Belsner v CAM Legal Services Ltd: Kain Knight acting in costs case of the decade – guide to the issues in the case

Posted 28 June 2022

Kain Knight Costs Lawyers are acting for the Appellants in the Court of Appeal case Belsner v CAM Legal Services Ltd, a case being labelled by many as the ‘costs case of the decade’ as it may have profound ramifications to those solicitors who charge fees to their clients where those fees are greater than the costs recovered between party and party.

The case is listed to be heard over three days beginning 4th October 2022. This article tells you everything you need to know about the history of the case and why it is so important.

Whilst the case itself arose out of a low value personal injury claim stemming from a road traffic accident, the issues the Court are to consider go to the heart of nearly every retainer every solicitor and their client enters into where the solicitor seeks to charge their client for work done. Indeed, the Court has given permission for the Law Society to intervene.

In fact, the issues are felt to be so crucial that the Court’s constitution is made up of the Master of the Rolls (Vos LJ), the Chancellor of the High Court (Flaux LJ) and Lord Justice Nugee.

The case had meant to proceed to a day and a half hearing on 22 and 23 February 2022. However, the bench, on day two, acknowledged the issues under review were important, having heard submissions on day one, and having considered additional material overnight, the Master of the Rolls reached the conclusion that the matters under review were of “very great significance…not just to this case…but to the development of the civil justice system.” This resulted in the Court taking the very unusual step of adjourning the appeal, giving further directions and for the appeal to be relisted to be heard from scratch for a further 3 days commencing on 4th October 2022 where the Court may also sit with Chief Costs Judge, Master Gordon-Saker, as an assessor.

The case concerns the interplay between s.74(3) of the Solicitors Act 1974 (“the Act”), the legislation which limits solicitor/client costs to inter-partes costs and CPR.r.46.9(2), the rule which sets out the conditions needed to be met to remove that limitation.

More broadly, the issues the Court will be considering are:

1. Does s.74(3) “limitation” apply to claims which use a pre-action protocol where no County Court proceedings are issued?
2. Does a solicitor owe its client a fiduciary duty before the retainer is agreed in respect of explaining the limitation and any removal of it, and if so, to what extent?
3. Do those fiduciary duties (if applicable) mean the exemption from s.74(3) in CPR.r.46.9(2) only applies if the client gave fully informed consent to paying more costs between solicitor and client than are recovered between party and party?
4. If no fiduciary duties were owed and s.74(3) was disapplied, was the term in the solicitor’s retainer (and the Law Society model CFA) which required the client to pay more costs between solicitor and client than recovered between party and party unfair (with reference to the Consumer Rights Act 2015)?
5. Did the client give her fully informed consent (if required at all) to the term requiring her to pay more costs to her solicitor than recovered between party and party.

In most situations where a solicitor charges its client costs, and costs are recovered between party and party, the solicitor/client costs are often greater than those between-the-parties costs. This is largely a function of the fact that solicitor/client costs are a liability on the indemnity basis (where proportionality does not operate and the benefit of any doubt as to the reasonableness of those costs falls in the solicitor’s favour) whereas between-the-parties costs are on the standard basis (where proportionality does operate and the benefit of any doubt as to reasonableness falls in favour of the client).

If ‘informed consent’ is required to remove the limitation and the Court of Appeal maintains the high bar set by Lavender J on first appeal as to the test whether ‘informed consent’ was given, literally hundreds of firms of solicitors operating in the low value/high volume market place will have to provide their former clients with refunds on most cases they’ve dealt with since the implementation of LASPO in April 2013 where success fee deductions were made. That will most likely force many of those firms to cease trading.

Furthermore, the Court will hear submissions on what legal business constitutes contentious business and what constitutes non-contentious business. It was thought that the understanding of where the division lies between contentious business and non-contentious business was settled:

“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.” re Simpkin Marshall Ltd [1959] Ch 229, at 235.

The Master of the Rolls, however, indicated in February 2022 that work done under a pre-action protocol could, in fact, be regarded as contentious business. One of the effects of this is that Contingency Fee Agreements are only lawful when they relate to non-contentious business. If firms have entered into Contingency Fee Agreements believing the business being conducted is non-contentious business but it transpires the business is contentious business (by the Court redefining the definitions from those believed to be settled) then the effect is that those Contingency Fee Agreements immediately become unlawful with costs being irrecoverable.

Kain Knight recommends all firms of solicitors who charge their clients fees and where those fees may exceed the costs that may be recovered between-the-parties, should watch the progress of this case very closely over the coming months and Kain Knight, as Costs Lawyers acting for the Appellants, will continue to update the legal profession over time.

Nick McDonnell and Ged Courtney of Kain Knight Costs Lawyers are acting for CAM Legal Services Ltd (the Appellant) together with Ben Williams QC and George McDonald of 4 New Square