Collet v Smith & Anor [2011] EWHC 90208 (Costs)

[2011] EWHC 90208 (Costs)Case No 1001744
IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE
Venue Clifford’s Inn, Fetter LaneDate 20 th May 2011.
London, EC4A 1DQ
Before
Master Haworth, Costs Judge
Between
BEN COLLETTClaimantMR GARY SMITHDefendantsMIDDLESBROUGH FOOTBALL & ATHLETIC COMPANY (1986) LTDDefendant
Mr Crawley, Solicitor (instructed by Messrs Beachcroft with written submissions by Jeremy Morgan QC) for ClaimantMr Gibbs, Costs Lawyer (instructed by Hextalls with written submissions by Mark Friston) for Defendant
Judgment

Master Haworth, Costs Judge:

[1]The Claimant, a professional footballer, sought damages for personal injuries sustained as a result of negligent tackle by the First Defendant for whom the Second Defendant was vicariously liable. Proceedings were issued and on the 7th February 2007, judgment was entered by consent for the Claimant against the First and Second Defendants for an amount of damages to be assessed by the Court.[2]On 19 October 2009, the Claimant served Notice of Commencement of assessment of his bill of costs. The bill totals £1,609,517.44. The matter was listed for a four day hearing at the Manchester Civil Justice Centre, commencing on 17 January 2011. The Claimant’s solicitor and Counsel were retained on a conditional fee agreement basis (CFA) and in their Points of Dispute the Defendants objected to the level of success fees being claimed in the sums of £581,834.75 for the Claimant’s solicitors and £12,365.00 for Counsel exclusive of VAT.[3]On 19 January 2011, I heard oral argument from the representatives for the Claimant and Defendants as to the level of both the solicitors’ and counsel’s success fees and reserved judgment on that issue. On 16 February 2011, the Defendants’ solicitors requested that I allow further submissions on the success fee issue in the light of the case of MGN –v- UK [2011] ECtHR (Application No 39401/04). Written submissions were received from Jeremy Morgan QC (for the Claimant) and Mark Friston (for the Defendants) on 10 March 2011.[4]This judgment deals solely with the success fee issue relating to the Claimant’s solicitors’ and counsel’s CFAs.

FACTS:

[5]The Claimant was injured whilst playing for Manchester United’s Reserve team in a football match against the Second Defendant on 1 May 2003. The Claimant initially consulted solicitors in or around October 2004, when it became apparent that he was unlikely to be able to return to play football at the level he had played prior to the injury.[6]Proceedings were issued on 21 April 2006. The matter was listed for a split trial on the issues of liability and quantum. The issue of liability was fully contested until 1 February 2007, three weeks before the liability trial was due to commence. The Defendants conceded liability and submitted to judgment with damages to be assessed.[7]The quantum trial took place over five days before Mrs Justice Swift DBE, judgment being handed down on 11 August 2008 with damages to the Claimant of £4,350,147.00. Outstanding issues including pension loss were determined at a further hearing on 3 October 2008. The Defendants were ordered to pay the Claimant’s costs of the action such costs to be the subject of detailed assessment if not agreed. The assessment was to be carried out on the following basis: i) On the standard basis up until the 26th June 2008 ii) Thereafter on the indemnity basis[8]The Defendants appealed the final award which exceeded £4.5 million. The Court of Appeal heard the matter on 6 May 2009, and delivered judgment on 17 June 2009, when the appeal was dismissed in its entirety. The Defendants were ordered to pay the Claimant’s costs of the appeal such costs to be the subject of detailed assessment if not agreed. The assessment to be carried out on the following basis: i) On the standard basis up until the 30th April 2009 and ii) Thereafter on the indemnity basis[9]Notice of Commencement of assessment of the Claimant’s bill of costs was served on 19 October 2009, and deals with the costs of both the substantive action and the appeal. The Defendants served their Points of Dispute on 23 December 2009. Replies were served on 16 February 2010.[10]On 8 November 2005, the Claimant entered into a Conditional Fee Agreement (CFA) with his solicitors, Beachcroft Wansborough. Paragraph 4 of the agreement states:
“4. The Success Fee The success fee is set at 100% of basic charges where the claim concludes at trial; or 90% where the claim concludes before a trial has commenced. 0% relates to the postponement of payment of our fees and expenses and cannot be recovered from your opponent. The success fee inclusive of any additional percentage relating to postponement cannot be more than 100% of the basic charges in total.”
[11]The agreement is to be read in conjunction with the Law Society document “What you Need to Know about a CFA” which was appended to the agreement. In relation to the success fee, the document said this:
“Success Fee The success fee percentage set out in the agreement reflects the following: (a) The fact that if you lose, you will not earn anything. (b) Our assessment of the risks of your case. (c) The specialist nature of the dispute. (d) The potential high value of the claim. (e) The difficulty faced in professional sports injury claims in terms of the undeveloped nature of the law. (f) The limited number of specialist sports injury lawyers in the country and the technical expertise and experience of Jan M Levinson, the partner having conduct of the claim in dealing with the area of sports injury claims for claimants. (g) The number of different experts required to be instructed. (h) Beachcroft Wansbroughs knowledge in respect of suitable experts. (i) The possibility of achieving success on liability/quantum but failure on enforceability.”

The success fee percentage set out in the agreement reflects the following:

