Further success for Kain Knight as Defendant solicitor costs reduced from £14,000 to £68
In this long-running solicitor costs dispute case Optimal claim limited T/A Optimal solicitors and Dariusz Glab, the Defendant challenged certain elements of the Bill prepared on behalf of Optimal who were the Claimant’s original solicitors. The Claimant, Mr Glab, who suffered a head injury following a road traffic accident entered into a Conditional Fee Agreement (CFA) with Optimal Solicitors on 17 April 2015. Over a year later, Mr Glab, having become increasingly concerned as to the lack of progress on his case, decided to change solicitors.
“There was no dispute that the Defendant was liable to pay costs to his previous solicitors” explains Alistair Merchant, Senior Costs Lawyer at Kain Knight who represented the Defendant in this case. “However, the amount of those costs was heavily disputed across various elements. It was clear that the Claimant’s original firm had costed the case with significant errors, including, the level of success fee set at 100%, the £400ph hourly rates charged for underqualified fee earners, the performance of the retainer itself and various other specific elements of the Bill.”
Barrister, Daniel Laking, of 39 Essex Chambers, instructed by Kain Knight to appear on behalf of the Defendant at the final hearing, said “The judge stated that was a ‘golden thread of irresponsibility’ which ran through the way Optimal conducted the file. They did not serve the Defendant well and there was a litany of mishaps. They did not do justice to the client or his case, and because of these failings, Optimal’s costs Bill was reduced from £14,000 to just £68.49. The outcome could not have been better for our client.”
The points of dispute
On the success fee the Judge found that no informed consent was given to the charging of a success fee. There was no evidence before the court that the Claimant had informed the Defendant that he was accepting a liability to pay significantly in excess of what would be recovered from the third party in the underlying proceedings. The burden was on the Claimant to show proper consent had been obtained. There was no file note of the initial call with the solicitor and thus no evidence of what was explained to the Defendant about the CFA. Moreover, the client was Polish (evident from the fact a translated CFA was provided) and had suffered a significant head injury (for which he had been in a medically-induced coma for three days). Therefore, the Judge would have expected steps to have been taken to ensure an understanding of the terms of the CFA in a way that was sympathetic to the Defendant’s language and cognitive needs. He had no such evidence. The Claimant had not discharged the burden of demonstrating informed consent and the success fee was thus unreasonable.
As to the amount of the success fee, the 100% level also troubled the judge. As was set out in Herbert v HH Law Limited [2019] 1 WLR 4253, the risk assessment would need to be specific to the case for it to be set at 100% (or there would have to be good evidence the Defendant had been informed that it was set as against generic factors). The risk assessment did not relate to this case. It was superficial and generic and included factors that would be present in every claim (such as the risk of losing). Moreover, in tricky cases one would expect an ATE premium to be taken out if the case was thought to be very risky. One was not. The fact you could not later rewrite the success fee later on was not a justification for charging 100% carte blanche in every case. It fundamentally broke the relationship between the legal risk of the case and the fees the solicitors were entitled to charge. That link was fundamental.
Overall, the Judge was not persuaded to allow any success fee and disallowed that element of costs in its entirety.
On the hourly rates the Claimant had applied an hourly rate of £400ph across the board for all fee earners. The vast majority of the work in the Defendant’s case was done by Grade D fee earners. The Judge reviewed CPR r46.9(3)(c) and set out that he had to consider whether the costs were unusual and whether there was evidence the solicitors had informed the client they would therefore be unrecoverable.
A Grade D fee earner is defined as a paralegal or trainee solicitor. The people working on the Claimant’s case were not qualified lawyers. It was for work done at the lowest level and without the legal acumen that an important case would require.
The Judge accepted that the Guideline Hourly Rates were simply guidelines and were not applicable in a detailed assessment between solicitor and client. However, he found that the GHRs gave him a “touchstone” as to what a reasonable rate might be for the purposes of considering whether these rates were unusual. He therefore used them as a comparator.
To bill out unqualified file handlers at £400ph was not acceptable. They required a high degree of supervision. They were not qualified. They were not able to perform tasks that solicitors would be expected to do such as give advice. They did not possess the requisite knowledge and experience. The Judge found that, “to bill them out at £400ph is borderline profiteering without any basis.”
Moreover, there was no information and consent. There was nothing in the CFA that explained the rates charged as against the experience of those charging them. Had the Defendant had it explained to him that he was being charged £400ph for an unqualified fee earner, he would not have agreed.
Accordingly, he awarded hourly rates in line with the GHRs for Preston (National 3) in 2010, namely £111ph for Grade D and £201ph for Grade A. There was nothing in this straightforward personal injury case that justified a departure from that.
