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

IN THE MANCHESTER COUNTY COURT

		5 January 2011

1. This Judgment arises out of a contested preliminary issue on a detailed assessment as to the level of success fee be allowed to the claimant. The point in question is one of importance to both parties bearing in mind that the entrenched position that both parties have adopted shows that they are potentially some £54,000 apart. The issue centres firstly on CPR 45.16 which provides at 45.16(1) that:

Subject to CPR 45.18, the percentage increase which is to be allowed in relation to Solicitors fees is –

(a) 100% if the claim concludes at trial.

(b) 12.5% where –

(i) The claim concludes before a trial has commenced or

(ii) The dispute is settled before a claim is issued.

2. The issue in this case is not the one which the SCCO and Regional Cost Judges are usually seized, namely as to whether or not this is a claim that has concluded before a trial has commenced. It is accepted that that is the case. The Rule is clear. It refers to a specified percentage increase, and consequently the starting point in this case is that the claimant is entitled to a success fee of 12.5%.
3. The claimant seeks to rely on CPR 45.18(2) as the basis upon which he is entitled to seek an increase on that 12.5% success fee. That Rule states:

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.

This case it is agreed settles for an amount in excess of £500,000.

The Facts of the Case

4. The claimant was a passenger in a vehicle driven by the defendant's representative on 29^th October 2005. The defendant's driver lost control of the vehicle on a motorway and collided with the central reservation. There were no seat belts in the van in which he was driving, and the claimant suffered serious personal injuries. Sadly, the driver of the defendant's vehicle suffered fatal injuries and has provided therefore no form of witness statement, albeit that it should be recorded that he did, prior to his death, advise and confirm that he was the driver of the vehicle and that the claimant was the passenger.
5. It would appear from that part of the file that I have been given and considered, that the claimant's Solicitors were not instructed formally until the beginning of January 2006 and their Conditional Fee Agreement is dated 3^rd January 2006, albeit that the first formal instructions appear to have come on 4^th January 2006. I return to this issue later in this determination. Counsel's Conditional Fee Agreement somewhat surprisingly is dated 1^st November 2005. However, Counsel's fees are not the subject of this appeal. On 10^th January 2006 a formal letter of claim was written by the claimant's Solicitors, in which it was alleged that the defendant driver had fallen asleep at the wheel. Notice was provided at the same time of the claimant's CFA funding arrangements. As early as 7^th April 2006 the claimant Solicitors were advised that there would be no issue on liability, albeit that the defendant Solicitors were unable to formally admit liability until they had received the police report confirming that the claimant was a front seat passenger. On 4^th May 2006 liability was formally admitted.
6. A Part 36 offer was made in the sum of £389,500 on 14^th March 2007. That offer was not accepted and considerable medical evidence from eminent neurosurgeons, neurologists and neuro-psychologists was obtained. On 27^th August 2008 the claimant Solicitors commenced proceedings and I am referred to the fact that the Particulars of Claim seek to recover damages in excess of £300,000.
7. The matter proceeds through allocation in April 2009 to case management in August 2009 to a joint settlement meeting fixed for 11^th November 2009 when the case settled in the sum of £627,170.95.

The Initial Events

8. There are produced important documents bearing in mind what subsequently transpires. Initial instructions were provided on 4^th January 2006. This is based on a letter of 4^th January to the claimant which is a formal letter and states

"I refer to recent meetings and confirm that I would be more than willing to act on your behalf".

There is a suggestion therefore that before that letter was written on 4^th January, the claimant and his instructed Solicitors had met. It is unclear from that letter whether it was earlier in the day on 4^th January or whether it was on 3^rd January. There is some relevance to this because the Solicitors Conditional Fee Agreement is dated 3^rd January.

9. On 6^th January 2006 there is a detailed attendance note showing that the Claimant's instructed Solicitor Miss Elizabeth Oldfield travelled to the premises of the defendant company for a meeting with the claimant's father and the obtaining of the completion of outstanding questions and information.
10. On 9^th January 2006 a confirmatory letter was sent to Weightmans on behalf of the defendant's confirming the claimant's Solicitors instruction in this matter.
11. These dates are of importance because it is the contention of Miss Macdonald on behalf of the defendants that the risk assessment post dates the Conditional Fee Agreement by 24 hours and that the risk assessment had not been completed prior to the CFA. She contends that the wording in the letter of 4^th January 2006 implies that the retainer had not yet been concluded. She submits that as the risk assessment post dates the CFA, it is necessary that the claimants should prove that they should receive more than the basic 12.5% and submits that the claimants have chosen not to disclose the CFA and that in such circumstances I should find in favour of the paying party. The point in question is whether or not at the time the CFA was entered into, whether a full and proper risk assessment had been completed.
12. Mr Smith submits that at the time of carrying out the risk assessment certain factors were not known to the claimant i.e.