[12]The CFA goes on to state: “Dealing with Costs if you Win• You are liable to pay all our basic charges, our disbursements and success fee. If your opponent fails to pay If your opponent does not pay any damages or charges owed to you, we have the right to take recovery action in your name to enforce a judgment, order or agreement. The charges of this action become part of the basic charges.”• You are liable to pay all our basic charges, our disbursements and success fee.[13]The CFA also made reference to Part 36 offers in the following terms:
“3. Paying Us It may be that your opponent makes a Part 36 offer or payment which you reject on our advice, and your claim for damages goes on to trial where you will recover damages that are less than that offer or payment. If this happens, we will not add our success fee to the basic charges for the work done after we received notice of the offer or payment.”
[14]On 19 July 2006, Beachcroft Wansboroughs assigned a benefit of the CFA to Beechcroft LLP.[15]Counsel instructed by the Claimant, also entered into conditional fee agreements, as follows:[16]Mr. NEIL BLOCK QC: this agreement is dated 24 April 2006. It is in the standard APIL/PIBA5(a); April/May 2001 format. In the Risk Assessment and Statement of Reasons, the agreement says this:
“5. The prospects of success are estimated by Csl as 50%. From the ready reckoner the basic uplift is 100%. The basic uplift is subject to the following enhancement…………….. … The total uplift to reflect the prospects of success is therefore 100%. 6. Statement of Reasons: The reasons for Csl’s assessment of the prospects of success in this case are (here state the particular risks of failure or non-payment identified in the risk assessment. N.B. The risks common to all claims are deemed to be incorporated into this Statement of Reasons): “This is a claim by a young professional footballer to damages to compensate for injuries sustained in a tackle. The merits are finely balanced and there are also significant potential issues about quantum.” “This is a claim by a young professional footballer to damages to compensate for injuries sustained in a tackle. The merits are finely balanced and there are also significant potential issues about quantum.”
[17]The effect of a Part 36 offer is set out in the following terms:
“20. If the amount of damages and interest awarded by a court is less than a Part 36 payment in to court, or effective Part 36 offer, which in either case has the result that after expiry of the payment in or offer, the court does not make an order for costs in favour of the client, then: 1) if counsel advised its rejection, he/she is entitled normal and success fees for work up to receipt of the notice of Part 36 payment into court or offer but OPTION A only normal fees for subsequent work.”

Mr. RICHARD A HARTLEY QC:

[18]This agreement was entered into on 2 April 2008. The risk assessment annexed to the CFA contains the following:
“6. Csl’s success fee will be a % percent increase on his normal fees. The % increase in this case will be 15% which comprises the following elements: (a) An element to reflect the prospects of success (see ready reckoner) 15%. (b) An element relating to the cost to Csl of the postponement of the payment of fees and expenses %. Total: 15% [Solicitor’s uplift 100%] 7. Statement of Reasons (1) Possibility of application to Resile (90% offer made yet 100% accepted). (2) Potential value may prompt Defendants to apply to resile or to take technical points as yet unknown. (3) Likely to be risky on quantum and involving high volume of lay and expert evidence with costs arguments ++ win, lose or draw!”
Total: 15% [Solicitor’s uplift 100%]

Mr. JONATHAN BOYLE:

[19]His agreement was entered into on 20 June 2008, and claims a success fee of 15%. The Statement of Reasons is in the same form as in the agreement of Richard Hartley QC.[20]The Points of Dispute and Replies deal with the success fee issue at length and set out the competing submissions of both parties. The Defendants offered the following success fees. Claimant’s Solicitors . “A 100% success fee is unrealistic. Reduce to 40%.” Neil Block QC “High. Reduce to 80%.” Richard Hartley QC and Jonathan Boyle “The Defendants reserve their position but consider the 15% wholly excessive if counsel were not at risk in relation to a Part 36 offers given judgment had been entered in relation to liability”.[21]On the 1st June 2005, the Claimant’s solicitor, Mr Levinson, reviewed a DVD of the match against Middlesbrough FC. In an attendance note of the same date he recorded the following:
“Incident occurs at about one hour 16 minutes, 30 seconds on the tape. It is difficult to see precisely what happens from the coverage of the incident in real time. However, there is a second slow motion replay from a different angle which, when it is shown, Paddy Crerand comments that it was a nasty challenge, at one hour 17 minutes. He also says it was a wild challenge slightly later at approximately one hour 17 minutes, 50 seconds, and refers to the fact that the opposition player, Gary Smith, should have been sent off. The other commentator questions whether the referee saw it. Paddy Crerand says that he obviously did see it because he gave a foul (which is later borne out when Chris Eagles takes the free kick for Manchester United) but says what he meant is that he obviously did not see how bad the challenge was. I reviewed the challenge a few times on both the second and third replays. It is quite an odd one. There is no yellow card or red card given. The points in our favour are that the ball was there to be won by both players……… The other thing that he does which suggests to me that it is not a good challenge is that he straightens his leg as he comes in and that is effectively the implement that caused the damage. It does seem to make contact with the ball but looks as if it goes right through it, and then breaks Collett’s leg at a fairly low height above the ankle.”
[22]On 12 July 2005, Mr Levinson and Mr Vickerstaff attended Manchester United’s Carrington training ground, interviewed and took statements in relation to the incident from Sir Alex Ferguson, Brian McClair and Ricky Spragia.[23]On 8 September 2006, a case management conference took place at Manchester Civil Justice before District Judge Gosnall (as he then was). On 13 September 2006, the Claimant’s solicitors wrote to the Defendants’ solicitors. In the letter they said this:
“In addition, Mr Padfield will have noted District Judge Gosnall’s comments to the effect that while he did not wish to prevent the Defendants from defending the matter, having viewed the stills annexed to the particulars of claim, he considered that liability for this matter ought to be relatively straightforward. In the circumstances we would invite your client to admit liability for the challenge now in order to limit the additional costs of adducing lay and expert evidence on the issue of liability. In the event that your clients refuse to admit liability now, you will appreciate we must reserve the right to refer this letter, and District Judge Gosnall’s comments concerning liability for the challenge as and when the issue of costs arises.”
[24]In response, the Defendants’ solicitors wrote on 15 September 2006, and stated:
“In relation to your comments upon liability, whilst we obviously heard what District Judge Gosnall said, it is our view that these comments are irrelevant. The District Judge has only viewed the stills but not the video, and we do not think any comment he made during the course of a CMC can be relied upon by you, even in relation to the issue of costs. District Judge Gosnall has not heard any evidence of the matter, and he himself said that he was only expressing his personal opinion, which in our view has no bearing on this claim”
. The Claimant’s reiterated their comments concerning liability in a further letter to the Defendant’s solicitors on 21 September 2006.[25]The trial in relation to the issue of liability was listed for hearing on 19 February 2007. On 1 February 2007, the Defendants offered to concede liability and on 7 February 2007 a consent order was approved by the Court whereby judgment was entered for the Claimant against the First and Second Defendants for the amount of damages to be assessed by the Court, together with the Claimant’s costs of the action on the standard basis up to the date of that order to be the subject of detailed assessment if not agreed.

