Ms Nicky Herbert v HH Law Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Soole |
| Judgment Date | 21 March 2018 |
| Neutral Citation | [2018] EWHC 580 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: COUNTY COURT CLAIM NO: C90 SE 097 |
| Date | 21 March 2018 |
[2018] EWHC 580 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
SHEFFIELD DISTRICT REGISTRY
The Law Courts
50 West Bar
Sheffield S3 8PH
Mr Justice Soole
Case No: COUNTY COURT CLAIM NO: C90 SE 097
Mr Andrew Hogan (instructed by the Defendant/Appellant solicitors)
Mr Ian Simpson (instructed by JG Solicitors Limited) for the Claimant/Respondent
Hearing dates: 8 November, 15 December 2017
Judgment Approved
This is an appeal by the Defendant solicitors (HH) from decisions of DJ Bellamy dated 28 April 2017 and 1 June 2017 whereby he:
(i) on assessment of HH's bill of costs in respect of the Claimant (Ms Herbert)'s personal injury claim reduced the success fee under the conditional fee agreement (CFA) from 100% to 15%;
(ii) approved a Cash Account in terms which treated payment of Ms Herbert's ATE insurance premium as a solicitor's disbursement;
(iii) in ordering HH to pay the costs of the assessment, refused to inquire further into HH's contention that the retainer of Ms Herbert's new solicitors JG Solicitors Ltd (JG) was tainted by illegality and unenforceable.
Permission to appeal was granted by a combination of DJ Bellamy and Langstaff J.
Ms Herbert's claim arose from a road traffic accident (RTA) on 15 October 2015, when the car she was driving was struck from behind by a bus. On 17 March 2016 she and HH entered a CFA which provided that if successful in the claim she would pay HH ‘…our basic charges, our disbursements, success fee and ATE Premium. You are entitled to seek recovery from your opponent of part or all of our basic charges and our disbursements…’
As to the success fee, the CFA set this at the statutory maximum of 100%, subject to the maximum of 25% of the total amount of general damages for pain suffering loss of amenity (PSLA) and damages for past financial loss. These maxima reflected Articles 3 and 5 of the Conditional Fee Agreements Order 2013 (the 2013 Order).
As to the ATE premium, HH's letter of the same date (17.3.16) had enclosed an ‘Insurance Information Fact Sheet’. That document referred to the Qualified One Way Costs Shifting (QWOCS) regime and the loss of protection in the specified events. Under the heading ‘After the Event Insurance’ the document stated in particular:
‘If you do not have suitable alternative funding as detailed above then we will take out an insurance policy with Centron Insurance…
…The insurance policy costs £349 and will be deducted from your damages at the conclusion of the claim as well as up to 25% of your damages. If you do not inform us otherwise, a policy will be taken out if you do not have suitable alternative legal funding to protect you against having to pay the other side's costs…
…We only deal with Centron Insurance for Legal Insurance Policies but we are not contractually obliged to conduct business in this way. You are free not to take out an insurance policy with Centron or choose your own insurance policy however we must advise that not having an insurance policy in place will expose you to the risk that you may have to pay costs and disbursements from your own pocket.
You are taking this insurance policy out without the firm having conducted a fair analysis of the market. We have researched legal protection insurance policies generally and found Centron policies to be reasonably priced given their high level of protection. You also do not have to pay for the policy unless your claim is successful, which we believe is a benefit for our clients. Please note that the firm does not have an interest in recommending this policy and the firm will not receive a commission from the Insurer…
…We believe that a contract of insurance with Centron Insurance is appropriate because..’, then citing a list of factors including ‘The premium reflects the category of risk’.
The document provided for the client (Ms Herbert)'s signature after confirmation that she had read and understood the above and that ‘I am aware that if I do not have the appropriate cover in place for this accident [HH] will proceed to take out an insurance policy at a cost of £349 to protect me. I am aware that the cost of the policy and a deduction of damages, up to a maximum of 25%, will be taken upon successful conclusion of my claim’.
