25.01.2011Sibthorpe & Anor v LB Southwark  EWCA Civ 25
Key issues: ATE, CFA, champerty, Court of Appeal
The Solicitors in this case acted on a CFA.
The CFA included a term which stated that the solicitors would indemnify the client if they lost, if ATE was unavailable.
The case was over whether or not this rendered the CFA invalid on grounds of champerty.
The Court held that in cases such as this – where ATE, if it was actually available, would be very expensive – the CFA was valid.
21.01.2011Leel v FBC Manby Bowdler LLP  EWHC 90200 (Costs)
This was a Solicitor/own Client dispute over costs relating to the Claimant’s divorce proceedings.
The hearing was over a preliminary issue regarding whether the Defendant’s Bills were interim statute bills or requests for payment on account; whether there was an agreement that interim statute bills could be served; and, if yes, does the Claimant have special circumstance which would allow an assessment even though they were over 12 months old.
At the outset of the case, the Solicitors estimated that the costs would be between £20,000.00 and £50,000.00, which the Claimant agreed, and paid £7,500.00 on account.
The Defendant served interim invoices on a monthly basis which contained detailed breakdowns as to the work done.
A subsequent estimate stated that the costs would be between £50,000.00 and £85,000.00 and this was later updated to £72,000.00 to £85,000.00.
The Solicitors subsequently issued proceedings for their outstanding fees, which were stayed pending the outcome of the Claimant’s claim against them.
The Claimant stated that he took the invoices as statements on account and that he had verbally agreed with the Solicitors that they would agree a figure at the end.
The Claimant submitted that the invoices were not interim statute bills and could not be enforced as there was no agreement to issue these and they did not include enough information to allow the Claimant to determine whether they should be assessed.
The Claimant also submitted that the special circumstances were that he was being overcharged when compared to the estimates.
The Defendant submitted that they complied with the requirements for interim statue bills; referred to the Solicitors Act 1974; stated how the figures were calculated and were not round figures which is what a payment on account request would be expected to contain.
The Defendant submitted that their terms of business, which the Claimant agreed to, refer to interim bills and so there was an express agreement. If not, then there was an implied agreement by the Claimant not disputing such bills.
The Defendant also disputed that there were special circumstances by updated estimates being provided and because the Claimant stated that he was doing all he could to pay.
The Court held that there was an express agreement by the Defendant’s terms of business, and if not, there was an implied agreement by the Claimant paying them.
The Court also held that the Defendant had complied with the necessary legislation to make them interim statute bills.
The Court finally held that there was no verbal agreement with the Solicitor to agree costs at the end.
The Court also held there were no special circumstances because the Claimant did request breakdowns of the fees.
Overall, the claim was dismissed with the Defendant’s costs to be assessed.
20.01.2011Crema v Cenkos Securities PLC  EWCA Civ 10
Key issues: Basis of assessment, CFA, Court of Appeal, Indemnity Basis, interest on costs, Part 36 offer
In the main action (a breach of contract claim over commission payments) the Claimant won some points while losing others.
A separate hearing over costs was then held, in which there were three main issues: what percentage of costs should be allowed, given that the Claimant lost some issues; on what basis the costs should be assessed; and whether interest should be awarded on costs.
The Claimant was awarded 75% of his costs, to be assessed on the Standard Basis until 19 January 2010 and on the Indemnity Basis thereafter because he beat his own Part 36 offer at trial.
Interest was also allowed on the costs, in contrast to the case of Gray v Toner, even though this case was also funded by a CFA.
20.01.2011Barratt, Goff and Tomlinson (Intervenor: The Law Society) v HM Revenue & Customs  UKFTT 71 (TC)
Key issues: disbursements, First-Tier Tribunal (Tax), medical reports, VAT
The Solicitors in this case deal with personal injury claims.
As part of these cases, they obtain and pay for medical reports which incur a VAT charge. The VAT cannot be claimed back by their clients as they are individuals.
HMRC had decided that they had to pay VAT on medical reports on the grounds that they formed part of the firm’s VAT-rated charges, not as part of their disbursements. The Law Society were given permission to intervene due to the potentially wide-ranging impact of this decision on the legal profession, if was upheld.
The Tribunal held that the medical reports are disbursements for VAT purposes and so outside the firm’s supply of VAT-rated services, thereby overturning HMRC’s decision.
18.01.2011MGN Ltd. v UK – 39401/04  ECHR 66
Key issues: CFA, European Court of Human Rights, human rights, success fee
In this case, the European Court of Human Rights (ECtHR) dealt with the impact of success fees in libel cases.
In 2001 the Daily Mirror printed photographs of the supermodel Naomi Campbell leaving a rehab clinic and its publishers were sued for an invasion of privacy.
After being appealed all the way to the House of Lords, Campbell won damages of £3,500.00 plus costs. These were claimed at £1.1 million, plus a further £255,500.00 in assessment costs, and were agreed at a total of £500,000.00. These costs included success fee for the Solicitors of 95% and Counsel of 100%. The House of Lords allowed the success fee but had concerns over proportionality.
MGN Ltd. subsequently decided to issue proceedings against the UK on the grounds that success fees in libel cases were a breach of the right to freedom of expression under Art. 10 European Convention on Human Rights.
The ECtHR accepted that CFAs improve access to justice. However, it stated that “the depth and nature of the flaws in the system … accepted in important respects by the [UK]… exceed even the broad margin of appreciation… in respect of general measures pursuing social and economic interests” and so 100% success fees in libel cases are a breach of Art. 10.
05.01.2011Ramzan v IW Textiles & Bedding Products Ltd.  EWHC 90183 (Costs)
Key issues: CFA, CPR 45.18, Part 45, RTA, SCCO, success fee
The main action was an RTA funded by a CFA.
Liability was initially disputed before being conceded pre-issue, and damages were eventually agreed as £627,170.95.
The accident occurred in October 2005 and so the fixed success fees under CPR Part 45, section III applied.
Given that the case settled for more than £500,000.00, the Claimant Solicitors issued an Application under CPR 45.18 for their success fee to be more than 12.5%.
The Claimant submitted that when the CFA was entered into there were various issues over liability and quantum and so applied for a 100% uplift. The Defendant submitted that there was nothing on the facts which justified a success fee greater than 12.5%.
The Court emphasised CPR 45.19 which states that a success fee that is assessed at between 7.5% and 20% will remain at 12.5% with the Claimant to pay the costs of the assessment. However, on the facts, the success fee was assessed at 25%.
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