25% CAP FITS: COURT STOPS INFORMED CONSENT CHALLENGE

This piece first appeared in Kerry On Costs… And So Much More…

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In

Swann v Slater and Gordon (UK) Limited 25 January 2021, Queen’s Bench Division Birmingham

District Judge Rouine, a Regional Costs Judge, held that a damages-based percentage cap on all costs to be taken from a client’s damages amount to “informed consent”, meaning the challenge to 400 Conditional Fee Agreements failed.

The court also held that no fiduciary duty was owed by a solicitor to a potential client whilst negotiating a retainer, thus declining to follow the judgment in

Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB).

All retainers had a 25% cap on all costs to be deducted and the court said that this had a “magnetic attraction” in terms of informed consent, and “is more than sufficient information… for the purposes of obtaining informed consent from a client for deductions to be made from their award of damages.”

The court distinguished the decision in Belsner, itself now subject to an appeal to the Court of Appeal, as there was no such overall costs cap in that case, which was “a very significant factual difference.”

52.         I am therefore drawn to the conclusion that in each of these cases, the claimant entered

               into the retainer, having given informed consent to the concept of a potential deduction from

               their damages of up to a maximum of 25 per cent of the damages awarded or agreed. I pause

               at this point to observe that I found noteworthy the wholesale absence of any evidence from

               any of the claimants in any of these cases, explaining what they had not been told or what

               they had not understood about the fact of a deduction from their damages or the potential

               level of the same. I also at this point confirm that the wording of the retainer documentation

               is sufficient, in my judgment, and I can reach the conclusions that I have without specific

               evidence in relation to each of the retainers being adduced as to the nature of the discussions

               and the advice given, and I confirm that that is the basis on which I have proceeded.

The court also found that CPR 46.9(2) displaces Section 74 of the Solicitors Act 1974, so an appropriate written agreement “puts in place an arrangement 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”. (Paragraph 57)

Insofar as that finding is different from that in Belsner…. “I am not bound to follow a decision of a High Court judge in an earlier case.”

In relation to the Consumer Contract Regulations 1999 and the Consumer Rights Act 2015, the court said:

“I begin by saying that I find there to be real force in the submission that there is nothing unfair, per se, in the concept of an arrangement whereby a solicitor can charge a client, by reference to a deduction in damages, sums over and above that which have been recovered as inter partes costs from the tortfeasor. Indeed, there has been statutory provision in place for a number of years to allow such arrangements to be put in place.” ( Paragraph 74).

75.         The question here, however, is whether the specific provisions in these retainers fall

               foul of either the 1999 Regulations or the CRA. I have already made clear earlier in this

               judgment my view on the way in which the provision of the retainers is framed. To confirm,

               I have not, thus far in this judgment, taken any issue with the wording of any of the retainers

               or the ends which they appear to be seeking to achieve in the context of permitting the

               defendant to make a deduction from the client’s damages. I see no reason to depart from my

               previous views about such wording at this stage in this judgment. In my judgment, the

               deduction from damages is part of the package of remuneration to which the solicitor is

               entitled in return for the provision of professional services to the client in the context of the

               client’s pursuit of a claim for personal injury damages.

76.         In relation to all of the retainers in respect of these assessments, I have, as previously

               indicated, confirmed that I am satisfied that the clients have had explained to them, in a way

               sufficient to enable them to provide informed consent on the point, both the principle of

               deduction from damages and the maximum amount, in percentage terms, which might be

               taken from them. It seems to me that the deduction from damages is part of the price which

               the client has to pay to secure the solicitor’s service. Incidentally, I do not, in the context of

               any of these points of dispute, accept that there is an obligation on the part of any solicitor to

               explain to a prospective client that there may be different or alternative terms on offer from

               other alternative legal practices.

77.         The concept of a deduction from damages is, in my experience, widespread in the field

               of personal injury litigation and, as I have said previously, has been expressly catered for and

               principally in the historic statutory provisions. I also remind myself that I have already

               concluded that all of the clients in all of these cases gave informed consent to this provision

               in their retainer at the outset of the solicitor and client relationship. Given all that I have just

               said, I find myself unable to reach the conclusion that this particular provision, in these

               particular retainers, has created an imbalance, let alone a significant one, between the parties

               to these contracts. I therefore find myself unable to conclude that the term is unfair by

               reference to the 1999 Regulations. For the avoidance of doubt, I confirm that nothing in the

               non-exhaustive list of potentially unfair terms contained at schedule 2 to the 1999

               Regulations comes close to assisting the claimants’ submissions on this point.

