COSTS – WHEN YOU SOMETIMES THINK THE WORLD HAS GONE MAD: SPEND £28,535 TO CHALLENGE AN ATE PREMIUM OF £392…

In  Bendriss v Nicholson Jones Sutton Solicitors Ltd [2024] EWHC 1100 (SCCO) Costs Judge Rowley dismissed a claimant’s application for specific disclosure.  One notable aspect of the application was that the claimant had spent £28,535 in respect of this one application in relation to an ATE premium of £392.00.

“The claimant’s schedule of costs for summary assessment in respect of this application comes to £28,535.00. The defendant’s comparable schedule claims £5,478.90… the size of the ATE premium (£392.00)”

The costs judge over your shoulder (solicitor and own client costs): Deducting costs from the client’s damages:  Webinar 15th July 2024

Booking details are available here.

This webinar looks at the regulations and case law relating to the deduction of costs from the client’s damages in a personal injury claim.

• When can a deduction from damages be made?
• Protection for the client
• What must be the client be told?
• What steps need to be taken if court approval is needed?
• How is a “success fee” justified?
• Avoiding difficulties and potential pitfalls
• Where do things go wrong?

The webinar examines the key judgments on this topic and looks at those areas that have proven to be problematic and which have led to litigation and solicitor-own client disputes. It looks in detail at the Legal Ombudsman’s guidance on Good Costs Service and the steps that lawyers have to take to comply.

THE CASE

The claimant is bringing a solicitor and own client assessment against its former solicitors.  It sought extensive disclosure of documentation and correspondence relating to the arrangements in relation to an ATE policy which totalled £392.00.

THE JUDGE’S OBSERVATIONS ON PROPORTIONALITY

1. 1. The claimant’s schedule of costs for summary assessment in respect of this application comes to £28,535.00. The defendant’s comparable schedule claims £5,478.90. Given these figures, the size of the ATE premium (£392.00) and the words of the Master of the Rolls in Karatysz v SGL Legal LLP [2022] EWCA Civ 1388 that claimants “should be in no doubt that the courts will have no hesitation in depriving them of their costs…if they continue to bring trivial claims for the assessment of small bills to the High Court…”, I asked the advocates, particularly Mr Mallalieu, as to the proportionality of such an application.

1. 1. Mr Mallalieu referred to the lack of alternatives available to a party in this claimant’s position. I understood this to mean the apparently widely held view that the use of the Legal Ombudsman’s scheme is not always possible, notwithstanding the endorsement of it by the Master of the Rolls. Mr Mallalieu also suggested that the extent of the costs was really a function of the defendant’s attitude in failing to provide documents when ordered to do so by the court.

1. 1. I think it is true to say that the disclosure hare was set running by (i) the defendant agreeing to respond to a Part 18 Request regarding the ATE policy (ii) stating in the Response that an insurance intermediary (WGAL) “may well have received a commission”, and (iii) it transpiring that there are common owners of that intermediary and the defendant firm of solicitors. Despite the efforts of Mark Carlisle, the fee earner dealing with this case on behalf of the claimant, there is little, if any, further evidence available to the claimant or the court regarding the make-up of the ATE premium and its distribution to the insurance company or the intermediaries.

1. 1. The lack of information received by the claimant’s solicitors from enquiries to WGAL, Amberis and F&I, was, according to Mr Mallalieu, exactly why the application for specific disclosure had been brought. Records which ought to have been held by the defendant (and which were not expressly denied as existing by the defendant) had not been provided as part of the “full file of papers” ordered by the court. These records consisted of accounting and regulatory documents required to be held by the Solicitors Regulation Authority as well as the records said not to exist simply because they were created online using a “portal” and which apparently could not be saved or printed off.

1. 1. Given the modest sum at stake in respect of the ATE premium, it might be thought that the investigations of the various insurance entities and the application for further documentation was a disproportionate approach to challenging this item in the defendant’s bill of costs. The extent of those investigations certainly go some way to explaining the costs claimed in respect of this application. Mr Mallalieu suggested that, in addition to potential “secret commissions” within the ATE policy which had not been notified to his client, there might be some effect on the reasonableness of the solicitors’ charges overall.

1. 1. The bill which is in issue in these Solicitors Act 1974 proceedings comes to a total of £9,103.60 including the ATE premium. (There are profit costs of £6,468 plus VAT, Counsel’s fee of £500 plus VAT, a shared surveyor’s fee of £350 and the ATE premium.) It seems to me that, given these sums, the cost of this application raises concerns about justice being achieved at proportionate expense even if the entire bill is vulnerable to the claimant’s arguments.