THE LAW:

[26]Section 11 of the Costs Practice Direction of the Civil Procedure Rules sets out the factors to be taken into account in deciding the amount of costs pursuant to Rule 44.5 CPR. The relevant provisions are:
“11.7 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 and at the time of any variation of the arrangement. 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 the costs were available to the receiving party.”
SUBMISSIONS: The Claimant:

SUBMISSIONS:

[27]The Claimant submitted that sporting injury cases are unique in the sense that injuries (even career ending ones) are part and parcel of the rough and tumble of competitive sport. Consequently the threshold for establishing liability in sporting injury cases is a high one. These cases are relatively rare and in many cases “volenti” can operate as a complete defence. The fact that the Defendants fought the issue of liability tooth and nail until three weeks prior to the liability hearing, demonstrates that the Defendants believed they had a serious and sustainable defence to the claim and that therefore this was a high risk case. It was argued that the determination of whether the challenge to Collett constituted a breach of duty was a sensitive issue requiring expert liability evidence. The liability experts were themselves in conflict on this issue. It was only after the Defendants’ liability expert appeared to change his opinion at the liability experts’ joint meeting, that the Defendants reconsidered their stance on liability. The Claimant also argued that the high value of the claim increased the risks in the case. This was borne out by the fact that the matter proceeded to trial which of itself justified the success fee claimed and a subsequent appeal of the judgment which would have been far less likely in a lower value matter. As such, quantum was highly contentious and could well have had an effect in terms of the order as to the costs obtained by the Claimant had the Defendants’ contentions been upheld.[28]For the Claimant, Mr Crawley submitted that enforceability was a real issue in this case. The Second Defendants had gone into administration twice, once in 1985 and again in 1988. Their insurance policy excluded an indemnity to individual players and there was a real risk that the Second Defendant would be unable to satisfy any judgment ordered by the Court. The Claimant himself was not in a position to meet his own costs in the event that he was successful in recovering damages, but failed to secure a favourable order as to costs between the parties.[29]It was also argued that in view of the comments of Mr. Neil Block QC contained in the Statement of Reasons in his own CFA, that “the merits are finely balanced and that there are also significant potential issues about quantum” demonstrate that from an early stage in the proceedings, the risks on liability were high. It was submitted that it is anomalous that on the one hand the Defendants had offered a success fee of 80% in respect of Leading Counsel’s CFA which was, entered into after the solicitor’s CFA, when only 40% had been offered to the Claimant’s solicitors. It was submitted that it was not unreasonable for the Claimant’s solicitors to draw a similar conclusion to Leading Counsel five months earlier, particularly given the increased risks assumed by their CFA, which covered any appeal. The CFA entered into by the solicitors was taken out within six months before the expiry of limitation when proceedings in the case were inevitable. The Defendants’ denial of liability made within one month of the expiry of the limitation demonstrated a clear intent to fight this case all the way, and thus it was reasonable to set the success fee of the solicitor’s CFA at 100%.

The Defendants:

[30]Mr Gibbs for the Defendant drew my attention to the solicitor’s CFA in the event of a Part 36 offer. He submitted that the terms of the CFA made it clear that the solicitor would be paid his base costs irrespective of whether a Part 36 offer was subsequently beaten at trial. He submitted that there was no quantum risk in this case. He argued that any quantum risk was transferred to the Claimant, and not to the Claimant’s solicitors, who stood to lose only their success fee, in the event of their client not beating a Part 36 offer at trial.[31]In relation to the issue of enforceability the CFA was in standard form. In the event of success, the Claimant remained liable for his solicitors’ costs. Accordingly it was submitted that the risk of enforceability of any judgment rested with the Claimant, and not with the Claimant’s solicitors. In relation to the actual risks on liability, at the time the CFAs were entered into, Mr Gibbs referred me to the comments of District Judge Gosnall at the CMC in September 2006, and the subsequent correspondence between the Claimants and Defendants, which demonstrated that the Claimants considered he had a good case on liability. Substantial work had been carried out prior to the CFA being entered into, a DVD had been obtained, witness statements had been taken from important lay witnesses, and that in the circumstances, the risks in relation to liability were low.[32]It was further submitted by Mr Gibbs that the staging for the success fee was unreasonably high in that the two stage success fee was set at 90% prior to the commencement of trial, and 100% if trial commenced. It was submitted that a staged success fee should give the paying party some incentive to settle. In this case, using the ready reckoner, it made a difference between the chances of success of 52/53% (90% success fee) and 50% (100% success fee).[33]In relation to the success fees of Richard Hartley QC and Jonathan Boyle, both these agreements were entered into after the admission of liability. Mr Gibbs submitted there was no quantum risk in this case. Both Counsel had agreed to Option A in their agreements, which meant that in the event of a Part 36 offer which was not beaten at the quantum trial, they would still recover their normal fees. At risk were simply their success fees. He submitted that there was little, if any, prospect of the Defendants resiling from their admission of liability, bearing in mind the consent order that had been entered into in February 2007. ADDITIONAL WRITTEN SUBMISSIONS: Claimant:

ADDITIONAL WRITTEN SUBMISSIONS:

[34]Mr Morgan QC submitted that the case of MGNLtd –v- The United Kingdom [2011] ECtHR (Application No 39401/04) (“MGN”) had recently been considered by the Court of Appeal in the case of Sousa –v- LB Waltham Forest [2011] EWCA Civ 194. He submitted that MGN was inconsistent with the decision of the House of Lords in Campbell –v- MGN (No 2) [2005] 1 WLR 3394, which was a decision reached in the same case. The conventional doctrine of precedent required me to follow the decision of the House of Lords. Any notion that decisions of the ECtHR can overrule a “decision” of the English Courts was misplaced.

