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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Herbert v H H Law Ltd [2019] EWCA Civ 527 (03 April 2019) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2019/527.html Cite as: [2019] WLR 4253, [2019] 4 All ER 835, [2019] EWCA Civ 527, [2019] 1 WLR 4253, [2019] Costs LR 253, [2019] WLR(D) 210 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
SHEFFIELD DISTRICT REGISTRY
Soole J
Strand, London, WC2A 2LL |
||
B e f o r e :
LORD JUSTICE LINDBLOM
and
LADY JUSTICE ASPLIN
____________________
Nicky HERBERT |
Respondent |
|
- and - |
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H H LAW LIMITED |
Appellant |
____________________
P J Kirby QC and Robin Dunne (instructed by J G Solicitors) for the Respondent
Hearing date : 20 March 2019
____________________
Crown Copyright ©
Sir Terence Etherton MR :
CPR 46.9
"(3) 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.
(4) Where the court is considering a percentage increase on the application of the client, the court will have regard to all the relevant factors as they reasonably appeared to the solicitor or counsel when the conditional fee agreement was entered into or varied."
"6.1 A client and a solicitor may agree whatever terms they consider appropriate about the payment of the solicitor's charges. If, however, the costs are of an unusual nature, either in amount or the type of costs incurred, those costs will be presumed to have been unreasonably incurred unless the solicitor satisfies the court that the client was informed that they were unusual and that they might not be allowed on an assessment of costs between the parties. That information must have been given to the client before the costs were incurred.
6.2 Costs as between a solicitor and client are assessed on the indemnity basis. The presumptions in rule 46.9(3) are rebuttable."
The background
"If you win your claim, you pay our basic charges, our disbursements, success fee and ATE premium. You are entitled to seek recovery from your opponent of part or all of our basic charges and our disbursements as set out in the document "Hampson Hughes Funding Agreements: What you need to know". We will use our best endeavours to recover maximum costs from the Defendant and their insurers."
"The Success Fee
(1) The success fee is set at 100% of basic charges.
(2) The success fee cannot be more than 100% of basic charges.
(3) There is a maximum limit on the amount of the success fee which we can recover from you.
(4) The maximum limit is 25% of the total amount of any
(i) General damages for pain, suffering and loss of amenity; and
(ii) Damages for pecuniary loss, other than future pecuniary loss;
Which are awarded to you in in the proceedings covered by this Agreement. The maximum limit is applicable to these damages net of any sums recoverable by the Compensation Recovery Unit of the Department of Work and Pensions. The maximum limit is inclusive of any VAT which is chargeable.
(5) The maximum limit includes any success fee payable to a barrister who has a CFA with us."
"If you do not have suitable alternative funding … then we will take out an insurance policy with Centron Insurance…
The insurance policy costs £349 and will be deducted from your damages at the conclusion of the claim as well as up to 25% of your damages. If you do not inform us otherwise, a policy will be taken out if you do not have suitable alternative legal funding to protect you against having to pay the other side's costs."
"We only deal with Centron Insurance for Legal Expense Insurance Policies but we are not contractually obliged to conduct business in this way. You are free not to take out an insurance policy with Centron or choose your own insurance policy however we must advise that not having an insurance policy in place will expose you to the risk that you may have to pay costs and disbursements from your own pocket."
"You are taking this insurance policy out without the firm having conducted a fair analysis of the market. We have researched legal protection insurance policies generally and found Centron policies to be reasonably priced given their high level of protection. You also do not have to pay for the policy unless your claim is successful, which we believe is a benefit for our clients. Please note that the firm does not have an interest in recommending this policy and the firm will not receive a commission from the Insurer."
"… We believe that a contract of insurance with Centron Insurance is appropriate because [in addition to a number of specified factors] -The premium reflects the category of risk."
"I confirm I … am happy for Hampson Hughes to waive the investigation into alternative forms of funding and proceed to take out an insurance policy with Centron at a cost of £349 to protect me. I am aware that the cost of the policy and a deduction of damages, up to a maximum of 25% will be taken upon successful conclusion of my claim."
