The Court of Appeal has signalled the possibility of a non-party costs order in the Belsner case after ordering the claimant to make an interim costs payment of £130,000.
However, a leading figure in the costs world has warned that there are plenty of other targets for CMLF, even if its focus on challenging small deductions from solicitors’ damages ends as a result of the ruling.
Last month, the court signalled an end to such challenges, with the Master of the Rolls, Sir Geoffrey Vos, saying it was “unsatisfactory that solicitors like checkmylegalfees.com (CMLF) can adopt a business model that allows them to bring expensive High Court litigation to assess modest solicitors’ bills in cases of this kind”.
The court has now ordered CMLF’s client, Darya Belsner, to pay Norfolk law firm CAM Legal Services’ costs for the entire case on the standard basis: the initial assessment by District Judge Bellamy, Mr Justice Lavender’s first appeal and the second appeal.
She has to make a £130,000 interim payment on account of costs by 28 November 2022, as well as repay the £25,000 interim costs payment made by CAM following Lavender J’s ruling, and the £295.50 deduction that he ruled the firm should return as well, plus interest of 3% above base.
But, unusually, the order explicitly states that any application for a non-party costs order may be made on notice to the King’s Bench Division. This hints at the possibility of an attempt to make the owners of CMLF pay Ms Belsner’s costs.
Ben Williams KC, the barrister who represented CAM, explained on Twitter today that this provision was “proposed by us and agreed by CMLF. The court then just rubber stamped it”.
He continued: “The only reason it is there is to give the KBD jurisdiction as otherwise any [application] would need to be made to the [Court of Appeal], which wouldn’t think that a good use of resources.”
The nature of CMLF’s retainer with her is not known. CMLF is a trading name of Clear Legal, a law firm regulated by the Solicitors Regulation Authority.
However, last year, in a test case involving a challenge to deductions made by Slater & Gordon, CMLF explained that it provided clients with an indemnity for their costs as it was unable to procure after-the-event insurance.
Costs Judge Rowley said he was not surprised by this, given the limited amount of damages in most cases and the likelihood that claims would be “stoutly defended”, meaning offering an indemnity was “logical”.
He did not accept the characterisation of the arrangements as consisting of unlawful insurance finding it a “peripheral element of the contract of legal services”.
In refusing also to order security for costs, Judge Rowley said Slater & Gordon had not shown that Clear Legal has stepped outside its legal adviser role so that a non-party costs order was “probable” at this stage.
“I do not consider that Clear Legal can be described as having effectively become, in all but name, a real party to the litigation motivated by its commercial interest.”
He was also not convinced that Clear Legal’s balance sheet “should be a matter of concern” for the repayment of its costs if the indemnity were triggered.
Clear Legal’s balance sheet at the time showed a net asset position of £3.1m. Mr Carlisle said this was more than sufficient to demonstrate an ability to pay the defendant if necessary.
Slater & Gordon argued the asset was illusory, or at least unreliable, in the sense that it was a debt owed by another company in the same group and had been outstanding for a number of years.
Clear Legal’s most recent balance sheet, to 30 September 2021, shows assets of £3.2m, down from £3.5m a year earlier, of which £3m was owed by “related entities”.
While many solicitors are already celebrating what they see as an end to the CMLF business model, costs guru Dr Mark Friston has cautioned that it still has plenty of avenues to explore.
The Hailsham Chambers barrister, who authors the Friston on Costs textbook, said that not all CMLF’s claims were “obviously disproportionate”.
Writing in the wake of the Belsner ruling, he said: “The focus in recent years has been on small assessments (which are governed by the one-fifth rule), but this is only a part of CMLF’s business.
“In particular, they are becoming very adept in seeking out billing errors, and such claims are governed by different rules. Furthermore, a large number of CMLF’s claims are not for small amounts.”
The Court of Appeal said the cases of small deductions should go to the Legal Ombudsman instead and Dr Friston said this could still prove worth the effort.
“There is ample opportunity for [CMLF] to make money out of large numbers of complaints to the Legal Ombudsman. Twenty five percent of a large number of small complaints is still a lot of money.
“They could easily leverage the fact that complaints are administratively burdensome and that the solicitor pays the ‘case fee’ of £400 win or lose.”
Further, the firm has “plenty of opportunity” to diversify, Dr Friston continued, saying that it “could easily start to target larger consumer work, the most obvious candidates being family work, probate work and employment disputes”.
CMLF’s website showed that “this is all low-hanging fruit from their perspective (especially family work)”.
It could move beyond consumers to commercial work too. “Many commercial firms’ retainers have either not been updated for years, or (worse) have been drafted by a committee.”