Defendants:

[35]Mr Friston submitted that in assessing the success fee, the Court should take into account, not only the reasonable needs of the Receiving Party, but the guaranteed rights of the Paying Party, and in particular the Article 6 right of access to the court with the likely effect that the success fee would have on that right. Furthermore, he submitted that in assessing the quantum of the success fee, I should take into account the following matters:[36]In relation to Counsel’s success fee, the risk that a Receiving Party may suffer adverse costs consequences as a result of having failed to beat a Part 36 offer when assessing the success fee: to do so would be a breach of the Defendants’ right of effective access to the Court. He argued that giving weight to the quantum risk places Defendants in a “Catch 22” situation in which the more reasonable they are, the more they have to pay to achieve access to the Court. He submitted that there can be a legitimate legislative objective in facilitating the right of claimants to have access to the Court in circumstances where the need for that access had been negated by the very offers that quantum risk purports to take into account. In the alternative, he submitted that I should give quantum risk marginal weight.[37]Also in relation to Counsel’s success fee on the facts of this case, I am permitted to allow different success fees for different periods during the litigation, and he argued to the extent that Ku –v- Liverpool City Council [2005] EWCA Civ 475 says otherwise, it can be distinguished or is wrongly decided.[38]He also submitted that I am permitted to look at the total fee claimed and to reduce the success fee (or the cost generally) by reason of the total being disproportionate and in this regard CPD Section 11.9 is “ultra vires”

DISCUSSION

[39]I was told by the Claimant that sporting injuries are unique in the sense that injuries (even career-ending ones) are part and parcel of the rough and tumble of competitive sport. Volenti can operate as a complete defence. The law in this area is still developing. Judge LJ (as he then was) in the case of Caldwell –v- Maguire and others [2001] EWCA Civ 1054 at paragraph 37 said this:
“Second, in the context of sporting contests, it is also right to emphasise the distinction to be drawn between conduct which is properly to be characterised as negligent and thus sounding in damages, and errors of judgment, oversights or lapses of attention of which any reasonable jockey may be guilty in the hurly burly of a race.”
[40]At paragraph 39, he went on to state:
“The level of care required is that which is appropriate in all the circumstances, and the circumstances are of crucial importance. Full account must be taken of the factual context in which a referee exercises his functions and he could not be properly held liable for errors of judgment, oversights or lapses of which any referee might be guilty in the context of a fast moving and vigorous contest. The threshold of liability is a high one. It will not easily be crossed.”
[41]It was submitted by the Claimant that the legal uncertainties themselves increased the risks of litigating this case. This risk was noted in the risk assessment in the following way:
“(e) The difficulty faced in professional sports injury claims in terms of the undeveloped nature of the law.”
[42]In Watson and Bradford City AFC v Gray and Huddersfield Town FC [1998] Times 26th November Hooper J set out the following test for negligence in footballer actions:
“Had it been shown, on a balance of probabilities that a player would have known there was a significant risk that if he tackled in the way he did, the other player would be seriously injured?”
[43]Accordingly, to establish liability in footballer actions, there has to be a significant risk of serious injury. Carelessness, a lapse, oversight or error of judgment in a fast moving game does not amount to a breach of duty. This case was fully defended by the First and Second Defendants, and proceeded on the issue of liability until 1 February 2007, some three weeks before the liability trial was due to commence, when the Defendants, without warning, offered to concede liability.[44]The following facts are in my judgment relevant to the determination of the level of success fee in this case. The tackle, which caused the injuries to the Claimant, lasted no more than a couple of seconds in the view of the Claimant, and the Defendants, who in the defence set out the case as follows: “(4)(f) The incident occurred at great speed within fractions of a second.[45]The determination of whether the tackle was made in error of judgment, or negligently, was a live issue until the admission of liability. It was one upon which the direct lay and expert evidence and expert witnesses in this case, could not agree.[46]The referee in this case, who saw the tackle, did not even give the First Defendant a caution as a result of his challenge. There was no yellow or red card. There was no crowd reaction nor reaction from the other players, nor an inquiry by the FA Disciplinary Committee following the match.[47]The solicitors’ CFA in this case was entered into at an early stage in proceedings on 8 November 2005. At the time of entering the CFA, Mr Levinson at the Claimant’s solicitors, had viewed the DVD of the incident. His note in my judgment demonstrates that the DVD was inconclusive. In addition, Mr Levinson had carried out a brief review of certain photographic stills. Other than that he had a draft unsigned statement from Ricky Spragia, who, at that point, was sole eye witness, supporting the Claimant’s case. He was the Claimant’s manager of the reserve team. In addition at the time of the entering of the CFA, the Claimant’s solicitors had statements from Sir Alex Ferguson and a draft statement from Brian McClair, supporting the Claimant’s case. These statements were based on the DVD footage and as such amounted to inadmissible opinion evidence. I accept the submission of the Claimant that the key evidence in these types of cases is invariably the liability experts’ assessment of the tackle to be deduced from all the available evidence. All the evidence upon which the Claimant sought to rely had not been obtained at the time the CFA was entered into. The first lengthy review of the Claimant’s case was not conducted until well after the CFA had been entered into.[48]In addition at the time that the CFA was entered into, the Claimant’s full medical records had not been obtained and there was no medical expert evidence on causation available to Mr Levinson.[49]The Defendants referred me to correspondence from the Claimant’s solicitors to the Defendants’ solicitors in September 2006 inviting them to admit liability. This correspondence followed a case management conference before District Judge Gosnall (as he then was) on 8 September 2006. The Judge’s view was that having viewed the photographic evidence annexed to the particulars of claim, he considered liability ought to be relatively straight forward. I remind myself that this was almost one year since the CFA was entered into in November 2005. Nevertheless, despite the comments of District Judge Gosnall, the Defendants refused to admit liability until February 2007 when their liability expert altered his position. I accept the Claimant’s submission that the invitation by the Claimant to the Defendant in their letter of 13 September 2006 to admit liability was one that any Claimant would make without expecting a positive response.[50]The principles for governing the assessment of success fees were dealt with Mr Justice Akenhead in the case of Redwing Construction Ltd –v- Wishart [2011] EWHC 19 (TCC).

