Ryan Perrett v Wolferstans LLP

Senior Costs Judge Rowley: Introduction

1. In these proceedings brought under the Solicitors Act 1974 , I gave a reserved judgment on 17 January 2025 in respect of preliminary issues numbered 2, 3, 4 and 5. On 21 May 2025 I dealt with the remaining “line by line” items which resulted in the profit costs in the statutory bill dated 13 April 2022 being reduced from £4,800 to a figure in the region of £3,850-£4,000 (all sums including VAT) and the success fee of £1,775.85 being allowed as claimed.

2. The apparent imprecision of the profit costs element was simply a result of the parties’ advocates seeking to deal with the remaining issue prior to a precise calculation of the sums that I had allowed. The remaining issue did not require a precise figure because it involved me “stepping back” and considering the figures allowed in the round. To that extent it did not matter whether I had allowed, for example, £3,864 which the advocate for the defendant, Mr Brighton’s running total suggested might be correct (and which, henceforth, I shall treat as the assessed figure for simplicity, rather than the suggested range).

3. The need for me to “step back” arises from the end of my January judgment in which I said: “86. This then leads to Mr Carlisle’s fallback position that the costs still need to be fair and reasonable in accordance with the S(NCB)RO. Article 3 of that Order says: “3. A solicitor’s costs must be fair and reasonable having regard to all the circumstances of the case in particular to – (a) the complexity of the matter or the difficulty or novelty of the questions raised: (b) the skill, labour, specialised knowledge and responsibility involved; (c) the time spent on the business; (d) the number and importance of the documents prepared or considered, without regard to length; (e) the place where and the circumstances in which the business or any part of the business is transacted; (f) the amount or value of any money or property involved; (g) whether any land involved is registered land within the meaning of the Land Registration Act 2002 ; (h) the importance of the matter to the client; and (i) the approval (express or implied) of the entitled person or the express approval of the testator to – (i) the solicitor undertaking all or any part of the work giving rise to the costs; or (ii) the amount of the costs.”

87. The method of assessment forms the substance of point of dispute 5. However, as canvassed in argument, relevant considerations can also potentially be found in the detailed points of dispute. The decision, at this stage, can only be a high level one concerning the method of assessment itself.

88. The claimant’s argument is that the court should at least contemplate making an overall assessment of a fair and reasonable sum rather than descending into the detail. Such an approach would bear in mind the factors set out in Article 3 but, in order to consider all the circumstances, the court should look at other elements as well. It is on this line of reasoning that Mr Carlisle sought to bring in various points such as the failure to comply with the SRA Code of Conduct. The absence of any information to the client about the inevitability of (a) a shortfall in the recovery of profit costs and (b) the imposition of a 25% deduction should weigh heavily in the scales. In respect of this second point, Mr Carlisle referred to the hourly rates in the CFA and the 60% success fee sought. Even if the success fee percentage was reduced on assessment, the 25% deduction would be justified, at least arithmetically, by the time claimed at the hourly rates and which would not be recovered from the opponent.

89. Furthermore, the difference between the incurred costs and those that could be recovered by the fixed recoverable costs allowed, should be considered as unreasonable or unusual in line with comments made by Constable J in St James . The reference to those comments actually related to costs above the budgeted costs allowed in a costs management order but Mr Carlisle drew an analogy with a level of recovery which is essentially fixed. He also referred to paragraph 70 of the judgment which criticised the solicitors’ reliance upon any shortfall being within the 25% cap as absolving them of a responsibility for keeping the client informed so as to look after his interests.

90. In order to reflect these various factors, Mr Carlisle relied upon the words of Longmore LJ in Jemma Trust v Liptrot [2003] EWCA Civ 1476 when considering the assessment of non-contentious costs with the assistance of two decisions from Donaldson J (as he then was) in the 1970’s ( Property and Reversionary Investment Corporation Ltd v Secretary of State for the Environment [1975] 1 WLR 1504 and Treasury Solicitor v Regester [1978] 1 WLR 446 .)

91. The headnote to the report of one of the Donaldson J cases refers to it being one of the few reported cases on the quantification of non-contentious costs. Half a century later, that remains the case. As such, I have no criticism of Mr Carlisle for relying upon such authorities but it seems to me that they involve cases which are fundamentally different from this one.

