Call Us 0161 832 4036     |     Public Access Enquiry
;

Belsner v Cam Legal Services Limited – An Important Decision, But Unanswered Questions Remain

John Meehan | October 21, 2020
On Friday 16th October, the High Court handed down judgment in Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB); an important decision affecting solicitors and their clients.

On Friday 16th October, the High Court handed down judgment in Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB); an important decision affecting solicitors and their clients. The decision is part of ongoing litigation between solicitors and former clients concerning deductions made from damages pursuant to Conditional Fee Agreements.

The Issues

The court was asked to consider whether a solicitor, seeking to rely on CPR 46.9(2), is required to show that the client gave informed consent to the payment to the solicitor of a sum greater than that which the client could have recovered from another party in the proceedings. Belsner was the first occasion on which the court had been asked to consider this question; a fact remarked on by Lavender J in the judgment. Accordingly, the court and both parties treated this as a test case.

Background & First Instance

The Claimant was injured in a road traffic accident in February 2016. In March 2016 the Claimant instructed the Defendant to pursue her personal injury claim. A Client Care Letter, including Terms and Conditions of Business and a Conditional Fee Agreement, was sent to the Claimant. Whilst the Conditional Fee Agreement capped the success fee recoverable from the Claimant, it did not include an overall global cap on the sum that could be deducted from any damages recovered. The Defendant pursued the claim, liability was admitted within the Protocol process and a Stage 2 settlement pack was sent to the Insurers with an offer of £1,916.98. The Insurers accepted the offer and the claim settled. The Defendant sent £1,531.48 to the Claimant, retaining £385.50 in respect of the deduction.

The Claimant subsequently brought a challenge against the Defendant in respect of the sum of £385.50 which had been deducted from damages. The Defendant served a statute bill and in July 2018, the Claimant applied for an assessment of the Defendant's bill. In February 2019 District Judge Bellamy carried out a provisional assessment of the bill. As part of this, District Judge Bellamy found that informed consent was required for CPR 46.9(2), that informed consent had not been given, and that accordingly the solicitor's basic charges were limited to £500.00 plus VAT. The Defendant challenged a number of aspects of this provisional assessment, including the finding that CPR 46.9(2) required informed consent. On this point, the District Judge changed his mind finding that:

'The next issue for the court to determine is what do the words "written agreement" mean in CPR 46.9(2) and whether the court should import in that paragraph that there must be sufficient information given to the contracting non-legal party, in other words the potential Claimant, in order to make an informed decision...It is said on behalf of the Claimant that there must be more information given in terms really that the client in order to give express permission must have enough information in order to balance up and have knowledge of the likely liability, for example, between fixed costs that might be recoverable as against the estimate of costs. I think that is setting the bar too high and I think it is trying to read in to 46.9(2) something that is not there. I think the court is entitled to look at the agreement, to make sure that it contains sufficient certainty and sufficient clarity from the other side...I think to import informed consent places the burden too high. It simply has to be an express term and an express term is a term that is clearly set out in the agreement and about which there can be no doubt and I am satisfied that this documentation meets this test.' [6]

Appeal

The Claimant appealed the decision of District Judge Bellamy. Her grounds of appeal were:

(1) Pursuant to section 74(3) of the Solicitors Act 1974, the amount allowed on assessment should not, except where rules of court permit, exceed the amount which could have been allowed as between party and party in the proceedings.
(2) The district judge held that the rules of court did permit the allowance of a greater amount, because CPR 46.9(2) applied, in that the Defendant and the Claimant had entered into a written agreement which expressly permitted payment to the Defendant of an amount of costs greater than that which the Claimant could have recovered from another party to the proceedings.
(3) There was indeed a written agreement which made express provision to that effect, but the Claimant contended that it was also a requirement that the Claimant had not merely signed that agreement, but had given informed consent to it, which required the Defendant to give the Claimant "a full and fair exposition of the factors relevant to it", which the Claimant contended that the Defendant did not do.
(4) The district judge rejected this contention. The Claimant contends on her appeal that he was wrong to do so.

The Decision On Appeal

Fiduciary Relationship

Lavender J found that the relationship between solicitor and client is a fiduciary one. Accordingly, he found: '

'As a fiduciary, a solicitor may not receive a profit from his client without his client's fully informed consent.' [34]

Informed Consent

As to informed consent, Lavender J held:

'A solicitor who wishes to rely on CPR 46.9(2) must not only point to a written agreement which meets the requirements of the rule, as the Defendant did, but must also show that his client gave informed consent to that agreement insofar as it permitted payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings. For this purpose, the solicitor must show that he made sufficient disclosure to the client.' [68]

At Paragraph 71 he described the key question as:

'...whether the Defendant made sufficient disclosure to the Claimant for the purposes of section 74(3) and CPR 46.9(2).'

Disclosure

In considering the disclosure made by the Defendant, Lavender J observed:

1. The Defendant did disclose to the Claimant that the agreement permitted payment to the Defendant of an amount of costs greater than that which the Claimant could have recovered from another party to the proceedings.
2. That in road traffic accident claims worth less than £25,000.00, the costs recoverable from another party to the proceedings were fixed by the CPR.
3. The Defendant did not attempt to summarise the fixed costs or provide any examples of the fixed costs within the retainer documentation.
4. The Defendant had provided the Claimant with an estimate of costs in the Client Care Letter. The estimate for basic charges was said to be £2,500 plus VAT in respect of a claim concluding at Stage 2.

