Belsner v Cam - Court of Appeal judgement finally handed down
The long-awaited judgement in this case has finally been handed down, following the Court of Appeal (“CA”) abandoning its first attempt at hearing in February 2022, following the realisation of the potential widespread impact of their decision.
The Solicitors were instructed by the Client to bring a claim on the RTA portal. The claim was
settled at stage 2 after the provision of medical reports, with the defendant’s insurer paying damages of £1,916.98 plus fixed costs of £500 plus disbursements, excluding 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. The Client subsequently instructed new solicitors, trading as checkmylegalfees.com (“CMLF”), to query the Solicitors’ charging.
On appeal from DJ Bellamy, Lavender J held that the Solicitors were not entitled to recover
more from the Client than they had recovered from the defendant because s 74(3) of the
Solicitors Act 1974 applied and the CFA / written agreement did not provide adequate
information on the costs risk and accordingly the Client could not have given informed consent to it. The Solicitors appealed to the Court of Appeal.
Key Rules and Legislation
S 74(3) of the Solicitors Act 1974:
“The amount which may be allowed on the assessment of any costs or bill of 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... “
“this rule applies to every assessment of a solicitors bill except [immaterial exceptions]”
“S 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”.
Summary of decision
The Court of Appeal’s decisions can be summarised into five issues:
Issue 1: The CA held, based on long-established principles, that because no proceedings were issued, the business could not be said to be “contentious”. Because the
RTA portal was mandatory, there were no “proceedings in the county court” and “Accordingly, … s 74(3) and CPR 46.9(2) do not apply at all to claims brought through the RTA portal without county court proceedings actually being issued” (par 60). As such, s
74(3) did not apply, meaning the issue of informed consent pursuant to CPR 46.9(2) did not arise either (pars 67 – 71).
Issue 2: The CA held that no fiduciary duties are owed during the negotiation of the Solicitors’ remuneration (pars 72 – 81).
Issue 3: Consequently, given these decisions, the Solicitors were under no obligation to obtain informed consent to the terms of the CFA entered into. However, the SRA Code of Conduct provides that Solicitors should ensure that clients receive the best possible information about pricing and the overall cost of the matter. The Client was not given the information relating to the fixed recoverable costs that the defendant’s insurers would pay within the RTA portal and had they done so, the Client would have known that she would have been ultimately out-of-pocket. However, this was a regulatory matter.
Issue 4: On the matter of the Solicitors charging more than the costs recoverable
from the defendant and if this was unfair under the Consumer Rights Act 2015 (“CRA 2015”), the CA rejected the Client’s fallback argument which was based upon the argument that
the recovery of costs was unfair and not binding upon her under s 62(4) of the CRA 2015. The CA accepted that if s 74(3) did not apply, then the CRA 2015 did not add anything to the Client’s case.
Issue 5: Concluding the need to conduct an assessment of costs afresh, given the small sums involved, the CA decided it would carry out that exercise itself and apply the test of what is fair and reasonable. As such, the appeal was allowed and the “sum of £295.50 was ordered to be repaid by the Client to the Solicitors” (par 101).
Implications and observations
1. The definitions or contentious and non-contentious costs are out-dated and confusing
2. It makes no sense that section 74(3) and CPR, r 46.9(2) should apply to cases issued in the county courts but not to portal claims.
3. Whilst solicitors have no fiduciary duty to clients when negotiating costs, they still have a regulatory duty under the SRA Code of Conduct and a breach can have drastic consequences.
4. Important guidance on the content of bills to clients was given by the Master of the Rolls: ‘Properly drawn bills ought in future to state the agreed charges and/or the amounts that the solicitors are intending by the bill to charge, together with their disbursements. They should make clear what parts of those charges are claimed by way of base costs, success fee (if any), and disbursements. The bill ought also to state clearly (i) what sums have been paid, by whom, when and in what way (i.e. by direct payment or by deduction), (ii) what sum the solicitor claims to be outstanding, and (iii) what sum the solicitor is demanding that the client (or a third party) is required to pay.’
5. The use of gross sum bills, so common in personal injury litigation, has become a minefield of complexity, given the confusion around what is contentious or non-contentious,
since there is no statutory authority for the delivery of gross sum bills in non-contentious matters.
6. Costs held to be non-contentious, must be considered to be “fair” in addition to “reasonable”
7. Solicitors should be cautious about any retainer which provides for recovery of costs from a client beyond those recovered from a paying party, given the clear comments of the Master of the Rolls: ‘It is wholly unsatisfactory for solicitors generally ... routinely to suggest that their clients agree to a costs regime that allows them to charge significantly more than the claim is known in advance to be likely to be worth. Solicitors do not resolve this unsatisfactory state of affairs by allowing a discretionary reduction of their charges after the case is settled.’
8. To avoid any doubt as to whether any written retainer is contentious or non-contentious, it is probably good practice to specify your intention clearly.
Don’t underestimate the importance of complying with the basic regulatory requirements within the SRA Code of Conduct, especially:
8.6 You give clients information in a way they can understand. You ensure they are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them.
8.7 You ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.
A thorough review of retainers and client engagement documents across your firm’s DR and litigation teams would be invaluable to avoid any surprises further down the line.