The second part of this blog post looks at Lavender J’s reasons, in Belsner v Cam Legal Services Ltd, for allowing Ms Belsner’s appeal against District Judge Bellamy’s decision in which he had found that “informed consent” to the deduction of a success fee was not required where the solicitor relied on CPR 46.9(2), and that the retainer documentation was sufficiently clear that the client could be charged more than the costs of recovery from the losing defendant.
The background to and facts of this decision were explored in the first blog post which can be read here.
Lavender J held that this was not a case where Ms Belsner had been unaware that there might be something for her to pay if she won her case. At paragraph 72 (and elsewhere), he gave nine examples from the retainer documentation where she had been told about the potential limits on the recovery of costs from the negligent driver’s insurers. Contrary to the conclusion reached by DJ Bellamy, however, it was Lavender J’s view that the need for “informed consent” arose because the position of client and solicitor was in its nature, fiduciary, which required the solicitor to make sufficient disclosure to the client to enable any consent given to be informed.
Expressed in layman’s language, that meant that if the solicitor wanted to take a cut of the damages, it was necessary to give the client a worst-case scenario, so that she knew what she was in for if she won and could decide whether to instruct the firm or go elsewhere, or to insist that any deduction was capped.
Lavender J was satisfied that Cam had not discharged its fiduciary duty to Ms Belsner. In doing so, he distinguished the leading case on “informed consent”, Herbert v HH Law. There, the Master of the Rolls said:
“It is important to bear in mind that the complaint of Ms Herbert on this issue is not that she should have been sent a more detailed invoice or further invoices but that she did not give her informed consent to the charging of the success fee and its amount. There is no merit in that complaint (subject to the risk point addressed below) because all the information relating to its imposition and calculation and to her exposure to HH’s fees generally, in the circumstances which occurred, was clearly set out in the documentation with which she was provided before agreeing HH’s retainer. … Subject to the point on litigation risk and the success fee, the totality of that information provided a clear and comprehensive account of her exposure to the success fee and HH’s fees generally.”
In Belsner, Lavender J found that the position was different:
- None of the documents had provided for an overall cap on the amount recoverable by Cam from Ms Belsner, save if the damages were less than the small claims limit. Indeed, no such cap had been proposed by Cam.
- While the agreement as to costs in Herbert was similar, what was notable here was that Cam had not capped Ms Belsner’s costs liability to 25% of the damages.
- Cam had acted as if the firm, like HH Law, had agreed to cap the costs which it could recover from Ms Belsner at 25% of damages but had not done so, although as he observed that “[m]any solicitors agree to do this”.
- Cam had not attempted to summarise the provisions or to give any examples of the fixed basic charges payable by losing parties in road traffic accident (RTA) claims worth less than £25,000.
- Telling the client that the base costs estimate was £2,500 but that she might only recover £500 if the case settled at Stage 2, would not have been an unusually onerous burden for the solicitors, especially when those estimated charges were five times greater than the fixed profit costs payable if the claim settled for less than £10,000. That was such a striking feature that it should have been brought specifically to her attention if she was to give informed consent.
- There was a striking contrast between Cam’s estimate and either the figure of £500 plus VAT (the fixed costs recoverable if the claim settled at Stage 2 for less than £10,000 while remaining within the Protocol) or the figure of £550 plus VAT (the fixed costs recoverable if the claim settled at that stage for £2,250 or less after leaving the Protocol). Had Ms Belsner been given that information about fixed costs, she might have asked whether her liability could be capped or approached a different firm, which would cap her liability.
For these reasons, Lavender J concluded that Ms Belsner had not given her informed consent to the agreement. It followed that Cam could not rely on it for the purposes of CPR 46.9(2), so the success fee would need to be repaid.
These findings are not easy to reconcile with the real world in which solicitors and clients conduct their dealings in low-value personal injury claims, in which the client pays nothing and the solicitor is paid nothing if the case is lost, and if, and only if the case is won, does either enjoy any financial reward.
First, in the context of fiduciary duty, it is by no means clear how a solicitor can owe a duty of care to a client who is not (yet) a client. Albeit in the context of the cost of funding litigation, in Motto v Trafigura, Lord Neuberger had this to say about the situation which pertains before a client is actually a client:
“108. Until the CFA is signed, the potential claimant is not merely not a claimant: he is not a client. When advising a potential claimant on the terms and effect of the CFA, the solicitors are acting for themselves, not for the potential claimant: the solicitors are negotiating with him as a prospective client, not for him as an actual client.
109. … And, even if solicitors were to charge a person for advising in connection with a CFA in respect of future litigation before the person becomes their client, that advice would not have been given to a person who, at the time of the advice, was a client (or a party to the proceedings)”.
If this matter goes further (permission to appeal has been sought), the Court of Appeal will need to decide how or whether Cam owed Ms Belsner a fiduciary duty before the solicitor/client relationship had been established, when the firm was merely proposing the terms on which it would act and which were open to negotiation before the retainer was finalised.
Second, if there was anything about which Ms Belsner was unsure, could she have asked? That was a point which Saini J considered in Higgins & Co Lawyers Ltd v Evans. This concerned an 89-year-old client who had signed a conditional fee agreement (CFA) to fund his mesothelioma claim. The judge held (at paragraph 82) that:
“By signing the document, Mr Hughes was confirming that he had read and understood all material terms of the CFA, including the Conditions. He was also given a chance to ask questions. In my judgment, the attention or notice requirement was clearly satisfied.”
Third, what of the circumstances in which the retainer was completed? In Higgins, Saini J set out (at paragraph 75) the well-established legal position that:
“… a party who signs a document knowing that it is intended to have legal effect will generally be treated as being bound by its terms and will be taken to have read them and be on notice of them – at least absent the case being an extreme one where there is cogent evidence of the signature being obtained under pressure or by some other improper conduct.”
Given that Belsner was also a case involving a CFA, it is to be observed that there was no discussion about this aspect of the formation of the retainer.
Fourth, to adopt Lord Denning’s terminology, this was not a situation in which solicitors who were “learned” were taking advantage of a client who was “ignorant”. That might have been the case had Cam sold Ms Belsner an after the event (ATE) insurance policy which she did not need and pocketed the commission, or, indeed, to have deducted more from her damages than the 25% that they did. On the contrary, Cam did as they said they would in the client care letter; namely that the success fee would be deducted at the end of the claim and that it “cannot be more than 25% of your damages”. There was no skulduggery. Had there been, doubtless Lavender J would have directed that the case be referred to the Solicitors Regulation Authority, but there was no suggestion that Cam had derived any improper profit or bonus out of the fiduciary relationship.
According to commentators, Belsner might have consequences for thousands of firms who conduct personal injury claims. Since the upshot of the judgment is that where solicitors wish to rely on CPR 46.9(2) and assert that they have agreed with their client to charge more than the costs recoverable inter partes, and must show that the client has given informed consent to that agreement, what should firms be doing?
In ongoing matters, they should check the file for potential retainer problems, especially where the firm may have taken over matters from other solicitors. Next, if there are concerns about “informed consent”, they should repair the retainer by applying an overall cap to deductions from damages and obtaining the client’s agreement to that variation. Lastly, in matters which have been billed and paid, they must recognise that the damage has been done and the Belsner siege will not be lifted unless or until the Court of Appeal decides otherwise.
Finally, spare a thought for Shakespeare at Henry VI Part 2: “Let’s kill all the lawyers”. Perhaps in the modern era of personal injury litigation, the question should be “Who would want to be a lawyer in the first place”.