The claim was submitted via the RTA portal on or about the same date. An internal HH review note dated 26 April 2016 considered Ms Herbert's completed accident questionnaire and under ‘prospects’ concluded that the claim ‘…enjoys reasonable prospects of success given it is a rear end shunt and liability has been admitted on thelinked files. I am a little wary that the client may have slammed on rather than slowed to a stop given the earlier altercation with the Defendant driver, however I am of the opinion that she would not have done considering she had young children in the back of the vehicle’.
The proceedings were issued in the County Court on 23 August 2016, claiming damages for a whiplash injury and consequential loss.
By letter dated 3 September 2016 the defendant's insurers made a Part 36 offer of £3400, together with costs as agreed or assessed, in full and final settlement of the claim.
By letter to Ms Herbert dated 6 September 2016 HH advised that she should accept the offer; and that if she did so the total deductions would be £1178.21, comprising ‘Contribution towards our Costs (25% of damages) £829.21’1 and ‘ATE Insurance policy £349.00’ and stated ‘To clarify, if you were to accept this offer you will receive £2,221.79 and balance of £1,178.21 will be paid towards our legal costs’.
Details of the costs incurred were enclosed in an invoice (not a request for payment) dated 6 September 2016. This was in the total of £6175.84 comprising 'costs 22.10 hrs at £118 £4795.70; VAT £959.40; and ‘Disbursements (expenses incurred on your behalf by the firm)’ of £421, comprising medical report (£216) and Court fee (£205).
On about 19 September 2016 Ms Herbert accepted the offer. By letter dated 3 October 2016 she received the net sum of £2221.79. HH subsequently delivered two bills, namely the previous invoice (6.9.16) totalling £6175.84 and invoice no. 173761 (26.9.16) in the sum of £691 plus VAT = £829.20, i.e. representing the success fee.
Ms Herbert subsequently instructed her present solicitors, JG. On 10 November 2016 HH supplied JG with its file of papers. By letter to HH dated 30 November 2016 JG challenged HH's costs, in particular contending that HH had failed to conduct a risk assessment justifying the level of success fee; and that the 100% uplift was out of step with the fixed success fee of 12.5% under the previous costs regime for RTA claims which settled before trial. That regime had been replaced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) with effect from 1 April 2013.
Assessment of success fee
The present claim for an assessment of the two bills was issued by JG. By order dated 14 February 2017 there was to be a ‘paper assessment’ limited to the amount of the success fee, pursuant to s.70(6) Solicitors Act 1974.
The post-LASPO CPR provisions for a solicitor-client assessment are in CPR 46.9. As far as material these provide:
(3) Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed
(a) to have been reasonably incurred if they were incurred with the express or implied approval of the client;
(b) to be reasonable in amount if their amount was expressly or impliedly approved by the client;
(c) to have been unreasonably incurred if
(i) they are of an unusual nature or amount; and
(ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party.
(4) Where the court is considering a percentage increase on the application of the client, the court will have regard to all the relevant factors as they reasonably appeared to the solicitor or counsel when the conditional fee agreement was entered into or varied'.
In support of its position, HH submitted a witness statement from its Mr Craig Ralph dated 20 March 2017. This explained that its pre-LASPO practice in personal injury litigation was to limit the costs payable by the client to the sums recovered from the other party. It would routinely recover costs on the standard basis and a success fee on those costs. This had been its business model which covered overheads and made profit.
This all changed with LASPO and the loss of the ability to recover success fees from the paying party. In order to continue as a business it had become necessary to restructure the charges to clients in order to cover overheads and make a profit. In consequence:
‘6. As a firm, we considered that the easiest and most transparent way was to make a solicitor own client charge, by way of a success fee which the client could pay out of damages. The success fee would be based on the basic costs that we actually recovered from the other side, thus limiting the fee.
7. We considered that clients would readily understand that method in principle, and we also thought it was fair, as the client's interests would be protected by the statutory cap on deductions from certain categories of damages of 25%. An individual client would therefore always retain 75% (at least) of his/her damages.
8. Conversely, charging the client an increased hourly rate, or requiring the client to pay hourly rates when only fixed costs were going to be recovered in many cases, seemed to us to be more cumbersome, result in the hardest fought and most difficult cases carrying the heaviest burden of irrecoverable costs and less fair.
9. I can say that the model we have adopted, is that opted for by most of our competitors. It is...
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