Fortune v Roe [2011] EWHC 2953 (QB)

[2011] EWHC 2953 (QB)Case No HQ07X545
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 10 th November 2011
Before
SIR ROBERT NELSON(Sitting as a Judge of the High Court)Sitting with Assessors
Between
ARLENE FORTUNEClaimant/JONATHAN ROEDefendant/
Nicholas Bacon QC (instructed by Irwin Mitchell) for AppellantRoger Mallalieu (instructed by Lamport Bassitt) for DefendantHearing Hearing date: 14 th July 2011
Judgment

Sir Robert Nelson :

[1]This is an appeal by the Claimant against the order of Costs Judge Master Campbell made on 4 November 2010 in which he held that the success fee claimed under a Conditional Fee Agreement should be 20% rather than the 100% claimed by the Claimant.

The Facts

[2]On 8 December 2001 the Claimant was involved in a serious car accident on the A421 road near Milton Keynes. The vehicle being driven by the Defendant in the opposite direction veered on to the Claimant’s side of the carriageway and collided head-on with her vehicle. As a consequent, she sustained very serious injuries; closed head injury, fractured spine at C1/C2, fractured right humerus associated with radial nerve palsy, fractured pelvis, open fractures of the right tibia, right femur and fibular, fractures to the ribs, knee caps, sacrum, wrist, laceration and soft tissue injuries including degloving injury to the left leg.[3]The Claimant consulted Irwin Mitchell. Her claim was initially covered by a before the event insurance policy but, when the limit of indemnity was reached, she entered into a Conditional Fee Agreement on 3 February 2006.[4]The trial date was ultimately set at 30 March 2009, but the claim was settled on 12 March 2009 when the Claimant accepted a Part 36 offer made by the Defendant on 20 February 2009 in the sum of £600,000 less CRU, plus costs on the standard basis, to be assessed if not agreed.[5]The key dates, which are set out in Master Campbell’s judgment, are as follows:• 8 December 2001 – the road traffic accident;• 27 January 2003 – criminal conviction of Defendant for dangerous driving;• 27 March 2003 – liability admitted;• 11 September 2003 – offer to settle by Defendant (not under Part 36) in the sum of £250,000;• 14 January 2005 – proceedings served;• 10 March 2005 – defence served admitting negligence, but denying that the Claimant had sustained a head injury;• 6 April 2005 – judgment entered for damages to be assessed;• 3 February 2006 – CFA signed;• 28 September 2007 – Defendant offers £475,000 less CRU;• 31 January 2008 – round table meeting; "informal" offer of £600,000 from Defendant;• 3 March 2008 – trial listed for 10-12 March 2008 vacated; trial listed for 30 March 2009;• 4 April 2008 – Part 36 offer by Claimant in sum of £800,000 less CRU;• 20 February 2009 – Defendant's Part 36 offer in the sum of £600,000 less CRU;• 12 March 2009 – offer accepted;• 16 July 2009 – consent order made by Master Eyre;• 12 October 2010 – detailed assessment proceedings head by Master Campbell;• 4 November 2010 – the decision under appeal by Master Campbell.[6]Master Campbell granted permission to appeal on 24 November 2010.

