Kerry Underwood

25% CAP FITS: COURT STOPS INFORMED CONSENT CHALLENGE

with 4 comments


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.

Written by kerryunderwood

March 31, 2021 at 11:40 am

Posted in Uncategorized

4 Responses

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  1. Just an update, an appeal was filed by the Claimant’s solicitors on 8 May 2021 following RCJ Rouine providing the Claimant with an extension beyond the 21 days after 25 January 2021. The story continues !!

    Nick McDonnell

    March 31, 2021 at 1:21 pm

  2. Many thanks!

    kerryunderwood

    March 31, 2021 at 1:35 pm

  3. Slightly amused that someone has taken time out of their day to register multiple down votes on this article. What’s not to like about damages based percentage caps in Conditional Fee Agreements?!

    Josh Coleman

    April 1, 2021 at 1:10 pm

    • I agree Josh! Always take it as a compliment – someone, somewhere is getting worried, but I agree – really cannot see what there is to worry about with this idea.

      Kerry

      kerryunderwood

      April 4, 2021 at 11:59 am


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