Atack v Lee & Anor

Success Fees: introductory comments

These two appeals were listed before us for hearing on the same day because they raised questions about the level of success fee it is appropriate to allow to a claimant’s solicitor who is acting on a conditional fee agreement (“CFA”) in connection with a personal injuries claim arising out of a road traffic accident. In the case of Atack, where a motor-cyclist claimed that his injuries were sustained when the defendant drove his lorry negligently on a roundabout, the action went all the way to trial, and the claim was only settled after the trial judge had made his ruling on liability. The case of Ellerton was concerned with injuries suffered by an elderly lady when the defendant’s vehicle reversed into her while she was walking in a supermarket car park. Proceedings had to be brought, but the case was settled after the defence was filed.

The issues to be determined in the Ellerton case were whether the court should start from the maximum success fee of 20% suggested by this court for modest and straightforward claims for compensation resulting from traffic accidents in Callery v Gray (No 1) [2001] EWCA Civ 1117, [2001] 1 WLR 2112, and if so whether the fact that the claim was likely to be a straightforward claim worth somewhat more than £15,000 constituted a feature which could reasonably have taken the success fee in this case above that figure of 20%. The issue to be determined in Atack, on the other hand, is not covered by previous Court of Appeal authority and relates to the reasonableness of the district judge’s approach in a case involving two moving vehicles where liability was clearly in issue when the CFA was entered into.

Before referring to the facts in these two appeals, we will first say something about the law we have to apply. The principles on which the court is to assess the reasonableness of a success fee when conducting an assessment of costs are now well-known. A success fee is an additional liability within the meaning of CPR Parts 44 to 48 (see CPR 43.2). CPR 44.4 and 44.5 contain the following provisions, so far as are material:

“44.4(2) Where the amount of costs is to be assessed on the standard basis the court will –

(a)

only allow costs which are proportionate to the matter in issue; and

(b)

resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in favour of the paying party.

44.5(1) The court is to have regard to all the circumstances in deciding whether costs were –

(a)

if it is assessing costs on the standard basis -

(i)

proportionately and reasonably incurred; or

(ii)

were proportionate and reasonable in amount.”

Paragraphs 11.5, 11.7 and 11.8 of the Costs Practice Direction provide:

“11.5

In deciding whether the costs claimed are reasonable and (on a standard basis assessment) proportionate, the court will consider the amount of any additional liability separately from the base costs.

11.7

Subject to paragraph 17.8 (2), when the court is considering the factors to be taken into account in assessing an additional liability, it will have regard to the facts and circumstances as they reasonably appeared to the solicitor or counsel when the funding arrangement was entered into.

11.8(1) In deciding whether a percentage increase is reasonable relevant factors to be taken into account may include: –

(a)

the risk that the circumstances in which the costs, fees or expenses would be payable might or might not occur;

(b)

the legal representative’s liability for any disbursements;

(c)

what other methods of financing costs were available to the receiving party.

(2)

The court has power, when considering whether a percentage increase is reasonable, to allow different percentages for different items of costs or for differing periods during which the costs were incurred.”

The author of Cook on Costs 2004 explained at p 563 the basis on which he has suggested a ready reckoner for calculating success fees. If the chances of success in a particular case are 75%, then provided that the costs earned in won cases are on the same level as the costs not earned on lost cases, a success fee of 33.3% is appropriate, since out of four cases of this type one is likely to be lost. Similarly if the prospects of success are 50%, a success fee of 100% will be appropriate on this hypothesis.

On these appeals we are not concerned with para 17.8 (2) of the Practice Direction, which appears in a section concerned with costs only proceedings.

The CFAs in these two cases were entered into in March 2001 and September 2000 respectively, at a time before this court gave general guidance as to the appropriate level of success fees in simple road traffic accident cases. In Callery v Gray (No 1), Callery v Gray itself involved a claim by a passenger in a vehicle which had been struck sideways on by the defendant’s vehicle. Russell v Paul Pak Corrugated Ltd, the other appeal heard at the same time, was concerned with an accident in which the defendant’s vehicle reversed into the claimant’s stationary vehicle. In giving the judgment of the court Lord Woolf CJ said at para 96:

“The scheme of the legislation and the regulations contemplated that both the ATE insurance premium and the amount of uplift will reflect an assessment of the risk that the claim may fail, having regard to the circumstances that are known or should reasonably be known at the time that the relevant agreements were entered into.”