(c) he said:

“A primary factor in considering the reasonableness of the percentage increase must be the prospects of the Claimant succeeding on its claim. This is to be judged primarily as at the date that the CFA is entered into. The greater the prospects of success, the lower the reasonable and proportionate percentage will be. It is difficult to be prescriptive about this, however, and there is no magic sliding scale. Where the chances of success, judged objectively, at the time when the CFA is entered into, are about even or less, the greater the justification will be for a 100% mark-up. Where the chances of success are great, there will almost invariably be a strong feeling that the CFA mark up should be significantly discounted. Where the Claimant was as good as bound to win, no mark up may be allowed.”
[51]In the case of Designers Guild –v- Russell Williams (Textiles) Ltd No 2 [2003] 2 Costs Law Reports, page 204, at paragraph 15, the Senior Costs

Judge Master Hurst said this:

“There is an argument for saying that in any case which reached trial, a success fee of 100% is easily justified because both sides presumably believe that they had an arguable and winnable case. In this case, we have no doubt at all that the matter was finely balanced, and that the appropriate success fee is therefore 100%.”
[52]In relation to the success fee in the solicitors’ CFA, the Points of Dispute state:
“Despite the Defendants’ views to the contrary, the Claimant’s solicitors clearly considered liability to be relatively clear cut in the light of the evidence available. As such, a 100% success fee is unrealistic. Reduce to 40%. Using the ready reckoner approach, a 40% success fee equates to a 70% chance of success”
[53]I am required by the provisions of Section 11.7 of the Costs Practice Direction to have regard to the facts and circumstances as they reasonably appeared to the solicitor or counsel when the CFA was entered into. I cannot apply the test of hindsight to determine the appropriate level of success fee.[54]In this case the solicitors’ CFA is staged. The staging is as follows:
“The success fee is set at 100% of basic charges, where the claim concludes at trial; or 90% where the claim concludes before a trial has commenced. 0% relates to the postponement of payment of our fees and expenses and cannot be recovered from your opponent.”
[55]In relation to staged success fees, Lord Justice Brook on Ku –v- Liverpool City Council [2005] EWCA Civ 475 said this: “Finally, we have benefited from reading the careful judgment of Judge Barnett in the Chester County Court on 9 May 2003 in Cheshire County Council –v- Lea (unreported). Although what we have said about the law (in particularly about paragraph 11.8(2) of the Costs Practice Direction) must supersede what is said in that judgment, this represented a bold attempt to combat what Lord Hoffman described as a ratchet effect in Callery –v- Gray (No 1 & No 2) [2002] 1 WLR 2000, para 32, leading to ever higher success fees. We end by reiterating that Costs Judges should be more willing to approve what appear to be high success fees in cases which have gone a long distance towards trial, if the maker of the CFA has agreed that a much lower success fee should be payable if the claim settles at an early stage”.[56]Master Campbell, in the case of Peacock –v- MGN Ltd [2010] EWHC 90174 (Costs) followed the decision in Ku and said at paragraph 25(i):
“A party who contends for a high success fee in a matter which has gone a long distance towards trial (the situation here) stands a better prospect of having that fee approved if a lower success fee would have been payable had the claim settled earlier (precisely what could have but did not happen here). A party who enters into a CFA with an unstaged success fee which is payable at that level irrespective of whether the case settles quickly or slowly, will find it difficult to justify the fee. For that reason, the “high” success fee, having been staged so that it would have been less if the case is settled “quickly” is justified.”
[57]It is open to the Claimant to choose the date of staging. In Ku, the Court of Appeal contemplated a low success fee and in Peacock “perhaps until the service of the defence”. In other words to have the benefit of a high success fee in the cases that do not settle early. In this case, the staging affords the Defendants little discount for an early settlement. A discount of 10% is applied to the period before the trial has commenced. In my judgment, what Mr Levinson, the Claimant’s solicitor, was contemplating at the time that he entered into the CFA with the Claimant, accords with the decision in Designer Guild. In other words, if this case went to trial, a success fee of 100% is easily justified because both sides presumably believed that they had an arguable and winnable case. At worst, what Mr Levinson was contemplating had the case settled before trial, was that the prospects of success were in the order of between 50% and 55%, which on the ready reckoner approach would equate to a success fee of somewhere in the order of 90%.[58]In my judgment, the potential high value of this claim, which is a factor reflected in the risk assessment, is real. This case settled for in excess of £4.5 million.

Lord Justice Moore-Bick in C –v- W [2008] EWCA Civ 1459 at paragraph 15, said:

“To add a further 20% success fee to reflect the size of the claim was, in my view, also wrong. It is probably true in general that high value claims tend to be more complex and to involve a greater amount of work than claims of lower value, but that does not of itself increase the risk of losing. If more work is done, the base fees are inevitably higher, but the application of a percentage success fee means that the amount recovered by the solicitor if the claim succeeds is correspondingly greater. It may be the case that the more complex the litigation, the larger number of potential pitfalls, but the right way to allow for that is to adjust the chance of success and by that means the success fee [my italics]. To make a direct increase in the success fee itself, is likely to distort the calculation.”
[59]Of the other factors reflected in the setting of the success fee percentage, I entirely accept “the specialist nature of the dispute”. I have already referred to the high threshold test to be adopted in relation to the issue of liability which was clearly a factor in the mind of Mr Levinson when the success fee was set. In addition a further factor is the “number of different experts required to be instructed”. Mr Leveinson holds himself out to be an expert in specialist sports injuries with the technical expertise to match. It is clear from his witness statement that he has had conduct of many winning and losing claims and was therefore fully aware when he entered into the CFA with the Claimant, the number of different experts and the disciplines required in connection with establishing liability, causation and quantum.[60]Mr Gibbs sought to persuade me that there was no quantum risk in this case. He referred me to the document “Conditional Fee Agreements: What You Need To Know” and the relevant conditions in the event of the solicitors terminating the CFA. In particular:
“Paying us if we end this agreement – (iii) we can end this agreement if you reject our opinion about making a settlement with your opponent, you must then: • Pay the basic charges and our disbursements, including barristers’ fees; • Pay the success fee if you go on to win your claim for damages.” • Pay the basic charges and our disbursements, including barristers’ fees; • Pay the success fee if you go on to win your claim for damages.”
[61]He submitted that in all the circumstances, there was no quantum risk to the solicitors in this case. The Claimant’s solicitors were always to be paid their base fees, come what may even in respect of a successful Part 36 offer or payment into Court by the Defendants. Their only risk was that they may not recover a success fee. In that regard, I accept that there was little, if any, quantum risk on the Claimant’s solicitors’ part in their CFA.[62]I also accept his submissions with regard to risk factor (i) in the Claimant’s CFA, namely “the possibility of achieving success on liability/quantum but failure on enforceability”. There is no departure from the standard wording of the CFA in this case. If the Claimant wins his claim, he remains liable for his solicitors’ basic charges, disbursements and success fee. Consequently, the risk was on the Claimant of non-recovery or non-enforceability of a costs order against the Defendants. There was no risk to the Claimant’s solicitors in that regard.[63]Having reviewed all the material that was available to Mr Levinson and his colleagues, at the time that the CFA was entered into, I am satisfied that in respect of the issues of liability, this was far from a straight forward case. Equally, I am satisfied that Mr Levinson accurately assessed the risks of the Claimant’s case, at the time that the CFA was entered into as being no more than marginally above 50%. Taking into account the discount of 10% referred to in the CFA, Mr Levinson, in my judgment, accurately assessed the risks in this case, for the reasons set out above, as no more than between 50% and 53%. I adopt the reasoning of Master Campbell at paragraph 25(i) of Peacock, and entirely agree with his conclusion that a party who contends for a high success fee in a matter that has gone a long distance towards trial, (the situation here), stands a better prospect of having that fee approved if a lower success fee would have been payable had the claim settled earlier. Admittedly the staging in this case was later than in the case of Peacock. Furthermore, the discount for early settlement was relatively small, namely 10%. Nonetheless, in my judgment, this accurately reflects the Claimant’s case on liability as it was known at the time that the CFA was entered into. With hindsight, that assessment proved accurate, bearing in mind that the Defendants did not admit liability until very shortly before the trial. Accordingly, in view of the fact that I have found that there was no quantum risk to the solicitors in relation to their fees, I find that the appropriate level of success fee, bearing in mind the admission of liability prior to the commencement of the liability trial is 90%.

