Informed consent not relevant to costs claimed under CPR 46.9(3)(c)(ii)

Informed consent is not relevant to costs claimed pursuant to CPR 46.9(3)(c)(ii), the High Court has ruled.

The decision in SGI Legal LLP v Karatysz [2021] EWHC 1608 (QB) is Mr Justice Lavender’s second foray into the issue of informed consent to deductions from damages in the wake of his decision last year in Belsner, which is headed for the Court of Appeal.

SGI acted for Marta Karatysz after she suffered a road traffic accident. She settled for damages of £1,250. SGI received costs and disbursements of £1,116 from the defendant insurer, Aviva. It took 25% of the damages as per the retainer and £143 for the after-the-event insurance premium.

The claimant then instructed to seek an assessment of the profit costs. At first instance, District Judge Bellamy in Sheffield held on the papers that section 74(3) of the Solicitors Act 1974 applied to limit the costs recoverable by SGI but, on an oral review, reversed this decision.

He ruled that, similar to the Belsner ruling, informed consent was relevant for the purposes of CPR 46.9(3)(c)(ii), and that SGI had not obtained informed consent to charge anything in excess of what was recovered from Aviva.

SGI’s bill was for around 11 hours at an hourly rate at £161 but the district judge considered nine hours at £120 to be reasonable. He also held that the success fee should be 15%, not 100%, following the Herbert ruling. This was not challenged.

At the oral hearing, DJ Bellamy said an hourly rate of £161 for a grade D fee-earner “might be deemed to be unusual in amount when most, if not all, low-value RTA cases are dealt with by grade D fee-earners and the courts are well aware of seeing rates between £111 and £125”.

On appeal, Lavender J found that CPR 46.9(3)(c)(ii) did not require informed consent – the rule says simply that costs to be assessed on the indemnity basis are presumed to be unreasonably incurred only if “the solicitor did not tell the client that as a result the costs might not be recovered from the other party”.

There was no authority for a requirement of informed consent, he said, continuing: “Mr Marven [for the defendant] submitted that informed consent is irrelevant to CPR 46.9(c)(ii). In my judgment, that is right.

“The issue under CPR 46.9(c)(ii) is whether or not the solicitor told his client what is there set out. That issue concerns what the solicitor said, not whether the client agreed with or approved what the solicitor told him.

“That issue is materially different from the issue under CPR 46.9(2) or 46.9(3)(a) & (b), which is whether the client agreed or approved something proposed by the solicitor.

“The focus there is on what the client did, which is why it is relevant to consider whether the client gave informed consent to what was proposed.

“Accordingly, I conclude that the district judge was wrong to decide that the presumption under CPR 46.9(3)(c) arose in the present case.”

SGI had included within the client-care documentation that its costs would “almost certainly” exceed the fixed costs received from Aviva and so Ms Karatysz would be required to pay the shortfall from her damages.

As the district judge had on assessment reduced both the hours and hourly rate to what he considered “reasonable” amounts, CPR 46.9(3)(c)(ii) was satisfied.

Lavender J said: “The effect of CPR 46.9(3)(c), where it applies, is to create, for the purposes of an assessment of costs on the indemnity basis, a presumption that certain costs were unreasonably incurred.

“Where a solicitor claims costs at an unreasonable rate, the appropriate course on assessment on the indemnity basis is usually to allow costs at a reasonable rate.

“Assuming that it was reasonable for the work to be done (and there was no challenge to the district judge’s decision that it was reasonable for nine hours’ work to be done), it is not unreasonable for the solicitor to be paid for that work at a reasonable rate.”

Lavender J also found that, for the purposes of the one-fifth rule, the amount of the bill was the actual amount the solicitors sought to recover in light of the 25% cap, rather than the bill for the full amount of its charges.

Robert Marven QC (instructed by the Appellant) for the appellant. PJ Kirby QC and Robin Dunne (instructed by Clear Legal Ltd t/a for the respondent.

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Costs News
Published date
27 Jan 2022

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