In para 102 Lord Woolf said that the court was concerned only with modest and straightforward claims for compensation for personal injuries resulting from road traffic accidents, and the court was faced with a difficult balancing exercise in setting guidelines for a new regime where there was little experience or published data to rely upon. In para 103 he said that the court did not consider that it could ever be said that a case was without risk. Against that background the court gave its guidance on the basis that the CFA would contain a single success fee (as opposed to the “two-stage” success fee Lord Woolf went on to discuss in paras 106-116):

“…[W]e have concluded that where a CFA is agreed at the outset in such cases, 20% is the maximum uplift that can reasonably be agreed…We wish to emphasise two matters in respect of this conclusion. The first is that it assumes that there is no special feature that raises apprehension that the claim may not prove to be sound. Where there is such a feature, the appropriate uplift will be higher…” [The second matter is not relevant in the present context.]

When Callery v Gray was heard on appeal in the House of Lords (see the report at [2002] UKHL 28, [2002] 1 WLR 2000), it was held that it was for this court and not the House of Lords to supervise developments in CFA practice. Every member of the House of Lords, however, exhibited misgivings about the appropriateness of the 20% figure mentioned by Lord Woolf and/or referred to the requirement for success fees to be calculated according to the merits of each individual case (see Lord Bingham of Cornhill at para 7; Lord Nicholls of Birkenhead at paras 11 and 16; Lord Hoffmann at paras 27-35; Lord Hope of Craighead at para 62; and Lord Scott of Foscote at paras 87 and 133-4). In particular Lord Scott said at para 134:

“I am in no doubt but that a success fee should be assessed by reference to the risk in the particular case. As I have said already, a costs assessment should be case specific…If the risk of a claim failing is minimal then, in my opinion, the success fee should be correspondingly low.”

Instead of solicitors following the guidance of this court in Callery v Gray to the effect that a two-stage success fee would be appropriate in a minimal risk case involving a modest claim (“Thus by way of example, the uplift might be agreed at 100%, subject to a reduction to 5% should the claim settle before the end of the protocol period”) it was the experience of the costs judges that solicitors regularly agreed a 20% single-stage success fee with their clients even in the simplest cases. This practice ran directly contrary to the worries expressed by the House of Lords nearly a year after this court decided Callery v Gray, and led to this court reformulating in Halloran v Delaney [2002] EWCA Civ 1258, [2003] 1 WLR 28 the approach to be followed in very simple cases:

“[34] We consider, however, that it is now time to re-appraise the appropriate level of success fee which should be recoverable on these simple claims when they are settled without the need for court proceedings…

[35] In paragraphs 106-115 of the judgment of this court in Callery v Gray (No 1), Lord Woolf drew attention to the availability of a two-stage success fee…

[36] After taking advice from our assessor, and after considering the arguments in the present case, we consider that judges concerned with questions relating to the recoverability of a success fee in claims as simple as this which are settled without the need to commence proceedings should now ordinarily decide to allow an uplift of 5% on the claimant’s lawyers’ costs (including the costs of any costs only proceedings which are awarded to them) pursuant to their powers contained in CPD para 11.8(2) unless persuaded that a higher uplift is appropriate in the particular circumstances of the case. This policy should be adopted in relation to all CFAs, however they are structured, which are entered into on and after 1 August 2001, when both Callery judgments had been published and the main uncertainties about costs recovery had been removed.”

There would, of course, be no difficulty in such cases about the agreement of a two-stage success fee structured to guard against the minimal risk that the claim might unforeseeably run into difficulties. This judgment was very widely misunderstood, and in In re Claims Direct Test Cases [2003] EWCA Civ 136, [2003] 4 All ER 505 Brooke LJ reverted to this topic:

“101.

Subsequent events have shown that I should have expressed myself with greater clarity [in Halloran v Delaney]. The type of case to which I was referring was a case similar to Callery v Gray and Halloran v Delaney in which, to adopt the “ready reckoner” in Cook on Costs (2003) p 545, the prospects of success are virtually 100%. The two step fee advocated by the court in [Callery v Gray (No 1)] is apt to allow a solicitor in such a case to cater for the wholly unexpected risk lurking below the limpid waters of the simplest of claims. It did not require any research evidence or submissions from other parties in the industry to persuade the court that in this type of extremely simple claim a success fee of over 5% was no longer tenable in all the circumstances. The guidance given in that judgment was not intended to have any wider application.”