Mr Neil Block QC:

[64]Mr Block’s CFA was entered into on 24 April 2006. The information upon which his written assessment was based were instructions dated 13 April 2006. He assessed the prospects of success at 50%, giving a basic uplift from the ready reckoner of 100%. In a statement of reasons he says this:
“This is a claim by a young professional footballer for damages to compensate for injuries sustained in a tackle. The merits are finely balanced and there are also significant potential issues about quantum.”
[65]In his agreement, Mr Block opted for “option A” in the event that the amount of damages and interest awarded by a court was less than a Part 36 payment into Court or effective Part 36 offer. Paragraph 20.1 of his agreement reads as follows: “If counsel advised its rejection, he/she is entitled to normal and success fees for work up to receipt of the notice of Part 36 payment into Court or offer, but OPTION A only normal fees for subsequent work”.[66]In other words, like the Claimant’s solicitors, leading counsel would recover his normal fees for work carried out on behalf of the Claimant after a successful payment into court or successful Part 36 offer by the Defendant. Consequently, in the light of my earlier findings in relation to the solicitors’ CFA, I find that there was little quantum risk on the part of leading counsel in this case. In my judgment any quantum risk was transferred from the Claimant’s solicitors and leading counsel to the Claimant on the basis that he remains liable for his solicitors’ and counsel’s base and/or normal fees.[67]So far as the risks on liability were concerned, Mr Block has specialist sporting injury experience. I accept that more evidence was available to him when he made his assessment of risk than was available to the Claimant’s solicitors. Mr Morgan QC in his written submissions to me, argues that the statement of Mr Block that “the merits are finely balanced and there are also potentially significant potential issues about quantum” is a statement of expert professional opinion for which counsel would be liable for disciplinary action if it were made without foundation. Accordingly, he submits it should be accorded considerable weight. I accept that proposition. Having reviewed the documentation available to leading counsel prior to the entry into the CFA by him, I am satisfied that his opinion was right. The merits of this case at the time the CFA was entered into, bearing in mind the denial of liability were finely balanced. The Defendants appear to recognise this fact, bearing in mind that they concede 80% in respect of Mr Block’s success fee, but only 40% for the Claimant’s solicitors. This reinforces my view that the Defendants accept that the case, on the issue of liability, was finely balanced. Accordingly, and allowing as I do a discount in respect of quantum risk, I allow 90% success fee in respect of Mr Block QC’s fees.

Mr Richard Hartley QC & Mr Jonathan Boyle:

[68]The CFA for Mr Richard Hartley QC is dated 2 April 2008 and the CFA of Mr Jonathan Boyle was entered into on the 20 June 2008. Both agreements are in similar form and incorporate the standard terms agreed between APIL and PIBA on 31 October 2005, namely APIL/PIBA6 which were incorporated but not annexed to the agreement. Both counsels’ CFAs contain the same risk assessment and statement of reasons. The success fee claimed for both counsel is 15%. Their statements of reasons record the following:
“(1) Possibility of application to resile (90% offer made – yet 100% accepted!) (2) Potential value may prompt Defendants to apply to resile or to take technical points as yet unknown. (3) Likely to be risky on quantum and involving high volume of lay and expert evidence with costs arguments ++ win, lose or draw!”
[69]The relevant standard terms and conditions in APIL/PIBA6 are: Definition of “success”. 14(1) “Success” means the same as “win” in the conditional fee agreement between the solicitor and the client. Part 36 offers and payments 15. If the amount of damages and interest awarded by a court is less than a Part 36 payment into court or effective Part 36 offer, then:(1) If counsel advised its rejection, he/she is entitled to normal and success fees for work up to receipt of the notice of Part 36 payment into court or offer, but only normal fees for subsequent work;(2) If counsel advised its acceptance, he/she is entitled to normal and success fees for all work done.” Failure 16. Subject to paragraph 17(1) hereof, if the case is lost or on counsel’s advice ends without success then counsel is not entitled to any fees or expenses Errors and Indemnity for Fees 17(1) If, because of a breach by the solicitor of his/her duty to the client, the client’s claim is dismissed or struck out: a) for non compliance with an interlocutory order:or b) for want of prosecution,or c) by rule of court or the Civil Procedure Rules; or……….. the solicitor shall (subject to sub paragraphs (3) – (6) hereof) pay counsel such normal fees as would have been recoverable under this agreement. Part 36 offers and payments (1) If counsel advised its rejection, he/she is entitled to normal and success fees for work up to receipt of the notice of Part 36 payment into court or offer, but only normal fees for subsequent work; (2) If counsel advised its acceptance, he/she is entitled to normal and success fees for all work done.” 17(1) If, because of a breach by the solicitor of his/her duty to the client, the client’s claim is dismissed or struck out: a) for non compliance with an interlocutory order:or b) for want of prosecution,or c) by rule of court or the Civil Procedure Rules; or………..

