Thu, 04 Jul 2019
The article has been reproduced with kind permission from Partners in Costs magazine
Herbert v HH Law: A Review and its Potential Consequences
Whatever your view on the benefits, or otherwise, of the Jackson Reforms, few can doubt that life for low-value personal injury claimant solicitors has become increasingly difficult over the past decade. The recent Court of Appeal decision in Herbert v HH Law [2019] EWCA Civ 527 provides no respite.
Ms Herbert instructed HH Law to recover damages for personal injury arising out of a road traffic accident when a bus collided with the rear of her car. She entered into a CFA which provided for a success fee amounting to 100 per cent of HH Law’s basic charges. Pursuant to The Conditional Fee Agreements Order 2013, that success fee would be subject to a cap amounting to 25 per cent of her recovered damages - general damages for pain, suffering and loss of amenity and past special damages.
Ms Herbert’s claim, and its corresponding CFA, were therefore similar to many other low-value personal injury claims managed by solicitors around the country. Moreover, the success fee, and this is the feature which may be causing other claimant solicitors some anxiety, was not calculated by reference to the risks in Ms Herbert’s particular case. The 100 per cent success fee was a blanket rate imposed across all similar claims managed by HH Law. As the director of HH Law, Craig Ralph, explained in his witness statement:
“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.”
After Ms Herbert accepted an offer to settle her claim from the defendant, HH Law sent her their bill of costs, amounting to £6,175.84, and a bill of £829.20, in respect of the success fee sought from her. She instructed solicitors to contest that bill and argued that there was no risk assessment to justify that level of success fee.
District Judge Bellamy assessed the success fee in accordance with CPR 46.9. He accepted Ms Herbert’s argument and held that the correct level of success fee should be 15 per cent. A rear end shunt posed no difficulties with liability and Ms Herbert had suffered soft tissue injuries. Quantum was also therefore straightforward. He rejected HH Law’s argument that a success fee could be adopted uniformly across claims as part of a firm’s business model. Mr Justice Soole rejected HH Law’s first appeal.
The decision of the Court of Appeal turned on the issue of ‘informed consent’. The presumptions in CPR 46.9 (3) (a) and (b) that costs have been reasonably incurred and were reasonable in amount only operate if they were incurred ‘with the express or implied approval of the client’. Ms Herbert had never been told by HH Law that the level of their success fee was not based on any assessment of the risks in her case. The Court held, therefore, that she could not have given informed consent as to the level of success fee, as set out in the CFA.
This decision confirms that the principles behind success fees in the pre-LASPO era still stand today. They must be produced by reference to the prospects of success, individual to any given claim, and cannot be used as a general tool to enhance a firm’s income, unless, possibly, the CFA makes this clear.
As fairly noted by Craig Ralph, HH Law’s policy towards success fees is not unique to that firm. The imposition of a 100 per cent success fee can in fact be described as close to ‘routine’ in the context of low-value personal injury CFAs. Subject to any appeal to the Supreme Court, though it is not known whether HH Law will be pursuing the matter further, this decision does have the potential to open the ‘flood gates’, to some degree, with respect to similar claims against solicitors.
It should be noted that many claims which operated under a 100 per cent blanket success fee will not be affected by this decision. The Court will not disallow a success fee because its level was not decided by reference to a risk assessment; it will simply substitute the level claimed for one which is more appropriate. If, for instance, the facts available to a solicitor at the outset of any given claim properly justified a success fee of 50 per cent, rather than 100 per cent, the amount payable by the client at the end of the litigation would still be 25 per cent of their damages, provided that 50 per cent of the solicitor’s costs exceeded that figure.
This decision may, however, prove worrying for solicitors’ firms which have recovered blanket success fees in respect of cases similar to Ms Herbert’s. Claims where liability has been admitted, where injuries are short-lived and where there are no particular complexities will rarely justify success fees above 15 per cent. On a solicitor-client assessment, it should be remembered that the solicitor will pay the costs of the assessment where the client reduces the bill by at least 20 per cent. In Ms Herbert’s case, despite making a relatively modest saving, HH Law was required to pay £4,500 as costs of the detailed assessment.
Solicitors who have represented infant claimants will already be familiar with the challenges involved in persuading judges that straightforward claims justify 100 per cent success fees. From my own experience, I know that figures higher than 10-15 per cent are rarely allowed. For further detail see A and Another v Royal Mail [2015] EW Misc B24 (CC).
The decision in Herbert leaves open the possibility that solicitors may still be able to recover blanket success fees in the future, so long as the CFA makes it clear that the figure of 25 per cent has been reached without any reference to the risks in any particular claimant’s case.
At paragraph 53 of his judgment, the Master of the Rolls rejected HH Law’s argument that the fact that a blanket success fee is charged across the industry was justification, in itself, for this policy. He said that this was “insufficient to avoid the need, for the purposes of informed consent of the client under CPR 46.9(3)(a) and (b), to have told the client that the success fee of 100 per cent took no account of the risk in any individual case but was charged as standard in all cases.”
The Court was not asked to determine what the situation would be if the CFA did in fact state this. I am a little sceptical that this would be sufficient to overcome the problem. As already noted, the judgment confirms that pre-LASPO principles relating to success fees still stand today. Then, as now, a success fee is calculated by reference to the ‘risk that the circumstances in which the costs, fees or expenses would be payable might or might not occur’ (C v W [2008] EWCA Civ 1459) i.e. the chance of winning a case. If the level of success fee is reached by reference to some other factor, for instance the commercial viability of the firm, then surely it is not a ‘success fee’. Moreover, would calling this chunk of additional income a ‘success fee’ be misleading? If so, can a solicitor really show that their client gave their informed consent to it?
It seems that the safest approach is for solicitors to produce realistic risk assessments for new claims and to consider their position carefully if any clients make ‘Herbert-style’ arguments at the conclusion of their case.
