The outcome of Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB) is critically important to lawyers specialising in RTA and EL/PL work subject to fixed costs and will have an immediate effect. However, the consequences may be much more far-reaching, and any lawyer undertaking CFA work would be well-advised to consider whether their terms require amendment.
Background
On 5 February 2016 the claimant, Ms Belsner, was a pillion passenger when the motorbike she was riding was involved in a collision. Following the accident, she instructed the defendant, a law firm, to pursue damages. The defendant offered to act under CFA terms and sent a client care letter which set out the basis on which they would charge her. The relevant details of the CFA are contained at paragraphs 9 to 16 of the judgment. However, importantly (as noted at para 15) “none of the documents provided for an overall cap on the amount recoverable by the defendant from the claimant…”
The defendant did not advise Ms Belsner of the value of her claim, but completed a risk assessment which indicated that the defendant considered the likely value of the matter was less than £2,000.
Matters progressed and the insurer settled Ms Belsner’s claim for £1,916.98 damages, plus fixed costs and disbursements totalling £1,783.48. The defendant then paid on to Ms Belsner the sum of £1,531.48 (the amount of damages less £385.50 in respect of the success fee) but did not send a bill of costs or invoice.
Ms Belsner instructed Checkmylegalfees.com Limited and on 10 May 2018 a claim form was issued seeking an order for delivery of a statute bill. The defendant served a statute bill on 24 May 2018 which totalled £4,306.07 comprising:-
- Basic Charges of £2,171.90 plus VAT
- 100% success fee capped at 25% damages of £385.50 plus VAT
- GP Report of £225 plus VAT
- Psychology report of £806 plus VAT
- Total £3,588.40 plus VAT
On the defendant’s case therefore, it had been entitled to charge the claimant £4,306.07, which would have left her £605.90 out of pocket. The defendant had therefore chosen not to charge the whole of the fees they were strictly entitled to, and instead charged only the sum of £2,168.98, being the fixed costs recovered plus the success fee.
The court subsequently carried out a provisional (on paper) assessment and at first instance held that the claimant had not given “informed consent” as required by CPR 46.9(2), and on this basis limited to the basic charges to the £500 plus VAT being the amount actually paid in respect of costs by the insurer relating to costs. The court also reduced the success fee from 100% to 15%. Commenting on whether informed consent had been given, District Judge Bellamy said “given the differences in hourly rates and the lack of detailed explanation of the various costs scenarios it is hard to see how informed consent could be given”.
At a subsequent oral hearing the defendant argued that the CFA was sufficiently clear that the amount they could charge were not limited, and that accordingly it was clear that circumstances could arise in which the claimant would have to pay more than they recovered from the opponent. The Claimant argued that it was not sufficiently clear, and that in order to give express permission she should have been given enough information to balance the likely liability with the likely recovery.
Ultimately, the court assessed the defendant’s costs in the sum of £1,392 plus VAT for base costs and £208.80 plus VAT for the success fee.
As such, the Court held that the defendant was entitled to:-
- Base Costs: £1,392 plus VAT
- Success Fee: £208.80 plus VAT
- GP Fee: £255 plus VAT
- Psychology report fee: £806 plus VAT
- Total £2,661.80 plus VAT
However, in total Ms Belsner had only ever paid £2,168.98 because the defendant had only charged the amount recovered from the defendant plus the success fee. As such, the provisional assessment did not result in any financial recovery for Ms Belsner.
The Appeal
Ms Belsner appealed the decision on the basis that she had not given “informed consent” to the agreement that she would (or could) pay more to her solicitor than the amount recovered from her opponent in the court proceedings.
Summary of Decisions
- The fact that the defendant had not sought to charge everything it was entitled to was not relevant; it was not a part of the agreement.
- Had Ms Belsner been provided with sufficient information about the likely damages and the likely costs recoverable from her opponent, it might have affected her decision to enter into the CFA.
- The general terms used by the defendant in its CFA were not sufficiently clear to enable Ms Belsner to understand that she might end up with a shortfall.
- This case was distinguishable from Herbert v HH Law [2019] EWCA Civ 527 because in Herbert the solicitor had stated in the CFA that the amount recoverable from the client was capped at 25% of damages. There was no such limitation in this case.
- As a result of the above findings, Ms Belsner did not give her informed consent to enter into the CFA and it was therefore unenforceable unenforceable to the extent it required the client to pay more than was actually recovered from her opponent.
Protecting Yourself
All lawyers practicing in cases subject to fixed costs, including EL/PL and RTA, as well as those acting in Intellectual Property subject to scale costs and tribunals which may be subject to specialist costs regimes should urgently review their CFAs and ensure that they:-
- Make clear that the client may be charged more than they could recover from their opponent; and
- Include a cap on the amount which will be taken from damages in the event of success as in Herbert; or
- Provide an estimate of the level of damages which the client can expect to recover (and this should be bespoke to each case) and set out the details if what costs are recoverable from an opponent under Part 45. This could be as simple as including tables 6B / 6C / 6D (and the relevant tables for “portal” costs) within a schedule to the CFA.
Of course, if the CFA is not compliant then it will be necessary to take remedial action in relation to ongoing cases. It may be sufficient to send a letter to your clients providing (1) an estimate of their damages, and (2) details of what they may recover from the opponent. It may then be possible to argue that by continuing to provide instructions they have given their “informed consent” to proceed on that basis. However, it may be necessary to go further and give the client an option to terminate. It is also possible that, were it to “get out” that such a letter had been sent, it may put firms which specialise in recovering legal fees for consumers on notice of a potential goldmine of cases.
Therefore, if you find yourself in this position, you should seek advice as soon as possible to protect yourself from potential future claims.
Matthew Rose is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact him at matthew.rose@clarionsolicitors.com and 0113 222 3248. You can contact the Clarion Costs Team on 0113 246 0622.