1. 1. The uncertainty of the extent of those arguments is said by the claimant to be a feature of detailed assessment proceedings. Mr Griffiths pointed out that if proceedings were brought elsewhere to challenge, for example, secret commissions, the claimant would have to set out her case before seeking any disclosure. Mr Mallalieu countered by suggesting that the court had correctly followed the usual detailed assessment procedure here in requiring disclosure and inspection of the file before requiring the client to set out her case as to the challenges she wished to bring.

1. 1. In respect of solicitor and client assessment proceedings generally, Mr Mallalieu is right to say that directions given for production of a breakdown, points of dispute and replies very often include an order for inspection of the solicitors’ file by the client (or usually their legal representative) before the points of dispute are served. But the purpose of doing so is to enable the client and their representative to consider which, if any, elements of the solicitors’ charges set out in the breakdown can be challenged in the light of the information on the file. It is therefore, in essence, an opportunity for the client to satisfy themselves that the costs claimed by the solicitors are supported by the file and, generally, therefore, reasonably incurred and reasonable in amount. Elements which do not appear to be reasonable to the client can then be challenged in front of the court. This exercise focuses the arguments thereby reducing the amount of court time involved and increasing the possibility of the parties reaching a resolution short of a hearing.

1. 1. That is, it seems to me, a very different proposition from obtaining the solicitors’ file in order to see if it may support any arguments the claimant wishes to run regarding matters such as potential “secret commissions.” It may be that where large sums are at stake, applications for specific disclosure in Solicitors Act proceedings may be proportionate, but it is difficult to see in a case of this size, that this can be the case.

1. 1. Mr Mallalieu said that in the absence of the disclosure sought, the client was left with the unpalatable choice of giving up on the secret commission etc challenge where the defendant has taken an unreasonable opposition to providing documents that it does not dispute it holds, or risking costs appearing to be disproportionate in making an application for the documents to which she is entitled.

1. 1. It seems to me that the size of the sum which the claimant has been charged by her former solicitors for the ATE premium, a little less than £400, must have an impact on how unpalatable the choice before her might be. The sum in issue is the first factor in considering whether the costs incurred are proportionate according to CPR 44.3(5). It is difficult to see how the claimant here could have thought it appropriate to instruct her solicitors to spend the sums incurred in this application over a premium of this size.

1. 1. At most, the claimant may be liable for £392. She already has, via the Part 18 Response, an indication that a commission was probably paid and she would have her own evidence about whether that was ever made clear to her. An argument regarding secret commissions, fiduciary duties et cetera could be made as things stand. Given the sum involved, the court would not expect to spend a long time, nor receive a lot of evidence, in deciding whether the cost of the policy had been reasonably incurred and / or was reasonable in amount.

1. 1. There is no evidence – either documentary, or in Ms Sutton’s witness statements – regarding the extent of any commission paid. Assuming for a moment that the Part 18 Response is taken as being confirmation that some commission was paid, it seems to me that the defendant is at risk of the entirety of the premium being disallowed unless it clarified the extent of that commission. This burden of proof is essentially the same as for any other entry in the breakdown of costs which is challenged. If there is no or insufficient evidence to support the item claimed, then it is likely to be disallowed. The benefit of the doubt in favour of the solicitor is not going to make any difference in these circumstances.

1. 1. The Civil Procedure Rules now require courts to case manage proceedings in ways which potentially prevent parties from bringing the case as they would wish. Limitation on the number of witnesses and the extent of their witness statements and limiting the expert evidence that can be adduced are two obvious ways where this case management applies. Similarly, the extent of disclosure has been reconsidered from the ubiquitous standard disclosure approach originally set out in the CPR. Dealing with cases justly and at proportionate cost can require the court to fetter the parties’ activities.

1. 1. For these reasons, I have grave doubts about the appropriateness of ordering the further disclosure sought by the claimant even if there may be documents relevant to the ATE policy arrangements. But, it is even less attractive where there is no way of knowing exactly what is relevant in the claimant’s pursuit of as yet uncertain claims. It does not seem to me to be an answer to say that in detailed assessment proceedings disclosure generally precedes a party setting out its case. The putative challenge here is not the sort generally made in detailed assessment proceedings and for which work on the file can be seen via disclosure / inspection.

1. For reasons that I am now coming to, I am dismissing this application in any event, but the impact of that dismissal may only be temporary. It is for this reason that I have set out the foregoing to set a context for any future application.