The Conditional Fee Agreement

[7]The relevant clauses are as follows: "Your Conditional Fee Agreement For Use in Road Traffic Accident cases. What is covered by this Agreement• The work done in pursuing your claim for damages for personal injury suffered in the course of an accident on 8 December 2001 insofar as your legal costs exceed the limit of the indemnity under the terms of your legal expenses insurance policy issued by Churchill Insurance … Explanation of Words …. Paying Us If you win your claim:• You are primarily liable to pay our basic charges, success fee, your disbursements, after the event insurance premium and VAT.• …. If you are not entitled to recover part of the costs of the claim (e.g. - because you are unsuccessful in some aspects of your claim), then you will not be liable for that part of our basic charges or success fee. … Success Fee The Success Fee will be:(a) if you win your claim prior to 3 months before the date fixed for the trial or the first date of the trial window (whichever is the earlier) 25% of the basic charges; or(b) if you win your claim at any later date or time: 100% of the basic charges; or(c) if Rules of Court fix the percentage success fee recoverable from your opponent this will be the percentage which shall apply. Whichever applies above the whole of the success fee relates to the risks involved in your case and no part thereof relates to the cost of postponement of payment of our legal fees and expenses. The reasons for setting the success fee at the above levels are set out in Schedule 1 attached to this Agreement.” Law Society Conditions The attached Law Society conditions (which have been modified by Irwin Mitchell) are part of this agreement … SCHEDULE 1 – Reasons for Level of Success Fee … The percentage success fee shown at (a) above reflects our assessment of the risks of your case, based purely on the information available to us at the time of entering into this agreement. This includes those specific issues which we regard as relevant and appropriate to take into account and which are set out in the table below: The percentage success fee shown at (b) above reflects all of the risks in the table below which would be enhanced considerably should your case not settle prior to three months before trial. The enhanced risks at trial are due to the potential risk of failing to establish one or more fundamental elements of your case in respect of which the Judge prefers the opponent's evidence, and also the significant risk that you may fail to beat an offer or Payment into Court made by your opponent (see Condition 3(k) – Part 36 Offers or Payments of your Agreement).” The risks are then set out in tabular form. The type of accident, and the issues of liability, contributory negligence and documents available, are classified as low risk; the Claimant’s evidence, causation, quantum and expert evidence classified as medium risk; and Part 36 offer classified as high risk. It is noted that liability has been conceded and judgment entered in the Claimant’s favour, that there is no allegation of contributory negligence, that there may be an issue as to the extent of the Claimant’s head injuries which are presently yet to be fully assessed, and that there are several variables on the issue of quantum including issue of the Claimant’s residual earning prospects, the care claim, the orthopaedic prognosis of the head injuries. The possible risk is described as relating to an effective Part 36 payment into court on quantum issues. It is noted that there had been no Part 36 offers to date. “Law Society Conditions” 3. Explanation of Words Used … (b) Basic charges – Our charges for legal work we do on your claim for damages. (c) Claim – A claim is your demand for damages for personal injury whether or not Court proceedings are issued. … (e) Damages – Money that you win whether by a Court decision or settlement. …. (j) Lose – The Court has dismissed your claim or you have stopped it on our advice. (k) Part 36 offers or payment – This is an offer by your opponent(s) to settle your claim made strictly in accordance with Rules of Court and which has certain consequences for recovery of legal costs. If your opponent(s) makes a Part 36 offer or payment to settle your claim then:• If you accept – the effect is that you have won your claim against that opponent (subject to Condition 4 below)• If you reject and continue to pursue your claim and either by settlement or trial you are awarded more, the effect is that you have won your claim (subject to Condition 4 below).• If you reject and supported by our advice you continue to pursue your claim, but you recover damages that are less than the sum offered or paid by your opponent(s), we will not charge you our basic charges or success fee for the work done after the expiry of 21 days following receipt of the notice of the offer or payment. We will charge you our basic charges, success fee, VAT, disbursements and insurance premium for the work done before that date, which you should be entitled to recover from your opponent(s). The legal costs payable will not be limited by reference to the amount of damages which may be recovered on your behalf. Your opponent(s) will be entitled to an order for costs against you but you may be covered for this risk by your insurance policy. (m) Success fee – The percentage of basic costs that we add to your bill if you win your claim for damages. (n) Win – Your claim for damages against your opponent or if your claim is against two or more opponents against any one of them, is finally decided in your favour, whether by a court decision or an agreement to pay your damages. This applies even if your claim has not succeeded against one or more of your opponent(s). “Finally" means that your opponent(s):• is not allowed to appeal against the Court decision; or• has not appealed in time; or• has lost any appeal. 4. What Happens if You Win If you win:• You are then liable to pay all our basic charges, success fee, VAT, your disbursements and insurance premium …• You will be entitled to recover our basic charges, success fee, VAT, your disbursements and insurance premium from your losing opponent provided these are reasonable and proportionate to the value of your claim.” What is covered by this Agreement Explanation of Words Paying Us If you win your claim: If you are not entitled to recover part of the costs of the claim (e.g. - because you are unsuccessful in some aspects of your claim), then you will not be liable for that part of our basic charges or success fee. Success Fee The Success Fee will be: Law Society Conditions SCHEDULE 1 – Reasons for Level of Success Fee

If you win:

[8]There are two attendance notes prepared by the fee earner from Irwin Mitchell making the Conditional Fee Agreement risk assessment. In the first it was noted that liability had been conceded and judgment entered by the court, with no allegations of contributory negligence. “There are therefore no risks in relation to whether or not our client will succeed in recovering damages on the grounds of liability”. Complex arguments arising as to the injuries and their causation were noted as were potential problems with loss of earnings and care management. No Part 36 proposals had been made and the fee earner concluded: "In summary, the major risks relate to quantifying this claim in the face of the Part 36 payment in or Part 36 offer for periodical payments. At the moment assessing the long term outcome for our client in terms of her needs for care, accommodation and her earning capacity is not straightforward. On the basis of this, we assess the prospects of success when measured against an unknown Part 36 risk at and therefore the success fee at ”[9]In the second attendance note it was concluded that:
“The probability is that a Part 36 payment will be made at some stage, potentially putting a significant risk on the recovery of costs beyond that point. Given the multi-facetted nature of this case, the assessment of those risks will be more difficult.”

The Law

[10]A success fee is based upon the premise that there is a risk that the Claimant’s solicitors will not recover all or part of their costs. The success fee compensates them for undertaking that risk. The level of risk determines the amount of the success fee, save in cases where such fees are fixed by the court.[11]Section 58 of the Courts and Legal Services Act 1990, as amended, defines a Conditional Fee Agreement as one which provides for fees and expenses or any part of them to be payable only in specified circumstances. The Conditional Fee Agreements Regulations 2000 provide that if the percentage increase is disallowed on the grounds that the level at which the increase was set was unreasonable in view of the facts which were or should have been known to the legal representative at the time it was set, that amount ceases to be payable under the Agreement unless the court is satisfied that it should continue to be so payable.[12]CPR 44.4 states that, where the court is assessing the amount of costs either by summary or by detailed assessment, it will not, either on a standard basis or on an indemnity basis, allow costs which have been unreasonably incurred or are unreasonable in amount. CPR Part 44 Costs Practice Direction provides in relation to success fees as follows: “11.7.. When the court is considering the factors to be taken into account in assessing additional liability, it will have regard to the facts and circumstances as they reasonably appear 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; …”.[13]A two-stage success fee, as was used here, has been encouraged in principle provided that it reflects the risk: Callery v Gray & Others [2001] EWCA Civ 1117 and U v Liverpool City Council Practice Note [2005] EWCA Civ 475. Settlement in the protocol period will justify a lower fee whereas settlement closer to trial may justify a higher fee, even up to 100% depending on the circumstances. Whether a percentage as high as 100% can be justified depends on whether it is appropriate in a particular case: Atak v Lee [2004] EWCA Civ 1712.[14]Fixed percentage fee increases in road traffic cases are dealt with under CPR 45.15. This was not in force at the time of the present case. Under CPR 45.16 the percentage increase allowed in relation to solicitors’ fees is 100% where the claim concludes at trial or 12.5% where the claim concludes before a trial is commenced or where the dispute is settled before a claim is issued. Where, however, as here, the new rules under CPR 45.16 do not apply, it is not permissible simply to adopt the new CPR fixed rates in assessing the reasonableness of a success fee. The reason for this is that the new CPR approach, which was informed by an industry-wide agreement, does not take into account the individual effects of a particular case (see Atak v Lee).[15]The cases illustrate instances where the courts have considered risk levels relative to success fees and their appropriateness. Thus in C v W [2009] 1 Costs LR 123, a single stage success fee, the court found that 20% was an appropriate level where, apart from general litigation risks, the only risk facing the recovery of costs by the solicitors was the risk of failing to beat a Part 36 offer at trial.[16]Another example is Alexander Glynn Williams v Mohammed Yasin Case No. 4LS90094 22 January 2010 where, on the facts of that particular case, it was held that the second success fee at 100% was appropriate on the facts and the 100% success fee was allowed where the case settled within three months of the trial date.[17]In Wood v Worthing and Southlands Hospital NHS Trust No. 23 of 2004, 18 October 2004, Mr Justice Hodge held that paragraph 3(k) of the CFA being considered in that case, which was the same as that in the present case, was relevant to the interpretation of the contract and that one of the factors to be taken into account in assessing the success fee was the risk that the receiving party’s legal representative would not be paid any of their charges on the grounds that the receiving party might not do better than the Part 36 payment which the receiving party had already rejected on their advice.[18]Whilst it is correct that two stage fees have been encouraged by the courts and that a second, higher stage success may well be treated more leniently by the courts, the actual determination will depend upon the nature and level of risk and the appropriateness of the success fee whether it is the only success fee or the first stage or second stage of a two-stage fee.