In respect of the non-performance of the retainer, the judge noted that he had a discretion pursuant to both the contractual principles and s63(3)of the Solicitors Act 1974 to reduce the fees charged if the client had to change solicitors.
The Judge found that there had been substantial non-performance of the contract between the Claimant and the Defendant. For example, when Weightmans reached out to them asking them to provide information to compete their enquiries, the Claimant provided no response. They provided a CNF in the Portal, but they never explained to the client the importance of the CNF, that it needed to be reliable, that it was an important document and that any inconsistencies within it would likely count against the Defendant at trial. There was no explanation of how the CNF would be used or what it was for.
The solicitors were not just form-fillers. The value they provided was about advice which came from experience and knowledge. However, in this case, they were simply a post-box. The failure to ask the Defendant to check the CNF or explain to him its relevance was a failing which could have damaged the Defendant’s prospects at trial.
There were also problems in respect of medical experts. The only step taken in that regard was to write to Optimal Med and ask for quotes for an A&E expert. This was a case where the Defendant had been seriously injured. He was hit off his bike and sustained head injuries. One would expect a radiologist, a neuroradiologist, a neurologist, a haematologist to be instructed. However, 8 months after the accident, the only step the solicitors took was asking for an A&E Consultant. It was a fundamental degradation of the duty to progress the case properly and timely by failing to obtain any (and particularly any relevant) medical evidence.
That was compounded by the lack of oversight in the firm. It was only in January 2016 that a solicitor actually looked at the file. At that point the supervising solicitor spent 24 minutes in which he noted that something considerably more in-depth than a single consultant report was required. But still nothing was done.
It was a failure of supervision to let a serious and complex case (the sort that ultimately would find its way to the multi-track) to be dealt with almost completely by Grade D fee earners and important steps to be taken in the litigation without supervision.
There was a “golden thread of irresponsibility” which ran through the way Optimal conducted the file. The solicitors showed very little attentiveness to the case. It is right they did some things (such as contacting the police) but they did them badly. Overall, the Judge was persuaded to allow the Claimant only 1% of the costs claimed based on the above failings.
Specific Points of Dispute
The Judge then assessed the specific points of dispute. On those he:
- Reduced 36 letters out to the client to 20 letters out.
- Reduced time spent for work on documents by 17 units for Grade D (total: 49 units) and increased the time spent by 2 units for Grade A (6 units).
- Reduced the time spent drafting the Bill to 15 units (from 20 units).
On costs, the Judge noted that the starting point was encapsulated in the Solicitors Act 1974 at s70(7) and (9) in that, where the Bill was reduced by one fifth or more, the ordinary rule was that the solicitor would pay the client’s costs. The question was: is there a good reason to depart from that general proposition?
The Claimant argued that the Defendant withheld an important point of information, namely the level of damages that were agreed. That hamstrung it from being able to make any offers. The Claimant also argued that the principle point of dispute between the parties was whether the Claimant was entitled to fixed costs or standard basis costs. That issue was conceded on the morning of the hearing by the Defendant.
However, in respect of the fixed costs point, the Judge found that ignored the fundamental findings of his assessment “the Claimant finds itself decimated” by his findings. That was due to the position adopted by the Claimant in respect of whether it had discharged its retainer, whether it had charged reasonable hourly rates and whether it had charged a reasonable success fee. That showed a troubling lack of insight into the litigation conduct. So, it was right to say that the Defendant had pursued a line of argument and then abandoned it, but that paled into insignificance when one considered the Claimant’s position.
Moreover, the point on failing to provide information as to the level of damages was a poor one. It went solely to the question of what the success fee might have been. The Judge already made findings on the level of the success fee and found it was unrecoverable. The Judge had been excoriating about the way the Claimant behaved. It was an unattractive argument to say that the level of success fee prevented offers being made when there was a poverty of evidence in relation to the original CFA and when there were problems with the percentage of the success fee in any event. If that issue held up negotiations it was an indictment of the Claimant’s one-track vision of focussing on the level of damages and not being able to step back and assess the offers.
When the Judge stepped back and considered the case in the round, he found that there was no basis from departing from the usual starting point and ordered the Claimant to pay the Defendant’s costs.
He was also sufficiently critical of the Claimant’s conduct that he was persuaded to order those costs to be paid on the indemnity basis. He summarily assessed the costs in the total sum of £9,400.40. Payment shall be made by 20 July 2023.
Finally, the Judge determined there were regulatory issues in this case that went beyond the facts of the individual case and the firm will now be referred to the SRA for further investigation.
Alistair Merchant, Senior Costs Lawyer, Kain Knight Ltd and Daniel Laking, Barrister, 39 Essex Chambers acted for the successful Defendant in this case.
Judgement available below.
