Our Special Adviser, Professor Dominic Regan has some words of caution following HERBERT V HAMPSON HUGHES. Get it right or you will suffer!!
You couldn’t make it up. It is the absolute duty of a Solicitor to advise their client upon the various ways in which a litigious dispute might be funded. The oddity is that one must mention options which you, the Solicitor, wouldn’t go near. By way of analogy how likely is it that a BMW sales representative would tell you that Mercedes were much better value? The position of Solicitor is one requiring utmost good faith.
The interests of the client always come first. “The ultimate requirement is to treat the client fairly and to ensure that the Solicitor complies with the duty to act in their best interests, even if that might mean advising them of a form of funding which the firm does not offer, which means that the client chooses to instruct a different firm.” These words of eminent Costs Counsel Roger Mallalieu encapsulate the legal duty.
There are practices which will only ever act under a conventional hourly retainer, with full fees payable regardless of outcome. Many clients with healthy cases cannot afford to gamble. Access to Justice sadly comes at a price.
I attended for every moment of the Court of Appeal hearing in HERBERT V HAMPSON HUGHES LAW (2019) EWCA Civ 527, a decision causing serious concern to many personal injury firms. It was a modest car passenger injury claim which settled within a month of issue for £3400. The claim was conducted using a CFA with the maximum success fee stipulated at 100%, subject to the overall cap of 25% to be deducted from general and special damages.
From the damages the Solicitor took £829.21, being 25% of damages plus £349 for ATE cover. Ms. Herbert was left with £2221.79. Post settlement, she approached JG Solicitors who challenged the 100% success fee, given the simplicity of the claim which arose from a rear end shunt by a bus. From District Judge upwards, every Court agreed that the fee was unusual and slashed it to 15%. Thus, the fee was reduced from £691 to £276 (excluding VAT in each case), a reduction of £415.Nicholas Bacon QC told the Appeal Court that the costs awarded by the DJ amounted to £4500!
Hampson Hughes asserted that the business model which it operated was the only one that enabled it to run low value injury matters on a viable economic basis. It claimed that many other firms did exactly the same.
The Appeal hearing concentrated upon whether the client had given informed consent to the CFA. She had certainly been sent documentation which told her about the deduction, but the Appeal Court unanimously concluded that more was required. Absent informed consent meant that there was no valid agreement to deduct so much. Critically, she should have been told that the fee was set arbitrarily without any risk assessment having been made.
The sub plot was that a well-informed client would not have made this bargain. In oral argument the Master of the Rolls observed that the success fee should plainly be geared to risk despite the 2013 repeal of the Rule requiring an assessment.
So, one can still take the maximum post HAMPSON HUGHES but only where someone has carefully and comprehensively explained the arrangement to the client. In 2013 Jeff Zindani astutely observed that Courts would carefully scrutinise deductions in a book we wrote, ‘Surviving Jackson’.
What of the thousands of settled cases where seemingly excessive deductions have been made? If informed consent was secured, then all is well. The anxiety is that some clients did not give such consent. The costs will have been spent. I am told by a Senior Costs Judge that a tidal wave of claims against Solicitors is in the pipeline.
Overcharging can have even darker consequences. The Administrative Court in Solicitors Regulatory Authority V GOOD ( 2019) EWHC 817 ( Admin) struck off a Solicitor who had grossly inflated bills by charging out at four times the permissible hourly rate and then automatically applying the maximum success fee without regard to risk .The Court emphasised the importance of maintaining integrity whenever a bill was signed. A paying party had an absolute right to expect bills to be accurately drawn.
Get it right or you will suffer.