Judgment

[19]Master Campbell noted at paragraph 6 of his judgment that the Defendants accepted that, as the case had settled within three months before the date fixed for trial, the second stage of the two-stage success fee under the CFA was reached. He stated that the task with which the Court was charged was to decide whether, having regard to the facts and circumstances as they reasonably appeared to Irwin Mitchell when the CFA was signed on 3 February 2006, the risk that the circumstances in which any fees due to the firm would become payable, were no better than evens, thereby justifying a success fee of 100%. Implicit in that statement of the issue, is the implication that a success fee of 100% could only be justified in the situation where the chance of recovery of any fees at all to a firm were no better than evens. This would arise, for example, where liability was in issue and the Claimant’s claim might fail completely.[20]The Costs Judge found that the Claimant “won” her case under the terms of the CFA when judgment was entered on liability for damages to be assessed and the possibility of the Defendant removing his admission of liability could no longer occur. It was sufficient, the Judge held, that there was “an agreement to pay you damages” rather than an agreement to pay a specific sum by way of damages. The agreement to pay damages became a “win” and “final” under the CFA when judgment on liability was entered, and how little or how much the Claimant would receive was irrelevant, since it was common ground ‘that the nature of her injuries dictated that money at a level to be determined would be paid in compensation’. (Paragraphs 24 and 25).[21]As at the time when the risk assessment was made in February 2006 the risk that Irwin Mitchell might go unpaid could be described as “none”. When the CFA was signed on 3 February 2006, with liability no longer in dispute, the Claimant was “litigating in a risk-fee environment so far as recovery of her costs were concerned, since she was bound to recover damages that were substantial (but the figure does not matter)”. The Judge concluded therefore that a 100% success fee in the CFA “as if liability had been in doubt” was unreasonable and the figure had to be reduced unless the Claimant could satisfy him that the difficulties and complexities that existed in assessing quantum carried with it a risk that justified a figure as high as 100%. (Paragraph 25)[22]The Judge was not so satisfied. He found that the high value and complexity of the case could only bear upon the risk of failing to beat the Part 36 offer, but even if that happened, the costs up to the date of the offer would have been recoverable and only those incurred after that date would have been payable to the Defendant. He accepted the Defendant’s submission that the possibility of failing to beat the Part 36 offer in the circumstances carried a risk which could be assessed at a 20% success fee (paragraph 27).[23]As to staging, the Judge concluded that the case of Williams could be distinguished and that staging could not be used to permit a litigant to recover a high success fee simply by virtue of the fact that the CFA sought a stage rather than a single success fee. He concluded that the success fee in this particular case should be assessed at 20% and so concluded. In so doing he relied upon the case of C v W. (Paragraph 26, 27, 28).

