Fortune v Roe

A success fee under a conditional fee agreement must bear a reasonable relationship to the litigation risk assessed by reference to the facts reasonably known when the agreement was made. Admission of liability and judgment for damages to be assessed may remove the risk of losing the action and secure recovery of costs incurred to that point. Complex quantum issues do not, without more, justify a 100% success fee where the principal remaining risk is failure to beat a Part 36 offer. A staged fee does not itself justify the higher stage. The court must assess the actual risk in the individual case, rather than apply fixed percentages retrospectively.

The claimant appealed against a Costs Judge’s order reducing the success fee under her conditional fee agreement from 100% to 20%. The claim arose from serious injuries suffered in a road accident. Liability had been admitted and judgment entered for damages to be assessed before the agreement was signed. The claim later settled when the claimant accepted the defendant’s Part 36 offer of £600,000 less CRU, within three months of the trial date.

The appeal concerned the meaning of “win” under the agreement, the effect of its Part 36 provisions and staged success fee, and the level of risk relevant to assessing whether a 100% fee was reasonable.

1. Appeal dismissed. The reasonable success fee was 20%, whether regarded as a single fee or the second stage of a staged fee.
2. A success fee compensates solicitors for the risk that some or all of their base costs will not be recovered. Under [2011] EWHC 2953 (QB), reasonableness must be assessed by reference to the facts and circumstances reasonably known when the conditional fee agreement was entered into. The court may substitute a reasonable fee where the agreed increase is unreasonable.
3. The ordinary meaning of “win” in clause 3(n), read with the agreement as a whole, required either a final court decision or a concluded agreement for an amount of damages which the claimant had accepted and could enforce. Judgment for damages to be assessed was not itself an agreement to pay the claimant’s damages. The Costs Judge’s construction was therefore incorrect.
4. That construction did not alter the risk analysis. When the agreement was signed, liability had been admitted and judgment entered. There was no issue of contributory negligence, and the claimant was bound to recover substantial damages. The risk of losing the action completely had gone, and costs incurred up to any later Part 36 offer were secure.
5. Complex issues concerning quantum, causation, expert evidence and the extent of the head injury did not create a material separate risk of a distinct costs order. The significant remaining risk was that a Part 36 offer would be rejected, the claim pursued on advice, and the offer not beaten. Even then, only costs incurred after the relevant period would be at risk.
6. C v W [2009] 1 Costs LR 123 was materially similar and supported the 20% assessment. The staged-fee authorities, including Callery v Gray & Others [2001] EWCA Civ 1117 and U v Liverpool City Council Practice Note [2005] EWCA Civ 475, established that staged fees may be encouraged, but did not make a higher stage automatically reasonable. Williams was distinguishable because it involved a four-day trial and continuing contributory-negligence issues.
7. The fixed success-fee regime under CPR 45.15 and 45.16 was inapplicable and could not retrospectively determine the individual risk. The appeal was accordingly dismissed.

• High Court (Queen’s Bench Division): Appeal from the Costs Judge’s order dated 4 November 2010. The appeal was dismissed and the 20% success fee upheld.