Haines v Sarner

Detailed assessment of the Claimant’s bill of costs took place on the 14th January 2005 and was adjourned part heard to 16th February 2005. I reserved Judgment in relation to item 82 of the bill of costs. This appears in part 5 of the bill on page 24 as follows:

The bill relates to the costs of the Claimant in connection with an action for damages for personal injury arising from a road traffic accident that occurred on 24th August 2000 on Western Esplanade at Southend on Sea. The Claimant was knocked off his bicycle by a vehicle driven by the Defendant. As a result of the accident the Claimant suffered severe head injuries leaving him with a permanent brain injury resulting in both intellectual impairment and personality changes. At the time of the accident the Claimant was a successful businessman running a substantial and profitable company. Following the accident the company went into Liquidation.

The Claimant changed his solicitors throughout the course of the action on a number of occasions. He initially instructed Messrs. Jefferies, subsequently Messrs. Batchelor and in December 2001 Alexander Harris & Co. were instructed on his behalf. From or about June 2002 Ms. Kennedy took over the conduct of the claim at Alexander Harris & Co. At that time the case was funded by a Conditional Fee Agreement dated 24th June 2002. In late 2003 Ms. Kennedy left Alexander Harris & Co. moving to Anthony Gold Solicitors taking the claim with her. A new Conditional Fee Agreement dated the 24th November 2003 was entered into between the Claimant and Anthony Gold and it is this Agreement which is the subject of this judgment.

A brief chronology of the claim is as follows:-

The sole issue I am asked to decide is whether the success fee claimed in the bill of costs of 60% referred to in the Agreement entered into between the Claimant and Anthony Gold Solicitors dated the 24th November 2003 is reasonable.

The evidence I heard with regard to the Conditional Fee Agreement dated the 24th November 2003 (CFA) was uncontroversial. The relevant provisions of the Agreement dated the 24th November 2003 are as follows:-

The Conditional Fee Agreement produced to me at the hearing did not contain the standard Law Society Conditions. I was provided with a CFA Risk Analysis setting out the case detail which I was told by Ms. Kennedy was the document referred to in sub paragraph (d) of Schedule 1 to the CFA. The paying party did not challenge this evidence. I was also told by Ms. Kennedy that the CFA was signed at a face to face meeting with the Claimant who was provided with the letter referred to in paragraph (d) of Schedule 1 to the CFA, a copy of the CFA itself signed by Ms. Kennedy and the CFA Risk Analysis I have already referred to. The letter referred to in paragraph (d) of Schedule 1 to the CFA could not be produced to me at the hearing.

The CFA Risk Analysis was as follows:-

It was accepted by both parties that the standard Law Society Conditions applied to the CFA and I was referred by Mr. Gibbs to condition 3 (n) of the Law Society Conditions which states:-

The other relevant Law Society Conditions are:-

Mr. Gibbs for the paying party submitted that the success fee of 60% claimed at item 82 of the bill was unreasonable in the circumstances of this case. Judgment had been entered in favour of the Claimant on the 8th October 2003 prior to the CFA being entered in to. On that date the Claimant had "won" in accordance with the definition contained in the Law Society Conditions annexed to the CFA at 3 (n). It was argued that in relation to the CFA dated the 24th November 2003 the Claimant’s solicitor carried no risk and would under the terms of the CFA recover their "base costs" in all circumstances. Mr. Gibbs referred to the provision concerning a Part 36 offer set out at paragraph 6 above and argued that even if (on his solicitor’s advice) the Claimant proceeded to trial and did not beat the Defendant’s Part 36 offer his solicitors would still be entitled to their base costs. In those circumstances all the Claimants solicitors would risk was their success fee in respect of their base costs for work done after they had received notice of the offer or payment into Court. It was argued for the paying party that the CFA was no more than a standard solicitor and client retainer allowing the Claimant’s solicitors to recover their base costs in all the circumstances of the case and as such they carried no risk.