The Parties Submissions

[24]I, together with my assessors, have been greatly assisted by the written and oral submissions in this case. They have all been considered in detail. I summarise here some of the main points.[25]Mr Nicholas Bacon QC on behalf of the Appellant submitted that the costs Judge had failed to construe the CFA properly and as a consequence wrongly concluded that the Claimant had achieved a “win” under the CFA. Had he properly taken into account the terms of the contract as a whole, and, in particular, the fourth clause under “Paying Us” and the three bullet points under 3k “Part 36 offers or payments” he would have concluded that there was no “win” when judgment for damages to be assessed was entered before the signing of the CFA, but only when the Part 36 offer was accepted within three months of the trial date. His failure to construe “win” properly led him, the appellants submit, to an erroneous view of the risks and the proper assessment of the success fee.[26]The Costs Judge, Mr Bacon submitted, failed to take into account the fact that this was a two stage success fee, and did not take into account the risk that if the Part 36 offer were not beaten, the solicitors would fail to recover a major part of their costs, the majority of which are often incurred close to the trial. The success fee was designed to compensate for failure to recover full costs; that was the risk that the claimant’s solicitors faced in this case.[27]The risk was not limited to failure to beat the Part 36 offer, but also the risk that the claimant might lose on a single issue, such as that relating to her head injury, and hence failed to recover costs on that issue.[28]The Costs Judge should not have asked whether “any” fees would become available, he should have asked in the two stage success fee whether the chance of recovering the full fee was no better than evens within three months of the trial date.[29]The Judge was wrong to find that after the admission of liability, the claimant was litigating in a risk free environment. This demonstrated that he had failed to appreciate the fact that the closer to trial, the higher the costs and the greater the risks. A two stage fee recognises that cases which go to trial are riskier. It was right to assume when the CFA was entered into that a Part 36 offer would probably be made closer to the trial, that that offer would be rejected, and that thereafter there was a greater risk that the offer would not be beaten. Indeed, when the offer was rejected, by virtue of the claimants counter offer of £800,000, Irwin Mitchell were at risk of thereafter working for nothing.[30]The Judge took inadequate account of the cases of Callery and U on staging, paid too much attention to the case of C v W and failed to properly take into account the cases of Wood and Williams. Furthermore the case of Designers Guild Limited v Russell Williams Textiles (Ltd) [2003] 2 Costs Report 204 supports the argument that the period working towards trial is risky, like the trial itself.[31]The Judge therefore came to the wrong conclusion as to the level of success fees. 100% could properly have been justified in this case.[32]The Defendant submitted that the Costs Judge was correct in every respect in his decision. The key issue was the extent to which Irwin Mitchell were at risk of the Claimant not being liable to pay them some or all of their base costs. The case of C v W was similar in material respects and the fact that it was a single success fee was immaterial to determining the risk level.[33]It was correct that (3k) should be taken into account in the interpretation of the CFA (even though the point was not taken below) but those clauses are only provided for clarification and did not change the essential definition of “win”. The first two clauses in (3k) make it clear that there are two situations in which the potential outcome in relation to Part 36 amounts to a win, as defined elsewhere, but the third clause, provides that in that situation, whilst a win, as defined elsewhere, is still achieved, an extra aspect of the conditionality of payment of fees is set up. It is that partial conditionality, namely failing to beat a Part 36 offer, which potentially puts part, but only part, of Irwin Mitchell’s fees at risk. Until such time as a Part 36 offer was made, Irwin Mitchell would be certain of recovering their costs up to that date. If, as was likely, a Part 36 offer was made closer to trial, they would be certain of recovering the majority of their costs. In such circumstances a 100% success fee was wholly inappropriate.[34]The fact that this was a two-stage success fee was irrelevant. Whilst it is correct to say that the use of a staged success fee has been encouraged and may, where appropriate warrant the court being more lenient to the assessment to the higher stage fee if the lower stage is not activated see (U v Liverpool City Council), that is not relevant on the facts of this case. The provision of an unrealistic first stage success fee cannot in itself justify second stage fee. The question is whether the success fee bears a proper relationship to the risk and that cannot be determined by the mere existence of a first stage success fee. The Costs Judge was right to rely upon C v W and distinguish the case of Williams.

