The Court of Appeal has handed down judgment in two eagerly anticipated costs appeals, Belsner v CAM Legal Services and Karatysz v SGI Legal LLP. Ben Williams KC and George McDonald instructed by Kain Knight Costs Lawyers acted for the successful appellant in Belsner and Robert Marven KC instructed by Weightmans LLP acted for the successful respondent in Karatysz.
In the first case, Belsner, the Court of Appeal held that:
- Solicitors do not owe fiduciary duties to their clients when negotiating the terms of their retainer;
- Pre-action work, including pursuing cases in the RTA portal, is non-contentious business;
- Thus, s.74(3) of the Solicitors Act 1974 (which limits recovery of solicitor’s fees to the amount of recoverable fixed costs) has no application to cases in the RTA portal;
- Nevertheless, solicitors’ present arrangements, derived from the Law Society’s model CFA, were unsatisfactory, as they did not clearly set out what charges could be made at the outset and could potentially be deducted from damages;
- However, in this case, the sums billed to the client were found to be “fair and reasonable” due to the cap the solicitor had imposed once the case had completed.
In reaching these conclusions, the Court identified that the Solicitors Act 1974 was “in urgent need of legislative attention”. The CJC is already carrying out such a review and we expect significant changes to be made to the Solicitors Act 1974 as a result. We also anticipate that the Law Society will release an updated model CFA, which had been withdrawn pending this appeal.
In the second case, Karatysz, the central issue was whether, for the purposes of determining the costs of an assessment under s.70(9) of the Solicitors Act 1974, the bill should be viewed as: (i) the amount actually charged to the client; or (ii) the amount that, absent a cap, would have been due. The Court of Appeal accepted Robert Marven KC’s case that it is only the amount actually charged to the client that is relevant.
Notably, the Court of Appeal gave guidance about what solicitor’s bills should contain and how “special circumstances” will be approached. The Master of the Rolls deprecated the practice of firms bringing claims in the High Court seeking trivial reductions to bills on the basis that they would recover costs far exceeding the sums in dispute. He explained that:
“Firms such as checkmylegalfees.com and their clients should be in no doubt that the courts will have no hesitation in depriving them of their costs under section 70(10) if they continue to bring trivial claims for the assessment of small bills to the High Court, even if those bills are reduced on the facts of the specific case by more than one fifth under section 70(9). The critical issue is and always will be whether it is proportionate to bring this kind of case to the High Court…”
Instead: “It is far more economic to use the Legal Ombudsman scheme which is a cheaper and more effective method of querying solicitors’ bills in these circumstances”.