MNO v HKC & Anor

On a solicitor-client assessment involving a protected party, a success fee is assessed on the indemnity basis and without hindsight. Client approval creates a presumption of reasonableness only where it was informed. This ordinarily requires a full and fair explanation of the factors determining the percentage, including how litigation risk translates into the uplift.

For a two-stage conditional fee agreement, the stages must be assessed together. A substantial later uplift, particularly 100% at trial, must be balanced by a lower earlier uplift. In a serious personal injury claim where liability is effectively secure and the principal risk is failure to beat a Part 36 offer, a 20% first-stage uplift was excessive; 15% was reasonable.

The claimant, a protected party, recovered substantial damages and periodical payments following a serious road traffic accident. His solicitors sought a 20% first-stage success fee under a conditional fee agreement, with a 100% fee if the claim proceeded to trial or settled within three months of trial.

The assessment concerned solicitor-client costs under CPR 46.4. Liability presented little material risk. The principal risk was that a Part 36 offer would be rejected and not beaten, causing costs incurred after expiry of the offer to become unrecoverable. The issues were whether the litigation friend’s approval was informed, whether the two-stage structure was relevant, and whether 20% was reasonable.

1. Basis of assessment. The assessment was on the indemnity basis. The court had to consider the presumptions in CPR 46.9 and assess reasonableness by reference to the circumstances reasonably appearing when the conditional fee agreement was entered into, without using hindsight.
2. Informed approval. Approval of a success fee under CPR 46.9 had to be informed. The litigation friend understood that a success fee would be paid from damages, but the documents did not adequately explain how the identified Part 36 risk justified a 20% uplift. The presumption of reasonableness therefore did not arise. In any event, approval would only create a presumption and would not require acceptance of an unreasonable fee.
3. Assessment of Part 36 risk. The relevant risks included whether an offer would be made, its timing, whether solicitors would advise rejection, whether that advice would be followed, and whether the offer would ultimately be beaten. The reasoning in C v W and NJL v PJL was applicable. The claim involved serious injuries and substantial quantum issues, but those features did not make it materially different from the cases covered by that guidance.
4. Effect of staging. The first and second stages could not be assessed independently. Where the agreement provided for a substantial second-stage uplift, the first-stage percentage had to be reduced to avoid over-compensation. The court applied the approach explained in U v Liverpool City Council and the encouragement of staged fees recognised in Callery v Gray.
5. Outcome. The only substantial risk was the Part 36 risk, and the claim was expected to settle after substantial preparation. A 20% first-stage success fee was too high. In the circumstances, 15% was reasonable, if anything generous. The success fee was therefore allowed at 15%, not 20%.

The judgment was a first-instance detailed assessment in the Senior Courts Costs Office. The substantive claim had previously been resolved by an order dated 17 June 2020, requiring assessment of solicitor-client costs.