During 2003 the Civil Justice Council commissioned research to assist in the determination of “reasonable” success fees in road traffic accident (“RTA”) cases. The result of this research (see the report by Paul Fenn and Neil Rickman, Calculating “reasonable” success fees for RTA claims, October 2003, which is now published on the Civil Justice Council’s Internet website (http://www.civiljusticecouncil.gov.uk) on its costs debate page) suggested that the appropriate level for a single step success fee for all RTA claims (including the most difficult) would be only 14.25%. This outcome led to the agreement within the RTA claims “industry” which underpinned the arrangements recently introduced in Section III of CPR Part 45 for fixed percentage increases in RTA claims. By CPR 45.16(1), in cases of the type with which we are at present concerned where the relevant accident occurred after 5^th October 2003, the fixed percentage increase to be allowed in relation to solicitors’ fees is 100% where the claim concludes at trial, or 12.5% where the claim concludes before a trial has commenced, or if the dispute is settled before a claim is issued.

So much for the general scene. It would obviously be wrong for courts to apply the new rules, being the outcome of much pragmatic bargaining to achieve a fixed regime acceptable to both claimants’ solicitors and motor accident liability insurers, to cases which have to be determined under the rules and practice directions that have to be applied to success fees in CFAs in RTA cases arising out of accidents which took place before 5^th October 2003 (which we will call “the old regime”). The early tables set out in the Fenn/Rickman report have placed in the public domain more statistical information than has previously been available to lawyers and the courts (including the Court of Appeal). This material will no doubt inform the approach to be adopted by solicitors in determining henceforward what level of success fee it is reasonable to agree in a CFA in an “old regime” case, and by district judges and costs judges when deciding the reasonableness of a success fee in an RTA case which was agreed between the solicitor and the client after the date of this judgment. Although the report was with the court’s papers in the Ellerton case, we did not hear any argument based on the statistical evidence it contained. We turn therefore against this background to the facts in the two appeals.

Atack v Lee

This is an appeal by the claimant Lee Atack from a judgment of Judge Butler QC sitting in the Nottingham County Court on 10^th February 2004 when she dismissed his appeal against a decision of Deputy District Judge Elsey on 11^th July 2003. The issue between the parties arose in the course of a detailed assessment of the claimant’s costs. The claimant had claimed that the success fee of 100% set out in his conditional fee agreement (“CFA”) was reasonable, but the deputy district judge reduced the allowable success fee to 50%, and Judge Butler did not interfere with his assessment. In granting permission for this second appeal Dyson LJ said:

“The question of what is a reasonable and proportionate success fee in a contested case is one of general importance. Although the position with regard to road traffic accidents which occurred post 5/10/03 will be governed by CPR 45.15 - 45.19, there is likely to be a significant number of cases concerning road traffic accidents which occurred before 6/10/03, and guidance given on the judgment may be useful for other types of accident claims as well.”

Mr Atack’s claim for damages for personal injuries arose from an accident on 16^th July 1998 at the Fox Covert roundabout on the A57 near Gateford, Yorkshire. He was 23 years old at the time. He was riding a 750cc Kawasaki motor-cycle, and as he traversed the roundabout, he passed a large quarry wagon (8 metres long) on its right hand side. This lorry was owned by Mr Grechan and driven by Mr Lee. Because the lorry had remained on the left hand side, Mr Atack expected it to leave the roundabout at the second exit (towards Gateford) which he was also aiming for, and he pulled in front of it to take that exit. The lorry, however, unexpectedly continued around the roundabout towards the third exit and forced him to take evasive action. In doing so, he touched the kerb of the central reservation and lost control of his motor-cycle. There was no contact between his motor-cycle and the lorry.

He claimed that the lorry was wrongfully positioned on the roundabout and was not signalling. He was supported in his account of what happened by his father, who saw the accident in his rear view wing mirror, and by a family friend, who was following him and had a better (but still imperfect) view of events. Both were riding quite powerful motor-cycles.

Mr Atack, who was a student at the time, suffered orthopaedic and neurological injuries. His head injury caused him serious problems with his temper and mood. Because he was a student with unclear ambitions about his future, his claim for future loss of earnings was not altogether straightforward.

