COST BITES 208: A CLIENT’S CHALLENGE TO THE DEDUCTION OF THEIR OWN SOLICITOR’S COSTS IN PERSONAL INJURY ACTION

There is a strange area of litigation and legal costs where issues of proportionality and common sense appear to totally disappear.  – that is former client’s challenges to solicitor’s deductions from damages.  We see another example in  Perrett v Wolferstans LLP [2025] EWHC 68 (SCCO) where the deduction was just over £2,000 and yet the hearing on a preliminary issue took two days, a reserved judgment with both sides instructing counsel, one of which was a KC.  Here we look at two evidential points in the judgment.  A later posts will look at the other arguments employed. Later posts will look at other arguments raised in this case (which I remind everyone started off as a dispute about £2,000 – there are now costs incurred which are likely 20 – 40 times higher than the sum in issue).

The costs judge over your shoulder – deducting costs from the client’s damages: booking details 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 is meant be the client “agreeing” the costs
• 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?
• When can a client ask for the bill to be assessed?
• What must you tell the client about the costs budget?
• What are the implications of going outside the costs budget?

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 defendant firm of solicitors had represented the claimant in a personal injury action, they acted under the terms of a Conditional Fee Agreement.  The case settled for just over £7,000. The defendant firm wrote explaining the terms of the offer, which set out the deductions that would be made.  The claimant’s case was that he expected to receive the damage sum without deduction, except for the ATE premium.

1. 1. This apparent contradiction was highlighted when Mr Perrett was taken by Mr. Marven to the correspondence between Mr Perrett and his former solicitors when considering making offers to settle his claim and considering offers made by his opponent’s insurers. For example, in a letter dated 21 October 2021, following advice to make a settlement offer of £7,334.63, the pre-penultimate paragraph of that letter stated:

“I would remind you that on settlement of your claim there will be a deduction in respect of the insurance premium with ARAG Insurance in the sum of £319.20 and this firm’s costs. Any contribution in respect of this firm’s costs will be limited to 25% of your damages.”

1. 1. Mr Perrett signed a mandate regarding the making of the offer two days later and which specifically recorded the sum to be offered of £7,334.63.

1. 1. Upon receipt of the claimant’s offer, the opponent made a counter offer of £7,102.61 which Tracey Barton had no hesitation in recommending to Mr Perrett should be accepted. The letter is dated 17 November 2021 and set out a list of two deductions that would be made from the damages. The first was the ATE insurance premium. The second was:

“This firm’s success fee – £1,500. We are entitled to make a deduction of up to 25% of damages. The proposed reduction represents 21% of your damages.

You will therefore receive £5,283.41″

THE CHALLENGE TO THE DEDUCTION

The claimant issued proceedings challenging the deduction.  A hearing of some of the preliminary issues took place over two days at which the claimant and one of the defendant’s solicitors gave evidence.

BUT THE RECEPTIONIST TOLD ME OTHERWISE

The claimant’s evidence was that he had had a “slight conversation” with someone at the defendant firm and this led to his view that there would not be any deductions.

1. 1. When pressed by Mr Marven as to why he did not challenge this apparent modification of the arrangement, Mr Perrett then suggested that he had in fact asked a question and had had a “slight conversation” regarding the letter. He said that he could not remember who it was – although it was a woman – and it might have been either Tracey Barton or her assistant, Rachel Green. He said that he had been told that the arrangement was how it had always been and he said “let’s just do it.”

1. 1. Mr Perrett accepted that he had not mentioned this conversation in his statement and, in answer to Mr Marven’s suggestion that his evidence amounted to him being unable to remember who he spoke to or what was said, he accepted this to be the case. This was at the end of his cross examination and I accept that Mr Perrett’s response may have been dealing with the point broadly, but it is certainly the case that the probative value of his evidence regarding the conversation alleged to have taken place after 17 November 2021 has to be extremely modest. There is no specific date or person mentioned with which the defendant could have made enquiries, even if it had been put on notice of its existence. Nor is there any indication of what was said which might jog a person’s memory. It seemed clear that the person spoken to was in fact neither of the fee earners who dealt with this case and therefore Mr Perrett’s evidence about the people who had confirmed the workings of the CFA at the beginning and end of the retainer was, at best, that it was from other members of staff.

1. 1. Partway through the cross examination, Mr Perrett said to Mr Marven that the latter was now making the terms of the agreement clear to him but that was not how he had read the agreement and that he had genuinely read it as being that the opponent was going to cover all of the costs.