78.         In relation to the CRA, I confirm that I accept the defendant’s submissions on the

               impact of section 64(1)(b) on these retainer terms, as, in my judgment, the question of total

               sums payable to the solicitor, including by reference to any deductions from damages, must

               form part of the assessment of the appropriateness of the price payable by the client for the

               legal services provided to them. There appears to be no issue between the parties that a

               solicitor retainer of this kind is, in fact, a consumer contract, for the purposes of the CRA; but

               my finding in relation to section 64(1)(b) of the CRA means that this particular provision of

               these retainers cannot be assessed for fairness under section 62. In summary, in relation to

               point of dispute two, I confirm that I have found in favour of the defendant in respect of all of

               the issues which I have determined in relation to that point of dispute in this judgment.

Comment

An outstandingly well-reasoned and argued judgment – perhaps the best in the history of Conditional Fee Agreements.

Right on every point.

Any other decision would have been deeply harmful to access to justice – a few quid back for opportunist clients but wrecking Conditional Fee Agreements which allow those without means access to justice.

Clients pass all risk to the solicitor. That solicitor is entitled to be rewarded for that risk.

I wonder if a single one of these 400 claimants would have pursued a personal injury claim if they had to pay full costs, win or lose.

I guess not.

Instead of getting 75% of damages, they would have gotten 0% of damages.

I trust that they are fully advised, so as to give informed consent, every time they are asked to challenge the fees of their former solicitors.

ONLY ONE CIVIL PROCEDURE RULE NEEDED SAYS SUPREME COURT JUSTICE – BUT NEW PORTAL HAS 1,684 RULES

It is nearly 1 April, but this is not an April Fool’s joke.

Speaking at the Cyprus Judicial Conference on 10 March 2021, Supreme Court Justice Briggs – who has form for this sort of thing – said that the Online Court might have only one rule:

“Do what it says in the electronic form.”

Fascinating.

The Justice referred to the new “low-value” – if sub £10,000.00 is “low-value” – Road Traffic Accident Online Portal for litigants in person, saying it will be the prototype for a radical recasting of the way in which most civil litigation will be conducted in England and Wales.

It runs to 168 pages and 1,684 rules, so not exactly an evidence based observation.

As can be seen this will be a very easy trail for a litigant in person to follow, provided that they are Einstein.

The Justice said that this single rule could be suitable for Family and Tribunal cases, as well as civil claims.

The effect would be to do away with the barriers thrown up by the Civil Procedure Rules and the White Book under which litigants in person “are simply unable to understand and then comply with the complex rules of the game.”

He added:

“This does not mean that the wise litigant will take no legal advice on the merits, or even where necessary, to use a lawyer to argue a point of law or cross-examine a witness at trial. But it cuts out the huge expense of doing the Civil Procedural dance necessary under our present CPR regime to get there, every part of which usually has to be, or at least is, conducted by a lawyer”.

Comment

This is madness. Rules of Court are necessary to govern court procedures. The new online portal is virtually incomprehensible to me as a solicitor of 40 years’ standing, let alone litigants in person.

The whole idea behind the online court is to stop plebs having access to Justice.

I have a better idea. These multi-billion-pound claims in the Business and Property Courts serve no useful social purpose at all.

Let us switch immediately to a fully online system for, say, all claims over £1 million, but have a fully functioning court system for all claims under that sum.

Physical Hearings better than virtual ones says Supreme Court President

Lord Reed, President of the Supreme Court, said that physical court hearings are more effective than virtual ones:

“We do want to revert to physical hearings in the Supreme Court as soon as we can, because they do work better. Counsel find they work better and so do we because the whole experience is much more spontaneous and interactive than it becomes online.”

Agreed. Please have a word with One Rule Online SCJ Briggs.

Competition

Compose the words for “Just One CPR” to the tune of “Just One Cornetto”, or O Sole Mio, or to classicists – It’s Now Or Never.

LAWYERS THREATENED WITH BANKRUPTCY AND DISCIPLINE FOR TAKING ON HOME OFFICE

In a move which lawyers of all political views are likely to find very disturbing, the government is proposing to force the Immigration and Asylum Chambers of the First-tier Tribunal and Upper Tribunal to consider a Wasted Costs Order against the lawyers representing an unsuccessful applicant, with a presumption in favour of making one.

