Darya Belsner v Cam Legal Services Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Geoffrey Vos,Sir Julian Flaux,Lord Justice Nugee |
| Judgment Date | 27 October 2022 |
| Neutral Citation | [2022] EWCA Civ 1387 |
| Docket Number | Appeal No: CA-2021-000398 (C1/2021/0161) |
| Court | Court of Appeal (Civil Division) |
and
[2022] EWCA Civ 1387
Sir Geoffrey Vos, MASTER OF THE ROLLS
Sir Julian Flaux, CHANCELLOR OF THE HIGH COURT
and
Lord Justice Nugee
Appeal No: CA-2021-000398 (C1/2021/0161)
Case No: E90SE056
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
Mr Justice Lavender [2020] EWHC 2755 (QB)
ON APPEAL FROM SHEFFIELD DISTRICT REGISTRY
DISTRICT JUDGE BELLAMY
Royal Courts of Justice, Strand
London WC2A 2LL
PJ Kirby KC and Robin Dunne (instructed by Clear Legal Limited t/a checkmylegalfees.com) for the Claimant/Respondent (the Client)
Benjamin Williams KC and George McDonald (instructed by Kain Knight Costs Lawyers) for the Defendant/Appellants (the Solicitors)
David Holland KC and Rupert Cohen (instructed by The Law Society Legal Services Department) for The Law Society
Hearing dates: 22 and 23 February and 4–6 October 2022
Sir Geoffrey Vos, Master of the Rolls:
Introduction
This case raises important questions concerning the way in which solicitors charge their clients for bringing small road traffic accident claims (RTA claims) on their behalf.
The law governing the way in which RTA claims can be brought has changed considerably in recent years. Most are now initiated on one of two pre-action online portals.
The pre-action protocol for low value personal injury claims in road traffic accidents (the RTA portal) was established in 2010 with the objectives of enabling: (a) defendants to pay damages and costs without the need for proceedings, (b) claimants to be paid within a reasonable time, (c) claimants' lawyers to receive fixed costs at each appropriate stage. The RTA portal is mostly used by clients represented by solicitors. At its height, more than 600,000 cases per annum were brought through the RTA portal.
Following the Civil Liability Act 2018, which introduced tariff damages for RTA claims, the Official Injury Claim Service (the Whiplash portal) was developed by the Motor Insurers' Bureau. The Whiplash portal began on 31 May 2021, and is governed by the pre-action protocol for personal injury claims below the small claims limit in road traffic accidents (now £5,000). The Whiplash portal is accessible both by litigants in person and by those that are represented. No costs are recoverable for the period prior to the issue of court proceedings. Claims are now being brought within the Whiplash portal at the rate of about 300,000 per year.
The Solicitors in this case were instructed by the Client to bring her claim on the RTA portal. The claim was settled at stage 2 after the provision of medical reports, as is common, with the defendant's insurer paying damages of £1,916.98 plus fixed costs of £500 plus disbursements (ignoring VAT). The Solicitors retained the fixed costs and paid the Client the damages less a success fee of £321.25 (capped at 25% of the recovered damages – see [28] below). The Client later instructed new solicitors trading as checkmylegalfees.com to query the Solicitors' charging. The Solicitors point out that the Client did not appeal DJ Bellamy's assessment that they could reasonably have charged £1,392 (11.6 hours at £120 per hour) for their work (plus a success fee of £208.80), instead of the £321.25 plus £500 fixed costs (£821.25) which they actually asked for and were paid.
On the first appeal, Mr Justice Lavender (the judge), allowed the Client's appeal, permitting the Solicitors to charge only the £500 fixed costs plus a £75 success fee (assessed at 15% of those fixed costs, again ignoring VAT). The judge approached the case on the basis that the Solicitors owed the Client fiduciary duties when their retainer was being negotiated. He held that an agreement for the purposes of CPR Part 46.9(2) had to be a valid and enforceable agreement. An agreement “whose performance would involve a breach of fiduciary duty” would not be valid and enforceable, and “[t]o that extent, therefore, CPR 46.9(2) [required] informed consent”. As will appear, this short passage in the judge's judgment at [69] requires some unpacking.
