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Deduction of legal fees from the client's damages: PI Costs Victory

The decision in SGI Legal LLP v Karatysz is the latest in a series of cases on which individuals have brought successful RTA claims and then sought an assessment of their solicitors’ bill of costs.

In this case the solicitor’s appeal was successful.

Mr Justice Lavender presiding previously decided an appeal in the case of Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB) last year and has stayed a number of similar appeals pending the outcome of this appeal.  There are also a number of similar cases pending before District Judge Bellamy in the Sheffield District Registry of the High Court.

The case in question concerned the defendant firm of solicitors, SGI Legal LLP who originally acted for the claimant, Mrs Marta Karatysz in respect of her claim for damages against Mrs Sioghan Muddiman arising out of a road traffic accident which occurred on 27th May 2016.

The claimant had instructed SGI Legal a few months after the accident and the firm’s client care letter sent on 26th October 2016 stated that no more than 25% of damages would be deducted for costs.

The third party insurer, Aviva subsequently paid damages in the sum of £1250.00 plus fixed costs and disbursements of £1,116.00 including VAT.

SGI Legal paid the sum of £794.50 to the claimant, which was the amount of damages less £455.50 made up of the success fee in the amount of 25% of the damages (£312.50) and the ATE premium (£143.00).  However, they did not provide the claimant with a bill of costs.

The claimant went on to instruct Checkmylegalfees and sought a bill of costs, which SGI delivered on 15th January 2018.  The claimant issued a Part 8 claim form in the Sheffield District Registry of the High Court seeking an assessment of the final bill pursuant to s.70 (6) Solicitors Act 1974.

At the initial hearing the District Judge held:

  1. That the amount of costs the solicitors were entitled to receive were limited to the costs recovered from the insurers.
  2. That the solicitors should pay the costs of the assessment given that the bill had been reduced by more than one fifth.

At the original hearing the District Judge found that informed consent was relevant for the purposes of CPR 46.9(3) (c) (ii) and that the solicitors’ costs should be limited to the costs recovered from the insurers.

The issue under CPR 46.9(3) (c) (ii) is whether or not the solicitor told his client about the potential for certain costs not to be recoverable from the other party.  That issue concerns what the solicitor said not whether the client agreed with or approved what the solicitor told him. 

In this instance SGI Legal did not (unlike the solicitors in Belsner v Cam Legal Services Limited) give the claimant an estimate of its likely costs and did not even tell the claimant what hourly rate it would charge. 

For the purposes of an assessment of costs on the indemnity basis, the effect of  CPR 46.9 (3) (c ) (where it applies), is to create a presumption that certain costs were unreasonably incurred.

On appeal Mr Justice Lavender noted that the client had not agreed to the firm doing 11 hours of work and being paid at £161 per hour and therefore the question of whether she gave her informed consent did not arise.  However, he said that it did not follow that is was appropriate to limit the firm’s base costs to the amount received from the insurer.

The judge in handing down his judgement stated that “assuming that it was reasonable for 9 hours of work to be done, it is not unreasonable for the solicitor to be paid for that work at a reasonable rate”.

This ruling is an important yardstick for the number of similar appeals waiting to be heard and reinforces the importance of informed consent.

Here at Box Legal we have been offering after the event legal expense insurance since 2004 and have a wealth of experience. We have competitively priced ATE insurance policies available for all types of personal injury claims and can also arrange legal expense insurance cover for non-personal injury claims such as housing disrepair and financial mis-selling.

The number and variety of cases we arrange cover for is always increasing and so please contact us to discuss any after the event insurance requirements. We are happy to discuss and develop ATE insurance for case types we do not already insure.

If you would like to speak to us or obtain further information then please call on 0870 766 997, or email info@boxlegal.co.uk

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