Conclusions

[35]The key issues in this case are firstly what was the level of risk, assessed by reference to the facts and circumstances as reasonably identified on 3 February 2006, of Irwin Mitchell not being able to recover some or all of their base costs, and secondly what success fee was justified by that level of risk. The Costs Judge had to satisfy himself that the success fee charged was reasonable, and if not, substitute for it a success fee, which was reasonable. The determination of the definition of “win” under the CFA, and the existence of staging, assist in deciding the key issues but do not determine them. The ultimate question that remains is whether the success fee was justified by the level of risk and whether it was reasonable.[36]When the Claimant and her solicitors, Irwin Mitchell, entered into the CFA liability had already been admitted and judgment entered for the assessment of damages. One of the main risks of litigation, namely losing the action completely, had therefore gone. Furthermore, the admission and judgment on liability ensured that Irwin Mitchell would receive their costs incurred up to that time. Indeed it would have been possible for them to have rendered the claimant a bill for their costs and take a payment on account, although they would still have been obliged under their retainer, to continue acting for the claimant in order to achieve a proper conclusion of her proceedings.[37]As judgment had been entered there were no assessable risks on the issue of liability, and as there were no allegations of contributory negligence it was inevitable that the Claimant would receive substantial damages given the very serious nature of her injuries. The case involved complex quantum issues but these are common in serious multiple injury cases. There is no material to suggest that the Claimant was likely to lose a specific quantum issue that would result in a separate costs order. The head injury issue was likely to be resolved as part of the general issues on quantum rather than as a stand-alone issue. The risk of the basic charges not being recovered would therefore only arise if a Part 36 offer was made, rejected, and on Irwin Mitchell’s advice, the Claimant pursued her claim and then failed to beat the Part 36 payment. It is probable in substantial personal injury cases of this kind that a Part 36 offer will only be made at a period close to trial when the expert evidence on the quantum issues has been resolved or at least is close to being resolved. Up until that time, i.e. close to trial, the fees earned up to that point, would in Lord Justice Moore-Bick’s phrase used in C v W, “be secure”.[38]Against this background I turn to consider the meaning of the word “win” under CFA and the effect of a two stage success fee in this case. There can be no doubt that the interpretation of clause (3n), the definition of “win” under the CFA, must be construed with regard to the contract as whole and taking into account its other relevant terms. Firstly, however, one must consider (3n) itself in which the primary definition of a “win” is set out.[39]Under this clause the claim is won when it is “finally decided in your favour, whether by a court decision or an agreement to pay your damages”.[40]Until an amount of damages is agreed there cannot be any agreement in respect of which the claimant could sue for breach or otherwise enforce. If the amount acceptable to the claimant were not finally agreed, the claimant would then not only be able, but also be obliged, in order to continue with her claim, to pursue her matter to court and obtain a decision. There would then be a right of appeal by her opponent, if it was so advised, and the case could only then be won if an appeal was either not permitted, or out of time or lost. It is therefore my view that the ordinary and natural meaning of the word “agreement” in (3n) is a concluded agreement for an amount of damages that the claimant has accepted and could enforce, as any agreement short of that could lead to the matter being taken to court and the defendant appealing the decision made. A win therefore is when the litigation has been concluded either by decision or by concluded agreement in the claimants favour. I would add that I am doubtful that clause (3n) could have two alternative meanings, first, “agreement” providing a “win” as soon as liability had been admitted and judgment entered for the assessment of damages, and second “a court decision” which could only amount to a win at a much later stage when the decision of the court had been given and the opportunity to appeal had passed. I do not consider that it can have been the intention of the parties to enter into such an agreement on 3 February 2006 when it was already known that liability had been admitted.[41]Furthermore the use of the words “or in agreement to pay your damages” in Clause (3n) may well have been used advisedly. The wording is not to pay “you” damages but “your” damages. This suggests that the agreement is to pay the claimant the damages to which she as an individual is entitled, not merely damages in principle. The fact that she was entitled to recover damages after the admission of liability and judgment being entered for damages to be assessed was not therefore sufficient: there had to be an agreement to pay her an amount of damages acceptable to her before a “win” would occur under Clause (3n).[42]Clause (3k) clarifies in its first two bullet points the circumstances in which, where a Part 36 offer has been made, the claimant will have won her claim; in this sense it clarifies Clause (3n). The third bullet point, the rejection of a Part 36 offer on advice and subsequent failure to beat that offer, states the consequence where a claimant fails in part of her claim. It also explains and clarifies 3(n) and provides a specific instance of conditionality where a success fee might be justified. In addition it clarifies the section under “Paying Us”, which envisages that a “win” includes a partial win of the claim which might occur, for example, where a claimant succeeds in her claim save in relation to a specific issue on quantum, or a Part 36 offer.[43]In each of the first two bullet points under (3k) there will have been an agreement or a trial by which the claim has been “finally decided” in the claimants favour. In the third bullet point where the claimant rejects the Part 36 offer, pursues the claim on advice and fails to beat the offer, the claim will have been “finally decided” in the claimants favour up to the service of the Part 36 offer, so that she wins to that extent under (3n), but as she has been unsuccessful in one aspect of her claim, i.e. failing to beat the Part 36 offer, she will not be charged by her solicitors for the basic charges or success fee for the work done after 21 days following with the receipt of the Part 36 notice.[44]Clause (3k) therefore makes explicit the special situation which applies where a Part 36 offer is made. It introduces a condition that potentially puts part of the solicitors’ fees at risk. Even if that risk eventuates by a failure to beat a Part 36 offer, these charges or the vast majority of them, are payable up to 21 days after the date of the successful Part 36 offer; it is only those incurred after that time which are not.[45]I conclude therefore that the Costs Judge’s construction of Clause (3n) and (3k) is incorrect. The Claimant had not ‘won’ her case before the CFA was signed but only when she accepted the Part 36 offer. The Judge was, however, right in concluding that after judgment for damages to be assessed had been entered, with no issue of contributory negligence, there was no risk to the recovery of charges to the solicitor until such time as a Part 36 offer was made. There was not even a general litigation risk, in the sense of losing the action completely as in the case of C v W, because here, unlike C v W, there was not merely an admission of liability that might technically be withdrawn, but a judgment for damages to be assessed. Up to the point when the Part 36 notice was served Irwin Mitchell’s costs would be paid. Master Campbell clearly had in mind the claimant’s solicitors’ costs as well as any costs liable to be paid the defendant if the Part 36 offer was not beaten. This is clear from his judgment as a whole and in particular paragraphs 25, 25 and 27. Furthermore, had he not acknowledged that there was a risk in relation to the recovery of Irwin Mitchell’s basic charges he would not have given any success fee, which he did. He clearly acknowledged that the risk of receiving no costs after failing to beat a Part 36 offer justified a success fee. It was compensation for that risk, payable if it materialised.

