Case No: 0407816
BAILII Citation Number: [2005] EWHC 90009 (Costs)
IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE
Clifford’s Inn, Fetter Lane
London, EC4A 1DQ
Date: 27 April 2005 
Before :
DEPUTY MASTER HAWORTH, COSTS JUDGE
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Between :
 	VICTOR SIDNEY HAINES 	Claimant 	
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 	HOWARD KEITH SARNER 	Defendant 	
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Mr. Collins, Costs Draftsman (instructed by Anthony Gold) for the Claimant
Mr. Gibbs, Costs Draftsman (instructed by Bond Pearce) for the Defendant
 
Hearing dates : 14th January 2005, 16th February 2005 
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Judgment

Deputy Master Haworth: 

BACKGROUND

1.	Detailed assessment of the Claimant’s bill of costs took place on the 14th January 2005 and was adjourned part heard to 16th February 2005. I reserved Judgment in relation to item 82 of the bill of costs. This appears in part 5 of the bill on page 24 as follows: 

Additional liabilities	 	 	
 	 	 	
 	VAT 	Profit Costs	
Solicitors success fee at 60%	£1702.66	£9,729.50	

2.	The bill relates to the costs of the Claimant in connection with an action for damages for personal injury arising from a road traffic accident that occurred on 24th August 2000 on Western Esplanade at Southend on Sea. The Claimant was knocked off his bicycle by a vehicle driven by the Defendant. As a result of the accident the Claimant suffered severe head injuries leaving him with a permanent brain injury resulting in both intellectual impairment and personality changes. At the time of the accident the Claimant was a successful businessman running a substantial and profitable company. Following the accident the company went into Liquidation. 

3.	The Claimant changed his solicitors throughout the course of the action on a number of occasions. He initially instructed Messrs. Jefferies, subsequently Messrs. Batchelor and in December 2001 Alexander Harris & Co. were instructed on his behalf. From or about June 2002 Ms. Kennedy took over the conduct of the claim at Alexander Harris & Co. At that time the case was funded by a Conditional Fee Agreement dated 24th June 2002. In late 2003 Ms. Kennedy left Alexander Harris & Co. moving to Anthony Gold Solicitors taking the claim with her. A new Conditional Fee Agreement dated the 24th November 2003 was entered into between the Claimant and Anthony Gold and it is this Agreement which is the subject of this judgment. 

4.	A brief chronology of the claim is as follows:- 

14th August 2002	Claim issued and served	
27th September 2002	Defence served	
17th December 2002	Action allocated to multi track, consequent directions given	
4th September 2003	Interim payment on account of damages £50,000.00.	
8th October 2003	Case Management Conference: Consent Order with judgment
entered for the Claimant for 70% of damages to be assessed by the Court	
9th February 2004	Tomlin Order concluding the action, claim compromised at £425,000.00.	

THE ISSUES

5.	The sole issue I am asked to decide is whether the success fee claimed in the bill of costs of 60% referred to in the Agreement entered into between the Claimant and Anthony Gold Solicitors dated the 24th November 2003 is reasonable. 

THE EVIDENCE

6.	The evidence I heard with regard to the Conditional Fee Agreement dated the 24th November 2003 (CFA) was uncontroversial. The relevant provisions of the Agreement dated the 24th November 2003 are as follows:- 

Paying us
If you win your claim you pay our basic charges, our disbursements and a success fee. The amount of the success fee is not based or limited by the damages. You are entitled to seek recovery from your opponent of part or all of our basic charges, our disbursements, a success fee and insurance premium. Please also see conditions 4 and 6.
It may be that your opponent makes a Part 36 offer or payment which you reject and on our advice your claim for damages goes ahead to trial where you recover damages that are less than that offer or payment. We will not add our success fee to the basic charges for the work done after we receive notice of the offer or payment.

