Belsner – “The Case of the Century”: the Unexplored Implications and What To Do About Them?
On 27th October, the Court of Appeal handed down its decision in Belsner v Cam Legal Services [2022] Costs LR 1569 in which Kain Knight acted for the successful appellant solicitors. Overall, the appeal took up five sitting days for their Lordships, with a reserved judgment being given by Sir Geoffrey Vos, the Master of the Rolls (with whom Flaux C and Nugee LJ agreed).
Much publicised in the legal press, Belsner has already achieved the accolade “The Case of the Century” and for a faultless first hand summary, look no further than Nick McDonnell’s video.
In a nutshell, the case involved a dispute about the deduction of a success fee of £385.50 from damages which Cam Legal had recovered for Ms Belsner in a personal injury case that had been settled without any court proceedings. Exercising her right under the Solicitors Act 1974 (“the Act”) to have the reasonableness of the success fee checked by the court, Ms Belsner had contended in those proceedings that she had not given “informed consent” to the deduction, and in the Court below, the judge had agreed with her. Lavender J held that the work undertaken was contentious business, Civil Procedure Rule (“CPR”) 46.9(2) required the client to give “informed consent” to an agreement to pay fees in excess of those recoverable from her opponent, and that, accordingly, the firm’s costs were limited under s 74(3) of the Act, to the fixed costs paid by the tortfeasor plus a reduced success fee of £90 (based on 15% of the recovered fixed costs of £500 plus VAT).
The Court of Appeal disagreed and allowed the appeal. The work had been non-contentious because it had been undertaken in the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (“the Portal”) and had settled at Stage 2 without any court proceedings. It followed that the judge below had been wrong to deploy CPR 46.9(2) and s.74(3) in his deliberations because they only apply in contentious business. As Vos MR expressed it:-
“….in my judgment, section 74(3) and Part 46.9(2) do not apply at all to claims brought through the RTA portal without county court proceedings actually being issued.”
It followed that the costs fell to be assessed not under the CPR, but under paragraph 3 of the Solicitors’ (Non-Contentious Business) Remuneration Order (2009) (“the Remuneration Order”) and upon its application, the court held that charges had been fair and reasonable, so the appeal was allowed.
Victory for the Solicitors who got their success fee back and given that this was a Test Case with scores of others waiting in the pipeline for the result, the outcome may well be that these types of claim under the Act, will disappear. Certainly, the Court of Appeal did not mince its words in criticising those acting for Ms Belsner for having troubled the courts with such a small claim. The Legal Ombudsman is the place for these, was the court’s message.
That said, the arguments before their Lordships were wide ranging and brought into sharp focus the differences between contentious and non-contentious business. These were succinctly explained 60 years ago by Wynn-Parry J in re Simpkin Marshall Ltd [1959] Ch 229
“There is now a clear and, I should have thought, logical division between contentious and non-contentious business. All business is now to be regarded as contentious which is done before proceedings are begun provided, that the business is done with a view to the proceedings being begun, and they are in fact begun, and also all business done in the course of the proceedings. All other business is non-contentious.”
It follows that if, and only if, proceedings are issued, does business become contentious, meaning that everything done in, for example, the Tribunals is non-contentious, with that extending through the Portal system, and even to catastrophic personal or clinical negligence claims which are resolved pre-action, as often happens where liability is admitted.
These distinctions, however, appeared on the first day on 22nd February to confuse even Sir Geoffrey Vos. On being told that the appeal was about a personal injury claim which had started and ended its life in the Portal and that the legal point was whether s.74(3) applied at all, it was his preliminary view that: “…that was the most unmeritorious point one can possibly imagine …the idea that it is not contentious business: it clearly is!”
Next day, however, there was back-peddling, with their Lordships recognising overnight that the differences between contentious and non-contentious business stretch back decades, that they are enshrined in law and that, in consequence, they were important matters for the Court of Appeal to address. For these reasons, the appeal was adjourned so that the parties could file revised skeleton arguments, with the case to be re-listed for a further three days in the summer.
In the event, the listing had to be delayed owing to Covid 19, but on the resumption on 4th October, one of the many arguments which were before the court concerned the type of bills which it is permissible for solicitors to deliver to their clients. Put simply, did it make a difference whether the work undertaken was contentious or non-contentious business when it came to the time to invoice the client?