In September 1998 he instructed solicitors on a conventional retainer. On 9^th December 1998 the defendant’s insurers denied liability, enclosing a witness questionnaire from a witness who was approaching the roundabout from Worksop (“the third exit”). They told the claimant’s solicitors that this witness was an off-duty policeman. In answer to the question “Who in your opinion was to blame?” he said “Motorcyclist. Tried to cut in front of tipper for exit.” He added that the motor-cyclist could have been patient and reduced his speed.

In a letter dated 14^th February 1999, which was marked “without prejudice”, the defendant’s insurers said that they strongly disputed liability and that their witness statement showed that the claimant was clearly responsible. This letter ended, curiously:

“We will have offers to make in regard to your client’s claim.”

No offers were in fact forthcoming, and since the sentence was completely at odds with the rest of the letter, Mr Bacon, who appeared for the claimant, suggested that the word “no” had been accidentally omitted after the words “We will have…” Since the receipt of a letter like this will clearly influence the mind of a solicitor when he is rating the prospects of success for a CFA following its receipt, we see no reason why we should not consider its effect on a dispute about a success fee despite its apparently unqualified “without prejudice” status, although we did not hear any very sophisticated arguments on this point.

Mr Atack did not pursue his claim for some time while he was recovering from his injuries, and particularly from the problems with his temper. On 22^nd March 2001 he renewed his instructions to his solicitor. He entered into a CFA with a 100% success fee on the following day.

Proceedings were then issued and the defendants joined issue on primary liability, contributory negligence and the amount of damages. Eventually judgment was given for the claimant at the end of the first day of a two-day trial, with Mr Lee being held 100% to blame. On the following day the claim was settled for £30,000. We were told that the claimant was willing to accept a 40% discount on his original claim for £50,000 because of the difficulties in proving his loss of earnings claim.

The deputy district judge said correctly that he should assess the reasonableness of the success fee against the perceived risk to the claimant and his solicitors should they fail to win their case at the time the CFA was entered into. The CFA was entered into in March 2001. He did not consider that either the delay or the fact that there had been silence on either side for two years particularly affected the assessment of the risk. The claimant was clearly reviewing his situation, seeing how his injuries progressed, and endeavouring to obtain a much better prognosis as to the future. On the other hand, the deputy district judge said that in doing nothing the defendants and their insurers were behaving as such people typically behave, and the fact of their silence could not validly affect the assessment of risk.

The claimant’s solicitor said that Mr Atack was a difficult and awkward client who had become volatile and violent. This gave rise to grave concerns about his ability as a witness. Another factor which was perceived to be a major difficulty from the claimant’s perspective was the fact that the one independent witness was on the defendants’ side, and his evidence seemed to be clear and concise. In contrast the claimant’s two witnesses were not independent. The deputy district judge commented that the second of the claimant’s witnesses (see para 15 above) was probably the most crucial, but the claimant’s solicitor said that his lack of independence created a very high risk factor.

In this case a statement of fact had been filed by Mr Cockx, who actually carried out the risk assessment within the claimant’s solicitors’ firm. The deputy district judge said that Mr Cockx’s matrix had proved to be quite illuminating because it actually showed what was the most significant feature in his mind when he conducted the assessment.

Counsel for the defendant had argued that the claimant was clearly an intelligent man and not a run of the mill motor-cycle witness. He was a law graduate who had subsequently secured well-paid employment, and was likely to prove a good witness. He was well experienced in the handling and driving of motor-cycles and was likely to carry that impression into the witness-box. Reliance was also placed on the fact that an in-house retired police officer had carried out a detailed assessment of the roundabout for the claimant’s solicitors and had examined the evidence of the defendant’s witness, with which he dealt in some detail in his report. (Although it later became clear in this court that the assessment had been carried out by the claimant himself, the deputy district judge was entitled to rely on what the claimant’s solicitor had told him about its authorship).

The deputy district judge was not particularly impressed by either of the points made by the claimant’s solicitor about the risks associated with establishing the likely value of the claim. If a volatile client failed to give instructions part way through the case so that the claim failed on that account, his solicitors would be entitled to recover their wasted costs from him. As to the suggestion that the loss of earnings claim was speculative in nature and the claimant might fail to beat a payment in, although he accepted that this was a factor, he felt it could be guarded against as the case progressed, and the risk would reduce because everybody could see how the case was likely to turn out and the risk of failing to beat the payment in could be avoided. “If you know your case is going to lose, you settle.”

