April 3
The claimant entered into a conditional fee agreement (“CFA”) with the defendant firm of solicitors to bring proceedings following her involvement in a road traffic accident. The CFA provided that the claimant would pay the firm’s basic charges, disbursements, success fee and ATE insurance premium which would be recoverable from the other party if her action succeeded. The success fee was set at the statutory maximum of 100% and capped at 25% of any damages recovered. Apart from the CFA the letter of retainer also contained an insurance information fact sheet, which stated that the claimant needed to have ATE insurance and that the premium would be deducted from the damages recovered. The claimant accepted an offer to settle proceedings in the sum of £3,400 plus costs, and a sum of £1,178 was deducted comprising the firm’s costs of £829 and the ATE premium. The claimant thereafter challenged the firm’s costs on the basis that it had failed to conduct a litigation risk assessment justifying the level of the success fee and that the 100% uplift was out of step with the fixed success fee under the previous costs regime. The firm contended that the success fee was reasonable and, within the terms of CPR r 46.9(3)(a) and (b), had been incurred with the claimant’s approval. On an assessment, under section 70(1) of the Solicitors Act 1974, as amended, of the bill of costs the district judge held that the circumstances of the case justified a success fee of 15%, and that the insurance premium should be treated as a solicitor’s disbursement and should have been included in the bill of costs. The High Court judge upheld the district judge’s decisions on the firm’s appeal.
On the firm’s further appeal—
Held, appeal allowed in part. (1) The presumption in CPR r 46.9(3)(a) and (b) that costs had been reasonably incurred and reasonable in amount required the pre-condition of informed approval in the sense that a client had given approval following a full and fair explanation to him. The overall burden was on the solicitor to show that the pre-condition of the presumption was satisfied if he wished to rebut an assessment under section 70(1) of the Solicitors Act 1974. Once the solicitor had adduced evidence of informed consent, the evidential burden moved to the client to show that no consent or informed consent had been given as a result of having been given insufficiently clear or accurate or comprehensive information by the solicitor or for some other reason. It was open to the claimant to seek to show that the documentation relied on by the firm was inaccurate or misleading in an aspect material to her understanding of the nature or amount of the success fee. The documentation provided by the firm was not misleading or inaccurate, showing that the claimant had nothing to pay by way of the firm’s charges other than the success fee capped at 25% of general damages recovered from the other party, and the totality of that information provided a clear and comprehensive account of her exposure to the success fee and the firm’s fees generally. The fixing of a success fee uplift in the context of a CFA had traditionally been related to an assessment of the risk of the proceedings being lost, as reasonably perceived by the solicitor or counsel at the time the agreement was made. The firm’s evidence went no further than that most of its competitors charged success fees in the same way, which was insufficient to avoid the need to have told the claimant, for the purposes of informed consent, that the success fee of 100% took no account of the risk in any individual case and was charged as standard in all cases. While the level of the contractual cap of 25% was not unusual, and its practical effect might be to reduce the success fee to an amount that was not in all the circumstances exorbitant, the starting point of a 100% uplift irrespective of litigation risk was unusual. The appeal in relation to the success fee would therefore be dismissed (paras 37–38, 40, 47–48, 50, 53–54, 56).
(2) A disbursement qualified as a solicitor’s disbursement if either it was a payment which the solicitor was obliged to make whether or not put in funds by the client, such as court fees, counsel’s fees and witnesses’ expenses, or there was a custom of the profession that the particular disbursement was properly treated as included in the bill of costs as a solicitor’s disbursement. The test was not what had been agreed between an individual solicitor and the client under the retainer. The ATE insurance premium did not fall within either category of solicitor’s disbursement, but was a premium on a policy of insurance between the insurer and the insured client to provide the client with funds to discharge costs he was liable to pay. The district judge and the High Court judge had been wrong to treat the insurance premium as a solicitor’s disbursement rather than an item in the cash account, and to that extent the appeal would be allowed (paras 57, 65–66, 68–70).
Per curiam. If the consequence is that the client will not be able to challenge the amount of an ATE insurance premium through the convenient mechanism of an assessment under section 70 of the 1974 Act, and this outcome is considered unsatisfactory within the profession, the Solicitors Regulation Authority and the Law Society can consider what could be done to bring an ATE insurance premium within the principle as to what is a solicitor’s disbursement (para 71).
Nicholas Bacon QC and Andrew Hogan (instructed by Hampson Hughes Solicitors, Liverpool) for the defendant.
P J Kirby QC and Robin Dunne (instructed by JG Solicitors, Leeds) for the claimant.