Gloucestershire County Council v Evans & Ors

Under section 58 of the Courts and Legal Services Act 1990, the percentage increase in a discounted-fee conditional fee agreement is calculated by reference to the basic fees payable once the conditional success element is removed. It is not calculated by reference to the difference between the basic and discounted rates, or the solicitor’s costs at risk.

The statutory counterfactual does not require an inquiry into the bargain the parties might have made without a conditional fee agreement. Any potential disproportion between risk and reward is addressed through assessment of the reasonableness of the success fee, taking account of all relevant factors, including fees recoverable following failure.

The claimant council retained solicitors under a collective conditional fee agreement. It provided for basic charges of £145 per hour and a 100% success fee following a win, but discounted charges of £95 per hour following a loss. After the underlying claim was settled with an agreement to pay the council’s costs, the defendants challenged the agreement during detailed assessment.

Deputy Costs Judge Lightman rejected the contention that the success fee was effectively 290% of the £50 per hour said to be at risk. The defendants appealed. The central issue was whether, under section 58(4)(b) of the Courts and Legal Services Act 1990, the relevant base was the £145 basic charge or the £50 difference between the basic and discounted rates.

1. The appeal was dismissed unanimously. Dyson LJ held that the agreement provided for a lawful 100% success fee on basic charges of £145 per hour. Lloyd LJ agreed for additional reasons, and Buxton LJ agreed with both judgments.

2. Section 58(2)(b) of the Courts and Legal Services Act 1990 defines a conditional fee agreement with a success fee by reference to the amount of fees which the agreement provides will be increased in specified circumstances. The statutory language does not use the solicitor’s costs at risk as the relevant base. Under this agreement, the only fees increased following a win were the expressly defined basic charges of £145 per hour.

3. For section 58(4)(b), the amount payable if the agreement were not conditional was therefore £145 per hour. It was artificial to treat the discounted rate of £95 as increasing first to £145 and then to £290 upon success. The agreement described £95 as a discounted charge following failure, rather than as the fee to be increased following success.

4. The statutory counterfactual does not require a factual inquiry into the hypothetical bargain the parties would have made if no conditional fee agreement had ever existed. The court must remove the conditional elements from the actual agreement. Removing the success-fee provision here left an agreement for legal work at the basic rate of £145 per hour.

5. The observations about risk and reward in Callery v Gray were directed to standard no-win-no-fee agreements. They did not justify importing a costs-at-risk concept into section 58. Potentially disproportionate arrangements can instead be controlled on assessment. The risk of failure is relevant to reasonableness, but it is not the only relevant factor; the court may also consider fees recoverable even if the case is lost.

6. The possible operation of fixed success fees in discounted-fee cases did not permit the court to give the statute a meaning its language could not bear. If practical difficulties arose as such agreements became more common, the fixed-fee rules could be revisited.

1. Court of Appeal (Civil Division): The defendants’ appeal was dismissed unanimously. The court upheld the conclusion that the agreement’s 100% success fee complied with section 58(4)(c) of the Courts and Legal Services Act 1990. [2008] EWCA Civ 21

2. Supreme Court Costs Office: Deputy Costs Judge Lightman rejected the defendants’ challenge, holding that the success fee applied to the £145 basic charge and did not exceed the prescribed maximum.