He was also unimpressed by the factors identified in Mr Cockx’s matrix. For instance, there was a leap to a 25% additional risk just because the claim went over £10,000. He was not convinced, either, that the length of the case was a significant factor. Similarly, he could not see why an actual denial in the usual opening flurry of correspondence increased the liability factors by ten from an anticipated denial.

He therefore put the matrix on one side, and applied his mind to what he saw as the risks and dangers in this case as they would be perceived by the claimant’s solicitor. This was a roundabout claim, and the solicitor clearly took the view that his client had a claim. Although the defendant’s insurers said that they had an independent witness on their side, and a police officer at that, an experienced solicitor would know that the argument did not end there.

When the claimant had returned to his solicitor in March 2001, he had acknowledged that he had been difficult and volatile, but he was now addressing the issues and was perfectly clear and able to proceed with his case. The claimant’s solicitor therefore had a client on his way to recovery and two supporting witnesses, one of whom was behind the vehicle and was probably the most important witness. He also had the benefit of the in-depth inquiry conducted by the employee of his firm who clearly had valuable experience. He had quite clearly concluded that the defendant was in the wrong. “Therefore the solicitor has sat there and thought ‘Well, on the balance of probabilities what is the likely outcome?’ and he has come to the conclusion that the likely outcome is that his client will succeed.”

He was met with the insurers’ straight denial, but experienced solicitors know that that is a regular feature and it is quite a regular occurrence that cases settle after issue. The deputy district judge therefore thought that the level of risk was not substantially higher than in any other road traffic accident which occurs on a roundabout. The calculations on the matrix at various stages were wrong, and although the claimant’s solicitors were not to be criticised because they were doing their best at the time, this did not mean that the defendant had got to pay everything they claimed.

He said he was well aware of the sort of percentage which was regularly allowed by the courts in these cases, and it seemed to him that a success fee of 50%, which the defendants had offered, was a reasonable one.

In her judgment on the appeal Judge Butler recited the version of the facts recorded in the judgment in the court below. When describing what happened at the roundabout, she noted that the defendant’s counsel had observed that his client admitted that he had approached the roundabout in the left hand lane of the dual carriageway intending to turn right. He also admitted that he was not indicating his intention as he approached the roundabout. As he started to pass the Gateford exit he was in the wrong lane, having only formed his intention to turn right on the roundabout itself, and being unaware where the motor-cyclist was before he started his manoeuvre.

Judge Butler said that the question for the judge in the court below was whether the identification of the risks of litigation as high, thereby setting the success fee at 100%, was reasonable and proportionate in the light of all the circumstances and with particular reference to the conduct of the parties. The judge was obliged to have regard to the facts and circumstances as they reasonably appeared to the solicitor when the funding arrangement was entered into. On an assessment on the standard basis any doubt as to the question of reasonableness had to be resolved in favour of the paying party. She then recorded all the points that had been made to her by the claimant’s counsel on the appeal, and the way in which the deputy district judge had dealt with each of them. She said that he had looked with care at all these points, and that the claimant had failed on the requisite standard of proof to show that he had either exercised his discretion on the footing of a material misdirection or that the exercise of his discretion was so plainly wrong as to be outside the scope of reasonable disagreement. For these reasons she had dismissed the appeal.

In order to allow this appeal we would have to be satisfied that Judge Butler was wrong (see CPR 52.11 (3)(a)) in exercising the generous ambit of her discretion when she dismissed the claimant’s appeal against the deputy district judge’s decision to reduce the success fee to 50%.

We need to bear in mind that we have to assess the reasonableness of the success fee on the basis of what was known, or should have been appreciated, by the claimant’s solicitor on 22^nd March 2001. At that time he had to hand his client’s version of events, the accounts of the accident given by his client’s father and the family friend, a police report (which did not take matters much further except that it tended to show that the claimant was to blame), the independent witness’s version of events on the questionnaire, the defendant’s insurers’ denial of liability (we ignore for this purpose the curious sentence at the end of their second letter since it had led to nothing a year later), and the assessment of the accident to which the deputy district judge referred.

