Herbert v H H Law Ltd

For the presumptions in CPR 46.9(3)(a) and (b) to arise, a client’s approval of a success fee and its amount must be informed approval. A solicitor relying on those presumptions bears the ultimate burden of establishing it. A standard 100% success-fee uplift, fixed without regard to the risk in the individual claim, requires a clear prior explanation of that feature. A statutory cap on the client’s recovery does not remove that requirement.

An ATE premium payable by the insured client under a contract of insurance is not ordinarily a solicitor’s professional disbursement. It may be included in a solicitor’s bill only where the solicitor is professionally bound to make the payment irrespective of funding, or established professional custom so provides.

Herbert v H H Law Ltd concerned deductions made by a personal-injury solicitor under a conditional fee agreement after the client accepted a Part 36 offer. The solicitor charged a 100% success-fee uplift, subject to a 25% damages cap, and arranged ATE insurance for the client.

District Judge Bellamy reduced the uplift to 15% and held that the ATE premium was a solicitor’s disbursement. Soole J dismissed the solicitor’s appeal: [2018] EWHC 580 (QB). The solicitor appealed on the operation of CPR 46.9 and on whether the ATE premium belonged in the bill of costs or the cash account.

1. The appeal was allowed in part. The court dismissed the challenge concerning the success fee, but allowed the appeal concerning the ATE premium.

2. CPR 46.9(3)(a) and (b) require informed approval. In a Solicitors Act 1974 section 70 assessment, the client must identify the disputed point. However, a solicitor seeking to rely on either presumption bears the ultimate burden of proving that the client gave informed approval. The evidential burden may move to the client once the solicitor has produced such evidence.

3. The documentation adequately explained the client’s general exposure to the success fee, subject to the point about risk. But the solicitor had not explained that its 100% uplift was fixed as a standard charge without regard to the litigation risk in the individual claim. A success fee under a CFA has traditionally been related to the risk of failure. The 25% cap and the solicitor’s business model did not make a risk-insensitive 100% uplift usual, or remove the need for a clear explanation. The presumptions therefore did not apply, and the unchallenged assessment of a 15% uplift remained in place.

4. Applying Re Remnant (1849) 11 Beav 603, a payment is a solicitor’s professional disbursement only if the solicitor is bound to make it in performing the professional duty undertaken, whether funded by the client or not, or if established professional custom treats it as such. That principle was supported by Hollins v Russell [2003] EWCA Civ 718, which identified the client’s liability for an ATE premium as arising under the insurance contract rather than the retainer.

5. The ATE premium was payable under a policy between the insurer and the client, arranged by the solicitor as disclosed agent. It was neither a payment the solicitor was professionally obliged to make irrespective of funding nor shown to be a professional disbursement by established custom. It therefore belonged in the cash account, not the solicitor’s bill subject to assessment under Solicitors Act 1974 section 70. The court recognised that this prevented a challenge to the premium through that assessment mechanism, but held that consequence could not justify departing from the governing principle.

• Court of Appeal (Civil Division) Allowed the solicitor’s appeal on the ATE-premium issue, but dismissed it on the success-fee issue.
• High Court, Queen’s Bench Division Soole J dismissed the solicitor’s appeal from the District Judge: [2018] EWHC 580 (QB).
• County Court District Judge Bellamy reduced the success-fee uplift to 15% and treated the ATE premium as a solicitor’s disbursement.