Whether or not the van was faulty

Whether or not the driver was negligent or

Whether or not the employer had failed to maintain the van and was consequently negligent

He submits that there is a lack of independent evidence, the police investigation had not finished, and the coroner's inquest had not taken place. He contends there was a possibility that the driver's seat was faulty. The Claimant had been severely injured. He indicates that it was not clear as to whether the claimant had a role in the management of the van that was driven, and consequently the extent to which the claimant's position as the son of the managing director of the company would impose upon any settlement and whether the claimant's role in the company would sound in damages. Further he submits that due to the injuries suffered the assessment of quantum would be difficult.

13. He submits that there are several factors that would need to be considered at the carrying out of the risk assessment.

There was no independent evidence

The driver was deceased

The cause of the accident was unknown

The claimant suffered serious injuries

Was this case a road traffic accident or an employers liability claim

Was the claimant the author of his own misfortune to the effect of having entered into a CFA Lite Agreement

Part 36 offers

That an account of the accident had already been provided to insurers

He submits that together the claimant suffered a substantial risk and suggests that the Solicitors when carrying out their risk assessment were entitled to view this matter as a 50/50 claim and that therefore the success fee should be claimed at 100%.

14. Miss Macdonald in her submissions firstly starts by taking me back to the date of the CFA. She submits that the vehicle collided with the central reservation and that this is a case of res ipsa loquiter. She points out that the claimant was a passenger and that with the driver being deceased there is no evidence to contradict this position. She points out that there was only one vehicle involved and that the case is as straight forward as any claim could possibly be. She refutes the concept that there might have been any concern that this matter was an employer's liability case, pointing out that there was no issue as to liability and this was a case of the assessment of quantum only. She points out that the claimants are seemingly seeking an enhanced rate for the level of fee earner, and whilst accepting that at CPR 18.4 (2) the claimants are entitled to make their application, that based on the factual matrix of this case, the success fee should not exceed 12.5%, hence just because the case is of high value does not mean, as of right, that the claimant is entitled to an enhanced success fee.

Authorities

15. Both sides seek to rely, or at least draw my attention to, one authority. I put it that way because there is little authorative guidance in this matter. I put that down to the number of high value claims of road traffic accidents being fortunately relatively few, and secondly to the fact that those where there is an earlier admission of liability even fewer. What is clear is that the starting point is 12.5% but that it is open for a claimant to seek a higher percentage that he has to justify to the assessing Judge.
16. Miss Macdonald seeks to rely on the authority of Hosking v Smallshaw a decision of Master Simons in the Supreme Court Costs Office dated 25^th March 2009. I do not find that authority particularly helpful. The issue in that case was whether or not there was or was not a contested hearing, and therefore whether or not there was a trial pursuant to CPR 45.15 (6)(B). The learned Costs Judge concluded that there was not and went on to make a determination that under the facts of the case, therefore the correct success fee was 12.5%. Nowhere within the Judgment does there appear to be any application to be considered by the assessing Judge that he should, in the event that he had found the matter not settled at trial, seek to vary the percentage recoverable by increasing it in favour of the claimant over and above the 12.5%. I acknowledge that at paragraph 32 of the Judgment, Master Simons states

"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".

17. Miss Macdonald relies upon that as strong indication that in this case the success fee should be capped at 12.5% pointing out that in Hosking v Smallshaw the case settled on the morning of the trial, that there had been four Part 36 offers (as against seemingly only one here) and that the settlement figure in Hoskins was £2.4 million, substantially in excess of that agreed in this case. She further contends the case was never run as an employers liability matter, that any finding must be in favour of the paying party, and that the claimants themselves never anticipated receiving the monies that they did, bearing in mind that they only issued the claim for a limited sum of up to £300,000 despite the fact that this was subsequently amended to take account of the settlement.
18. Mr Smith on the claimant's behalf refers me to the Court of Appeal decision in C v W [2008] EWCA Civ 145. In that case the claim settled in the sum of £680,000. The CFA provided for a success fee of 98% and on detailed assessment a success fee of 70% was allowed by the District Judge. On appeal the Circuit Judge reduced the success fee to 50%. That was further reduced to 20% based on the facts of the case by the Court of Appeal.

Conclusions

19. I am satisfied that the correct approach to this case is to adopt a two stage process. One is to satisfy myself that this is a case in which I have discretion. I am satisfied the claim meets the criteria in CPR 45.18(2) and consequently it is a requirement upon me to assess the percentage increase. In doing so, I am satisfied that I am not in any way constrained in the amount and that I assess the success fee based on what was known, or ought to have been known, at the time of signing of the CFA. The only fetter upon me is the amount that is then awarded (under CPR 45.19) which depends upon my assessment of the success fee. In other words the correct process is to carry out the CPR 45.18(4) exercise first and then assess the success fee and only then see whether that engages CPR 45.19. This is a claim that settled after an admission of liability but not before proceedings had been issued but thereafter there had been a joint settlement meeting culminating in a settlement in excess of £600,000.
20. Having reached that conclusion it is necessary to look at para 11.8 (1) of the Costs Practice Direction which makes it clear in deciding whether a success fee is reasonable, one of the principal factors to be taken in account, and indeed normally the most significant, is the risk that the circumstances in which the costs, fees or expenses would be payable, might or might not occur. I am thus thrown back on the risk analysis. Some guidance is to be found in C v W – a case that I find to be more helpful to this litigation than Hosking v Smallshaw. In C v W attached to the CFA was a document described as "a percentage increase explanation form" which provided a clear insight into the way in which the instructed Solicitors calculated the success fee. Within that case they identified four main factors to be considered.

