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C v W, Court of Appeal, 19 December 2008

2 February 2009
The issues

Conditional Fee Agreement – costs – success fee – admission of liability.

The facts

The Claimant was a passenger in a car driven by her brother. The driver lost control of the vehicle causing it to crash into a tree. The Claimant was thrown from the car and suffered serious injuries, including an injury to her head. The claim was commenced and on the 19th February 2001 the Defendant’s insurers admitted liability. Shortly afterwards she went to a new firm of solicitors and on the 18th May 2001 entered into a Conditional Fee Agreement. That agreement provided for an uplift on base costs or success fee of 98%, of which 15% represented the cost of funding. Proceedings were issued in July 2003. The claim was settled in the sum of £680,000.00 plus costs. Base costs were subsequently agreed at £92,500.00 plus VAT. The only issue between the parties related to the success fee. On Detailed Assessment the District Judge allowed a success fee of 70%. On Appeal the Judge reduced it to 50%. The Defendant appealed against that decision on the grounds that even that reduced rate was too high. The principle ground on which the Defendant challenged the success fee was that the Defendant had already admitted liability at the time the CFA was entered into. It was difficult to see how the Claimant could have failed to recover substantial damages given the serious natures of her injuries. The chance of success in this case was very high and the risk of losing correspondingly low – certainly no more than 5% and probably rather less. Applying the ready reckoner that would give a basic success fee of at most 5% rather than the 33% as calculated by the Claimant’s solicitors in their risk assessment in which they assessed the chance of success at 75%.

To add a further 20% success fee to reflect the size of the claim was wrong. It was true that high value claims tended to be more complex but that did not of itself increase the risk of losing.

A further 10%, according to the risk assessment, had been added in respect of unidentified Defendants and insurance issues. It was difficult to see how that increase could be justified in the particular circumstance of this case since the driver’s identity was known and the insurers had admitted liability.

The real difficulty in the case lay in clause 5 of the agreement and in assessing the risk that the solicitors might lose the right to recover part of their fees as a result of failure to beat a Part 36 offer which he had rejected on their advice. The chance was difficult to assess but the Court would not have expected highly experienced solicitors practicing in this field to differ very widely in their assessment of the bracket in which an award would be likely to fall provided they had access to the same information. The Claimant’s solicitors had not attempted to grapple with the task of assessing this properly and, indeed, the Court doubted whether they had the means of doing so in any reliable way.

There was nothing unreasonable in entering into a simple CFA at a time when liability had been admitted provided that the parties had made a proper assessment of the inevitably much reduced risk of failure. The circumstances of the success fee allowed by the Judge was too high and the appropriate success fee was 20%.

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