Judgment given in Belsner costs ‘case of the year’

The case challenged the costs recovery system used by many personal injury firms, and concerned deductions from damages recovered on behalf of a client, Darya Belsner, in a motorbike crash claim funded on a conditional fee agreement basis.

Some 900 cases have been stayed pending the judgment, which NLJ columnist Dominic Regan has dubbed the ‘costs and funding case of the year’. Regan has described its importance: ‘The prime issue set to affect every practitioner is what duty, if any, does one owe a putative client when setting out terms of engagement?

‘Is there already a fiduciary obligation in place? Might there be some other obligation to put the interests of the client above those of your practice?’

Belsner’s RTA portal claim was settled for £1,917 plus fixed costs of £500 plus disbursements. The solicitors kept the fixed costs and gave the clients the damages minus a success fee of £321 (25% of the damages). Belsner later instructed new solicitors, checkmylegalfees.com to challenge this deduction.

At first instance, the judge held the solicitors owed the client fiduciary duties when their retainer was being negotiated, therefore the client’s ‘informed consent’ was required. He permitted the solicitors to take only the £500 fixed costs and a £75 success fee (15% of the fixed costs). The case was then appealed.

In an anxiously-awaited judgment last week, however, the Master of the Rolls, Sir Geoffrey Vos, Lord Justice Nugee and Sir Julian Flaux held the solicitors’ deductions were fair and reasonable and did not need to be paid back.

Sir Geoffrey, giving the lead judgment, said the judge was wrong to say the solicitors owed the client fiduciary duties in the negotiation of their retainer and were not obliged to obtain the client’s informed consent to the terms of the conditional fee agreement.

Nevertheless, he also stated the solicitors did not comply with the Solicitors Regulation Authority code of conduct since ‘they neither ensured that the client received the best possible information about the likely overall cost of the case, nor did they ensure that the client was in a position to make an informed decision about the case’.

Moreover, Sir Geoffrey criticised the current rules on costs: ‘I have concluded that the current position is unsatisfactory in a number of respects… the distinction between contentious and non-contentious costs is outdated and illogical. It is in urgent need of legislative attention... it is unsatisfactory that, in RTA claims pursued through the RTA portal (and perhaps the Whiplash portal), solicitors seem to be signing up their clients to a costs regime that allows them to charge significantly more than the claim is known in advance to be likely to be worth.

‘The unsatisfactory nature of these arrangements is not appropriately alleviated by solicitors deciding, at their own discretion, to charge their clients whatever lesser (and more reasonable) sum they may choose with the benefit of hindsight... it is also unsatisfactory that solicitors like checkmylegalfees.com can adopt a business model that allows them to bring expensive High Court litigation to assess modest solicitors' bills in cases of this kind.

‘The Legal Ombudsman scheme would be a cheaper and more effective method of querying solicitors' bills in these circumstances, but the whole court process of assessment of solicitors' bills in contentious and non-contentious business requires careful review and significant reform’.

A Law Society spokesperson said: ‘We welcome the judgment on this important case.

‘As an intervening party, we understand a different outcome of this case may have significantly impacted many of our members. It is crucial that solicitors can be paid fairly and reasonably for the vital work they do. This judgment upholds that important point.

‘Personal injury solicitors are there to fight for those people who are injured or become ill through no fault of their own. While this judgment provides some welcome clarity, it is clear that much more needs to be done to ensure the statutory framework underpinning solicitor-own client funding agreements and their assessment is fit for purpose.

‘We would urge the UK government to consider this at the earliest opportunity.’