Part 36 offers and payments

[70]Mr Hartley QC defines normal fees in his agreement in the following way:
“(2) (i) Details of Richard A Hartley QC’s fees can be provided upon request by the clerks.”
[71]In the case of Mr Boyle, normal fees are defined as:
“In accordance with clause 11(1) of the standard terms, counsel’s normal fees will be as follows: (1) Advisory work and drafting in standard fee, fast track or multi track cases as set out in “table 1” annexed hereto. (2) In other (non-standard) cases, in accordance with counsel’s hourly rate obtained for such work in this field as set out in “table 2” annexed hereto. (3) Court appearances in “standard fee” cases as set out in “table 3” annexed hereto. (4) Brief fees for trial or interim hearings to be assessed and agreed upon delivery of the brief trial/hearing.”
[72]The definition of “win” in the solicitors’ CFA is set out in the document marked “Conditional Fee Agreement: What You Need to Know”, is defined as follows:
“(o) Win Your claim for damages is finally decided in your favour, whether by a court decision or an agreement to pay you damages or in any way that you derive benefit from pursuing the claim.”
[73]The consent order in respect of the issue of liability in this case was signed by the Claimant’s and Defendants’ solicitors and approved by the Court on 12 February 2007. It records that “judgment be entered (by consent) for the Claimant against the First and Second Defendants (“the Defendants”) for an amount of damages to be assessed by the court.”[74]I was provided with a note on the success fees claimed by Mr Richard Hartley QC and Mr Jonathan Boyle. Paragraph 2 of that note states the following:
“The Defendants argue that no success fee is justified, ie the risk that Counsel would fail to receive their base fees was nil. If the Defendants are correct, the Court must find that, at the time at which the CFA was entered into, the prospects of counsel receiving their base fees were in fact at 100%.”
[75]That is the conclusion that I have reached for the following reasons. In my judgment, the definition of “win” in the solicitors’ CFA which is the same as “success” in counsel’s CFAs, had already been triggered at the time that counsel’s CFA’s had been entered into. The consent order of 7 February 2007 dealt with the issue of liability with judgment being entered for the Claimant for an amount of damages to be assessed by the court. A consent order was signed by all the parties at least fourteen months before the CFA of Mr Richard Hartley QC was entered into, and that Order not been appealed. Counsels’ statements of reasons for setting their success fees at 15% refer to the possibility of an application to resile, and the fact that the case was “likely to be risky on quantum”. In my judgment, bearing in mind that counsel’s CFAs were not entered into until some 14-16 months after a judgment by consent had been entered, any application to resile from the admission from liability would have been unlikely to succeed. This must be the case even though the Claimant had offered to accept judgment for 95% of damages with the Defendants purporting to agree the Claimant’s proposal, but then conceding the issue of liability on a 100% basis. I find it inconceivable that a court, some fourteen to sixteen months after a consent order admitting 100% liability in this claim, would reopen the entire issue of liability. Even if an application to resile was successful to the extent of increasing contributory negligence on the part of the Claimant, it would, in my judgment still have been a “win” or “success” thus triggering a success fee. In my judgment paragraph 16 of the APIL/PIBA6 would never have been engaged in this case. The Claimant was successful on the issue of liability and accordingly in my judgment counsel was at no risk in relation to an application to resile.[76]So far as quantum risk is concerned, the terms of APIL/PIBA6 make it clear that if the amount of damages awarded by the court is less than a Part 36 offer or payment into Court and that counsel has advised its rejection he will still recover his normal fees for any subsequent work. If he advises on acceptance he is entitled to normal and success fees for all work done. This was the case with both the CFA’s of Mr Hartley QC and Mr Boyle and therefore in my judgment, they carried no quantum risk. Save to the extent that the claim is “lost” in accordance with paragraph 16 of the APIL/PIBA6 terms, counsel will always recover their normal fees.[77]Mr Hartley and Mr Boyle in their note on success fees, refer me to a number of other risks at paragraph 12. They crystallise these as the “ordinary risks of litigation”, and, for example, refer to the Claimant ceasing to co-operate or, alternatively, failing to provide instructions, leading to his claim being struck out. Or, by way of another example, some procedural breach or failure to comply with court orders. Even in these eventualities, the ABIL/PIBA6 terms at paragraph 17 provide that counsel can recover their normal fees from their instructing solicitor for work carried out. In those circumstances and in my judgment both Mr Richard Hartley QC and Mr Jonathan Boyle carried no risk in relation to the factors set out in their statement of reasons contained within their CFAs. Accordingly, their success fees will be assessed at nil.[78]Dealing with the submissions of the parties in relation to the issues arising out of MGN Ltd –v- The United Kingdom [2011] ECTHR (Application No 39401/04) and the Defendants’ submissions that in assessing the success fee, the court should take into account, not only the reasonable needs of the Receiving Party, but also the guaranteed rights of the Paying Party. In particular, the right of access to the court and the effect that the success fee is likely to have on that right. Mr Friston, in his written submissions to me, argues that the Defendants’ right of access to the court has been violated by the fact that a success fee is charged. In the alternative, it is argued that the right of access has been violated by the fact that counsel’s success fee is calculated in an irrational and unfair way and that both success fees ought to be limited to what is necessary in a democratic society for the purpose of achieving access to justice. The Defendants rely on Article 6 of the ECHR, namely the right to a fair trial, and submit that on the basis of the MGN decision; circumstances exist in which the Defendants’ human rights may be violated if the costs which are claimed against them are excessive. To the extent that this is to be taken into account, it is a necessary implication of this decision that the court is able to take the party’s human rights into account. He submits that the success fees claimed in the bill of costs amount to some £581,832 for the Claimant’s solicitors and £14,816 for counsel, giving a total of £596,648 exclusive of VAT. He submits that the overall sums which are awarded ought not to be allowed to reach such a high level that it bars access to the court. In that regard, he submits that I should look at absolute figures, and allow no more than is acceptable so as not to prevent access to justice, and that I should reduce globally the success fee to a level that is not a bar to access to the court. A practical approach to deal with this issue would be under the guise of proportionality which, it was argued, was positively encouraged by Lord Hope in the MGN House of Lords decision, where at paragraph 47 he said this:
“There remains the question of proportionality. The direction does not attempt to identify any factors that may be relevant other than directing that the question whether the success fee is proportionate, is a separate question from that relating to the proportionality of the base costs. On the other hand, it would be wrong to conclude that this an empty exercise. It is, in the end, the ultimate controlling factor which the court must apply if it is to ensure in a case such as this which is for breach of confidence that the right of access to the court of the Receiving Party to vindicate her right of privacy under Article 8 of the Convention is properly balanced against the losing party’s Article 10 Right of Free Speech. Account must, of course, be taken of the fact that it is to be the losing party that is being called upon to pay the success fee. But any reduction in the amount of the percentage increase that is to be paid by the losing party will have to be borne by the client under her agreement with the solicitor. So the rights and interests of both sides must be considered and weighed up against each other in deciding whether, having regard to the interests at stake, the amount was proportionate.”
[79]The conditional fee agreement in the MGN case before the House of Lords was clearly unusual. It did not provide for a waiver of the shortfall of the success fee. The conditional fee agreement with the Claimant’s solicitors in this case does. As such, the Claimant will not have to bear the shortfall. For the Claimant, Mr Morgan QC submits the facts of MGN are distinguishable from this case for a number of reasons: i) The Claimant is not wealthy and would have been excluded from access to justice for financial reasons if he had not some form of funding arrangement such as a CFA in place. ii) The damages in MGN were some £3,500. In the present case £4.5 million. iii) The present case does not concern freedom of expression namely Article 10 ECHR, which was the convention right engaged in the MGN case. Article 10 confers on the person an express right to freedom of expression subject to certain limitations. No comparable expressly stated right is engaged here. iv) MGN raises issues of proportionality. In this case, no general proportionality challenge under Lownds or proportionality challenge to the success feewas raised in the points of dispute. In any event, elements of the bill of costs are to be assessed on the indemnity basis where proportionality is not a factor.[80]MGN was considered by the Court of Appeal in the case of Sousa –v- LB Waltham Forest [2011] EWCA Civ at 194, where