Success fee
This is 60% of our basic charges.
The reasons for calculating the success fee at this level are set out in Schedule 1 to this Agreement.
You cannot recover from your opponent the part of the success fee that relates to the costs to us of postponing receipt of our charges and disbursements (as set at paragraphs (a) and (b) at Schedule 1). This part of the success fee remains payable by you.
Schedule 1 
The success fee
The success fee is set at 60% of the basic charges and cannot be more than 100% of the basic charges.
The percentage reflects the following:- 

a) the fact that if you win we will not be paid our basic charges until the end of the claim 

b) our arrangements with you about paying disbursements 

c) the fact that if you lose we will not earn anything 

d) our assessment of the risks of your case. These include the following: 

See attached letter and Schedule 

e) any other appropriate matters 

The matters set out at paragraphs (c) and (d) above together make up 60% of the increase on basic charges (the risk factor). The matters at paragraphs (a) make up 0% of the increase on basic charges and the matters at paragraph (b) make up 0% of the increase on basic charges so that the total success fee is 60% as stated above.

7.	The Conditional Fee Agreement produced to me at the hearing did not contain the standard Law Society Conditions. I was provided with a CFA Risk Analysis setting out the case detail which I was told by Ms. Kennedy was the document referred to in sub paragraph (d) of Schedule 1 to the CFA. The paying party did not challenge this evidence. I was also told by Ms. Kennedy that the CFA was signed at a face to face meeting with the Claimant who was provided with the letter referred to in paragraph (d) of Schedule 1 to the CFA, a copy of the CFA itself signed by Ms. Kennedy and the CFA Risk Analysis I have already referred to. The letter referred to in paragraph (d) of Schedule 1 to the CFA could not be produced to me at the hearing. 

8.	The CFA Risk Analysis was as follows:- 

Type 	Specific 	Detail 	
Law	Limitation	NA	
 	Liability	Accepted with reduction for CN	
 	Causation: Other possible causes	Issues concerning extent of injury as result of helmet resolved with apportionment. But there are significant issues remaining concerning clients pre-accident personality and whether he was "like this" in part before.	
 	Causation: Medical history	 	
 	Complexity	Complex client problems, very complex issues of loss of profits involving potentially significant dispute and risk. Client is adamant about franchising loss which we are unable to support with full external evidence.	
 	Novelty	 	
 	Significant contributory fault	 	
 	Damage	 	
 	Counterclaim	 	
 	Other	 	
Client	Memory	 	
 	Historian	Client has head injury. His memory of the substance and success of his business is likely to be seriously challenged by the defendants as is his franchising commitment.	
 	Exaggeration	We think any problems here are as a result of head injury. The defendants are like to take a different view.	
 	Other	 	
Opponent	Admitted liability	Yet but risk on payment in	
 	Opponent problematic	 	
 	Opponent denied liability	 	
 	Multiple defendants	 	
 	Other	 	
Witnesses	Lay witness good	 	
 	No lay witness	No witnesses to loss of profit that will stand up and support	
 	Lay witness reluctant	 	
 	Lay witness poor	 	
 	Other	 	
Experts	Expert evidence good	 	
 	Expert dispute	 	
 	Multiple experts	 	
 	Expert evidence poor	 	
 	Other	 	
Documents	Good documents	 	
 	No documents	 	
 	Poor documents	 	
Other factors	 	 	

Decision 	Fee Earner 	Date 	Partner 	Date 	
Reject case	 	 	 	 	
Further investigation required	 	 	 	 	
Accept case	Yes, we have agreed`	 	 	 	
Case category	RTA	 	 	 	
Success fee	60%				

9.	It was accepted by both parties that the standard Law Society Conditions applied to the CFA and I was referred by Mr. Gibbs to condition 3 (n) of the Law Society Conditions which states:- 

(n) Win.
Your claim for damages is finally decided in your favour whether by a court decision or an agreement to pay you damages. "Finally" means that your opponent:-

•	Is not allowed to appeal against the Court decision: or 

•	Has not appealed in time: or 

•	Has lost any appeal. 