"The deduction of damages if you proceed with the Hampson Hughes CFA & ATE premium, are in respect of a success fee which is no longer recoverable from the Defendant due to a change in the law since April 2013. The deduction of your damages will never be more than 25% and will only be made if your case is successful and you do not have the requisite BTE cover as detailed above."
"…enjoys reasonable prospects of success given it is a rear end shunt and liability has been admitted on the linked files. I am a little wary that the client may have slammed on rather than slowed to a stop given the earlier altercation with the Defendant driver, however I am of the opinion that she would not have done considering she had young children in the back of the vehicle."
"The total deductions that we must make from your damages is therefore £1178.21. This figure is broken down as follows
Contribution towards our Costs (25% of damages) £829.21
ATE insurance policy £349
To clarify; if you were to accept this offer you will receive £2,221.79 and a balance of £1,178.21 will be paid towards our legal costs."
The assessment
Judgment of DJ Bellamy
"Finally the Claimants have asked that I deal with the cash account as the final step in the assessment process. I agree that the ATE should be shown (and indeed treated as) a disbursement (see Cook on Costs 2017 paragraph 2.12), but of course I also note that there has been no challenge to that item as being unreasonable in amount nor did it form part of this assessment. Nonetheless the revised cash account exhibited to the Claimants' submissions would appear to be correct."
Judgment of Mr Justice Soole
Grounds of Appeal
(1) was wrong in law in his construction and application of CPR 46.9(3), in particular misconstruing and misapplying the presumptions in CPR 46.9(3);
(2) was wrong in law in his construction and application of CPR 46.9(4), in particular as permitting the court to reduce an agreed success fee on a solicitor and client basis by the court's own assessment of the degree of risk present in the case;
(3) was wrong in law in characterising an ATE insurance premium as a solicitor's disbursement liable to assessment under the Solicitors Act 1974 s.70; and
(4) was wrong in law in holding that PD 46.6 para. 6.6(b) permitted a merits based review of the cash account instead of its arithmetic subsequent to an assessment.
Discussion
The success fee
"Basic charges
These are for all the work we do on your claim, from the date you first instructed us. These are subject to review.
How we calculate our basic charges
These are calculated for each hour engaged on your matter. Routine letters and telephone calls will be charged as units of one tenth of an hour. Other letters and telephone calls will be charged on a time basis.
The hourly rate charged is £240 per hour.
If your claim is allocated to the Multi Track the hourly rate will increase to £400 regardless of the status of the fee earner conducting the work.
We review the hourly rate on 31st March each year and we will notify you of any change in the rate in writing.
The above are our basic charging rates however in the event of an Order for costs made by the Court on an indemnity basis, out [sic] charging rate will be £400 per hour.
Value added tax (VAT)
We add VAT, at the rate (now 20%) that applies when the work is done, to the total of the basic charges and success fee."
"I can say that the model we have adopted, is that opted for by most of our competitors. It is routine that solicitors now make a solicitor client charge in the form of a success fee: I also know that many of our competitors charge success fees in the same way that we do. Our policy on success fees and the amount therefore reflects the "market rate" for a person who wishes to instruct a solicitor will pay. Equally of course, clients are free to "shop around" for a better rate, or lower success fee."
The ATE insurance premium
"That such payments as the solicitor, in the due discharge of the duty he has undertaken, is bound to make, so long as he continues to act as solicitor, whether his client furnishes him with money for the purpose, or with money on account, or not: as, for instance, fees of the officers of the Court, fees of counsel, expense of witnesses, &c., and also such payments in general business, not in suits, as the solicitor is looked upon as the person bound, by custom, to make, as for instance, counsel's fees on abstracts and conveyances, payments for registers in proving pedigree, stamp duty on conveyances and mortgages, charges of agents, stationers, or printers employers by him, &c., are, by practice and we think properly, introduced into the solicitor's bill of fees and disbursements.
