The Issues:

The claimant had instructed the defendant solicitors in a personal injury case.  The claimant’s claim arose from a road traffic accident when the car she was driving was struck from behind by a bus.  The agreement between the claimant and the defendant allowed a 100% mark up for the additional liability.  The case eventually settled for £3,400.00.  The defendant deducted £829.20 from the damages representing the success fee.  The claimant subsequently instructed JG who challenged HH’s costs, and in particular contended that HH had failed to conduct a risk assessment justifying the level of success fee.

In the initial hearing before the District Judge Bellamy he;

1. reduced the success fee under the conditional fee agreement from 100% to 15%;
2. approved a cash account in terms which treated payment of the claimant’s ATE insurance premium as a solicitor’s disbursement;
3. in ordering HH to pay the costs of the assessment, refused to inquire further into HH’s contention that the retainer of the claimant’s new solicitor was ‘tainted by illegality and unenforceable’.

There was no evidence of any formal risk assessment which would justify a success fee of 100% being reasonable.  In the circumstances of the case, being a RTA where the claimant had suffered a minor soft tissue injury with no time off work it was difficult to see that an uplift of much more than 12.5% could be justified.

The defendant contended that following civil justice reforms in 2013 it had been necessary to restructure charges to clients to cover overheads and made a profit.

On appeal Mr Justice Soole said that the risk assessment was still a ‘relevant factor’ when considering the success fee percentage and that the client’s informed approval required the agreement to be ‘clearly explained’ before the claimant entered it.  Soole also said that the £349.00 ATE insurance should be paid by HH because it was a disbursement which the solicitor had failed to include in the bill.

 Held:

1. Success fees must be backed up by a risk assessment and 100% success fees are open to challenge if this is not done, or the risk assessment doesn’t support a 100% uplift.
2. An ATE premium is a disbursement, and since (unusually) it was not billed to the client, the client need not pay it.  The long standing rule applies that leave of the court is needed to withdraw a solicitor bill and issue a new one.

Comment:

Some sums are not disbursements (eg estate agents fees which a solicitor pays out on completion), so are not included in a bill – they are a client liability and just go in a case statement, but ATE premiums ARE disbursements – they must be billed to a client.  The only reason the solicitor failed to recover its ATE premium outlay is that it never billed the premium to the client!

We have always advised that any ATE premium is a disbursement which must be included in a solicitor’s bill to its client.  Solicitors should urgently check their procedures.  There was no challenge to the ATE premium of £349.00 on this RTA claim, so the Court made no comment on it.

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