England and Wales High Court (Senior Courts Costs Office) Decisions

IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		25 March 2009

Master Simons :

Introduction

1. The issue that I am asked to decide is whether or not the success fee to which the Claimant's solicitors are entitled pursuant to CPR 45.16 is 100% or 12.5%.

The Facts

2. The Claimant suffered catastrophic injuries following a road traffic accident which occurred on 16^th May 2004. Sometime later he instructed Messrs Rowberry Morris to bring a claim for damages against the Defendant. The Claimant entered into a Conditional Fee Agreement with Rowberry Morris dated 28^th July 2004. The Defendant's insurers did not admit liability until January 2005 following the Defendant's conviction for driving offences at the Exeter Magistrates' Court. Proceedings were issued in October 2006.
3. Rowberry Morris continued acting for the Claimant until late in 2006 when the Claimant decided to change solicitors and instructed Stewarts, Solicitors.
4. On 7^th December 2006 the Claimant entered into a Conditional Fee Agreement with Stewarts Solicitors. The relevant parts of the Conditional Fee Agreement (for the purpose of this judgment) read as follows:

"Paying us

If you win your claim, you pay our basic charges, our disbursements and a success fee. You are entitled to seek recovery from your opponent(s) part or all of our basic charges, our disbursements, a success fee and insurance premium as set out in the document "What you need to know about a CFA".

It may be that your opponent(s) makes a Part 36 offer or payment which you reject and, on our advice, your claim for damages goes ahead to trial where you 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 the last day for acceptance of the offer or payment.

Success fee

The Success Fee is 22.5% of our basic charges, unless your case proceeds to a trial of an issue in which case the success fee will be 100%.

10% of the above Success Fee 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.

Trial

The final contested hearing or the contested hearing of any issue to be tried separately and a reference to a claim concluding at trial includes a claim settled after the trial has commenced or a judgment.

Win

Your claim for damages is finally decided in your favour, whether by a court decision or an agreement to pay you damages. "Finally" means that your opponent:

has made a payment of part or all of your damages or your costs;

is not allowed to appeal against the court decision; or

has not appealed in time; or

has lost any appeal."

5. On 10^th January 2008 Gerard McDermott QC and his junior, Matthew Phillips, entered into separate Conditional Fee Agreements with Stewarts. The Conditional Fee Agreement relating to Mr McDermott covered work done from 11^th December 2006 and the Conditional Fee Agreement entered into with Mr Phillips was stated to cover work done from 28^th September 2007. Both Conditional Fee Agreements stated that it was intended that the Agreements had retrospective effect.
6. I set out below relevant extracts from both of the Conditional Fee Agreements entered into with counsel:

"Counsel's success fee

Counsel's success fee will be 12.5% rising to 75% if the case settles within 21 days of trial and 100% if it settles at trial or after trial has started.

The reasons, briefly stated, for Counsel's success fee are set out in his risk assessment.

Part 36 Offers and Payments

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.

Counsel's risk assessment for CFA purposes

The overall risk is comparatively low and in fact it appears to me that the appropriate course is to enter into a CFA in which the uplifts are the standard ones provided by 45.17 where the case is allocated to the multi-track."

7. The case was listed for a 5-day hearing to commence on 28^th January 2008.
8. On 23^rd January 2008 the Defendants made four Part 36 offers. Each of the offers provided for differing lump sums and differing annual payments.
9. By the morning of the trial the parties had agreed a settlement and I set out extracts of the Order made by Consent by the Hon. Mr Justice Roderick Evans on 28^th January 2008:

"1. The Defendant do pay the Claimant by way of immediate damages a total gross lump sum, inclusive of interest, CRU benefits and interim payments, of £2,475,000.00 and periodical payments of £25,000 per annum from 11^th February 2008, in full and final satisfaction of this claim.

4. The periodical payments are to be paid from 11^th February 2008 and will be updated annually (from the date of this Order) in accordance with ASHE (6115) 80^th centile. A final form of order will be lodged when agreed – see paragraph 8 below.

7. The Defendant will pay the Claimant's costs of the action such costs to be the subject of detailed assessment in default of agreement.

