We had a slightly early Christmas miracle this year, the conclusion of Belsner -v- Cam. We will take a little bit of a whistle stop tour of the matter from start to finish.
The background to the case is that Ms Belsner (B) was injured in an RTA and instructed Solicitors (CAM) to act on her behalf. The CFA had no cap on base costs but an uplift capped at 25% of damages. The Client Care letter, T&Cs and CFA provided that CAM could charge fees in excess of those recovered from the Defendant however:
- They failed to provide any real detail of those circumstances
- It provided an estimate to the effect that “the basic charges for the work … will be £2,500.00”.
Liability was admitted in accordance with the Low Value RTA Protocol with damages agreed in the sum of £1,916.98. Fixed costs and disbursements in the sum of £1,783.19 were also paid by the Defendant.
The instructed Solicitor provided B’s damages to her in the sum of £1,531.48 (less £385.50 – 25% of damages).
B then requested a statute bill from CAM which contained the following charges, totalling £4,306.07 (inc VAT):
- Basic charges of £2,171.90 plus VAT
- A success fee of 100% of the basic charges, capped at 25% of the recovered damages
- The fee of £225 plus VAT for obtaining a GP report
- The fee of £806 plus VAT for obtaining a psychology report.
As CAM only recovered £1,783.19 for costs and disbursements from the Insurers, B was liable to pay to CAM the sum of £2,522.88 (£4,306.07 less £1,783.19). This would have extinguished B’s damages and left her liable to CAM for £605.90.
CAM agreed to limit the costs they sought from B to those recovered from the Insurers plus the success fee of £385.50. B thereafter issued a Part 8 Claim Form seeking an assessment of the profit costs and success fee elements of CAM’s bill.
CAM’s bill was initially assessed in the sum of £1,392 plus VAT and a success fee of £208.80 plus VAT on the basis that CPR 49.6(2) applied. Therefore, CAM was entitled to recover more from B than what had been recovered from the Insurers to the original claim.
B appealed arguing the CPR 46.9(2) should not apply as she had not given “informed consent”. It was argued that to provide informed consent, she should have been furnished with enough information to have a knowledge of her likely liability.
CAM argued that CPR 46.9(2) did not require informed consent, only a written agreement which makes clear that Solicitors can recover more from the Claimant than the amount from the Defendant.
In reaching his decision, Lavender J considered the relationship between CPR 46.9(2) and CPR 46.9(3) together with the case of Herbert v HH Law  2 Costs LR 261. Lavender J stated the following;
‘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.’
The crux of Lavender’s findings was that B should have given some indication of what the likely recoverable costs from the Insurers might have been.
Lavender J also commented that CAM’s estimate was 5 times the fixed recoverable costs and that under the terms of CAM’s funding documentation, the first £3,200 of the Claimant’s damages would have been paid to the Defendant. He held that this was so striking that it should have been brought to B’s attention.
On the first day of the hearing, substantial arguments arose as to the definition of contentious business for the purpose of the Solicitors Act 1974. Lord Just Vos suggested that work done under the pre-action protocol was contentious business – these arguments took up the majority of the first day. It was argued that s.74(3) applied only to contentious business where proceedings had been issued and it therefore did not apply to MOJ portal claims that settled at stage one or two.
In returning for the second day and considering the issues of the first day, Vos LJ stated that the ramifications of the case were “more profound than (what they) appeared at the start of the case” and as a result, the Court did not believe sufficient time was available for arguments to be heard.
Vos LJ went on to say that “If it is a non-contentious space, so called, then we need to understand the ramifications of that”.
The hearing was thereafter re-listed.
Court of Appeal decision
Prior to considering interesting comments made by the COA, it is prudent to consider the overall conclusions reached.
It was held that if a matter settles at Stage one to two (in respect of MOJ Portal claims) a claim should be considered as non-contentious and, as a result, s.74(3) did not apply.
The Court also held that the solicitor did not owe any fiduciary duty to their Client when negotiating fees. However, the Court did state that a Solicitor has a duty to provide the best possible information to their Client in respect of the likely costs.
The Court thereafter went on to criticise a number of aspects of the regime and parties overall.
In respect of the regime, the Court was of the view that the distinction between contentious and non-contentious was in urgent need of legislative change as the current position, in the view of the Court, was illogical.
They were also of the view that it was not appropriate for Solicitors to sign their Clients up to retainers which ultimately exposed them to costs greater the fixed costs. In making this comment, they also stated that it was not logical that s.75(3) and CPR 46.9(2) did not apply to Portal claims.
In relation to the parties, the Court criticised Solicitors for Belsner for failing to comply with their professional duties under the Solicitors code of conduct as they failed to provide the best information as to costs to their Client at the outset of the claim.
More scathing was the criticism of the Solicitors for CAM. The Court was displeased that the business model of Checkmylegalfees allowed the claim to reach the High Court when there was such a modest amount in dispute.
Having concluded that the costs were to be considered non-contentious, the Court undertook the assessment based on what was reasonable and fair. It was concluded that profit costs of £500 was reasonable and fair.
The is no doubt that this case has been one of the most hotly contested cost cases in recent history and what is clear, following the outcome of the case, is that there is a need for legislative reform in respect of the Solicitors Act.
Furthermore, it is clear that given confirmation of the distinction between contentious and non-contentious, there is a need for Solicitors to review their current (and future) CFAs to ensure that the correct funding arrangements are in place.
Finally, it is yet another reminder of the need to provide information regarding the level of costs to Clients. Doing so may save a lot of headaches later down the line.