The two matters which emerged most clearly from this assessment were the width of the dual carriageway road approaching the roundabout (so that a large lorry intending to take the third exit should not have hugged the left hand lane unless it was signalling – and the evidence that it was not signalling was clearly rehearsed in the assessment) and the photographic evidence which showed that the island on the roundabout would have prevented the independent witness from witnessing anything but the last few seconds before the accident.

This case has the curious feature that the matrix prepared by Mr Cockx, which should have been useful in revealing his reasonable thought processes when assessing the risk of litigation, was of no value at all, so that the deputy district judge was right to consider the matter from the standpoint of a reasonably careful solicitor assessing the risk on the basis of what was known to the claimant’s solicitor at the time.

No two judges will assess a matter like this in precisely the same way. We would probably have attached more weight to the insurers’ firm denial than the deputy district judge did and we would not have accepted, as he did, that the CFA in this case (in contrast to the CFA in the Ellerton case) put the solicitors at any risk at all of not being paid if a Part 36 payment was not beaten. Furthermore some judges might reasonably have considered a single-stage success fee of up to 67% reasonable on this material. But viewing the matter in the round we consider that the deputy district judge’s figure of 50% was well within the range reasonably available to him, and that Judge Butler was not wrong when she decided not to interfere. The risks were not as high as 50-50 for the reasons the deputy district judge gave and which the assessment clearly illustrated.

We would therefore dismiss this appeal.

Ellerton v Harris

This is an appeal by the defendant John Harris against so much of a decision by District Judge Brown sitting in the Shrewsbury County Court on 8^th June 2004 as held on the detailed assessment of the claimant’s costs in this personal injury action that she should be reasonably entitled to receive 30% by way of a success fee in conjunction with the CFA she had entered into with the solicitors then acting for her on 22^nd September 2000. The success fee set out in the CFA was 60%; the claimant’s solicitors claimed 40% on their bill of costs; and they limited their claim to 30% at the hearing. The defendant contended that a reasonable success fee would have been 12.5%. The appeal has come to this court pursuant to an order to that effect by Judge Rubery after he had granted permission to appeal on 23^rd July 2004. He said that he was told that decisions on other similar cases were being given by this court. On a later occasion, when dismissing an application by the claimant for an order setting aside that direction, he said that he knew from his discussions with district judges in his court that it would be helpful to receive clarification as to the proper approach to the level of success fee in this type of case.

This action arises out of an accident to the claimant Hilda Ellerton when she was walking in Tesco’s car park in Whitchurch on 19^th June 2000. The defendant reversed his car out of a parking space and knocked her over. A letter of claim was sent to the defendant on 28^th September 2000, six days after the CFA was signed, and on 30^th January 2001 the defendant confirmed that liability for the accident was accepted. On 16^th May 2003 proceedings were issued, and on 29^th October the defence was served, once again admitting liability. Negotiations continued, and on 3^rd December 2003 the claim was settled for £15,378.79 together with costs on a standard basis, to be assessed if not agreed.

The defendant’s solicitor argued that a 12.5% success fee would have been reasonable. This would have represented an assessment that there was a 90% prospect of success. It was a straightforward road traffic accident in which a vehicle reversed into a pedestrian walking across a car park causing her injuries. The only remaining issue was whether the claimant’s solicitors could trace the driver, who did not stop after the accident, but they could always have had recourse to the MIB.

The claimant’s solicitor said that the district judge had to consider the situation as it was when he was first instructed. He had calculated the chance of success at 65%: hence the success fee of 60%. As it turned out, liability was admitted on the day after the defendant was found guilty in the magistrates’ court of driving without due care and attention. He referred the district judge to the guidance in Callery v Gray which indicated that 20% was the starting point in a case like this. This was not a simple road traffic accident.

The district judge considered that 12.5% was totally off the scale. It seemed to him that it was more difficult than a rear-end shunt case, particularly because of the driver “taking off”. He thought that this factor was sufficient to take the success fee up to 30%.

On this appeal the defendant contends that the prospects of success were far better than about 75% at the time when the CFA was entered into. 75% was broadly the assessment of risk which the district judge had made: see Cook on Costs (2004) p 563. This was a modest and straightforward accident case in which the claimant contended that the defendant had reversed out of a parking space and knocked her to the ground. There were witnesses to the accident and the prospects of a successful outcome were very high. The claimant had suffered a fracture of her left distal radius and ulna, an injury to her left knee, and an adjustment disorder which only lasted for three months. The case did not merit the award of a high success fee.