8. The Defendant do make a payment on account of costs in the sum of £100,000 by 11^th February 2008.

9. The parties will use their best endeavours to agree the wording of the final order and schedule dealing with periodical payments and provisional damages by 18^th February 2008."

10. The parties were unable to agree as to whether or not the periodical payments were to be made annually or monthly and, accordingly, on 23^rd April 2008 Stewarts issued the following application:

"We Stewarts Solicitors on behalf of the Claimant intend to apply for an Order that

this matter is listed for hearing first available date to determine: (1) the frequency at which Periodical Payments should be paid and (2) who should pay for the medical certificate to be provided to defendant insurer on annual basis.

because

The parties are unable to reach agreement in respect of the above two issues and the detailed Periodical Payment Order is not able to be finalised. The Claimant seeks annual periodical payments and the Defendant seeks monthly periodical payments. (see the attached letter to Mr Justice Roderick Evans, the trial judgment who has agreed to release this matter to another judge)."

11. The application was heard by Mr Justice Royce on 15^th May 2008. The learned Judge decided that the payments should be made annually as argued on behalf of the Claimant. Consequently the final Order was drawn up and was sealed on 26^th June 2008. The issue regarding who should pay for the medical certificate was no longer live by 15 May 2008.
12. The parties were unable to agree the amount of the Claimant's costs and on 12^th August 2008 Stewarts served Notice of Commencement of Assessment of Bill of Costs in the sum of £783,199.46. This was inclusive of the profit costs, disbursements and counsels' fees of both Rowberry Morris and Stewarts.
13. In their bill of costs Stewarts claim a success fee of 100% in the sum of £156,975.
14. Mr McDermott QC and Mr Phillips have claimed success fees at 100% totalling £44,650 and £17,075 respectively.
15. All costs (including success fees) relating to the costs incurred by Rowberry Morris have been agreed by the parties.
16. The Claimant's case is that as the hearing on 15^th May 2008 was a contested hearing after which the claim concluded his solicitors and counsel are entitled to 100% success fee.
17. The Defendant's case is that the claim was listed for trial on 28^th January 2008 and that the claim settled before trial and, therefore, the Claimant's solicitors success fee is limited to 12.5% and that Counsel's success fees are limited to 75%. They submit that the hearing on 15^th May 2008 was a request for clarification of the final wording of the Order.

The Regulations CPR

"III. FIXED PERCENTAGE INCREASE IN ROAD TRAFFIC ACCIDENT CLAIMS

Scope and interpretation

45.15

(1) This Section sets out the percentage increase which is to be allowed in the cases to which this Section applies.

(2) This Section applies where –

(a) the dispute arises from a road traffic accident; and

(b) the claimant has entered into a funding arrangement of a type specified in rule 43.2(k)(i).

(3) This Section does not apply if the proceedings are costs only proceedings to which Section II of this Part applies.

(4) This Section does not apply –

(a) to a claim which has been allocated to the small claims track;

(b) to a claim not allocated to a track, but for which the small claims track is the normal track; or

(c) where the road traffic accident which gave rise to the dispute occurred before 6th October 2003.

(5) The definitions in rule 45.7(4) apply to this Section as they apply to Section II.

(6) In this Section –

(a) a reference to 'fees' is a reference to fees for work done under a conditional fee agreement or collective conditional fee agreement;

(b) a reference to 'trial' is a reference to the final contested hearing or to the contested hearing of any issue ordered to be tried separately;

(c) a reference to a claim concluding at trial is a reference to a claim concluding by settlement after the trial has commenced or by judgment; and

(d) 'trial period' means a period of time fixed by the court within which the trial is to take place and where the court fixes more than one such period in relation to a claim, means the most recent period to be fixed.

