Halloran v Delaney

A conditional fee agreement in the Law Society model form covered costs-only proceedings as an integral part of the claim, although those proceedings were not enforcement proceedings. A success fee may therefore be recovered on their costs because the solicitor bears some risk even in detailed assessment.

For simple claims settled without proceedings, conditional fee agreements entered into on or after 1 August 2001 should ordinarily attract a 5% uplift on the lawyers’ costs, including awarded costs-only proceedings. A higher uplift requires justification from the particular circumstances. Earlier agreements must be assessed by reference to the risks and legal uncertainties reasonably apparent when made.

The claimant settled a road traffic personal injury claim for £1,500 without commencing proceedings. The defendant agreed to pay reasonable costs, but the parties initially disputed the success fee and after-the-event insurance premium. The claimant began Part 8 costs-only proceedings under rule 44.12A of the Civil Procedure Rules 1998.

District Judge Harrison decided that the claimant reasonably commenced those proceedings and summarily assessed their costs at £1,298.24, including a 20% success fee. The defendant appealed directly from the Liverpool County Court. The issues were whether the Law Society model conditional fee agreement covered costs-only proceedings, whether an uplift was recoverable on their costs in principle, and whether 20% was excessive.

1. Appeal dismissed. Brooke LJ delivered the judgment of the court, with Peter Gibson and Tuckey LJJ. The Law Society model conditional fee agreement, properly construed, embraced costs-only proceedings within the claim for which it provided coverage. The agreement contemplated a result under which the client recovered damages and quantified costs from the opponent. Costs-only proceedings were therefore an integral step in resolving the costs aspect of the claim.

2. The district judge was wrong to classify the Part 8 proceedings as enforcement proceedings. Liability for costs still required quantification before it could be enforced. She was nevertheless correct that the agreement covered those proceedings. The court accepted the conclusion and reasoning in Tilby v Perfect Pizza Ltd.

3. A success fee on the costs of costs-only proceedings was recoverable in principle. Even in a straightforward case, a solicitor acting reasonably could face reductions arising from locality, confidentiality disputes, retainer issues or other matters in detailed assessment. Those risks were greater when this agreement was made in May 2000 because the law governing costs recovery remained uncertain.

4. The district judge was entitled to allow the 20% uplift. Callery v Gray (No 1) [2001] EWCA Civ 1117 had treated 20% as the maximum reasonable uplift for a modest and straightforward road accident claim without a special feature casting doubt on its soundness. Given the uncertainties prevailing when this agreement was made and the district judge’s wide discretion, there was no proper basis for appellate interference.

5. For simple claims settled without proceedings, a new prospective policy was required. For conditional fee agreements made on or after 1 August 2001, judges should ordinarily allow a 5% uplift on the claimant’s lawyers’ costs, including awarded costs-only proceedings, unless persuaded that the particular circumstances justify more. The power to allow different percentages for different items or periods arose under paragraph 11.8(2) of the Costs Practice Direction.

6. The court declined to decide whether the conditional fee agreement could be withheld from the paying party. That question had not been determined below and did not arise for decision on the appeal.

1. Court of Appeal: The appeal was dismissed. The district judge’s assessment, including the 20% success fee, was left undisturbed.
2. Liverpool County Court: District Judge Harrison ordered the defendant to pay £1,298.24 for the Part 8 costs-only proceedings, including a 20% success fee. Judge Marshall Evans QC ordered that the first appeal proceed directly to the Court of Appeal.