SGI LEGAL LLP v Mrs MARTA KARATYSZ [2021] EWHC 1608 (QB)

"… Enclosed is a Conditional Fee Agreement (CFA) which, together with this Client Care Letter, will form the agreement between us. We also enclose a copy of the Personal Injury Booklet that explains how the CFA works and also contains our Terms of Business, which you are advised to read carefully, particularly the sections on Client Satisfaction, Client Money and Limitation of Liability." "

"This agreement is a binding legal contract between you and your solicitor/s and confirms the agreement entered into by telephone between us on 26/10/2016 17:34:28. Please read everything carefully. This agreement must be read in conjunction with the document: "

"CFA: What You Need to Know". … 4. The Success Fee 4.1 The success fee is set at 100% of our basic charges but will be capped at 25% of the damages you recover relating to: a) General damages for pain, suffering, and loss of amenity; and b) Damages for pecuniary loss, other than future pecuniary loss Net of any sums recoverable by the Compensation Recovery Unit of the Department of Work and Pensions, inclusive of VAT."

" 2. Procedure 2.1 If your claim is successful, you will be paid damages by your opponent. The damages are the amount of money you will receive. 2.2 After your damages have been awarded, we will seek to recover our fees, which will comprise our basic costs, disbursements made on your behalf and a success fee. 3. Basic Charges 3.1 These are our charges for the legal work we do, based on the rate we charge which is set out in the enclosed Client Care Booklet. 3.2 You agree to these hourly rates, expressly understanding the following; it may be that your case is one to which the court fixed fees apply. This means that the amount of costs which your opponent will have to pay if your ( sic ) win is limited to a fixed sum. The costs which are chargeable under this agreement will almost certainly exceed those fixed costs and so you will be required to pay the shortfall from your damages. This is because the Solicitors' basic charges are comprised of hourly rates which when multiplied by the likely number of hours worked will exceed the fixed fees payable by the opponent. Even if your case is not a fixed fee case, the hourly rates are higher than the rates which the court is likely to order your opponent to pay to ( sic ). We believe these rates are justified to reflect the skill and specialised knowledge in the handling of your claim. However, we are required to provide a warning to you that the hourly rates might not be recovered from your opponent and that you nevertheless approve the rates which we are charging. This warning having been given, you permit payment to us of an amount of costs greater than that which you can recover from another party to the proceedings. 3.3 Further to the above warning as to recoverable costs, s 74(3) of the Solicitors Act 1974 shall not apply and having been warned that hourly rates may not be recovered in full you accept that the rates are chargeable in full."" " 8. What happens if you win 8.1 You are then liable to pay all our basic charges, disbursements, success fee and the insurance premium for any After-the-Event insurance taken out. 8.2 You may be able to recover part or all of our basic charges and disbursements from your opponent. If for whatever reason you cannot recover all of our costs and disbursements from your opponent then you remain liable to pay them to us. 8.3 You will not be able to recover the Success Fee or your insurance premium (if applicable) from your opponent. You must pay both costs yourself. 8.4 If you and your opponent cannot agree the amount, the Court will decide how much you can recover. If the amount agreed or allowed by the Court does not cover all our basic charges and disbursements, we will seek to recover the balance from you." "

"Less monies received on account from Aviva £1,116.00"

"Balance payable by client, limited to 25% of £455.50 damages plus ATE premium paid."

"The Clamant seeks an order that – 1. There be an Order in standard form pursuant to s.70(1) Solicitors Act 1974 for assessment of the final bill delivered to the Claimant as follows (a copy of which is attached to this claim form) a. Bill Number: SB73269.1 and delivered on 15 th January 2018 in the total sum of £2731.90. 2. Such assessment be restricted by virtue of s.70(6) Solicitors Act 1974 to the profit costs element in the sum of £1,977.42."

"We agree to an Assessment in accordance with Paragraphs 1 & 2 only of the Claimants ( sic ) Particulars of Claim."

"There be an assessment pursuant to s.70 Solicitors Act 1974 of the Defendant's invoice/invoices as follows – a. Invoice Number SB 73269.1 Dated 15/01/2018 Amount of £2731.90 [such assessment to be limited pursuant to s.70(6) Solicitors Act 1974 to [those parts of the invoices that are actually in dispute, namely the success fee in the sum of £1977.42 inc VAT]]"

"The bill comprises – … The bill therefore totals £2,731.90. The sum of £1,116 received from the third party is then credited, leaving a balance payable by the client of £1,615.90, which is then limited to £455.50. The reality therefore is that the Defendant has charged legal fees of £1,571.50 (£1,116 of which was paid by the third party, and £455.50 by the Claimant). As a consequence the bill must as a starting point be reduced to a maximum of £1,571.50, otherwise the Claimant would owe a further £1,160.40 (as demonstrated in the attached draft Cash Account)."