The claimant’s representative argued that the case had the potential of being a claim against an untraced driver. His client was elderly and confused, even to the extent of being initially unclear about the date of the accident. She was also confused as to whether there had been any witnesses. Her injuries were serious, and there was a risk that she might have been found contributorily negligent. The success fee should be greater than the normal success fee for a pedestrian claim in a road traffic accident.

On the appeal to this court Mr Pooles QC, who appeared for the defendant, did not contend for a success fee lower than 20%, given that this was a pre-Callery v Gray CFA. He submitted, however, that there was absolutely nothing to take this claim out of the “simplest” category. The matter which appeared to have influenced the district judge most was the fact that the car driver disappeared after the accident. While he accepted that in some cases a claimant’s solicitor might run the risk of doing unremunerated work before ascertaining that his client would have to have recourse to the MIB untraced drivers agreement (which at that time limited the allowable costs of pursuing a claim to £150), in this case the claimant’s solicitor knew the driver’s name and that the police possessed details of an independent witness, and all he had to do was to ring up the police and obtain confirmation that Mr Harris was indeed the driver, a straightforward task that was in fact accomplished within a week.

Mr Wilkinson, who appeared for the claimant, reminded us that this was to be a multi-track case which settled for over £15,000. He said that there was a risk that in due course the claimant might not beat a payment into court which was refused on her solicitor’s advice, and that this CFA had a special condition which prevented the solicitor from charging his fees to his client in those circumstances. He suggested that claims involving pedestrians were inherently more risky than claims involving passengers or rear-end shunts, and that the district judge was right to take this factor into account. He was also right, he said, to take into account the prevailing uncertainty as to the identity of the driver.

We have considered the rival arguments carefully and benefited from the advice of Master O'Hare, who acted as our assessor. In our judgment the guidance given by this court in Callery v Gray can be applied by analogy to this case even though it was allocated to the multi-track and settled for a sum exceeding £15,000. We consider that there are no factors here which could legitimately have taken this success fee over 20%. The uncertainty about the identify of the driver could have been resolved by a single telephone call to the police, which the solicitor could have made before entering into the CFA, and the only significant risk related to the possibility of the claimant accepting her solicitor's advice and then not beating a payment in. This is just one of the rare risks which justified a success fee set as high as 20% in the simplest of claims.

To this extent we would therefore allow this appeal.

Concluding comments

Because there seems to be some lingering uncertainty about the combined effect of Callery v Gray and Halloran v Delaney we feel that we ought to restate for the benefit of district judges and costs judges the principles in cases governed by the old regime (for the meaning of this phrase see para 12 above). The reasonableness of the success fee has to be assessed as at the time the CFA was agreed. It is permissible for any CFA to include a two-stage success fee, and this is to be encouraged. In other words the success fee may be a higher percentage (up to 100% in an appropriate case) in the event that a claim does not settle within the protocol period, and a lower success fee (down to 5% in the very simplest of cases) in claims which do settle within that period. Further statistical evidence is now available (see paras 11-12 above) to which it will be legitimate for parties to refer in relation to success fees agreed in an old regime case after the date of this judgment. Whether it is permissible on the assessment of costs for a judge to have recourse to para 11.8(2) of the Practice Direction and to set a two-stage success fee when no such fee was contained in the CFA is an issue that will be determined by this court in an appeal to be heard next term.

It is not permissible simply to adopt the new CPR fixed rates for success fees when assessing the reasonableness of a success fee in an RTA case where the assessment of the CFA is not governed by the new rules. The reason for this is that the new CPR approach (informed by an industry wide agreement) does not take into account the individual facts of each particular case (cf Lord Scott's opinion quoted in para 8 above).

The costs of the appeal

We will hear counsel as to the costs of these two appeals when this judgment is handed down. But we believe it may be helpful if we make it clear now that it is unlikely that we will allow a fee for two counsel in either case. While we think we understand the motives that may have impelled the defendants’ insurers in each case to instruct leading counsel, we will be concerned to award costs that are reasonable and proportionate to the amounts actually involved in these claims, and at present it appears to us that these do not warrant the instruction of leading counsel.