10. The other relevant Law Society Conditions are:- 

1.	Explanation of words used 
a.	Lose. 
The Court has dismissed your claim or you have stopped it on our advice.
10.	What happens if you win? 
If you win:
You are then liable to pay all our basic charges, our disbursements and success fee - please see Condition 3 (n). 
Normally you would be entitled to recover part or all of our basic charges, our disbursements and success fee from your opponent … 
You remain ultimately responsible for paying our success fee.
11.	What happens if you lose? 
If you lose you do not have to pay any of our basic charges or success fee. You do have to pay:-
•	Us for our disbursements: 
•	Your opponents legal charges and disbursements 
2.	What happens when this Agreement ends before your claim for damages ends? 
•	Paying us if you end this Agreement. 
You can end the Agreement at any time. We then have the right to decide whether you must:
•	Pay our basic charges and our disbursements including barristers fees when we ask for them: or 
•	Pay our basic charges and disbursements including barristers fees and success fee if you go on to win your claim for damages. 
•	Paying us if we end this Agreement. 
•	We can end this Agreement is you do not keep to your responsibilities in condition (ii). We then have the right to decide whether you must: 
•	Pay our basic charges and our disbursements including barristers fees when we ask for them: or 
•	Pay our basic charges and our disbursements including barristers fees and success fee if you go on to win your claim for damages … 
•	.... 
•	We can end this Agreement if you reject our opinion about making a settlement with your opponent. You must then: 
•	Pay the basic charges and our disbursements including barristers fees: 
•	Pay the success fee if you go on to win your claim for damages: 
•	If you ask us to get a second opinion from a specialist solicitor outside our firm we will do so. You pay the cost of the second opinion … 
0.	Death 
This Agreement automatically ends if you die before your claim for damages is concluded. We will be entitled to recover our basic charges up to the date of your death from your estate. 
SUBMISSIONS

11.	Mr. Gibbs for the paying party submitted that the success fee of 60% claimed at item 82 of the bill was unreasonable in the circumstances of this case. Judgment had been entered in favour of the Claimant on the 8th October 2003 prior to the CFA being entered in to. On that date the Claimant had "won" in accordance with the definition contained in the Law Society Conditions annexed to the CFA at 3 (n). It was argued that in relation to the CFA dated the 24th November 2003 the Claimant’s solicitor carried no risk and would under the terms of the CFA recover their "base costs" in all circumstances. Mr. Gibbs referred to the provision concerning a Part 36 offer set out at paragraph 6 above and argued that even if (on his solicitor’s advice) the Claimant proceeded to trial and did not beat the Defendant’s Part 36 offer his solicitors would still be entitled to their base costs. In those circumstances all the Claimants solicitors would risk was their success fee in respect of their base costs for work done after they had received notice of the offer or payment into Court. It was argued for the paying party that the CFA was no more than a standard solicitor and client retainer allowing the Claimant’s solicitors to recover their base costs in all the circumstances of the case and as such they carried no risk. 

12.	For the receiving party it was argued that the Claimants solicitors were still at risk even though judgment had been entered. There were no provisions in the CFA relating to the situation where the Claimant proceeded to trial after a Part 36 offer against the advice of his solicitors. In those circumstances were the Claimant to recover damages of less than the offer or payment into Court the Claimant’s solicitors would not receive any success fee. Furthermore, it was argued that the solicitor carried other risks regarding the litigation for example the bankruptcy of the Claimant or the Claimant ceasing to provide instructions or terminating his retainer with Anthony Gold. It was argued that the Claimant’s solicitors risked not being paid at all. 

FINDINGS

13.	A success fee of 60% is claimed in Part 5 of the bill in respect of the profit costs of Anthony Gold. The success fee has been calculated on the basis of the factors set out in paras (c) and (d) of Schedule 1 to the CFA which includes the CFA risk analysis set out in para 8. 

14.	By the time that the CFA was entered into liability issues had been resolved in favour of the Claimant on a 70/30 basis. There was a Court Order to reflect the agreement reached between the parties dated the 8th October 2003. Issues referred in the Risk Analysis such as causation, the extent of the Claimants injuries, exaggeration, lay witnesses etc had all been resolved in the Claimant’s favour. There had been a "win" in accordance with the Law Society condition 3 (n). In those circumstances the factor referred to in Schedule 1 at paragraph (c) namely that "the fact that if you lose, we will not earn anything" was never a possibility in this case and was never a risk for which Anthony Gold could seek a success fee.