Addressing the House of Commons on 24 March 2021, having first told The Sun newspaper the previous weekend, the Home Secretary said that this would “tackle the practice of meritless claims which clog up the courts with last minute claims and appeals,” saying that  “for too long our justice system has been gamed”.

The basis of the proposal is that, by definition, if a person fails in an immigration or asylum claim, then they are likely to be deported and not around to satisfy any costs judgment in favour of the Home Office.

“To achieve this, we propose to introduce a duty on the Immigration and Asylum Chambers of the First-tier Tribunal and Upper Tribunal (FtTIAC) to consider applying a WCO in response to specified events or behaviours, including failure to follow the directions of the court, or promoting a case that is bound to fail. While the grant of a WCO is at the sole discretion of the judge we are considering introducing a presumption in favour of making one. In addition, as WCOs only cover the costs of the parties to the claim, we are also considering introducing a mechanism to cover the court’s costs.”

A Wasted Costs Order is made against a lawyer personally and Section 67 of the Criminal Justice and Courts Act 2015 requires a court to report to the regulator any lawyer against whom a Wasted Costs Order is made.

The power exists already throughout the Court and Tribunal system.

There can be little doubt that this move is designed to deter lawyers from taking on cases that currently would not put them at risk of a financial penalty and possible disciplinary action.

In effect, lawyers risk being penalised and disciplined for making an application where their client’s life may be at stake if they are deported back to their own country.

That is morally wrong and an afront to all traditional values, right or left, of the United Kingdom.

What is the next step? To make a presumption of a Wasted Costs Order against solicitors and counsel representing a person found guilty in a criminal matter, on the basis that the criminal in prison will be unable to satisfy any costs order.

This is very dangerous territory indeed.

CROWD FUNDING, COST CAPPING AND TAXPAYERS

A recent decision by the High Court to grant a cost capping order of £250,000 in a claim against the government, relating to the lawfulness of contracts for protective equipment awarded during Covid-19, has attracted publicity, with the claimants accusing the Government of bullying, by stating that it would cost £1 million to defend the claim.

The claimants had asked for a cost-capping order of £100,000.

The claimants are Crowd-funded and had raised around £250,000 through the CrowdJustice website to fund the case. It is probably no coincidence that that is the sum that the court ordered as the cap.

The assumption is that Crowd funding, costs-capping and not for profit equal good and worthy and that those apposing it here were trying to ensure that those bringing in the case were “bullied out by costs” (Good Law Project) and that the government was attempting to “intimidate” campaigners into dropping the case (Tweet by Every Doctor Chief Executive).

Whatever the rights or wrongs of cost-capping, and I am in favour of fixed recoverable costs for absolutely everything, the reality is that a cost-capping order in favour of a party acting against a government department simply means that any costs over and above that sum are borne by the taxpayer.

In that sense the claimants in the cost-capping case against the government are being provided with Legal Aid, in the sense that the taxpayer is to relieve the claimants of part of their costs by ability.

That may be right, and it may be wrong, but given that Legal Aid has been all up abolished in civil proceedings, it is highly questionable that this is the best method of determining government expenditure in relation to civil proceedings.

Crowd funding itself is a highly debatable issue. Let us be blunt – Crowd funding for a person charged with a serious criminal offence is unlikely ever to capture the public imagination, and nor is the case of a person appealing against refusal of their social security benefits or whatever.

To put it bluntly again, Crowd funding is attractive to middle-class people. I have nothing against that group, but if the effect of a Crowd-funded claim getting off the ground, and achieving a cost-capping order, is that less pocket money is available for the Civil Justice system generally and I question its worth and value.

“Not for profit” is also a term capable for the many nuances.

I am not for one second suggesting that anyone at Good Law Project or Every Doctor is paid one penny piece – I simply do not know – and it may well be that everyone in both organisations gives all their time free of charge.

However, that is certainly not the case with all “not for profit” organisations.

Many law firms, and many barristers, are struggling and making very little profit, and indeed many barristers are paid below the national minimum wage, even when being paid, or perhaps especially when being paid, Legal Aid rates by the state.

Yet, they are not for profit.

However, an offer profit company paying its Chief Executive £50,000, or whatever, but making no profit, can properly be described as “not for profit”.

I repeat that I am not suggesting for one minute that that was the case with these organisations, I am simply questioning the assumption of Crowd funding, cost-capping and not for profit are good things.

There may be, or there may not be, but the whole picture is more nuanced than generally reported.