For the receiving party it was argued that the Claimants solicitors were still at risk even though judgment had been entered. There were no provisions in the CFA relating to the situation where the Claimant proceeded to trial after a Part 36 offer against the advice of his solicitors. In those circumstances were the Claimant to recover damages of less than the offer or payment into Court the Claimant’s solicitors would not receive any success fee. Furthermore, it was argued that the solicitor carried other risks regarding the litigation for example the bankruptcy of the Claimant or the Claimant ceasing to provide instructions or terminating his retainer with Anthony Gold. It was argued that the Claimant’s solicitors risked not being paid at all.

A success fee of 60% is claimed in Part 5 of the bill in respect of the profit costs of Anthony Gold. The success fee has been calculated on the basis of the factors set out in paras (c) and (d) of Schedule 1 to the CFA which includes the CFA risk analysis set out in para 8.

By the time that the CFA was entered into liability issues had been resolved in favour of the Claimant on a 70/30 basis. There was a Court Order to reflect the agreement reached between the parties dated the 8th October 2003. Issues referred in the Risk Analysis such as causation, the extent of the Claimants injuries, exaggeration, lay witnesses etc had all been resolved in the Claimant’s favour. There had been a "win" in accordance with the Law Society condition 3 (n). In those circumstances the factor referred to in Schedule 1 at paragraph (c) namely that "the fact that if you lose, we will not earn anything" was never a possibility in this case and was never a risk for which Anthony Gold could seek a success fee.

After the 8th October 2003 what then were the risks to justify a 60% success fee? In my judgment from the 8th October 2003 Anthony Gold were at risk as to quantum only. Furthermore, in respect of the quantum risk their agreement with the Claimant made it plain that even were the Claimant to reject a Part 36 offer on their advice and proceed to trial recovering damages of less than the offer or payment into Court they would still be entitled to recover their base costs. All they would forego would be their success fee. After the judgment on 8th October 2003 Anthony Gold were never at risk of not recovering any costs in this case.

Leaving aside the position regarding a Part 36 offer condition 4 of the Law Society Conditions make it plain that in the event of a win the Claimant was then liable to pay all the basic charges, disbursements and success fee of Anthony Gold who could enforce the Agreement against the Claimant in the event they were unable to recover either base costs or a success fee from the Defendant. Furthermore the Law Society Conditions make it clear at condition 7 that where the Agreement ends before the claim for damages is resolved Anthony Gold would have the option of recovering their base costs, disbursements, barristers fees and in certain circumstances a success fee. Furthermore, condition 7 (c) makes that the Claimant’s estate liable for payment of Anthony Gold’s base costs in the event of the Claimant’s death.

The only situation where Anthony Gold would not recover any base costs or success fee was in the event that the Claimant lost in accordance with Law Society Condition 5. Taking in to account the definition of "lose" referred to in Law Society Condition 3 (j) referred to in paragraph 9 this was never a possibility in this case.

The Court of Appeal have recently considered the issue of the level of success fees in quantum only cases. See Atack v Lee and Ellerton v Harris [2004] EWCA Civ. 1712. In the Ellerton case the CFA entered into by the Claimant had a similar but subtly different provision with regard to a Part 36 offer or payment. In that case where the Claimant did not beat a payment into Court which was refused on her solicitor’s advice, the solicitor was prevented from charging all his fees to his client in those circumstances. Accordingly not only was he unable to recover a success fee (as is the case here) but he was also unable to recover his base costs. Accordingly, the solicitor was at risk of not recovering any costs in the event that a Part 36 offer or payment was not beaten at trial. Brooke LJ in assessing the appropriate level of success fee said at para 49:-

Lord Woolf remarked in Callery v Gray (No. 1) [2001] EWCA Civ.1117 at para 103:

I give permission for either party to restore the detailed assessment to determine any further outstanding issues including the costs of the detailed assessment proceedings.