We’ve all heard about Belsner, but where does the Judgment leave matters?

Rebecca Mogford

We’ve all heard about Belsner, but where does the Judgment leave matters?

It was quite a week for Solicitor own Client matters last week, Judgment was handed down in what was arguably “case of the year”, not just in terms of the principle and importance but in terms of the practical implications. Now the dust has settled, where does the outcome leave us?

My colleague Kathryn has previously provided commentary on the initial case and the Appeal (Belsner v Cam Legal Services Limited ) and so I will not go into great detail regarding the initial decision.

However, for those that may not be aware, in a nutshell, the arguments were: –

• The Solicitor had charged their client a success fee following a successful PI case
• The CFA entered into by the client allowed for the Solicitor to charge any shortfall of costs (i.e., the difference between what costs they had incurred and what were recovered from the Paying Party) and a success fee
• The client issued an application for an assessment of the base costs and success fee with an argument regarding a lack of informed consent to charge anything that was over and above the level of fixed costs applicable at the time. Following a paper assessment and then an oral hearing thereafter, the Judge found that all that was required was a written agreement (i.e. a retainer) which allowed for the recovery of costs in excess of those recovered from the Paying Party and that no informed consent was required
• The matter was appealed, with Mr Justice Lavender overturning the original decision, finding that there was a need for informed consent as a result of the fiduciary duty the Solicitor had. As a result, there was no informed consent for any payment over and above the sums paid by the Paying Party (which here, were fixed costs).
• There was a second appeal in which the Solicitor raised a number of arguments regarding the nature of the business agreement and further arguments were put forward regarding whether the Solicitor owed a fiduciary duty to the client. Arguments were put forward that because Section 74(3) of the Solicitors Act was concerned only with contentious business where ‘proceedings’ were issued in the County Court; it did not apply to MoJ portal claims which settled at stage one or two (which were to be considered non-contentious costs)

The Appeal was long awaited, for those of us that managed to watch snippets of the Court of Appeal Hearing via YouTube, it was fascinating to watch such technical arguments be considered and poured over in minute detail.

Then the good news (for practitioners) came last week. The Court took the stance that those claims which settled at stage one or two of the MOJ Portal were non-contentious costs and as result, Section 74(3) of the Solicitors Act did not apply. This is critical, this was a very specific issue and practitioners must be alive to the impact of this specific element.

The Court also held that the Solicitor did not owe any fiduciary duty to a client when negotiating fees i.e., when dealing with the retainer. However, there was a very loud and clear warning shot fired by the Court of Appeal in the Judgment;

“The duty to ensure that clients receive the best possible information about pricing and the likely overall cost of the case may have similarities to fiduciary duties of loyalty, but they are not such duties. They are professional duties, and the consequences of the breach of a professional duty, even one given effect by statute, are different from the consequences of breaches of fiduciary duties.”

This makes it very clear, whilst there was no failure or breach of the Solicitor’s fiduciary duties, there was still a very firm duty Solicitors had to perform to ensure that the client receives the best possible information about how much the case will cost them. So, whilst the result in Belsner was fantastic, and credit should be given to all those involved who pursued such technical and specific points, it does not provide Solicitors with huge amounts of comfort regarding the issues concerning the level of information being provided to the client regarding the cost of the claim. For example, the Master of the Rolls made it clear that in a case where a client had not been told of the potential level of fixed costs and subsequently the level of shortfall was not made clear it was, in his view, that the reasonable and fair amount for profit costs, was the sum of those fixed costs.

The Appeal did not come without its criticisms, particularly regarding the distinction between contentious and non-contentious costs being in the Court’s view illogical (the difference being whether the costs are regarded as fair and reasonable or simply reasonable) and in urgent need of reform. There were concerns raised regarding Section 74(3) of the Solicitors Act applying to cases issued in the County Court but not in respect of claims in the RTA Portal along with the fact that Solicitors were having retainers agreed with clients which gave them the ability to charge a shortfall.

It is clear that whilst in this case the outcome was satisfactory for the Solicitors, realistically there are a lot more questions asked now and the issues are likely to rumble on. However, what was made clear was that the Court was critical of clients who brought claims that were wholly disproportionate and were of the view that those claims should go to the Legal Ombudsman. Whilst this may be the situation in an ideal world, as we all know, we unfortunately don’t live in an ideal world and we would be surprised to see that idea become reality unless there are huge reforms of the way the Legal Ombudsman works and functions.