The Staging of the Success Fee

[46]It is correct that the courts have encouraged a two-stage success fee such as in Callery and U but that in itself does not assist the Appellant. The question still remains as to what the level of risk was and what success was justified. The mere fact that a two-stage fee is in place does not mean that the second stage fee, closer to trial, can always be justified. If there is no proper justification for the first stage fee it cannot be used as a platform for the second stage success fee. The case of Williams can properly be distinguished on the grounds set out in Master Campbell’s judgment at paragraph 28. The most profound difference is that the matter went to trial in that case with contributory negligence still an issue in a highly complex and potentially contentious claim. Indeed, the trial lasted for four days until the defendant accepted the claimant’s Part 36 offer (paragraph 17).[47]Nor does the fixed success fee regime under CPR 45 assist in the resolution of this appeal. The regime was not in place when the CFA was signed here and is therefore inapplicable. Furthermore, the fixed fee arrangements were agreed across the industry and bear no relationship to what may or may not be the particular risks in an individual case.[48]This takes one to the central issue in the appeal. What was the risk in February 2006 when the CFA was signed and what would a reasonable success fee be in such circumstances? There may have been potential problems with the claimant’s evidence or the expert evidence, or the extent of the claimant’s head injury, but none of these issues were likely to have any effect on costs save in so far as they affected whether the claimant beat the Part 36 offer. In the absence of such an offer, those issues would not have prevented the claimant from obtaining a “win”. Issues such as a dispute about the causation of a head injury in a complex personal injury case are not without difficulty, but they are very rarely determined as a specific issue that can lead to a separate and distinct costs award.[49]It was indeed probable that a Part 36 offer would be served when the CFA was signed. It was also probable, given the size and complexity of this claim, that such an offer would probably be made late in the proceedings. By that time a substantial part of the Claimant’s solicitors’ charges would have been incurred and this is not altered by the fact that the last few weeks before trial are always particularly expensive. Where a Part 36 offer is likely to be made as here, within the last two or three months before trial, the costs likely to be incurred before that date would have been secure and recoverable by the Claimant’s solicitors. Even after the Part 36 offer is served, the risk should not be described as substantial. As Lord Justice Moore- Bick said in the case of C v W 130:- “ one would not expect highly experienced solicitors practising in this field to differ very widely in their assessment of the bracket in which an award would be likely to fall, provided they had access to the same information.”[50]The case of C v W was in many senses very similar to the present case. The fact that there was only a single success fee in that case does not enable it to be distinguished in any meaningful way. The assessment of the true level of risk faced by the claimant in that case was not essentially different to the assessment of the level of risk here.[51]I would add the comment that it is difficult see how a first stage success fee of 25% could have been justified in this case where there was no significant risk facing the Claimant or her solicitors until the Part 36 offer was likely to be served, close to the trial.[52]Where, as here, the risk was not great, and a substantial proportion of the costs were already secured for the Claimant’s solicitors, a success fee of 100% is unjustified. At the time that this CFA was entered into in 2006, liability had been admitted, and judgment entered for damages to be assessed, with no issue on contributory negligence. There was no risk of any substance thereafter until any Part 36 offer was made. Such an offer was likely to be made only close to the trial. The Claimant’s solicitors’ costs up to that time, which would have been substantial, were secured. A success fee of 100% in such circumstances is unreasonable as Master Campbell rightly found.[53]I am grateful to the assistance I have had from my assessors. With the helpful guidance of Lord Justice Moore-Bick and the knowledge and experience of my assessors, I have come to the clear conclusion that a reasonable success fee, whether single or second stage, in the circumstances which pertained in February 2006 when the CFA was entered into, was 20%. I am satisfied that Master Campbell was wholly correct in this conclusion and that accordingly the appeal must be dismissed.

Cited in 4 later judgments