A Costly Lesson? A discussion of the decision in Belsner v Cam Legal Services Limited  EWHC 2755 (QB)
INTRODUCTIONLavender J has held that solicitors cannot rely upon CPR 46.9(2) to recover more from a client than could have been recovered between parties in the proceedings, unless they can show that the client provided informed consent. The decision potentially has far-reaching consequences for the use of conditional fee agreements (“CFAs”). The judgment of Lavender J in Belsner v Cam Legal Services Limited  EWHC 2755 (QB) sent solicitors scrambling to amend their template CFAs but there is potentially no need to panic. Cam Legal Services (“the Defendant”) is seeking permission to appeal the decision and there is a reasonable chance that it will be overturned.
THE LAWThe case involved a dispute over the amount payable by a client to their solicitor for work done on a claim where the fixed recoverable costs regime applied. Section 70 of the Solicitors Act 1974 (“the Solicitors Act”) allows a client to apply to the High Court for an assessment of the bill of costs of their solicitor. Section 74(3) of the Solicitors Act limits the amount of costs which the High Court may allow when conducting an assessment under section 70 in relation to proceedings in the county court. Under Section 74(3), the assessed amount cannot exceed the amount that could have been allowed in respect of that item as between party and party in the county court proceedings. However, section 74(3) does not apply if the solicitor and the client have entered into a written agreement which expressly permits payment to the solicitor of an amount greater than that which the client could have recovered from another party to the proceedings [CPR Part 46.9(2)]. The questions in Belsner were:
- Is informed consent also a requirement under CPR 46.9(2)?
- If so, what information must be provided to allow a client to give informed consent?
THE FACTSThe Claimant was injured in a road traffic accident on 5 February 2016 and instructed the Defendant to bring proceedings on her behalf. The Defendant provided a CFA and various other documents to the Claimant which set out the terms on which the Defendant would be acting. These documents expressly stated that if the Defendant’s costs exceeded the amount recovered for costs from the other party to the claim, the Claimant would be herself liable for the excess. The documents also contained the following clauses:
- “If your claim is above the small claims limit, you can claim from your opponent part or all of our basic charges and disbursements.”
- “In cases involving road traffic accidents worth less than £25,000, the amount that the Defendant is liable to pay in respect of our basic charges is fixed by the provisions of the Civil Procedure Rules.”The documents also contained the following clauses:
- “Most Personal injury claims settle by negotiation after medical evidence and details of financial losses had been obtained. I estimate that the basic charges for the work necessary to obtain this information will be £2,500...”
- 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.
THE APPEALThe Claimant appealed on the basis that CPR 46.9(2) should not apply because she had not provided her informed consent to being charged more by the Defendant than the amount recovered from the Insurers. The Claimant contended that, in order to provide informed consent, she should have been provided with enough information to balance up and have knowledge of her likely liability, for example, information about the fixed costs that might be recoverable as against the Defendant’s estimate of their costs. The Defendant argued that CPR 46.9(2) did not require informed consent, merely a written agreement that is sufficiently clear that the solicitors have the right to recover more from the Claimant than the amount recovered from the other side. Lavender J began his judgment with a discussion of the fiduciary relationship between solicitor and client. He went on to discuss the relationship between CPR 46.9(2) and CPR 46.9(3) and considered Herbert v HH Law  2 Costs LR 261. The key paragraphs of his decision are  –  where he states (my emphasis):
‘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.’According to Lavender J, the requirement for informed consent arises because of the fiduciary relationship between solicitor and client. For the Claimant to be able to provide informed consent, Lavender J stated that the Defendant should have given some indication of what the likely recoverable costs from the Insurers might have been. Lavender J states that his decision does not impose an onerous requirement upon the Defendant. The Defendant had informed the Claimant that most personal injury claims settle at Stage 2 and so, according to Lavender J, the Defendant could easily have also indicated the likely costs that would be recoverable from the Insurers. Finally, Lavender J noted that this case was particularly striking because the Defendant’s estimated costs were five times the fixed recoverable costs and that, under the terms proposed in the Defendant’s documents, 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 the Claimant’s attention.
DISCUSSIONFirst, some practical advice for solicitors: make sure that any CFA contains either:
- Basic information about fixed costs; or
- An overall cap on the Claimant’s liability.