For whom the Belsner tolls…do not let it toll for you
In the unlikely event you have not considered the lengthy (23 pages) judgment of the Court of Appeal or indeed perused one of the very many detailed and informative summaries of the case Belsner v Cam Legal Services Limited or perhaps you are a visitor from another planet with an unusual desire to study England and Wales case law involving costs… then you are in luck as here comes another review.
By the way, if you have travelled from a distant planet, welcome to Earth and please excuse the mess.
The case has been described as, “the case of the year,” the “case of the decade,” and “a waste of time and money.” As Mr Loaf once sang, two out of three ain’t bad, so feel free to pick the one that you feel doesn’t apply.
So why the fuss?
Belsner asked whether the client in a low-value RTA claim had given informed consent to her solicitors CAM Legal Services for the deduction of unrecovered costs from her damages.
Ms. Belsner had sustained minor injuries following a motorcycle accident in 2016 and instructed the Solicitors to act for her under the terms of a CFA.
The CFA made clear that if she won her claim, she would pay the Solicitors ‘basic charges, our expenses and disbursements and a success fee together with the premium for any insurance you take out’.
She went on to recover damages of £1,916.98 after liability was admitted and the Solicitors charged £385.50 including VAT on top of the £500 fixed costs they recovered from the defendant.
Via new solicitors, Checkmylegalfees.com, the fees were challenged by Ms Belsner.
In the first instance, DJ Bellamy decided, in effect, that the Solicitors were entitled to charge the only sum which they had ever claimed from the Client, namely the success fee of £385.50. He allowed £1,392 in respect of base costs and a success fee of 15% of that sum.
On appeal, Mr. Justice Lavender in the High Court upheld an appeal from the client deciding that the Solicitors were required to obtain the client’s informed consent to charge more than the fixed costs recovered from insurers and ordered the solicitor to repay £295.50 (being the success fee allowed by the district judge less the £75 plus VAT success fee permitted by the judge). Crucially, the judge found that The Client had to agree to greater charges under CPR Part 46.9(2), and an agreement whose performance would involve a breach of fiduciary duty would not satisfy that provision. A solicitor, as a fiduciary, could not receive a profit from his client without his client’s fully informed consent.
Off to the Court of Appeal, the matter went where the significance of the case was reflected in the court’s constitution: the Master of the Rolls, the Chancellor of the High Court (Lord Justice Flaux) and Lord Justice Nugee.
The core issue was whether the judge was right to assume that section 74(3) and CPR Part 46.9(2) applied to cases brought through the RTA portal, where no county court proceedings were actually issued. That question turned on whether the claims made within the pre-action portals were properly to be regarded as “non-contentious business” (as the Solicitors contended), or as “contentious business” (as the former Client contended).
The COA identified 5 main questions:
- whether section 74(3) and CPR Part 46.9(2) apply at all to claims brought through the RTA portal without county court proceedings actually being issued
- whether the Solicitors were required to obtain informed consent from the Client in the negotiation and agreement of the Conditional Fee Agreement (CFA), either due to the fiduciary nature of the solicitor-client relationship or through the language of CPR Part 46.9(2)
- if informed consent was required, whether the Client gave informed consent to the terms of the CFA relating to the Solicitors’ fees
- 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
- what were the consequences of the determination of these issues on the assessment.
Claimant solicitors up and down the country held their collective breaths as the matter was heard over 3 days in October 2022 with many tuning in to watch proceedings via live stream courtesy of YouTube.
If you are considering reviewing on YouTube, spoiler alert, the following paragraphs contain references to the outcome.
The Court of Appeal’s findings
In the 23-page judgment handed down on 27 October 2022, the court not only found in favour of the Solicitors on every single legal point taken against it by its former client, and her legal representatives, checkmylegalfees.com, but also criticised the cost recovery firm’s business model.
The judgment was however also critical of elements of how PI clients are treated in the claims process and called the current process ‘unsatisfactory in a number of respects”.
A fuller summary of the decision on the 5 questions appears at the foot of this review.
The appeal from Lavender J was allowed and the court ordered that the base costs and the success fee payable by the Client, in this case, should be assessed in the total sum £821.25 plus VAT. The sum of £295.50 was to be repaid by the Client to the Solicitors.