Based upon the estimate provided, and taking into account the absence of a global cap on the sum that could be deducted from damages, Lavender J observed:

'If the claim had settled at that stage (and the Defendant acknowledged in paragraph 23 of the Client Care Letter that most personal injury claims do settle at or after that stage) then, on the basis of the Defendant's estimate, if the claim had remained within the Protocol (and using for these purposes the success fee as set out in the CFA, rather than as reduced on assessment), the Claimant would have owed the Defendant £2,400 (i.e. £2,500 - £500, plus VAT) plus 25% of the damages. In that event, unless the damages were at least £3,200, the effect of the agreement was that the Claimant would have had to pay all of her damages and more to the Defendant.' [83]

As to the materiality of the failure to provide disclosure of the operation of the fixed costs regime, Lavender J found:

'It is necessary to ignore for these purposes the fact that the Defendant subsequently chose not to claim everything which it was entitled to claim by way of costs. The Defendant acted as if it, like HH Law, had agreed to cap the costs which it could recover from the Claimant at 25% of the damages. Many solicitors agree to do this, but the Defendant did not.' [84]

'If it had been pointed out to the Claimant, that while the Defendant's estimate of costs was £2,500.00 plus VAT, she might recover only £500 or £550 plus VAT from the Insurers, then that may have affected the Claimant's consent to the agreement between them insofar as it permitted payment to the Defendant of an amount of costs greater than that which the Claimant could have recovered from the Insurers. It may, for instance have led the Claimant to ask whether her liability could be capped, or to approach a different firm of solicitors, who would cap her liability, Prima facie, therefore, it ought to have been disclosed.' [85]

Herbert v HH Law

Lavender J accepted that the documentation was similar to that provided to the claimant in Herbert v HH Law [2019] 1 WLR 4253. In that decision, whilst finding that the relationship between risk and the setting of the success fee had not been explained to the claimant, the Court of Appeal held that:

'...the totality of that information provided a clear and comprehensive account of her exposure to the success fee and HH's fees generally'.

However, Lavender J found that the agreement in Herbert differed from that in Belsner because '...it included a cap of 25% of the damages on the amount which HH Law could recover from Ms Herbert' (Paragraph 88). The Judge also observed that the Court of Appeal had not been asked to specifically address CPR 46.9(2).

Conclusion

Ultimately Lavender J found that each case had to be determined on its own facts: '

...In this case it is a very striking feature of the agreement being proposed to the Claimant by the Defendant that the Defendant's estimated basic charges were five times the amount which the Claimant might be entitled to recover from the Insurers if her claim settled for less than £10,000 at Stage 2 in the Protocol and that, in that event, she might have to pay the first £3,200 of her damages to the Defendant. This was so striking that it ought, in my judgment, to have been brought specifically to the Claimant's attention, if she was to give informed consent to the agreement...' [90]

Accordingly, Lavender J held that the Claimant did not give her informed consent to the agreement and the Defendant was therefore unable to rely upon it for the purpose of CPR 46.9(2). The result of this is that S74(3) SA 1974 will apply so as to limit the recovery of basic charges, as between solicitor and client, to the sum that was recoverable from another party in the proceedings.

Implications

This is an important and consequential case for solicitors and a victory for those challenging deductions made from damages in personal injury claims. The decision is likely to result in Claimant solicitors spending many hours scrutinising their retainer documentation so as to consider, to what extent, it resembles, or can be distinguished from, the documentation in Belsner. It is undoubtedly the case that many retainers will not contain the level of detail as to the operation of fixed costs that Lavender J considered was required in order to establish informed consent.

However, the decision appears to leave open a series of questions which will likely form the next stage in the ongoing litigation concerning challenges to deductions from damages. Firstly, it remains unclear as to the extent to which this decision can be applied to a claim in which the solicitor's retainer includes an overall cap on the sum to be deducted from damages. As Lavender J observed, many solicitors choose to include such an overall cap in their retainer. It is notable that Lavender J considered the absence of such a cap to be a 'striking feature' of Belsner. Further, in considering the materiality of the information which was not provided to the Claimant, Lavender J concluded that the provision of this information may have resulted in the client seeking an alternative solicitor or funding arrangement which did provide for an overall global cap. It may be said to follow that where such a cap is present within the documentation, the absence of information concerning the operation of fixed costs is not material and therefore informed consent may still be found. Secondly, as it did not form part of the issues to be determined on appeal, Belsner does not answer the question of whether S74(3) SA 1974 applies at all where there are no proceedings, such as claims that settle at Stage 2 of the Protocol process. Finally, the concept of fiduciary duty was central to the decision in Belsner. It remains to be seen how this concept can be said to apply to govern the relationship between the solicitor and client prior to the contractual documentation being entered into, at the point at which terms are only being proposed. Again, this issue remains unanswered in Belsner.

It is highly likely that the next destination for this matter is the Court of Appeal. If so, it is hoped that some much needed clarity will be provided.

© John Meehan. The author assumes no responsibility to any party in respect of this article. Specific legal advice tailored to specific problems should always be obtained.