NJL v PTE

In a pre-LASPO conditional fee agreement case where liability has been admitted, a success fee must reflect the risk that solicitors will fail to recover costs, not the complexity or value of the claim alone. The assessment should focus principally on: (1) the proportion of costs likely to remain at risk when a Part 36 offer is made; and (2) the chance that the offer will be rejected on advice and not beaten at trial. Those risks should be combined rather than treated as risks that the claim will fail entirely. A 100% success fee is unjustified in such circumstances absent an appropriate evidential basis. A costs judge must analyse the relevant percentages and explain the assessment. Under the applicable rules, a percentage increase assessed at no more than 20% and no less than 7.5% is reduced to 12.5%.

The claimant, a protected party who had suffered severe brain injury in a road traffic accident, entered into two pre-LASPO conditional fee agreements after liability had been admitted. The claim settled before trial for a lump sum and periodical payments. District Judge Searl assessed the solicitors’ and leading counsel’s success fee at 65%.

The defendant appealed. The central issue was whether the District Judge had properly assessed the litigation risks existing when the agreements were entered into, particularly the risks associated with a later Part 36 offer and disputes concerning causation and quantum.

1. Appeal allowed. The District Judge’s assessment of a 65% success fee was plainly wrong and was set aside. The success fee for both CFA2 and CFA3 was assessed at 20%, which reduced to 12.5% under CPR 45.19.
2. The governing authority was C v W [2008] EWCA Civ 1459. The assessment had to be made by reference to the risks reasonably identifiable when the CFA was entered into, without hindsight. Where liability had been admitted and no Part 36 offer had yet been made, the principal risks were the timing of a Part 36 offer and the risk that it would be rejected on legal advice and then not beaten at trial.
3. Costs incurred before the relevant period following a Part 36 offer were effectively secure. Accordingly, the percentage of total costs at risk had to be estimated. That percentage then had to be combined with the assessed chance of giving incorrect advice in response to the offer. The resulting risk could be translated into a success fee using the ready reckoner.
4. Complexity, high value, causation disputes and the claimant’s protected-party status did not, without more, establish a proportionate risk of losing recoverable costs. Complexity should not be confused with risk. The solicitors’ experience and any available advice from leading counsel were relevant to the assessment of the risk of mishandling a Part 36 offer.
5. A costs judge should allow reasonable latitude because the exercise is imprecise. However, the receiving party must show that the success fee was calculated by reference to the relevant risks. The District Judge had not identified the percentage of costs at risk or the chance of failing to beat a Part 36 offer, and had given no adequate reason for selecting 65%.

• High Court (Queen’s Bench Division): On appeal from the order of District Judge Searl dated 23 May 2017, the 65% success fee was set aside. The success fee for both conditional fee agreements was fixed at 12.5% after application of CPR 45.19.