The chances of success,

The existence of additional or complicating factors,

Opportunities to reduce risk and

The cost of funding the claim.

Thereafter Moore-Blick LJ's Judgment sets out in some detail how the analysis was carried out.

21. In C v W the calculation of the success fee was made at a time when the defendant had already admitted liability. I acknowledge that that is not the case here. In such circumstances it was submitted that there was no significant risk that the claimant would fail to recover substantial damages in respect of her injuries even if she were to be found partly to blame. It is inappropriate to go into a detailed analysis of the Judgment in C v W because it is case specific. However the factual matrix in this case is important. I do not agree with the risk analysis. Basically this is a claim that is brought by a passenger in a vehicle where there is an admission of liability within six months of the accident. I acknowledge that it is necessary to look at the position at the time the risk assessment was made, and that at the time the risk assessment was made, it is debatable whether or not the CFA had been entered into. It does appear however that the CFA had been entered into on the 3^rd or at worst the 4^th January and that the risk assessment process was not carried out until 9^th January. It would be normal to have expected the Solicitors to carry out a risk analysis before entering into a CFA. If they failed to do so, it seems to me they are almost absolving themselves from any concern as to whether this is a case that they would under their risk analysis undertake.
22. I am not sympathetic to many of the submissions made by Mr Smith. This is a relatively straight forward case albeit a serious injury is suffered where the claimant was an innocent passenger. However, I acknowledge that the driver is deceased, that the causes of the accident were unknown, that at the time of carrying out the risk assessment there had been no police report obtained, nor any coroner's inquest arranged and the claimant suffered serious injuries. I am not persuaded that the suggestions that the claimant was personally involved in the management of the defendant company or of issues of employers liability were ones that were entertained at the time of risk assessment, or ones that would have influenced the decision in this particular case.
23. I am however satisfied that substantial items of quantum needed to be resolved and it would be fair and proper in this case to award a percentage of success fee for all the above reasons, for a figure greater than 12.5%. I am however conscious of the provisions of CPR 45.19 namely

"If the court is satisfied that the case falls within the relevant criteria it will assess the percentage increase or make an order for it to be assessed. If the percentage increase allowed is greater than 20% or less than 7.5% the percentage allowed will be that assessed by the Court. If the percentage is assessed at no greater than 20% or no less than 7.5%, the increase allowed will remain at 12.5% and the cost of the application and the assessment will be paid by the claimant."

This is a clause clearly aimed at preventing frivolous applications which puts a claimant at risk as to costs the Court is to award if a percentage between 12.5% and 20% is allowed as the success fee. Indeed, if such an amount is awarded, that will not remain the success fee and the figure will be reduced to 12.5%.

24. I am satisfied in this case, that a success fee in excess of 20% is appropriate. At the time the risk assessment was carried out there were difficulties in assessing the cause of the accident which may have been such that it was not reasonable to come to a conclusion that the facts spoke for themselves and that the claimant must succeed. However, for reasons given above, I do not agree with the view expressed by Mr Smith that the figure should be as high as 100%. I acknowledge that in this instant case, unlike C v W, at the time of signing the CFA liability had not been admitted. That in itself gives some strength to the claimant's arguments that overall this was a case where on the facts there appears to have been some element of risk but this is not a case which I would consider suggests that a risk analysis on a 50/50 basis would take place. The odds upon the claimants succeeding at the time the risk analysis was carried out were, in my view, for all the above reasons, substantially greater, and I conclude that the correct and appropriate success fee in this matter is 25%.
25. I would make one comment and proviso with regard to the amount allowed herein. Reference has been made, particularly by Mrs Macdonald to the level of hourly rate charged by the claimant with some reliance on the paragraph from Hosking v Smallshaw recited above, that high basic fees should not be used as a basis to be enhanced even further by seeking substantial success fees. That clearly is a correct contention, but in my view that is not the way in which this particular case should be looked at. I have assessed the success fee based on all the factors referred to above. I have not made an assessment of the correct hourly basic rate. Those are set down in the Supreme Court Costs Guidelines. They can be varied. One of the factors upon which they can be varied, is the degree of difficulty that a case imposes upon the instructed Solicitors. Whilst assessing quantum at a high level involves skill and expertise, this is not a case, bearing in mind the date when liability was admitted, that I would have thought (albeit it may be that I am in due course asked to consider it and therefore make no immediate finding) that any exceptional degree of difficulty is involved which would justify the enhancing of an hourly rate. That may be a matter for another day if this assessment does not settle following consideration of this preliminary point. I thus emphasise that I have made the assessment of the success fee based on the factors pursuant to CPR argued herein, and the facts of this case rather than by any reference to the hourly rate charged within the bill.
26. If there are further issues either which require clarification or further issues within the detailed assessment which I am requested to consider, then the instructed Solicitors are most welcome to request my clerk to restore this matter, so those matters are be aired.

D N Harris

Deputy District Judge

5 January 2011