92. All three cases support Mr Carlisle’s argument in principle that the court should refrain from simply considering the amount of work done but should look at the other factors set out in what is now the S(NCB)RO. As a quotation from the Treasury Solicitor decision describes, “The magnetic attraction of [the time spent] as a foundation for assessment of fair and reasonable remuneration is that, in the absence of an approved scale applied to value, it is the only figure which is readily calculable. It is an attraction which must be sternly resisted in cases of this sort where one or more of the other factors is such as to dwarf it into insignificance.”

93. In two of the three cited cases, the value of the property was the key issue. The Property and Reversionary case involved the conveyance of a property worth £2.25million and in Jemma Trust , the estate was worth almost £10 million. In the Treasury Solicitor case, the key issue was described as the “adrenalin factor” where urgency and precision were key. (The value was said to be £2 million.)

94. In all three cases, the courts were at pains to say that these other factors made simply looking at the time spent the wrong approach to take to reflect the appropriate figure to allow for the solicitors’ fees. There was no suggestion, as I understood Mr Carlisle, that any of the specified factors in the S(NCB)RO ought to “dwarf” the time spent in this case in the manner suggested by Donaldson J. Instead, Mr Carlisle’s submission was that I should take factors which are not specified in the S(NCB)RO so as to take all the circumstances into account. The court’s reference to an adrenalin factor in Treasury Solicitor supports that approach since it too does not really come within in any of the matters specified by the Order. But, it seems to me that simply to treat those factors as a non-exhaustive list for which other matters should be equally important is a path that I should be hesitant to follow. The previous incarnations of the S(NCB)RO in 1972 and 1994 are differently worded. They cover the same ground but there has obviously been consideration given to the precise terms of those factors and it seems to me that they should be given the greater weight, in the same way as the relevant parts of the CPR are considered when assessing contentious work.

95. Accordingly, where, as here, there are no other specific factors said to dwarf the time spent, I consider that I should assess the costs by reference to that time spent and then to consider the sum allowed to see whether other matters cause me to adjust that figure in order to determine a sum that is fair and reasonable. As Donaldson J concluded in Treasury Solicitor , the court’s role is to make a value judgment based on discretion and experience to establish: “ a right figure: one which is reasonable in all the circumstances and which is fair both to the client and to the solicitor.””

4. Mr Carlisle referred to point 6 of the claimant’s points of dispute. He began with reference to the decision of Simon J in Nizami v Butt [2006] EWHC 159 (QB) regarding the concept of fairness where the recoverability of costs were fixed by the rules. He said: “It seems to me that the intention underlying CPR 45.7-14 was to provide an agreed scheme of recovery which was certain and easily calculated. This was done by providing fixed levels of remuneration which might over-reward in some cases and under-reward in others, but which were regarded as fair when taken as a whole.”

5. These words were approved twice by the Court of Appeal as this passage from the decision in Kilby v Gawith [2008] EWCA Civ 812 demonstrates: “Although I recognise that this case is not on all fours with Nizami v Butt on the facts, Simon J there made it clear that the purpose of the new rules was to provide fixed levels of remuneration which might operate on a swings and roundabouts basis, which was regarded as fair taken as a whole. That approach was subsequently approved as correct by this court in Lamont v Burton .”

6. From these authorities, Mr Carlisle put forward the proposition that the fixed costs figures provide fair remuneration for solicitors at levels which reflect the work actually done on a swings and roundabouts basis.

7. In this case, the recoverable costs were £900. Whilst Mr Carlisle accepted that recoverable costs were fixed and that that was a different basis from solicitor and client costs, he relied upon the evidence of Tracey Barton, the witness for the defendant at the preliminary issues hearing, where she had accepted that there was no oral explanation of the extent of the recoverable costs. This was a point that I recorded in my earlier judgment and described it as being less than the best information possible as required by the Solicitors Regulation Authority’s Code of Conduct.

8. Mr Carlisle anticipated a response from Mr Brighton that the Court of Appeal in Belsner v Cam Legal Services [2022] EWCA Civ 1387 also took the view that the solicitors had not complied with the Code of Conduct, but that had not prevented them from recovering the sum set out in their invoice from their client.

9. Mr Carlisle’s argument in relation to Belsner was that, in that case, whilst the invoice referred to the sum of £2,171.90 plus VAT, it had made clear that the solicitors only sought to recover from the client the amount received from the third party’s insurers in respect of profit costs, together with a success fee of £321.25 plus VAT. The recoverable profit costs from both the opponent and the client were therefore £500. Mr Carlisle also suggested that the Master of the Rolls’ judgment in Belsner was critical of the lacuna created by s74(3) in that it only related to cases where proceedings had commenced. The Master of the Rolls did not say that if s74(3) did not apply, then the solicitors were freed from any responsibility in describing the likely recoverability of costs. This could be seen by the fact that the Court of Appeal only allowed slightly more than the fixed recoverable costs. Whilst that aspect of Belsner was not binding on me, it gave some context as to where the court should step in.

