Fee-recovery lawyers say millions of clients could stand to benefit from a court judgment which reduced legal fees deducted from compensation.
In Belsner v CAM Legal Services, the court ruled that the claimant had not given informed consent to her former personal injury solicitors deducting £385.50.
The decision was based on a requirement under CPR 46.9 (2) for a solicitor to obtain a client’s ‘informed consent’ to an agreement to charge more than another party to proceedings.
In his ruling, Mr Justice Lavender said: ‘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.’
The case was brought by website checkmylegalfees.com and is the latest key dispute between firms specialising in recovering costs and the personal injury firms that previously represented their clients. The stakes of this case were such that, although the claim was based on a £385 deduction in one RTA case, the claimant and defendant spent £52,575.63 and £35,139.70 respectively on this appeal.
Belsner had brought a challenge to the costs taken from her damages by her solicitors following an RTA claim. The underlying claim settled for £1,917 and CAM charged a total of £4,306 in profit costs, success fees, disbursements and VAT. Fixed costs recovered from insurers were £1,783, leaving the shortfall to be paid by Belsner, with CAM deducting £385 from her compensation.
Mr Justice Lavender said this was the first case where a court had to decide whether a solicitor seeking to rely on CPR 46.9 (2) had to show that the client gave informed consent to a costs payments greater than the client could have recovered from another party to proceedings.
The judge found the claimant was only responsible for profit costs to the £500 level they recovered from the third party insurer. CAM Legal was only entitled to charge a reasonable success fee on the level of profit costs recovered (ie 15% of £500 plus VAT), the effect being there must be a £295.50 repayment to the claimant.
Mark Carlisle, from Checkmylegalfees.com said the judgment will potentially enable five million people to claim refunds of excessive success fees deducted from compensation under conditional fee agreements. He noted that the ruling did not eradicate success fees but reduced them to a level closer to the average of 10% anticipated by Lord Justice Jackson in his civil justice reforms.
Carlisle added: ‘The judgment is a long overdue reminder of a solicitor’s fiduciary duties. The court has, for the first time, confirmed that it is those duties that underpin all aspects of “informed consent” to legal fees, and that those duties don’t stop outside the door of the post LASPO personal injury department or when a conditional fee agreement is involved.
‘I have no doubt that it will be painted by the sector as an interference with freedom of contract but that misses the point. Solicitors remain free to contract with clients in whatever way they like, but subject to informed consent following full and frank disclosure of the material facts.’
The defendant in Belsner has already said that the decision will be challenged in the Court of Appeal. Darren Draper, practice manager for CAM Legal said: ‘We are, of course, disappointed with Mr Justice Lavender’s decision to overturn the successful decision we obtained before District Judge Bellamy at first instance. We genuinely believe he was wrong to ignore the fact that we, as a firm, did ultimately cap all of our unrecovered costs.’