"The bill is limited to £1,571.50 in that this is the amount of the payment which it requires. The form of the bill is entirely a matter for the defendant and the defendant is perfectly entitled to set out in its bill the component elements which are payable by the claimant under the terms of her retainer; and then to set out that the amount payable above inter partes recovery is limited to 25% of damages (in accordance with the indications given in the retainer documentation) plus the ATE premium."

"I agree with C. See notes in White Book p. 2370.

"74(3) applies: County Court proceedings were contemplated by the mere fact of adopting the Low Value procedure in CPR.

"Having considered the Bill & further comments 9 hrs x £120 would seem reasonable." (2)(f)(v) The "

"But of course it is important not to lose sight of what one does under sub-rule (3). It is a question of, firstly, what the presumption is. Even if you say that I am the wrong side of the presumption – this ( sic ) it is presumed to be unreasonable – I would suggest that, once you have gone through this bill, you have assessed the hourly rates at whatever you think is right and you have reduced the time, that is not unreasonable any more."

"5. So where does that take me in relation to this review and the thorny problem of informed consent? It remains my view, because it is supported by the judicial authority in MacDougall and Herbert , that it is not possible to rely solely upon a piece of paper exchanged between solicitor and client as express consent when matters, for example, in relation to hourly rates, time spent and success fees are being discussed. 6. It is very difficult to imagine a scenario where a lay client who is not well versed in the litigation process can be said to have sufficient information to approve, whether expressly or impliedly, without seeing an explanation. Simply to say "

"1. The Court's 'on paper' decisions are affirmed, save that in respect of the decision on point of dispute 2, in the event that court proceedings were not issued the Solicitors Act 1974 section 74(3) does not apply, but the court's decision remains that the Defendant's base costs are limited to base costs recovered inter partes by the Claimant, on the basis of the presumptions in CPR r 46.9(3). 2. The Defendant do by 28 th January 2020 file and serve a witness statement confirming whether or not proceedings were in fact issued on the claim that is the subject matter of the Defendant's bill. 3. The Defendant's bill be assessed in the sum of £1,394.00, being base costs of £750 and a success fee of 15% on such base costs, together with VAT and the disbursements as claimed. 4. The Court having undertaken the Cash Account exercise the Defendant do by 21 st January 2020 pay to the Claimant the balance of £177.50. 5. The Defendant's bill having been reduced by 49% the Defendant do by 21 st January 2020 pay the Claimant's costs of the application, summarily assessed in the sum of £8,500 inclusive of VAT."

"If and in so far as it is necessary to address the issue, the district judge was wrong to conclude that, if court proceedings had been issued, (which they had not), SA 1974 s 74(3) would have been engaged to limit basic charges to inter partes recovery. The district judge was wrong not to conclude that the CFA had the effect that SA 1974 s 74(3) was disapplied under CPR r. 46.9(2)."

"In light of the judgment in Belsner and on consideration of the matter by leading counsel the claimant would wish to serve a respondent's notice which would seek to contend that the District Judge should also have found that s74(3) Solicitors Act 1974 applied. (It would appear – although it is not entirely clear – that the District Judge found that there were not proceedings in the County Court and that therefore s74(3) of the Act did not apply.)"

"the judge was wrong to find that s. 74(3) Solicitors Act 1974 did not apply to this claim. Proceedings should be construed to include claims that settle within the MoJ Portal."

"1. The Respondent waited until the High Court determined the issue of whether informed consent was required to displace the presumptions as ( sic ) s. 74(3) and r. 46.9(2) in Belsner v CAM Legal [2020] EWHC 2755 (QB) . The High Court found that informed consent was required. Had it found to the contrary, the issues raised in the Respondent's Notice filed on ( sic ) would not be relevant. The question whether s. 74(3) and r. 46.9(2) apply to cases that settle within the MOJ portal was fully argued at first instance. The Appellant is fully aware of the issue and will suffer no prejudice by having to address this point at the appeal. 2. Those representing the Respondent alerted the Court, and the Appellant, to the proposed Respondent's Notice on 22 nd October, by way of a latter to the Court, which was copied by email to the Appellant's representatives."

"This is achievable because the Court rules currently allow you to recover costs from your opponent and so this enables us to claim your costs from your opponent rather than entirely from your damages. If the rules were to change to prevent you from recovering costs from your opponent, then by entering into the CFA with us, you hereby agree that we would be entitled to deduct a higher proportion than 25% of your damages in respect of costs." (5) He submitted that it was implicit in the second of these sentences that, unless the rules of court were changed, the Defendant could not deduct more than 25% of the Claimant's damages in respect of costs. However, in my judgment it is not possible to imply such a term in the face of an express term to the contrary, namely paragraph 8.1 of the document entitled "

"This rule applies to every assessment of a solicitor's bill to a client except a bill which is to be paid out of the Community Legal Service Fund under the Legal Aid Act 1988 or the Access to Justice Act 1999 or by the Lord Chancellor under Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012."

"Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed – (a) to have been reasonably incurred if they were incurred with the express or implied approval of the client; (b) to be reasonable in amount if their amount was expressly or impliedly approved by the client; (c) to have been unreasonably incurred if – (i) they are of an unusual nature or amount; and (ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party."