Percentage increase of solicitors' fees

45.16

Subject to rule 45.18, the percentage increase which is to be allowed in relation to solicitors' fees is –

(a) 100% where the claim concludes at trial; or

(b) 12.5% where –

(i) the claim concludes before a trial has commenced; or

(ii) the dispute is settled before a claim is issued

Percentage increase of counsel's fees

45.17

(1) Subject to rule 45.18, the percentage increase which is to be allowed in relation to counsel's fees is –

(a) 100% where the claim concludes at trial;

(b) if the claim has been allocated to the fast track –

(i) 50% if the claim concludes 14 days or less before the date fixed for the commencement of the trial; or

(ii) 12.5% if the claim concludes more than 14 days before the date fixed for the commencement of the trial or before any such date has been fixed;

(c) if the claim has been allocated to the multi-track –

(i) 75% if the claim concludes 21 days or less before the date fixed for the commencement of the trial; or

(ii) 12.5% if the claim concludes more than 21 days before the date fixed for the commencement of the trial or before any such date has been fixed;

(d) 12.5% where –

(i) the claim has been issued but concludes before it has been allocated to a track; or

(ii) in relation to costs-only proceedings, the dispute is settled before a claim is issued.

(2) Where a trial period has been fixed, if –

(a) the claim concludes before the first day of that period; and

(b) no trial date has been fixed within that period before the claim concludes,

the first day of that period is treated as the date fixed for the commencement of the trial for the purposes of paragraph (1).

(3) Where a trial period has been fixed, if

(a) the claim concludes before the first day of that period; but

(b) before the claim concludes, a trial date had been fixed within that period,

the trial date is the date fixed for the commencement of the trial for the purposes of paragraph (1).

(4) Where a trial period has been fixed and the claim concludes –

(a) on or after the first day of that period; but

(b) before commencement of the trial,

the percentage increase in paragraph (1)(b)(i) or (1)(c)(i) shall apply as appropriate, whether or not a trial date has been fixed within that period.

(5) For the purposes of this rule, in calculating the periods of time, the day fixed for the commencement of the trial (or the first day of the trial period, where appropriate) is not included.

Application for an alternative percentage increase where the fixed increase is 12.5%

45.18

(1) This rule applies where the percentage increase to be allowed –

(a) in relation to solicitors' fees under the provisions of rule 45.16; or

(b) in relation to counsel's fees under rule 45.17,

is 12.5%.

(2) A party may apply for a percentage increase greater or less than that amount if –

(a) the parties agree damages of an amount greater than £500,000 or the court awards damages of an amount greater than £500,000; or

(b) the court awards damages of £500,000 or less but would have awarded damages greater than £500,000 if it had not made a finding of contributory negligence; or

(c) the parties agree damages of £500,000 or less and it is reasonable to expect that if the court had made an award of damages, it would have awarded damages greater than £500,000, disregarding any reduction the court may have made in respect of contributory negligence.

(3) In paragraph (2), a reference to a lump sum of damages includes a reference to periodical payments of equivalent value.

(4) If the court is satisfied that the circumstances set out in paragraph (2) apply it must –

(a) assess the percentage increase; or

(b) make an order for the percentage increase to be assessed.

Defendant's submissions

19. Mr Marven submitted that the claim was settled prior to the hearing on 28^th January 2008 when a Consent Order quantifying the amount of damages was drawn up. He acknowledged that the Claimant had conceded (for the purpose of this hearing) that the hearing on 28^th January 2008 was not a contested hearing within the meaning of CPR 45.15(6)(b). The hearing on 15^th May 2008 was the hearing of an application made by the Claimant for the court to determine the frequency of periodical payments. The parties had agreed the amount of the periodical payments as part of the settlement reached prior to 28^th January 2008 and the only issue was as to whether or not the payments were to be made annually or monthly. This was, therefore, a dispute only on the precise wording of the form of Order and could not, therefore, be a trial within the definition of "trial" in CPR 45.15(6)(b).
20. Mr Marven referred me to paragraphs 1,4 and 9 of the Order of 28^th January 2008.
21. Mr Marven submitted that the wording of paragraph 1 clearly sets out the terms of settlement of the claim. Paragraphs 4 and 9 made clear that the parties were endeavouring to agree the final wording of the Order and that consequently the application made by the Claimant that was heard on 15^th May 2008 was only an application to request the court to resolve a dispute with regard to the final wording of the Order. Consequently that hearing could not be a final contested hearing or a contested hearing of any issue ordered to be tried separately.
22. Mr Marven referred to a letter dated 16^th April 2008 sent by the Claimant's solicitors to Mr Justice Roderick Evans, who was the judge who made the Order on 28^th January 2008, and which was attached to the Claimant's application dated 23 April 2008. Mr Marven stated that there was reference in that letter to the fact that the parties had reached a compromise. It also suggested that the failure to agree on the frequency of the periodical payments order should be determined by the judge on the papers, and, that Mr Justice Roderick Evans should release the matter to another judge to enable the parties' submissions to be heard expeditiously. He also referred to the agreed statement of facts that was lodged before the hearing on 15^th May 2008 which clearly indicated that the claim had settled. All these factors pointed to the fact that the hearing on 15^th May 2008 could not have been a trial or a trial of an issue but was simply a request for the court to clarify the wording of the final Order.
23. In those circumstances, Mr Marven submitted that this case had been concluded before the trial had commenced and consequently the success fee payable to the solicitors and counsel should be allowed on that basis.

