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KU (a Child) v Liverpool City Council, Court of Appeal, 27 April 2005

5 May 2005
The issues

Costs – Success Fees – Tripping Claims – Highways – Whether Court Can Allow Different Success Fee For Different Periods Of A Claim’s Life

The facts

The Claimant aged 4 year old at the time of the accident in 2001. She cut her leg when she was coming home from school. As she walked across a grass verge between a public car park and Boundary South in Liverpool she stepped into a hole. The hole was hidden by grass. A CFA was entered into by the Claimant’s mother on 18th October 2001 in the Law Society model form with a success fee set at 100%. The risk assessment measured the chance of success at 50%. In November 2001 a Letter of Claim was sent to the Council. There was silence on the part of the Council other than an acknowledgement until June 2002 when a hearing for a successful application for pre action disclosure was dealt with.

The Council was not certain whether it owned the verge or not. An Unless Order eventually had to be sought and obtained. On 24th September 2002 the Council admitted that it owned the land and that the verge was dangerous but said that the position on liability was not clear. Proceedings were issued in March 2003 and Counsel was instructed under a CFA containing a success fee of 50%. The Council filed a Defence in April 2003 admitting fault for the condition of the verge but not admitting the accident, liability, causation or loss and requiring the Claimant to prove its claim. In May a Deputy District Judge directed that Judgment be entered for damages to be assessed on 1st August 2003. The Council evinced an intention to apply to have that judgment set aside since causation was still in issue but waited until 28th July before saying so. At the Hearing on 1st August the Application was not pursued and the claim was settled for £2,500.00 with costs on the standard basis.

The matter was remitted to the Court of Appeal with directions that the Court should consider the following matters:-

1. Whether a success fee of 100% was appropriate at the time when it was made and if not, what success fee would have been appropriate?
2. Whether on the construction of the CFA had allowed contractually for the possibility of a different success fee on the Detailed Assessment from the success fee on the main claim.
3. Whether if differential rates were not permissible as a matter of contract between solicitor and client, the Court had the power to direct that a success fee was recoverable at different rates for different periods of the proceedings.
4. If a Court had such a power when and in what circumstances it should be exercised.
5. What was the proper order in this case?

The decision

Issue 1

Was a success fee of 100% appropriate at the time when it was made?

The Court had to assess the reasonableness of the success fee having regard to the facts and circumstances as they reasonably appear to the solicitor at the time the CFA was entered into (see Atack v Lee). Hindsight was not permitted.

The Claimant’s solicitor could have entered into a two stage success fee as discussed in Callary v Gray whereby he restricted himself to a low success fee if the case settled within the protocol period for example. Alternatively he could have selected as he did in fact select a single stage success fee. In the first case he would have had the benefit of a high success fee for the cases that did not settle early whereas in the case of a single stage success fee it would not be possible to justify so high a success fee.

This was not a typical tripping accident on a city pavement. The Claimant’s solicitor has visited the scene and saw that the hole represented a concealed trap. The identification of the owner of the grass verge ought not to have proved over complicated and the likelihood of the defence proving successful was not particularly high. There was a risk that the claim originally might not exceed £1,000.00. It was not reasonable that the Defendant should have to pay the Claimant’s solicitor a higher success fee against the risk that the value of the claim was so low that legal costs would not be recoverable at all. That was a risk that the solicitor had to bear if he was willing to act at all. An appropriate single stage success fee would have been 50%. On the hypothesis that winning and losing claims were of equal weight this would reflect a two to one chance of success. This figure was near to the figure produced in the “report of the case profiling study: Personal Litigation in Practice by Pascoe Pleasance” published by the Legal Aid Board and Research Unit in 1998 showing a 77% success rate in trip, slip and fall cases against public authorities.

Apil had produced a study containing a category called “public liability” showing a success rate of 61%. However the category was too broad to be able to draw any useful conclusions from it in relation to a case as straightforward as this one.

The Court of Appeal noted that it did not yet have sufficient empirical data to be sure that it was not understating the prospect of success and that this was an area in which the civil justice counsel might have a valuable input to make. The answer to the first issue was therefore that a single stage success fee of 100% was inappropriate on this CFA at the time it was made and a reasonable success fee would have been 50%.

Issue 2

Does the CFA allow contractually for the possibility of different success fee on the Detailed Assessment from the success fee on the main claim?

In Halloran v Delaney the Court of Appeal had been satisfied that the language of the Law Society in Model CFA covered the costs only proceedings within the “claim” for which it provided coverage. The CFA was on identical terms. The answer to the question was therefore no. As a matter of contract the same single stage success fee was available throughout the proceedings on this claim including the detailed assessment of costs.

Issue 3
Does the Court have the power in the absence of the contract permitting differential rates to direct that a success fee is recoverable at different rates at different periods of the proceedings including Detailed Assessment.

The language of the Courts and Legal Services Act and the Conditional Fee Agreements Regulations did not envisage a Conditional Fee Agreement containing two or more success fees or a success fee which might subsequently waiver upwards or downwards as the risks of the proceedings increased or were diminished. Nowhere in the statute, the regulations, or the rules was there any indication that the Court was to have any power to subvert the statutory scheme by determining that although the level of a success fee was reasonable in view of the facts which were or should have been known to the legal representative at the time it was set, he was only entitled to recover a different much lower success fee in respect of some later period when different facts were or should have been known to him.

In the light of this, paragraph 11.8(2) of the Costs Practice Direction (which provided that the Court had the power when considering whether a percentage increase was reasonable, to allow different percentages for different items of costs or for different periods), was impossible to reconcile with the statutory and regulatory scheme. There was simply no room for a Costs Judge to substitute different percentage increases for different items of costs or for different periods when costs are incurred once it was accepted that the task of the Costs Judge was to determine whether that success fee was a reasonable one in the light of the matters that the legal representative knew or should have known when it was made. He could only do so otherwise with the benefit of hindsight which was prohibited and the rules and regulations gave him no power to remake the parties’ agreement. His power of interference is limited to altering the success fee to a more reasonable one when he considers the size of the additional liability which the paying party should bear. A Practice Direction has no legislative force. They provide guidance but insofar as they contain statements of law which are wrong they carry no authority at all.

The answer to the third issue is that the Court has no power to direct a success fee as recoverable at different rates for different periods of the proceedings. Insofar as the costs practice direction suggests otherwise it is wrong.

Issue 4
This issue in the light of the answer above did not arise.

Issue 5
What was the proper Order in this case? The District Judge should have ruled that 100% was unreasonable and substituted 50% covering the entire proceedings including the Detailed Assessment of costs.

Appeal dismissed.


Lea v Cheshire at one stage was going to the Court of Appeal. In the final paragraph of his Judgement Lord Justice Brooke commends the Judgment of Judge Barnett in that case save insofar as his Judgment superseded what was said in that Judgment and commented that it represented “a bold attempt to combat what Lord Hoffman described as a ratchet effect in Callary v Gray÷.. leading to ever higher success fees.” He commented that Costs Judges should be more willing to approve what appear to be high success fees in cases which have gone a long distance towards Trial if the maker of the CFA had agreed that a much lower success fee should be payable if the claim settled at an early stage.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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