"(1) Where the court is to assess the amount of costs (whether by summary or detailed assessment) it will assess those costs – (a) on the standard basis; or (b) on the indemnity basis, but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount. (2) Where the amount of costs is to be assessed on the standard basis, the court will – (a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and (b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party. (3) Where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party."

"There is no longer any dispute between the parties in relation to CPR r 46.9(3)(c). The judge recorded (at para 27) that Mr Andrew Hogan, counsel for HH before him and junior counsel for HH before us, accepted that an irrecoverable success fee could be regarded as a cost of an "unusual nature or amount" but had submitted that, as the retainer made it clear that the success fee could not be recovered from the other party, the condition in CPR r 46.9(3)(c)(ii) was not satisfied, and so there was no presumption under CPR r 46.9(3)(c) that it was unreasonably incurred. The judge agreed with that submission: para 47. There is no respondent's notice challenging that decision."

"And I keep my hourly rates as they are, by the way."

"Unless— (a) the order for assessment was made on the application of the solicitor and the party chargeable does not attend the assessment, or (b) the order for assessment or an order under subsection (10) otherwise provides, the costs of an assessment shall be paid according to the event of the assessment, that is to say, if the amount of the bill is reduced by one fifth, the solicitor shall pay the costs, but otherwise the party chargeable shall pay the costs."

"… includes the full amount of the bill, and disregards the added expression "say X" ( Re Carthew (1884) 27 Ch D 485 ; Re Mackenzie (1894) 69 L.T. 751) or the fact that a lesser figure is alone claimed ( Re Paull (1884) Ch D 485)."

"… the costs of such reference shall, except as herein-after provided for, be paid according to the event of such taxation; that is to say, if such bill when taxed be less by a sixth part than the bill delivered … then such attorney or solicitor … shall pay such costs; and if such bill when taxed shall not be less by a sixth part than the bill delivered … then the party chargeable with such bill … shall pay such costs ; …"

"The first point is, was it a bill for £78? It is impossible, in my opinion, to say that it was. It was a bill containing items making up £83 3s. 4d., with an offer to take a less sum, and it is impossible to say that the bill delivered within the meaning of the Act was a bill for £78."

"In In re Paull an order was obtained under sect. 41 for taxation after payment. The bills as delivered amounted to £361 19s. 2d., but the solicitor stated that he claimed only £320 16s. 6d., which was £41 2s. 8d. less than the amount of the bills. He had previously delivered a cash account in which he had treated the bills as being of the lesser amount. An order for taxation after payment having been obtained, full bills were carried in and the Taxing Master disallowed £81 3s. 8d., reducing their amount to £280 15s. 6d., which is more than five-sixths of the £320 16s. 6d. but less than five-sixths of the £361 19s. 2d. If the matter stood there, I should say, as in Carthew's Case, that the bill must be taken as at the larger amount, and that it must be considered that more than a sixth has been taxed off, and that the solicitor must pay the costs of the taxation."

"I understand that note when expanded to mean, "

"Section 70(9) provides for a basic and simple default rule that the costs of the assessment should follow the event (ie be paid by the losing to the winning party), where the "event" (ie the criterion of who has won and who has lost) is defined by reference to whether a reduction in the amount of the bill of one fifth has been achieved by the client in the assessment (I refer to this as "the one-fifth rule"). However, subsection (10) allows the court to modify this position where the costs officer certifies that there are "special circumstances relating to a bill or to the assessment of a bill.""

"Disputes between solicitors and clients regarding the amount of solicitors' bills can be substantial, and the costs of resolving them can likewise be substantial. ... Both client and solicitor benefit from knowing in advance what the basic default rule is governing the costs of an assessment, and what ordinarily counts as winning and losing, so that they can make a rational calculation of the risks involved in proceeding with a disputed assessment before a costs judge."

"In my judgment, the policy behind section 70(9) is that the remedy under section 70 should be efficacious and that potential claimants should not be disincentivised from bringing claims under section 70 by the usual costs-shifting rule. The result of the usual cost-shifting rule would be that, if the solicitors were successful in obtaining judgment for their bill they would in the absence of other factors obtain an order for costs. Without section 70(9), this would be so even if it was reduced by 20% or more. Section 70(9) displaces that result."

" Farrell v Alexander [1977] AC 59 establishes, that where the meaning of a consolidation statute is clear, the court should not generally investigate its "antecedents": see per Lord Wilberforce, at p 73, Lord Simon of Glaisdale, at p 83, and Lord Edmund-Davies, at p 97. It should interpret the statute afresh according to its ordinary meaning. Those antecedents include earlier judicial authorities as well as earlier legislative provisions. But it does not follow that the interpretation of a consolidation statute in this way authorises the court to ignore some earlier authority on an earlier legislative provision which has been consolidated where that authority is binding on it under the doctrine of precedent ."

"The reality therefore is that the Defendant has charged legal fees of £1,571.50 (£1,116 of which was paid by the third party, and £455.50 by the Claimant)."