Lord Justice Ward said this:

“36. The Appellant accepts that even though our case is not one in which Article 10 is engaged, we nonetheless have to have regard to European Jurisprudence and read our domestic provisions relating to costs in accordance therewith. The Appellant contends that this would be incongruous and illogical if the means of a CFA party could be taken into account on the question of reasonableness in a case where Article 10 was engaged but not in any other case and so the court should give effect to the clear intention of the legislation which is to give access to justice to those otherwise excluded for financial reasons. The views of the Strasbourg court as to reasonableness were ones which we should not ignore. 37. I prefer the view of the Respondent that the Court of Appeal remains bound by the decision of the House of Lords; see Kay –v- Lambeth LBC [2006] UKHL 10 [2006] 2 AC 465. If the House of Lords regarded the fees as reasonably incurred, so should we.”
[81]At paragraph 54 of the judgment,

Lord Justice Moore-Bick said this:

“54. Finally, it is necessary to mention briefly the recent decision of the European Court of Human Rights in the case of MGN –v- The United Kingdom (Application No 39401/04) in which the court held that the award of costs in favour of Miss Campbell against MGN that included a success fee (upheld in Campbell –v- MGN (No 2)) involved an infringement of the Defendant’s right to free speech. Mr Bacon submitted that the decisions supported the wider proposition that it is unreasonable for a Claimant who can finance the litigation without recourse to an additional fee agreement to do so and that therefore Mr Sousa should not be allowed to recover the success fee as part of the costs in this case. 55. I am unable to accept that submission for two reasons. Firstly, because in MGN –v- The United Kingdom, the court was concerned with the question of whether the liability to pay a success fee involved the disproportionate interference with a newspaper’s right of free speech and was unreasonable on that account. The case is not, therefore, remotely comparable to the present. Second, because unless the liability to pay a success fee can be said to infringe the Defendant’s rights under the convention (which it is clearly not the case here) questions of proportionality and reasonableness do not arise. It is for Parliament to decide what arrangements viewed overall will best serve the general requirement for access to justice. Moreover, the submission is contrary to the decision of the House of Lords in Campbell –v- MGN (No 2), which remains binding on this court.”
[82]Lord Hoffman in Campbell –v- MGN (No 2) dealt with the issue of proportionality in the following way:
“In my opinion these arguments are flawed. The first confuses two different concepts of proportionality. The CPR on costs are concerned with whether expenditure on litigation was proportionate to the amount at stake, the interests of the parties, complexity of the issues and so forth. But Article 10 is concerned with whether a rule which requires unsuccessful defendants, not only to pay the reasonable and proportionate costs of their adversary in the litigation, but also to contribute to the funding of other litigation, is a proportionate measure to provide those other litigants with access to justice, having regard to its effect on the Article 10 right to freedom of expression. MGN do not really deny that in principle it is open to the legislature to choose to fund access to justice in this way.”
[83]I prefer the submissions of the Claimant in relation to this matter to those of the Defendants. I distinguish the MGN case on the facts and, in particular, for the reason that this is not an Article 10 case. I am not bound to follow the MGN decision, of the ECtHR which is inconsistent with the decision in the House of Lords in Campbell –v- MGN (No 2). In my mind, the conventional doctrine of precedent requires me to follow the decision of the House of Lords, and approval for that course of action is found at paragraph 37 of Sousa. Accordingly, the success fees allowed in this case are: Claimant’s solicitors – 90% Mr Block QC - 90% Mr Hartley QC – nil Mr Boyle – nil[84]As far as the costs of this issue are concerned, these are reserved to the conclusion of the detailed assessment.