Belsner v Cam Legal Services – Already the case of the year?
The outcome of a new hearing by Belsner v Cam Legal Services on July 11, 2022, which focuses on the issue of informed consent to deductions, has implications for thousands of cases where lawyers have deducted costs from damages in fixed cost cases and depending on the outcome of the hearing, may need to be reimbursed.
The introduction of live streaming of Court of Appeals hearings (on YouTube) has brought a strong spotlight to the “ongoing” Court of Appeals hearing in Belsner v Cam Legal Services. This is a case that clearly has potentially significant implications for all lawyers, not just those in the personal injury business.
Due to the scale of the issues, the Master of the Rolls took the unusual step of stopping the initial hearing mid-term on the second day, in February this year. The Barreau was already an intervener in the appeal and is represented by counsel.
The case has now been rescheduled for a new hearing on July 11, 2022 for 2 days with a third day in reserve if needed. The senior costs judge, Andrew Gordon-Saker, was asked to sit as an expert assessor for the rescheduled hearing.
The case itself is notable only for being so ordinary. This was a low value RTA case that was handled as expected in the RTA portal. The claimant’s claim was settled for the relatively small sum of £1,916.98 plus fixed costs and disbursements of £1,783.19 after submission of the Stage 2 settlement package.
The claimant then requested, under section 70 of the Solicitors Act 1974, an assessment of the bill provided by his solicitors. The Court ordered that:
“Defendant’s invoice is to be valued at the sum of £3,104.15 (i.e. base profit costs of £1,392, success fee on profit costs (at 15%) of £208.80, VAT on profit costs of £320.16 and disbursements inclusive of VAT” The defendant business (like many other businesses would have done/still do) capped its costs at the amount recovered from the opponent plus 25% of recovered damages.
The High Court appeal focused on two main issues, namely:
First – the provisions of section 74(3) of the Solicitors Act 1974, which provides:
“(3) The amount which may be awarded on the assessment of any costs or bill of costs in respect of any matter relating to a proceeding in the county court shall not, except insofar as the rules of court provide otherwise, exceed the amount which could have been allowed in respect of this object between parties to the said proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.
Second – CPR 46.9 (2) which states:
“(2) Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly authorizes the payment to the solicitor of a greater amount than the customer could have recovered from another party to the proceedings.”
At trial before the District Judge, the Court held that informed consent under CPR 46.9(2) was not required (unlike CPR 46.9(3)). On appeal, Lavender J allowed the appeal finding that:
“The relationship between lawyer and client is a fiduciary relationship. As a fiduciary, an attorney cannot receive profit from his client without his client’s fully informed consent…..whether disclosure has been sufficient must depend on the facts of each case…a number of cases considered whether the fiduciary duty must disclose not only the fact that he is to receive a commission, but the amount of it.
” Therefore, the judge concluded (1) that it is necessary to obtain informed consent in relation to CPR 46.9(2):
“The requirement of informed consent which applies in the cases referred to in article 46.9 (3) of the CPR does not arise because of the use of the word “approval” rather than the word “agreement”. requirement of informed consent stems from the fiduciary nature of the relationship”. (2) That there had been insufficient disclosure in this case, because the client had not been informed of the probable recoverable costs – that being the case even though here they had provided an estimate of their likely costs
The implications of this judgment are obviously very important. Law firms across England and Wales will be aware of their potential liability if the Belsner decision is not overturned on appeal. There are undoubtedly a significant number of cases (most likely counted in the hundreds of thousands) where deductions have been made from the client’s damages where the CPR 46.9(2) cap would result in reimbursement to their clients. Looked at another way, in my experience and that of others, the number of signed client engagements where informed consent was given is likely to be concerning.
ISSUES TO BE RESOLVED BY THE COURT OF APPEAL
To ensure that there is a more solid basis for the next hearing, the Court will consider four questions: These, in summary, will deal with the following points:
First – Do the provisions of the Solicitors Act 1974, and in particular section 74(3), apply to cases which end before the commencement of legal proceedings? With the growing importance of pre-action protocols in all forms of litigation, this decision will have a much broader impact than the present case. A question the Master of the Rolls thoroughly enjoyed during submissions as he spearheads the Pre-Action Protocols initiative! Should a dispute that ends before the initiation of formal court proceedings be properly considered a non-litigious or contentious matter?
Second, did the client give “informed consent” to the lawyer charging more than what was recovered from the defendant? As has been said “A solicitor wishing to rely on CPR 46.9(2) must not only point to a written agreement which meets the requirement of the rule, as the defendant did, but must also show that his client has given informed consent to this agreement to the extent that it permitted the payment to the lawyer of an amount of costs in excess of what the client could have recovered from another party to the proceedings. fiduciary started – at the first meeting or when the mandate was signed or at another time?
Third, if s. 74(3) does not directly apply because the Court finds that steps 1 and 2 of the pre-action protocol are non-contentious matters, what are the consequences?
Fourthly, entering new territory with regard to the Consumer Rights Act 2015 and what would happen if, under either a written agreement for the purposes of section 46.9(2) of the CPR, or an assessment due under the mandate under the non-contentious regime, the amount of the basic costs is greater than the fixed costs. In this respect, the Court will be asked whether it has sufficient elements to conclude whether it is unfair that the amount of the fees to be paid by the non-professional client is higher than the fixed fees and whether the conditions allowing such a higher sum unfair under the 2015 law and if so what are the consequences.
It can be seen that the outcome of this case has the potential to impact hundreds of thousands personal injury and litigation cases already settled as well as in progress. There will undoubtedly be a large number of lawyers and claims management companies watching the new hit television program “Belsner” on July 11 and 12, 2022.
I will publish my analysis and the implications once the judgment is delivered, which, given the importance of the case and the Master of the Roles’ criticisms of the importance of the pronouncement of judgments, will hopefully not be so long to come.