15.	After the 8th October 2003 what then were the risks to justify a 60% success fee? In my judgment from the 8th October 2003 Anthony Gold were at risk as to quantum only. Furthermore, in respect of the quantum risk their agreement with the Claimant made it plain that even were the Claimant to reject a Part 36 offer on their advice and proceed to trial recovering damages of less than the offer or payment into Court they would still be entitled to recover their base costs. All they would forego would be their success fee. After the judgment on 8th October 2003 Anthony Gold were never at risk of not recovering any costs in this case.

16.	Leaving aside the position regarding a Part 36 offer condition 4 of the Law Society Conditions make it plain that in the event of a win the Claimant was then liable to pay all the basic charges, disbursements and success fee of Anthony Gold who could enforce the Agreement against the Claimant in the event they were unable to recover either base costs or a success fee from the Defendant. Furthermore the Law Society Conditions make it clear at condition 7 that where the Agreement ends before the claim for damages is resolved Anthony Gold would have the option of recovering their base costs, disbursements, barristers fees and in certain circumstances a success fee. Furthermore, condition 7 (c) makes that the Claimant’s estate liable for payment of Anthony Gold’s base costs in the event of the Claimant’s death. 

17.	The only situation where Anthony Gold would not recover any base costs or success fee was in the event that the Claimant lost in accordance with Law Society Condition 5. Taking in to account the definition of "lose" referred to in Law Society Condition 3 (j) referred to in paragraph 9 this was never a possibility in this case.

18.	The Court of Appeal have recently considered the issue of the level of success fees in quantum only cases. See Atack v Lee and Ellerton v Harris [2004] EWCA Civ. 1712. In the Ellerton case the CFA entered into by the Claimant had a similar but subtly different provision with regard to a Part 36 offer or payment. In that case where the Claimant did not beat a payment into Court which was refused on her solicitor’s advice, the solicitor was prevented from charging all his fees to his client in those circumstances. Accordingly not only was he unable to recover a success fee (as is the case here) but he was also unable to recover his base costs. Accordingly, the solicitor was at risk of not recovering any costs in the event that a Part 36 offer or payment was not beaten at trial. Brooke LJ in assessing the appropriate level of success fee said at para 49:-
"... We consider that there are no factors here which could legitimately have taken this success fee over 20%". 
Taking into account the circumstances of this case and in particular the fact that the Claimant’s solicitor will recover his base costs irrespective of whether a Part 36 offer is beaten at trial any success fee claimed must be modest and certainly less than the 20% awarded in Ellerton.

Mr. Collins for the receiving party urged upon me the risks faced by Anthony Gold in connection with this claim. He referred to the Claimant’s bankruptcy, the insurers bankruptcy, the Claimant's death or the other issues mentioned in paragraph 9. In my judgment these risks are inherent in any solicitor and client retainer and not simply in relation to CFAs. Furthermore the CFA caters for the risk of the Claimant’s death and makes provision for recovery of any base costs incurred from his estate (see Law Society Condition 7 (c)). The remaining risks referred to by Mr. Collins are not risks for which the paying party must pay. They are risks which in essence relate to the postponement of recovery of the solicitor’s charges which are not recoverable from the paying party. Accordingly I preferred the submissions of the paying party in relation to the appropriate level of success fee in this case. 

19.	Lord Woolf remarked in Callery v Gray (No. 1) [2001] EWCA Civ.1117 at para 103:
"We do not consider that it can ever be said that a case is without risk"
Those remarks must be equally true with regard to this claim. Nevertheless for the reasons referred to above the risk assumed by the Claimant’s solicitors in relation to the CFA entered in to on the 24th November 2003 was small and I therefore assess the recoverable success fee at 5%.

20.	I give permission for either party to restore the detailed assessment to determine any further outstanding issues including the costs of the detailed assessment proceedings.