The core question in the appeal is actually whether the judge was right to assume, as he did, that section 74(3) of the Solicitors Act 1974 (section 74(3)) and CPR Part 46.9(2) (Part 46.9(2)) applied to cases brought through the RTA portal, where no county court proceedings are actually issued. The Solicitors say now (though they did not make the submission before the judge) that the judge was wrong on this fundamental point, but the Client submits he was right. That issue turns broadly on whether the claims made within the pre-action portals are properly to be regarded as “non-contentious business” (as the Solicitors contend), or as “contentious business” (as the Client contends). That distinction has been entrenched in statute for many decades.
Section 74(3) concerns the proportionality of the amount claimed by solicitors in respect of their costs. It provides that: “[t]he amount which may be allowed on the assessment of any costs … in respect of any item relating to proceedings in the county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and … counterclaim”.
Part 46.9(2) provides a long-standing exception to that statutory provision as follows: “[s]ection 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings”.
If, as the Solicitors contend, section 74(3) and Part 46.9(2) have no application to cases settled within the RTA portal without the issue of proceedings, the case has mostly proceeded up to now on a false foundation. But even then, a question arises that has been raised by the Client's respondent's notice, namely whether the terms in the Conditional Fee Agreement (the CFA) that the Client entered into with the Solicitors, allowing the Solicitors to charge the Client more than the costs recoverable from the defendant to the RTA claim, were unfair either under the Consumer Rights Act 2015 (the CRA 2015) or otherwise.
The Client points to a fundamental unfairness in respect of what she was told about the personal injury claim she wanted to bring. She accepts that she freely signed a retainer agreement with the Solicitors under which she agreed to pay personally any shortfall in the Solicitors' costs recovered from the negligent defendant. She accepts that she was told that the Solicitors estimated their base costs (net of VAT and disbursements) at £2,500, on the assumption that most such claims would settle within the RTA portal after production of medical evidence and financial losses. She also accepts that she was told that the Solicitors estimated her damages entitlement at £2,000. But she complains that she was not told that, on the basis of the Solicitors' own assumptions about when her claim might settle, the fixed costs that would be recovered from the defendant would have been only £500, five times less than she would have to pay (and that that was before any success fee was applied).
Conversely, the Solicitors submit that this case is unreasonable satellite litigation brought in the High Court over very small sums and without economic risk to the Client. They complain that the Client has provided no evidence in support of her claim. The reforms introduced pursuant to Sir Rupert Jackson's reports were never intended to regulate the assessment of costs as between solicitor and client. Sir Rupert said expressly at [1.4] in his Review of Civil Litigation Costs: Supplemental Report: “[g]iven the multifarious kinds of litigation it is not feasible to preordain how much clients must pay to their lawyers in every individual case. Also, that would be an unacceptable interference with freedom of contract. The best that we can do is to restrict the recoverable costs”.
Against that background, the key questions that will require determination are: (i) whether section 74(3) and Part 46.9(2) apply at all to claims brought through the RTA portal without county court proceedings actually being issued, (ii) whether the Solicitors are required to obtain informed consent from the Client in the negotiation and agreement of the CFA, either due to the fiduciary nature of the solicitor-client relationship or through the language of Part 46.9(2), (iii) if informed consent was required, whether the Client gave informed consent to the terms of the CFA relating to the Solicitors' fees, (iv) whether, in any event, what can be regarded as the term in the Solicitors' retainer allowing the Solicitors to charge the Client more than the costs recoverable from the defendant to the RTA claim was unfair under the CRA 2015, and (v) what are the consequences of the determination of these issues on the assessment in this case.
For the reasons that appear in this judgment, I have decided in summary that (i) section 74(3) and Part 46.9(2) do not apply at all to claims brought through the RTA portal without county court proceedings actually being issued, (ii) the judge was wrong to say that the Solicitors owed the Client fiduciary duties in the negotiation of their retainer, (iii) although the Solicitors were not obliged to obtain the Client's informed consent to the terms of the CFA on the grounds decided by the judge, the Solicitors did not comply with the SRA Code of Conduct for Solicitors (the Code) in that they neither ensured that...
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