A collective sigh of relief from the claimant side of the profession was heard countrywide.
Going somewhat under the radar was the case of:
Karatysz v. SGI Legal LLP (the Karatysz case) heard by the COA on the same day as the Belsner case.
This also concerned the way in which solicitors charged their clients for bringing small road traffic accident claims (RTA claims) through the online pre-action protocol for low-value personal injury claims in road traffic accidents (the RTA portal).
The Solicitors brought the Client’s case on the RTA portal. When the claim was settled at stage 2 after medical reports, the defendant’s insurer paid damages of £1,250 plus fixed costs of £500 plus £250 plus disbursements. The Solicitors retained the costs and paid the Client the damages less £455.50, made up of a capped success fee of 25% of the damages (£312.50 including VAT) and the after-the-event insurance premium of £143.
As with Belsner the Client later instructed new solicitors, checkmylegalfees.com, to question the Solicitors’ charging and brought assessment proceedings in the High Court under section 70 of the Solicitors Act 1974 (the 1974 Act).
DJ Bellamy in Sheffield originally decided the case, and on the first appeal the matter was heard by Lavender J before proceeding to the COA which took Belsner as its starting point.
DJ Bellamy had decided on several questions in assessing the costs. Most significantly, deciding that the amount of the Solicitors’ bill (for the purposes of section 70(9) of the 1974 Act), was £2,731.90. Accordingly, since he reduced the size of the Bill significantly, he ordered the Solicitors to pay the costs of the assessment.
Those of you still with me will be aware that Section 70(9) provides that: “the costs of an assessment shall be paid according to the event of the assessment, that is to say, if the amount of the bill is reduced by one-fifth, the solicitor shall pay the costs, but otherwise the party chargeable shall pay the costs”. Section 70(10) of the 1974 Act provides that the “costs officer may certify to the court any special circumstances relating to the bill or to the assessment of the bill, and the court may make such order as respects the costs of the assessment as it may think fit”.
On the first appeal, Lavender J decided that the amount of a bill was “the amount demanded by the bill” and he decided that the answer to the question, “how much was being demanded by this Bill?” was that the Solicitors were merely seeking to justify their retention of the £1,116 received from the insurers for the defendant to the RTA claim and the £455.50 deducted from the Client’s damages and were not demanding more money.
The Court of Appeal broadly agreed with Lavender J’s approach, deciding that the question to ask in order to determine, “the amount of the bill” under section 70(9) was “what is the total sum that the bill is demanding be paid to the Solicitors, whether or not all or part of that total sum has actually been paid”. When that question was asked in the instant case, the judge had been right to find that the Bill totalled £1,571.50. Accordingly, the Client had failed on the assessment to reduce the Bill at all and had to pay the costs by virtue of the effect of section 70(9).
The Court of Appeal went on to provide the following guidance with the MOR stating:
“properly drawn bills ought in future to state the agreed charges and/or the amounts that the solicitors were intending by the bill to charge, together with their disbursements. They should make clear what parts of those charges were claimed by way of base costs, success fee (if any), and disbursements. The bill ought also to state clearly (i) what sums had been paid, by whom, when and in what way (i.e. by direct payment or by deduction), (ii) what sum the solicitor claimed to be outstanding, and (iii) what sum the solicitor was demanding that the client (or a third party) was required to pay. The practice of imposing conditions on the face of a statutory bill was confusing and unhelpful. If conditions were to be imposed, they should be transparent. If, for example, the bill was for £5,000, but the solicitors wished to say that they would accept £4,000 in full and final settlement if payment were made within 14 days, that should be clearly stated. The amount of such a bill would be held to be £5,000”.
The Court of Appeal also said that the Client had allowed checkmylegalfees.com to bring a costly case on her behalf when she had almost nothing to gain. The process whereby small bills of costs were taxed in the High Court was to be discouraged. The Legal Ombudsman scheme was cheaper and more cost-effective.
It had not been necessary to decide the instant case as to whether there were “special circumstances” under section 70(10), because the Client had not succeeded. But the Court of Appeal said that firms such as checkmylegalfees.com and their clients should be in no doubt that the courts would have no hesitation in depriving them of their costs under section 70(10) if they continued to bring trivial claims for the assessment of small bills to the High Court, even if those bills were reduced on the facts of the specific case by more than one fifth under section 70(9). The critical issue is and always would be whether it was proportionate to bring such a case to the High Court. In the instant case, it was not.
