Signing CFA “not informed consent” to deduct costs from damages

Irwin Mitchell: Rates were “unusual”

A costs judge has ruled that a litigation friend did not give informed consent to deductions from a protected party’s damages simply by signing a conditional fee agreement (CFA).

In the latest ruling on informed consent, Costs Judge Brown said the requirement could not be satisfied “by the mere fact of the litigation friend’s consent to the relevant type or amount of costs to be incurred”.

He continued: “If it were otherwise then the word ‘informed’ would be redundant.”

The judge made the comments in holding that the hourly rates Irwin Mitchell was seeking for grade C fee-earners in a clinical negligence claim were “unusual in amount”.

He was considering the firm’s claim to recover a £28,113 shortfall in costs from their client’s £225,000 damages. The settlement allowed for costs of £130,000.

“The solicitors’ argument is that the litigation friend has approved the hourly rates by entering into a CFA which provided for the rates claimed. Such approval to the rates was provided after an oral explanation of the terms of the CFA,” he said.

Irwin Mitchell said the litigation friend gave her express agreement to what the defendant would pay in the knowledge that the claimant would be exposed to a claim for the shortfall.

“The approval, it is said, was informed consent to the costs and it was argued in those circumstances that there was not merely a presumption of reasonableness, but that presumption was irrebuttable so that the rates are deemed reasonable.”

But Judge Brown said he was not satisfied that the litigation friend would have had explained to her, and would have understood, on what basis the amount of the deduction was reasonable and appropriate.

“It is not enough in these circumstances that a litigation friend should be warned that a deduction would be made from damages (not least because such advice would, to my mind, be inaccurate or incomplete insofar as it did not also refer to the process of assessment which any claim for a deduction would generally involve).

“In any event it seems to me that the rules provide, in effect, that there must be a detailed assessment.”

Judge Brown continued that CPR 46.9(3)(c)(ii) provided that, where costs were unusual, “the solicitor should tell the client that as a result [his emphasis] the costs might not be recovered from the other party”.

Citing the Senior Costs Judge’s recent decision in ST v ZY – also involving Irwin Mitchell – Judge Brown said it was “clear that the terms of CPR 46.9(3)(c)(i) and (ii) are linked so that the solicitor’s explanation must be directed to the unusual nature of the costs: in this case, the hourly rates”.

As there was no informed consent here, there was no presumption of reasonableness. “Further, in the absence of the requisite explanation, to my mind, the rates are presumed unreasonable.”

In any event, he found that the rates of £235-£240 per hour claimed for grade C fee-earners were “clearly unreasonably high for the work done”; the current guideline hourly rate for Southampton (where the work was done) was £178.

The claim was “not of high complexity either in respect of liability or quantum” and the judge allowed £210 for two of the fee-earners and grade D rates for others.

He also rejected the argument that the rates sought were not unusual because they were normal for Irwin Mitchell, as a major personal injury firm.

“It barely needs me to explain why. Not only am I not satisfied that the rates are normal or that IM occupy such a dominant position in the field of personal injury work that whatever rates they charge should be regarded as usual, I have to look at the matter across the board.

“I accept that rates of many firms seen in assessment can be sometimes high, indeed it is very often because the hourly rates are high that the claims are disputed, but costs budgeting reveals a broader range of hourly rates.”

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