10. Mr Carlisle’s next argument related to the proposition that the cap on recovery caused by fixed recoverable costs was entirely analogous to the setting of budgets. This proposition allowed him to rely upon the decision of Constable J in St James v Wilkin Chapman [2024] EWHC 1716 (KB). In that case, the initial estimate of £2,000 was directly comparable with the fixed recoverable costs actually received. Right from the start, the concepts of budgeting and fixed recoverable costs put the client in a situation where it was likely that there would be irrecoverable costs. As Constable J said in St James , the golden rule was to tell the client about any such costs which were likely to be irrecoverable. In this case, Mr Carlisle submitted that there was a complete failure to look after the claimant’s interests by failing to keep to the £900 limit which was recoverable from the opponent.

11. If a client instructed solicitors on a case in the small claims track, there would be judicial concern, in Mr Carlisle’s submission, if the solicitors did not say there was a very restricted possibility of recovering costs compared with hourly rates. If it had been a fast-track trial prior to 2023 and the costs billed were three times the recoverable figure, the presumption about the unreasonableness of them would similarly engage. The same is true for the post-2023 regime where, for example, a case which got no further than the time for serving the defence in the intermediate track, complexity band one, would recover £1,652 plus a sum equivalent to 3% of the damages. In any of these circumstances, an hourly rate retainer which did not tell the client clearly to bear in mind that the estimate was significantly more than the likely costs recoverable meant that the presumption of unreasonableness would be engaged. In Mr Carlisle’s submission, such costs would be unusual or unreasonable, and he could not see that there was a principled basis in this case of suggesting that the costs claimed were not unusual or unreasonable because the net expense could have been avoided if the solicitors had managed to follow Constable J’s golden rule.

12. Mr Carlisle also referred to the comments of Lavender J in SGI Legal LLP v Karatysz [2021] EWHC 1608 (QB) where he described costs between solicitors and their client as being very different from those recoverable between the parties. Mr Carlisle submitted that Lavender J’s decision had been superseded by the Court of Appeal’s decisions in Belsner and Karatysz , as well as the decision of Constable J in St James .

13. In response, Mr Brighton began by pointing to the fact that, although Mr Carlisle had referred to point 6 of the points of dispute, most of his arguments came from point 5 which I had already dealt with. As such, most of the claimant’s arguments should simply be dismissed. Whilst Mr Brighton’s argument is correct in that Mr Carlisle’s arguments were generally to be found in point 5, I do not think that assists the defendant. It is clear from my first judgment that I was dealing with the manner of assessment in a broad fashion and was not dealing with the effect of the criticisms raised by the claimant.

14. Mr Brighton then moved on to whether budgets could be said to be analogous to fixed costs in terms of the need to explain to the client the potential limitation of recoverable costs. Mr Brighton submitted that there was no analogy to be made. Budgets were prepared by solicitors who had a reasonable idea of the costs involved and the directions that would be given. If the solicitor did not then tell the client about a potential shortfall, he may well have problems in claiming those costs from his client. By contrast, the level of fixed recoverable costs were only known at the end of the case. As such, the client could only be kept informed at the conclusion when it could be ascertained as to what any costs in excess of the recoverable costs could be ascertained. The best a solicitor could do was to make it clear in the agreement that it provided for a shortfall and, to the extent possible, what that shortfall was.

15. Mr Brighton prayed in aid the decision of DJ Rouine, a regional costs judge, sitting in the Birmingham District Registry in the case of Swann v Slater & Gordon LLP (unreported) on 25 January 2021 where he decided (at paragraph 48) that reference in the retainers to a maximum liability of 25% of the client’s damages was more than sufficient information for the purpose of obtaining informed consent to making a claim for sums to be deducted from their award of damages.

16. When he came to reply, Mr Carlisle submitted that Swann had been superseded by the St James decision of Constable J and said that the 25% cap was not a panacea. Having re-read St James , I am afraid that I cannot see from where Mr Carlisle seeks to draw this support. St James dealt with inconsistent contractual documentation and concluded that the terms of the client care letter overrode the other documents so that the client had a CFA Lite rather than an ordinary CFA. Constable J also dealt with arguments concerning reliance on estimates and the effect of budget overspends. None of this, as far as I can see, supersedes the decision in Swann , albeit that DJ Rouine’s decision is not binding upon me in any event.