The Claimant's submissions

24. Mr Wilkinson submitted that the hearing on 15^th May 2008 was clearly a contested hearing and was therefore a trial pursuant to CPR 45.15(6)(b). Consequently the Claimants solicitors and counsel were entitled to a 100% success fee.
25. Mr Wilkinson submitted that the court had no discretion. If it was satisfied that the hearing on 15^th May 2008 was a trial for the purpose of the regulation then the Claimant's solicitors and counsel were entitled to the 100% success fee even if this produced an anomalous result. The fixed costs regime provided certainty and had to be interpreted without regard to the wider scheme of the Civil Procedure Rules or even the overriding objective itself. He referred me to Lamont v Burton [2007] EWCA Civ 4429.
26. With regard to the hearing on 15^th May 2008, this need not have involved the calling of live evidence or the cross-examination of witnesses and he referred me to Waring v Stoddart, a decision of HHJ Stewart on 8^th August 2005.
27. The hearing on 15^th May 2008 was a contested hearing which resulted in a judgment. Mr Wilkinson speculated that if the Defendant wished to appeal that Order then that Order would have to be regarded as a final Order for appeal purposes.
28. Mr Wilkinson also referred me to paragraph 15 of the Order of 15^th May 2008 which reads:

"15. The Defendant do pay the Claimant's costs of this action on the standard basis, to be subject to detailed assessment if not agreed. Those costs to include the costs of the final hearing in this matter on 15^th May 2008."

29. Mr Wilkinson submitted that those words made clear that the hearing on the 15^th May 2008 was a final hearing.

My conclusions

30. I accept Mr Marven's submissions that the claim concluded prior to the hearing on 28^th January 2008.
31. In my judgment the hearing of the Claimant's application on 15^th May 2008 dealt with the fine tuning of the settlement agreed between the parties. The Order of 28^th January 2008 clearly recited the terms of settlement and in paragraphs 4 and 9 of the Order clearly anticipated that there would be efforts on both sides to endeavour to agree the actual wording of the Order and, by implication, that if agreement could not be reached as to the final wording of the Order, the parties could refer back to the Court. Liability had been agreed and quantum had been agreed. The agreed statement of facts presented to Mr Justice Royce at the hearing on 15^th May 2008 refers to "the date of settlement of his claim" and that "his claim has been resolved by way of an immediate award of lump sum damages…". Furthermore, in their letter to Mr Justice Roderick Evans of 16^th April 2008 the Claimants made clear that the parties had reached a compromise. All these factors are indicative of the fact that the claim had concluded before the trial had commenced.
32. Whilst I accept Mr Wilkinson's submissions that the Court of Appeal in Lamont v Burton commented that the price of providing the certainty contained in Part lll of CPR 45 could be some anomalous results, it seems to me that it would be absurd for solicitors and counsel who, justifiably in the context of this high-value case have charged high basic fees, should be entitled to double their basic fees in sums in excess of £150,000 as a result of their seeking to obtain clarification from the court in respect of one aspect of an agreed Order, in circumstances where they have at no time been at any risk of not being paid their basic fees.