The answer was one that the Court of Appeal declined to give. The furthest that their Lordships were prepared to go was to say this:-
“22 There was some discussion of whether the Bill here was a gross sum bill and, if so, whether such a thing was permissible for non-contentious business. It seems to me that this point is beyond the scope of this appeal. ……
48 There was discussion about whether anything about this case changes because the Bill was, in the event, for non-contentious, rather than contentious, costs. I do not think so. But points made about gross sum bills and the legal (as opposed to good practice) requirements for the content of bills were not in the grounds of appeal and we have not, therefore, decided them.”
However, what these remarks have done is to draw attention to a distinction which has become ever more blurred over recent decades and now begs the question: do solicitors really give any thought when they are ready to bill their clients, if it matters whether the work was contentious or non- contentious?
Whilst the thrust of the judgment in Belsner was directed at the concept of “informed consent” and whether it arises in Portal cases, the unexplored implication of the case may well be that the distinction matters very much. To understand why that is likely to be the case, it is necessary to go back to the basics of how to bill a client.
The starting point is that in either type of business, contentious or non-contentious, the solicitor can deliver a bill which contains detailed items, showing a bottom line figure for the work done, but split into items with a figure, so that the client can see how the money was spent, for example at meetings, drafting documents, writing letters, making telephone calls and so on. This will be a final bill for the period to which it relates.
In contentious business, however, a solicitor may choose instead to deliver a bill in a gross sum, which will also show a bottom line figure for the work, but only have a narrative describing the tasks undertaken. For example “receiving your instructions, reading documents supplied, instructing counsel, attending conference with counsel, reporting to you”, but with no breakdown showing exactly how much time was spent on each piece of work, by whom and when.
Gross sum bills can be further nuanced in contentious business. Although under the common law, an invoice could only be delivered at the end of the case as the retainer was an entire contract to do a job of work (see Underwood, Law & Piper v Lewis [1894] 2 QB 306) provided the client agrees, bills can be delivered on an interim basis as the case progresses. That way, the solicitor does not have to wait until the end of the case for payment, and the clients know on a regular basis, what they are in for costs-wise.
There is then a further nuance: where the solicitor is permitted in the retainer to deliver interim bills in contentious business, at the solicitor’s choice these can be on-account of a final invoice to be delivered at the end of the case. Alternatively, the solicitor can elect to render an interim “statutory” bill, which is final for the period to which it relates and cannot be re-opened, in contrast to an on-account bill which can. If the client wishes to challenge the charges under the Act, time runs for doing so for on-account bills from the date of the final bill, whereas if the bill is “statutory”, the client’s time starts straightaway.
Now the rub. With Belsner having established beyond peradventure that Portal work and anything litigious which resolves itself without legal proceedings is non-contentious, how should it be billed?
Without the benefit of a judgment deciding this issue under modern conditions and making the point that the following is not a view shared by all costs gurus, the answer is that the safest course is to send the client a bill containing detailed items; a gross sum bill in non contentious business is inadvisable and if that be right, it is plainly the case that solicitors have been, and are continuing to send their clients the wrong type of bill.
The authority for that proposition proceeds as follows, and as so often is the case with matters to do with the Act, is steeped in law going back decades.
In Re a Solicitor: in the taxation of costs [1955] 2 Q.B. 252, Denning LJ said this:-
“Until the year 1920 a solicitor’s bill, even for noncontentious work, had to be drawn in the traditional way, item by item, with a separate charge against each item…..In 1953 the Solicitors’ Remuneration Order, 1953, was made, which made great alterations in the method of charging for non-contentious business. The solicitor is now entitled to “such sum as may be fair and reasonable having regard to all the circumstances of the case.”
Thus in 1955, a solicitor could deliver a gross sum bill in non-contentious business and in terms of deciding the demarcation lines, Denning LJ had this to say:-
“These illustrations persuade me that where the work done before writ is such that, if the case went to trial, it would properly be allowed as against the other party on a party and party taxation, then it is contentious business, even though a writ is not in fact issued; but if the work would not be allowed on a party and party taxation, it is not contentious business.”
The test therefore, had nothing to do with whether proceedings were actually issued: what mattered was whether the costs would be recoverable on a between the parties assessment.
