Rupert Cohen summarises the landmark case of Belsner v CAM Legal Services, and what this means for solicitors going forward
In the case of Belsner v CAM Legal Services Ltd  EWCA Civ 1387, the Court of Appeal addressed the perennially difficult issue of solicitors’ retainers and the cost information a solicitor is required to give a client. The Law Society intervened in this appeal; an appeal which provides a welcome dose of stability and reassurance to solicitors, and particularly those taking on personal injury conditional fee agreement (CFA) work.
The appeal stemmed from a challenge by a client to the fees retained by her solicitors, who had acted for her in her claim against a third-party for damages for personal injury arising from a road traffic accident. The relevant facts are as follows:
- The client was not informed when entering the retainer of the costs which the third-party would pay her if her claim settled during the road traffic accidents (RTA) Portal (referred to as “the Portal”), despite being told that the majority of claims of the same nature were settled in the Portal.
- The client’s claim settled at Stage 2. The solicitors were, on the terms of the retainer, entitled to charge their full-time costs but voluntarily restricted their charges to the fixed costs recovered from the third-party, plus a success fee equal to 100% of the solicitor’s base charges, capped at 25% of general damages, in the sum of £321.25 (excluding VAT).
- Some years afterwards, the client commenced an assessment pursuant to the Solicitors Act 1974, where she argued that the solicitors should not be able to recover more than the fixed costs, plus a success fee at 15%, in the amount of £75 (excluding VAT). Therefore, the claim was worth £295.50 (inclusive of VAT). The client’s argument was that, because she had not been informed of the fixed costs payable by the third-party in the event that her claim settled in the Portal at the outset of the solicitor’s instruction, she had not given “informed consent” to the solicitor charging more than that payable by the third-party, such that the condition in CPR 46.9(2) that s.74(3) Solicitors Act 1974 (which provides that the amount which may be allowed on assessment of a bill for “proceedings in the county court shall not…exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings”) be disapplied only where the client and solicitor had entered into a “written agreement… [permitting the solicitor to recover from the client]… an amount of costs greater than that which the client could have recovered from another party to the proceedings” (being the relevant wording in CPR 46.9(2)) had not been satisfied.
- DJ Bellamy held at first instance that the condition for the disapplication of s.74(3) SA 1974 in CPR 46.9(2) did not require “informed consent”. Accordingly, given that the retainer provided that the client would remain liable for any shortfall in costs between that charged by the solicitor and that recovered from the third party, CPR 46.9(2) had been satisfied such that s.74(3) SA 1974 did not apply. Lavender J, on appeal, held that:
- because the solicitor was in a fiduciary position with respect to the client “informed consent” to the disapplication of s.74(3) SA 1974 in CPR 46.9(2) was required;
- because the solicitor did not explain to the client the fixed costs which would be recovered from the third party were the claim to settle in the Portal, her consent to the solicitors charging more than that recovered from the third party was not “informed” so that the condition in CPR 46.9(2) was not satisfied;
- s.74(3) SA 1974 therefore applied such that the solicitor could not charge by way of base costs more than the amount recovered from the third party;
- the success fee should, therefore, have been 15% of the fixed costs rather than 15% of the base costs;
- the solicitor was to refund the client the sum of £295.50 (inc VAT).
On appeal, before the Court of Appeal, the solicitor raised a new point which was that s.74(3) SA 1974 did not apply at all because it only applied, on its own terms, to “contentious business done… in the county court” (s.74(1)) such that there had to be “proceedings in the county court” (s.74(3)) and, where a claim settles in the Portal, no such proceedings exist. The Court heard argument over 5 days across two separate hearings and held that:
- S.74(3) SA 1974 did not apply to claims settled in the Portal because they were not “contentious business” which required proceedings to have been issued. The fact that the SA 1974 was in “urgent need of legislative attention” did not provide a basis for interfering with the settled legal definitions of what constitutes “contentious business” and “non-contentious business”.
- In any event:
- CPR 46.9(2) could not enlarge the meaning of s.74(3) and, therefore, no “informed consent” could be required by reason of that provision;
- a solicitor does not owe a fiduciary duty in respect of the negotiation of its retainer.
- The solicitors had, however, failed to give the client the “best possible information about [pricing]… and the likely overall cost of the matter” in breach of paragraph 8.7 of the SRA Code of Conduct for Solicitors. That, however, did not affect the amount that the client was liable to pay the solicitor for the purposes of the Solicitors Act assessment given that the amount charged to the client was “fair and reasonable” for the purposes of paragraph 3 of the Solicitors’ (Non-Contentious Business) Remuneration Order 2009.
- The appeal was allowed and the client was to repay the solicitor the sum of £295.50 (inc VAT).
The Court’s recognition of the settled distinction between “contentious business” and “non-contentious business” will be welcomed by the wider profession as will its decision that when negotiating the terms of a solicitor’s remuneration in a retainer a solicitor does not owe the client a fiduciary duty. However, the emphasis the Court placed on paragraph 8.7 of the SRA Code of Conduct for Solicitors is a salutary reminder to solicitors to ensure that they give clients the best possible information about their potential liability for costs of a given matter.
The Law Society was represented by David Holland KC and Rupert Cohen of Landmark Chambers