Nicky Herbert v H H Law Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Terence Etherton,Lady Justice Asplin,Lord Justice Lindblom |
| Judgment Date | 03 April 2019 |
| Neutral Citation | [2019] EWCA Civ 527 |
| Docket Number | Case No: A2/2018/0828 |
| Court | Court of Appeal (Civil Division) |
| Date | 03 April 2019 |
[2019] EWCA Civ 527
THE MASTER OF THE ROLLS
Lord Justice Lindblom
and
Lady Justice Asplin
Case No: A2/2018/0828
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
SHEFFIELD DISTRICT REGISTRY
Soole J
Royal Courts of Justice
Strand, London, WC2A 2LL
Nicholas Bacon QC and Andrew Hogan (instructed by Hampton Hughes Solicitors) for the Appellant
P J Kirby QC and Robin Dunne (instructed by J G Solicitors) for the Respondent
Hearing date: 20 March 2019
Approved Judgment
Sir Terence Etherton MR:
This appeal raises two principal issues of general importance in relation to a detailed assessment of solicitor and client costs pursuant to the Solicitors Act 1984 s.70 and CPR 46.9. The first issue concerns the proper meaning and application of CPR 46.9(3) as regards a success fee of 100% under a Conditional Fee Agreement (“the CFA”), which has been fixed at that level without any regard to the risk of failure of the claim. The second issue is whether the cost of the premium for an After The Event (“ATE”) insurance policy was properly to be treated as a solicitor's disbursement or merely an entry in the client account.
The appeal is from the order of Mr Justice Soole of 21 March 2018 dismissing the appeal of the appellant, HH Law Limited, which trades as Hampson Hughes (“HH”), from (1) the decision of District Judge Bellamy of 28 April 2017 in which he held, among other things, that the presumptions in CPR 46.9(3)(a) and (b) were rebutted and the appropriate percentage increase should be reduced to 15%, and (2) the decision of District Judge Bellamy of 1 June 2017 in which he held, among other things, that the ATE insurance premium should have been included in the bill as a disbursement and should not have been included in the cash account as an item of client expenditure.
CPR 46.9 is headed “Basis of detailed assessment of solicitor and client costs”. CPR 46.9(3) is as follows:
“(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.”
46PD.6 concerns the assessment of solicitor and client costs and relates to, among other things, CPR 46.9. It provides, so far as relevant to this appeal, as follows:
“6.1 A client and a solicitor may agree whatever terms they consider appropriate about the payment of the solicitor's charges. If, however, the costs are of an unusual nature, either in amount or the type of costs incurred, those costs will be presumed to have been unreasonably incurred unless the solicitor satisfies the court that the client was informed that they were unusual and that they might not be allowed on an assessment of costs between the parties. That information must have been given to the client before the costs were incurred.
6.2 Costs as between a solicitor and client are assessed on the indemnity basis. The presumptions in rule 46.9(3) are rebuttable.”
The background
On 15 October 2015 Ms Herbert was involved in a road traffic accident when the car she was driving was struck from behind by a bus. On 17 March 2016 she entered into a CFA with HH, which specialises in personal injury claims. The CFA included the following provisions:
“If you win your claim, you pay 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 set out in the document “Hampson Hughes Funding Agreements: What you need to know”. We will use our best endeavours to recover maximum costs from the Defendant and their insurers.”
“The Success Fee
(1) The success fee is set at 100% of basic charges.
(2) The success fee cannot be more than 100% of basic charges.
(3) There is a maximum limit on the amount of the success fee which we can recover from you.
(4) The maximum limit is 25% of the total amount of any
(i) General damages for pain, suffering and loss of amenity; and
(ii) Damages for pecuniary loss, other than future pecuniary loss;
Which are awarded to you in in the proceedings covered by this Agreement. The maximum limit is applicable to these damages net of any sums recoverable by the Compensation Recovery Unit of the Department of Work and Pensions. The maximum limit is inclusive of any VAT which is chargeable.
(5) The maximum limit includes any success fee payable to a barrister who has a CFA with us.”
HH wrote a letter on the same day to Ms Herbert (“the retainer letter”). It enclosed an “Insurance Information Fact Sheet” which, among other things, said the following under the heading “After the Event Insurance”:
“If you do not have suitable alternative funding … 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 Expense 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 [in addition to a number of specified factors] — The premium reflects the category of risk.”
Earlier in that document, above Ms Herbert's signature, there is the following statement:
“I confirm I … am happy for Hampson Hughes to waive the investigation into alternative forms of funding and proceed to take out an insurance policy with Centron 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 document also contains the following statement under the heading Damages Deduction:
“The deduction of damages if you proceed with the Hampson Hughes CFA & ATE premium, are in respect of a success fee which is no longer recoverable from the Defendant due to a change in the law since April 2013. The deduction of your damages will never be more than 25% and will only be made if your case is successful and you do not have the requisite BTE cover as detailed above.”
An internal HH review note dated 26 April 2016 considered Ms Herbert's prospects of success, concluding that the claim:
“…enjoys reasonable prospects of success given it is a rear end shunt and liability has been admitted on the linked 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.”
HH, acting on behalf of Ms Herbert, took out ATE insurance with Centron Insurance (“Centron”). The premium was £349.
Having originally submitted her claim through the RTA portal in accordance with the pre-action protocol for low value personal injury claims in road traffic accidents, Ms Herbert issued proceedings 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 CPR 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 continued:
“The total deductions that we must make from your damages is therefore £1178.21. This figure is broken down as follows
Contribution towards our Costs (25% of damages) £829.21
ATE insurance policy £349
To clarify; if you were to accept this offer you will receive £2,221.79 and a balance of £1,178.21 will be paid towards our legal costs.”
Details of the costs incurred were contained in an invoice dated 6 September 2016. This was in the total amount of £6175.84, comprising £4795.40 (22.10 hours at £118) in respect of “costs”, £959.40 for VAT, and £421 for “Disbursements (expenses incurred on your behalf by the firm)” comprising a medical report (£216) and Court fee (£205).
On 19 September 2016 Ms Herbert accepted the offer. By letter dated 3 October 2016 she received the net sum of £2221.79. HH Law subsequently...
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