The Court of Appeal has allowed the Defendant’s appeal in the case of Belsner v CAM Legal Services, ruling that the assessment of costs at this stage of a Portal claim was a non-contentious matter and that the solicitor’s bill to the client was fair and reasonable in all the circumstances. This is an extremely important costs case which, had the appeal been disallowed, would have and significant ramifications for solicitors.
The claim was a low-value RTA in which the Defendant solicitors acted for the Claimant. The RTA claim was settled for £1916.98 damages, following which the Defendant deducted the sum of £321.25 (not including VAT) from the Claimant’s damages. This was by way of payment of a capped success fee in addition to the fixed costs of £500 plus disbursements which were recovered from the insurer of the Defendant in the RTA claim.
On first appeal the Claimant’s appeal had been allowed, and the success fee was reduced to £75, being 15% of the fixed costs recovered. Mr Justice Lavender had been of the view that the Defendant solicitors owed their client (the Claimant) a fiduciary duty when negotiating the retainer, and that that retainer could only be valid and enforceable if the client had informed consent when entering into it. No proceedings were issued in the RTA claim.
The main question to be answered in the second appeal was whether the judge was right to assume that CPR 46.9(2) and s.74(3) Solicitors Act 1974 applied in RTA cases started in the Portal and where no county court proceedings were issued. In order to decide that point, the Court of Appeal had to decide whether the claims started in the Portal were contentious business or non-contentious business.
The Court of Appeal found that the term in the solicitor’s retainer with the client to charge the client more than could be recovered from the Defendant to the RTA claim was not unfair under the Consumer Rights Act 2015 and that the business was non-contentious business, in which case the court could decide what was fair and reasonable to pay. Master of the Rolls, Sir Geoffrey Vos, cited Mastercigars v. Withers [2009] 1 WLR 881 at [102] in which it was held:
“Even if the solicitor has spent a reasonable time on reasonable items of work and the charging rate is reasonable, the resulting figure may exceed what it is reasonable in all the circumstances to expect the client to pay and, to the extent that the figure does exceed what is reasonable to expect the client to pay, the excess is not recoverable.”
At paragraphs 97 to 101 of his judgment, Sir Geoffrey Vos said:
- “I agree with the Client that, in all the circumstances, she ought as a matter of good professional practice to have been told the level of fixed costs that she would recover if the case settled within the RTA portal. But that does not necessarily mean that the Solicitors’ Bill was unfair. The question is only whether it was fair and reasonable in all the circumstances, having regard to the factors in the 2009 Order for the Client to pay an additional £385.50 on top of what was recovered from the third party. I see no reason why she should not be required to do so. She has filed no evidence suggesting that she is not a reasonably sophisticated client. She accepted in her points of dispute that she expected that she might have to pay some of her base costs. DJ Bellamy assessed the Solicitors’ reasonable base costs at some £1,392 plus VAT, which exceeded the £500 plus VAT recovered from the third party. She has never suggested that she did not understand that she would have to pay a success fee on top of some of her base costs. The success fee charged fee was capped by statute at 25% of recovered damages. Lavender J admittedly applied the success fee (of 15% of base costs) assessed by DJ Bellamy to the base costs of £500 recovered from the third party, but he thought the Solicitors had a legal duty to obtain the Client’s fully informed consent to charging more by way of base costs than was recovered from the third party. He was wrong about that.
- The Client in this case has never had any real or economic interest in the pursuit of this costly litigation. Only checkmylegalfees.com have such an interest. The Solicitors capped their fees voluntarily at a fair and reasonable level after the event, even if they ought to have told the Client what she would recover by way of fixed costs in the RTA portal, and even if they ought to have agreed in advance when they entered into the CFA to the cap they later applied voluntarily. Mr Ben Williams KC, counsel for the Solicitors, told us in argument that the Solicitors would not have “dreamed” of doing anything other than making a proportionate deduction from the damages as opposed to charging the Client their full base costs and the maximum possible success fee. In future, I hope that solicitors will not suggest CFA or other fee arrangements to their clients that allow for fees that they would not dream of actually charging.
- The Client, in effect, argued that the full ramifications of the fully informed consent requirement found by the judge (but not upheld by me) should be read back in to the assessment through the requirement of fairness in the 2009 Order. I do not agree. I think the overall Bill was fair and reasonable. I would, therefore, re-assess the total base costs and success fee payable as being £821.25 plus VAT (£500 + £321.25, the latter figure being £385.50 less VAT). I am conscious that, on one analysis, this assessment could be construed as allowing base costs in excess of £500, since a success fee of 15% of base costs was fixed by DJ Bellamy and not appealed thereafter. In the extremely unusual circumstances of this case, I am reassessing the Bill from scratch because the costs are non-contentious ones which were assessed as contentious ones. For the reasons I have given, I have not found it helpful to do so in the traditional way of assessing base costs and then the success fee. Nothing I have done in that regard will be relevant to future cases. I have simply applied Morgan J’s dictum and an overall approach to fairness and reasonableness in the convoluted circumstances of the three stages of this case.
- For the reasons that I have given in Karatysz v SGI Legal [2022] EWCA Civ 1388, which was heard immediately following this case, the question to ask in order to determine “the amount of the bill” under section 70(9) of the 1974 Act is “what is the total sum that the bill is demanding be paid to the Solicitors, whether or not all or part of that total sum has actually been paid”. Accordingly, in this case, the amount of the Bill was £821.25 plus VAT, and the Client achieved no reduction from that Bill as a result of seeking an assessment for the purposes of section 70(9) either before DJ Bellamy or in this court. The prima facie position would, therefore, be that the Client should pay all the costs unless there are special circumstances under section 70(10) of the 1974 Act. I am conscious that there may be other arguments as to costs in the complex circumstances of this case, so will leave the parties to agree the costs here and below, and we can determine them on paper if necessary.
- Conclusion
- For the reasons I have given, I would allow this appeal, and order that the base costs and the success fee payable by the Client in this case should be assessed in the total sum of £821.25 plus VAT. The sum of £295.50 must be repaid by the Client to the Solicitors.”
Whilst solicitors will be pleased with the result of this appeal, they should note Vos’s comments at paragraph 15 of the Judgment:
“…it is unsatisfactory that, in RTA claims pursued through the RTA portal…, solicitors seem to be signing up their clients to a costs regime that allows them to charge significantly more than the claim is known in advance to be likely to be worth. The unsatisfactory nature of these arrangements is not appropriately alleviated by solicitors deciding, at their own discretion, to charge their clients whatever lesser (and more reasonable) sum they may choose…”
And those challenging solicitors’ bills should also beware:
“…it is also unsatisfactory that solicitors like checkmylegalfees.com can adopt a business model that allows them to bring expensive High Court litigation to assess modest solicitors’ bills in cases of this kind. The Legal Ombudsman scheme would be a cheaper and more effective method of querying solicitors’ bills in these circumstances, but the whole court process of assessment of solicitors’ bills in contentious and non-contentious business requires careful review and significant reform.”
It will be interesting to see how, in due course, the long-awaited outcome of this case impacts on those affected by it.