1. 1. I accept that Mr Perrett was a witness genuinely trying to assist the court with his recollections. Furthermore, as Mr Carlisle pointed out, the only evidence before the court regarding the conversation between Mr Perrett and the receptionist was Mr Perrett’s own evidence. Ms Barton’s evidence was entirely a commentary on what would usually be the case.

1. 1. But Mr Perrett’s evidence has to have some cogency, even if uncontested by other evidence. That cogency was challenged by Mr Marven’s cross examination. At the time of the conversation with the receptionist, Mr Perrett had had a telephone conversation with members of the defendant, including Ms Barton, and at which time, Mr Perrett was keen to establish that the defendant used “no win, no fee” agreements. Ms Barton declined to confirm whether or not a CFA would be offered until she had further information. There is no disagreement between the parties that, prior to the accident form being handed in, this was the situation. Having heard Mr Perrett describe the conversation with the receptionist in very different terms under cross examination from the contents of his witness statement, I am not persuaded that a conversation in terms remotely close to the one set out in his witness statement took place.

1. 1. On Mr Perrett’s own evidence, he simply decided to leave the house so that he could drop in the form rather than delivering it in some other fashion. That does not suggest that he went to the defendant’s offices with the intention of clarifying the terms of the retainer. He had been asked to provide more information so that a decision could be taken on whether the defendant would even be prepared to take on the claim. In my judgment, any conversation whilst dropping off the form was more likely to be closer to the evidence given in the witness box.

1. 1. The receptionist’s response of “that’s right” seems to me to be more likely to have related to a comment about whether the defendant used “no win, no fee” agreements generally than anything specific about their mechanics. As I have recorded at paragraph 7 above, Mr Perrett is now able to describe the outcomes of both winning and losing (if using a CFA Lite). At the time he was seeking to instruct solicitors for his personal injury claim, the phrase “no win, no fee” is all that either side say he used. That phrase, on its own, does not highlight what happens if there is a win and that seems to be a general reflection that would-be clients are particularly interested in covering off the potential downside of a loss. Given Mr Perrett’s own description that he was looking for a “no win, no fee” agreement when he first contacted the defendant, I am not persuaded that the concise description of a CFA Lite which he gave in the witness box was one which was likely to have been used when dropping off the accident form before he even became a client. In my view, the understanding over time that some CFAs may be CFA Lites, has blended into his recollection of the conversation with the receptionist which, I find, was more likely to have been no more than an offhand comment on the use of CFAs by the defendant.

1. 1. Similarly, I do not accept that there was any meaningful conversation with anyone regarding the settlement proposal. The very existence of that conversation did not come to light until Mr Perrett entered the witness box and it was not his first explanation of why he accepted that a deduction would be made from his damages. To the extent that there was any such later conversation, it seems to me that Mr Perrett’s evidence that he was told that the agreement had always been that a deduction would be made is by far the most likely to be accurate.

1. In my judgment, Mr Perrett appreciated the evidential hole he was in whilst in the witness box and his sudden, vague recollection of a later conversation which confirmed the understanding that he had throughout the case was a reconstruction of events rather than any true recollection.

THE DEFENDANT’S ADVICE FORM

1. 1. I am quite prepared to accept that Mr Perrett’s faulty understanding of the written terms of his agreement was not assisted by the rather peculiar method of the defendant in providing advice to a would-be client when sending out the CFA documentation. From Mr Carlisle’s cross-examination of Ms Barton, it was entirely apparent that the “confirmation of advice given” in the form signed by Mr Perrett was no such thing. No advice was given in the way the costs were calculated, how qualified one-way costs shifting worked, or the court procedure for challenging the defendant’s bill amongst the 10 statements for which boxes were provided so that they could be ticked.

1. 1. Whilst the boxes were ticked, Ms Barton had to accept that there was no separate conversation regarding the terms of the CFA and that the client was left to understand how it worked from the wording of the CFA itself. On that basis, it seems to me that the confirmation of advice given document was pointless since the client either understood the CFA from its own terms or, as appears the case, he did not and in either event would be none the wiser by reading the confirmation document and seeking to complete it.

1. 1. One statement in the confirmation of advice given which Mr Carlisle particularly quizzed Ms Barton about, concerned the bald statement that “My Solicitor considers that a Conditional Fee Agreement is the most appropriate form of funding for my case.”

1. Mr Carlisle queried what other forms of funding were considered. He was met with the answer that the defendant did (and does) not offer any other funding options besides a CFA or a private paying arrangement. Ms Barton accepted therefore that the stated advice that a CFA was the most appropriate form of funding did not cover other potential forms of funding besides the two offered. She did, however, consider that the firm complied with the Solicitors’ Code of Conduct.