But that payments which the solicitor is not either by law bound to make, or, by custom, looked upon as the person to make, as for instance, purchase-monies or interest thereon, monies paid into Court, damages or costs paid to opponent parties, bills due to the solicitors of trustees, mortgagees, or other parties, legacy or residuary duties, or other payments of a like description, which the solicitor makes as agent, on the order of the client, and not in discharge of his own duty or liability as solicitor, are, by practice and we think properly, charged in the cash account.
We think also, that the question whether such payments are professional disbursements or otherwise, is not affected by the state of the cash account between the solicitor and the client; and that (for instance) counsel's fees would not the less properly be introduced into the bill of costs as a professional disbursement, because the client may have given money expressly for paying them; and that the purchase-money or damages would not be properly so introduced, notwithstanding the solicitor may have advanced the money out of his own funds."
"From this certificate, and from the inquiries which I have made, it appears to me, that it is the practice of solicitors, who may have to pay or advance money on behalf of their clients, carefully to distinguish such professional disbursements as ought to be entered in their bills of costs, from such other advances or payments, as ought to be entered only in their cash accounts, as cash payments or advances. And it seems to me to be a very reasonable and proper rule, that those payments only, which are made in pursuance of the professional duty undertaken by the solicitor, and which he is bound to perform, or which are sanctioned as professional payments, by the general and established custom and practice of the profession, ought to be entered or allowed as professional disbursements in the bill of costs. And, considering that the sum of £64, 18s. 6d. now in question, was not a sum which it was incumbent on the solicitor to pay in the discharge [614] of his professional duty, and that it is not the practice or custom of the profession to consider such a payment as a professional disbursement, but only as a cash payment, I have come to the conclusion (not in accordance with my first impression) that the Taxing Masters' certificate is right, and that the petition must be dismissed."
"whether this large payment in cash has been made by the solicitors in their professional character as solicitors, or whether it has been made by them as agents independently of that character, just as a banker or any other agent might make disbursements for a client."
"in respect of those activities for which the practice is regulated by the SRA, any sum spent or to be spent on behalf of the client or trust (including any VAT element)"
The expression "professional disbursement" is defined as meaning:
"in respect of those activities for which the practice is regulated by the SRA, the fees of Counsel or other lawyer, or of a professional or other agent or expert instructed by you, including the fees of interpreters, translators, process service, surveyors and estate agents but not travel agents' charges.
Lady Justice Asplin :
Lord Justice Lindblom :
IN THE COURT OF APPEAL (CIVIL DIVISION)
Case Number: A2/2018/0828
ON APPEAL FROM THE HIGH COURT OF JUSTICE
SHEFFIELD DISTRICT REGISTRY
Soole J Neutral Citation Number: [2018] EWHC 580 (QB)
BETWEEN:
Respondent
Appellant
BEFORE the Master of the Rolls, Lord Justice Lindblom and Lady Justice Asplin
UPON hearing Mr Bacon QC and Mr Hogan of Counsel for the Appellant, and Mr Kirby QC and Mr Dunne of Counsel for the Respondent
AND UPON the handing down on 3 April 2019 of a judgment
IT IS ORDERED THAT:
1. The appeal is allowed in part, namely in relation to the ATE insurance premium.
2. Paragraph C of the Order of DJ Bellamy of 1 June 2017 is varied to provide as follows:
"The Defendant shall pay 80% of the Claimant's costs, assessed at £3,963.39."
3. Paragraph D of the Order of DJ Bellamy of 1 June 2017 is varied to provide as follows:
"The Court approves the Cash Account in the sum of £498.01, to which balance should be added the costs award."
4. Paragraph 2 of the Order of Soole J of 21 March 2018 is varied to provide as follows:
"The Appellant shall pay 70% of the Respondent's costs of and occasioned by the appeal on the standard basis, with such costs to be subject to detailed assessment if not agreed."
5. The Appellant shall pay the Respondent's reasonable costs of the appeal on the standard basis, with such costs to be subject to detailed assessment if not agreed.
6. The Appellant shall pay the sum of £30,000 within 28 days of the date of this Order as a payment on account of the Respondent's costs of the appeal.
Dated 3 April 2019