to the client was £691 plus VAT.

Consequently, unless I am missing something, there was in fact no success fee at all in this case as all of the charge to the client fell within the unrecovered element of solicitor and own client costs.

Clearly £118 per hour is a very modest rate and appears not to have been challenged.

In those circumstances, the decision appears to be obiter, in the sense that the court did not need to rule on the success fee as in law no actual success fee was charged.

It is well established law that academic claims cannot be brought; in other words the client cannot bring a Solicitors Act 1974 challenge in relation to a bill never delivered, even if the retainer contained challengeable provisions.

If I am correct, and this decision is obiter, then of course it is not binding.

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Written by kerryunderwood

August 8, 2018 at 8:10 am

Posted in Uncategorized

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