The “Denning Test”, however, lasted just two years. In 1957, s.87 of the Act was amended to change the definition of contentious business:-
“… ‘contentious business’ means business done, whether as solicitor or advocate, in or for the purposes of proceedings begun before a court or before an arbitrator …”
That meant, as the Court of Appeal found in Belsner, that before any business could be contentious, proceedings had to be “begun”, and when that happened, as Robin Dunne explains in his Practical Guide to Solicitor and Client Costs:-
“Once the matter becomes issued then the work previously undertaken is retrospectively turned into contentious business [1.37]”
The “Denning Test” then suffered a further knock when the Remuneration Order was implemented in 2009, omitting the words in the 1953 Order “such sum as may be fair and reasonable having regard to all the circumstances of the case.” In addition, the right of clients to obtain a Remuneration Certificate from the Law Society certifying the fairness of the charges was also repealed. It followed that in the view of Dr Mark Friston in his masterly work “Friston on Costs”, that meant that:
“…it is at the very least arguable that the ability to render gross sum bills for non-contentious work has ceased to exist.“
Indeed, Dr Friston continued [35.58] “In the absence of an English authority on the point, a cautious solicitor would do well to ensure that they render only reasonably detailed bills for non-contentious work.“
That being so, as both PJ Kirby KC and Robin Dunne (counsel for Ms Belsner) have observed:
“Almost every firm in these low value [Portal] cases send gross sum bills, which it appears are impermissible in non – contentious work…..it seems clear that such bills would arguably not comply with the Act and would not start the timescales for assessment unders.70”
Does it matter? Yes it does. In Bilkus v Stockler Burnton [2010] 2 Costs LR 237, the solicitors had succeeded in action which established that their client owned a share a company. Later, that share had been independently valued at £6.6m whereas the client had expected to sell it for £1.5m. The solicitors argued that they were entitled to an uplift of £50,000 as a “value element” for getting a good result. The Court of Appeal held that all the business was contentious business and s.60(4) of the Act did not permit any such uplift to be charged unless there was an agreement with the client to that effect, which there was not. If it had been non-contentious business, the solicitors could have relied on the predecessor to Article 3 of the Remuneration Order. Instead, the solicitors lost their £50,000 bonus for the good result.
Where does this leave the unfortunate lawyers in today’s market, who have undertaken successful but hard fought pieces of litigation on behalf of their clients, and are now ready to bill them for their diligence, not least following the comments of Vos Mr in Belsner 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 reform”.
The first point is that the hard pressed solicitor must recognise (as not all do now), that Portal work, and, indeed any litigious work, is non-contentious business until proceedings have begun. That means that the way the client should be charged is by delivering a bill containing detailed items, even though in Portal work, the costs recoverable on a win from the opponent will have been calculated using the CPR. That will be a final bill for the If the judgment in Belsner hastens and resolves any of these things, it should, and indeed, will, be remembered as “The Case of the Century”. period of the work, with the client’s time for challenging it running from the date of delivery. Fail to do that, and arguably there will have been no compliance with the Act, the bill will be a nullity and the client will have a complete defence if the solicitor sues for the firm’s fees.
Second, if, and only if proceedings are begun (and remember that cases in any Tribunal are not proceedings) does the business become contentious. In that eventuality, it is a case of once contentious, always contentious, and if the firm has not yet sent the client a bill, the solicitor can do so using one that is in a gross sum. In doing so, all the work for the non-contentious period will be picked up, even though had such work been billed before proceedings had begun, a detailed bill would have been preferrable. As Vos MR mused, what on earth can be logical about that?
Third, that when the work becomes contentious business, there can be no charges rendered until the job has been completed, unless the firm has agreed with the client to the delivery of interim bills. That will be so, even if the solicitor has delivered a detailed bill for the work done when the matter was non- contentious. Again, one might ask rhetorically, what is the logic in that?
Fourth, that if the firm is permitted to deliver interim bills, they can be on-account or statutory, and that the client must be told which they will be.
That is the way it is for now. What of the future? Here are some thoughts
(1) First for consideration should be whether and why there needs to be two charging regimes: for contentious work, the CPR and for non- contentious business, the Remuneration Order.
(2) Second for consideration, what is the logic in converting non- contentious business into contentious business when proceedings begin, and then to back-date it so that all the work ever undertaken is contentious business? Much better, surely, to go back to the wisdom of Lord Denning: if it is work which would give rise to a between-the parties-costs order if it went to court, it is contentious, it being irrelevant whether or not proceedings have been issued.
(3) Third, surely it is time that the concepts of interim bills, statutory bills, final bills, bills containing detailed items and gross sum bills, are confined to where they belong – the days of Queen Victoria. Bills need to be simple and not reliant on out of date case law. At present, bills confuse not only the clients but also, and perhaps more often, the very solicitors who prepare them in the first place.
If the judgment in Belsner hastens and resolves any of these things, it should, and indeed, will, be remembered as “The Case of the Century”.
Colin Campbell, Consultant at Kain Knight, Deputy Costs Judge