Is this the end of the matter? Probably not, though at the time of jotting down this note no appeal has been filed in either case however that is unlikely to deter other avenues being explored – perhaps larger consumer work, family work, probate work and employment disputes, etc.
Checkmylegalfees.com will continue to challenge and perhaps we will see the emergence of checkmylegalfeeslegalfees.com. Facetious, Moi?
Certainly, the criticisms that were made by the Master of the Rolls will not go unheard and changes can be expected in respect of the way the existing portal operates and possibly to the Solicitors Act 1974 by way of secondary legislation; time will tell.
It is possible that small bills will no longer be “taxed” [sic] in the High Court but rather referred to the Legal Ombudsman as per the Master of Rolls’ steer, though how the LO would cope remains to be seen.
Solicitors will need to take heed and provide Belsner advice to their clients, where appropriate, to echo the strong views of the MOR with more emphasis on the provision of fee estimates at the outset, both chargeable and recoverable against the opponent and where rates are claimed against the client higher than the Guideline Hourly Rates an explanation as to why would not go amiss.
Should the client be advised as to the difference between contentious and non-contentious costs? In the portal costs are non-contentious (costs only become contentious on the issue of proceedings). That is for the individual solicitor to consider with each client and there will be the fear that the Client Care Agreement will be longer than this note but with the Defendants considering increasingly inventive ways to reduce/disallow costs a belt, braces and extra belt may be worthwhile in the long run.
Should the ever weary Solicitor provide bills that set out details of agreed charges/amounts to be billed, details of disbursements payments on account etc, certainly the words of the Master of Rolls bear repeating: properly drawn bills ought in future to state the agreed charges and/or the amounts that the solicitors were intending by the bill to charge, together with their disbursements. They should make clear what parts of those charges were claimed by way of base costs, success fee (if any), and disbursements. The bill ought also to state clearly (i) what sums had been paid, by whom, when and in what way (i.e. by direct payment or by deduction), (ii) what sum the solicitor claimed to be outstanding, and (iii) what sum the solicitor was demanding that the client (or a third party) was required to pay.
Ignore the guidance at your peril.
My favourite view post the COA’s decisions belongs to Ben Williams KC of 4 New Square Chambers who represented the Solicitors and was moved to tweet:
Breaking my usual rule on legal self-tweeting, the appeal in Belsner has been allowed, and on terms that may make it much harder for claims organisations to turn a profit from shaking-down solicitors.
It may not be the end of such challenges but, you will be relieved to see that it is the end of this missive.
Thank you and safe travels to those heading back to your home planets.
For those still awake – COA decision with regard to the 5 issues identified in Belsner:
(i) The distinction between contentious and non-contentious costs was outdated and illogical. It was in urgent need of legislative attention.
(ii) There was no logical reason why section 74(3) and CPR Part 46.9(2) should now apply to cases where proceedings are issued in the County Court and not to cases pursued through the pre-action portals.
(iii) It was unsatisfactory that, in RTA claims pursued through the RTA portal (and perhaps the Whiplash portal), solicitors seemed to be signing up their clients to a costs regime that allowed them to charge significantly more than the claim was known in advance to be likely to be worth. The unsatisfactory nature of these arrangements was not appropriately alleviated by solicitors deciding, at their own discretion, to charge their clients whatever lesser (and more reasonable) sum they might choose with the benefit of hindsight.
(iv) It was illogical that, whilst the distinction between contentious and non-contentious business survives, the CPR should make mandatory costs provisions for pre-action online portals, but otherwise dealt only with proceedings once issued. Section 24 of the Judicial Review and Courts Act 2022 would allow the new Online Procedure Rules Committee (OPRC) to make rules that affect claims made in the online pre-action portal space. The OPRC could make all the rules for the online pre-action portals and for claims progressed online.
(v) It was unsatisfactory that solicitors like checkmylegalfees.com could adopt a business model that allowed them to bring expensive High Court litigation to assess modest solicitors’ bills in cases of this kind. The Legal Ombudsman scheme would be a cheaper and more effective method of querying solicitors’ bills in these circumstances.
Gary Knight, Partner and Costs Lawyer