17. Mr Brighton concentrated on the costs which he said the claimant knew were being incurred having been told of the hourly rates that were charged. The main fee earner’s charging rate was below the Guideline Hourly Rate and so could not possibly be considered “unusual” under CPR 46.9(3). The defendant relied on the clear contractual terms set out in the documentation at the beginning of the case and of which the claimant was aware. The claimant also signed a confirmation at the time of settlement of the case which showed he was aware of the contractual terms that applied. Indeed, according to Mr Brighton, the claimant was contractually liable for considerably more than he was actually charged. Discussion and decision

18. I reserved this decision on the basis that it related to the mechanics of an assessment of non-contentious costs and for which there was a dearth of authoritative case law that was any more recent than the 1970s. Having now drafted this judgment, it seems to me that I did much of the ‘heavy lifting’ in the first judgment and which I have set out at the beginning of this decision. In particular, where the agreement is essentially based on hourly rates, the consideration of the challenges to the time spent (and indeed the rates themselves), ought to be carried out first. Once that had been done, it would be possible to ‘step back’ to see, in all the circumstances, and in particular given the factors set out in the 2009 Order, what sum would be fair and reasonable to allow.

19. This approach differed from the decisions of Donaldson J in the 1970s where he made it clear that the time factor should be given rather less weight. But, as I set out in the first judgment, I considered those cases to relate to matters where other factors, particularly regarding value, were the substantial factors and not the time spent. As such, a different approach was appropriate.

20. Here, I considered the hourly rates and reduced the junior fee earners’ rates. I also disallowed some time on the item by item assessment. The sum of £3,864 therefore takes into account such matters and it cannot be correct to take them into account again in deciding whether the resulting figure ought to be adjusted further.

21. The claimant’s arguments distil into the proposition that costs recoverable from the opponent represent fair remuneration and that if a party’s solicitors are to be entitled to claim any further sum from their client, they need to explain this so that the client is fully informed as to the potential shortfall.

22. I do not think that the quotations relied upon by the claimant from the Court of Appeal in cases such as Kilby support his argument. The decision of Simon J in Nizami expressly refers to “an agreed scheme of recovery” which was easily calculated and was fair as a whole even if the sums were too high in some cases and too low in others, if calculated purely in respect of the individual case.

23. That ‘scheme’ plainly related to recoverable costs and the fairness referred to the swings and roundabouts nature of the scheme as a whole. It cannot be said that this means the remuneration recovered is a fair sum as between the solicitor and client since that has nothing to do with their contractual terms. As Lavender J said in Karatysz at paragraph 102: “…I should state that I do not accept the Claimant’s submission that any costs in excess of the fixed costs allowed inter partes were unusual for the purposes of CPR 46.9(3)(c)(i) on an assessment of costs between solicitor and client on the indemnity basis. It is not necessary for me to decide this point, because the district judge did not base his decision on it, but it may be worth stating that in my judgment the question of what is usual or unusual as between solicitor and client is a very different from the question of what is recoverable inter partes.”

24. I do not accept that this passage has been superseded by the decisions of either the Court of Appeal or Constable J. But it is, in any event, plainly obiter and not binding upon me (in the same way as Constable J’s comments on this issue are obiter). Lavender J’s statement is, if I may so, simply a description of the difference between solicitor and client and between the parties’ costs. The reference to CPR 46.9 relates to the business conducted having been contentious. The claimant’s argument here seeks to refer the concept of unusual costs to non-contentious business. To the extent that it can be transferred, I do not consider it helps the claimant. The difference between contractual costs owed by the client to the solicitor and those recoverable by the client from a third party is the same in either form of ”business.”

25. Insofar as the need to keep the client informed is concerned, it seems to me that confirmation of the maximum liability is the crucial element to this. I have previously found that Mr Perrett understood the terms of the agreement regarding a 25% deduction and was aware of them when he signed the confirmation for his solicitors to accept the damages offered. It would obviously have been preferable if Mr Perrett had grasped more of the detail of the agreement, but that is no criticism to be levied at the defendant’s contractual documentation.

26. For these reasons, it seems to me that the sum of £3.864 (or thereabouts) allowed for the profit costs at the end of the item by item assessment, is also a fair and reasonable sum in accordance with the 2009 Order.