Last week saw the latest instalment in the ongoing saga concerning deduction from damages in successful cases, particularly routine RTA cases. This was the judgment in SGI Legal LLP v Karatysz [2021] EWHC 1608 (QB).

The facts are familiar to anyone who has followed the story. A straightforward RTA claim settled for £1250. The solicitors recovered £1116 from the insurers. They deducted a total of £445.50 from the damages in respect of a success fee of £312.50 and ATE premium of £143.00. The case was brought against the solicitors by who conceded that the ATE premium was properly deducted. Neither did they dispute all of the success fee. They argued that £135 was reasonable on the basis of 15% of the base costs of £900. This took £278 out of the equation and narrowed down the sums in dispute to £177.50. This seems a remarkably modest amount. But as we have seen across these cases, the overall impact to the claimant sector can run to many thousands.

The client argued that the solicitors base costs were limited to the sums recovered from the insurer – £900 plus VAT. CPR 46.9 (3) says that costs are presumed to have been unreasonably incurred if –

1. They are of an unusual nature and
2. It was not explained to the client that they might not be recoverable from the other side

It was found that the solicitors had made it clear to the client that the success fee would not be recovered from the other side. So the question was whether the costs were unusual. The solicitors’ hourly rate was £161. The DJ found that was too high and reduced it to £120 and limited the time spent to 9 hours. But this on its own did not justify limiting the costs to what was recovered from the insurer. It was self evident that if the DJ had found that an hourly rate of £120 x 9 hours was reasonable, then those costs cannot have been ‘unusual’. This resulted in base costs of £1080 plus VAT – £1296. This meant that the solicitors were entitled to deduct the full £445.50.

[Interestingly the Belsner v Cam argument that the deduction was limited to sums recoverable from the other side as result of s74 (3) Solicitors Act 1974 fell away. This was because the point was not raised in the respondents’ notice and relief from sanctions was refused]

A second issue arising from the appeal is a bit more straightforward. Indeed the arguments for the client were a bit far fetched in our opinion. This concerned costs of the assessment. There had been a reduction in the bill. S70 (9) Solicitors Act 1974 provides that the solicitor will pay the costs of the assessment if the deduction exceeds 1/5 of the amount of the bill.

In this case the time recorded costs appearing in the breakdown totalled £2731.90. But the costs were actually capped at £1571.50. The client argued that the higher figure was the starting point for the purpose of s70 (9) and so they had achieved a reduction entitling them to costs. The solicitors argued that the real figure was £1571.70 so any reduction was based on this. Lavender J took a common sense approach and summarised the position succinctly as follows –

“Since a bill of costs is a demand for payment, it is in my judgment plain that the amount of a bill is the amount demanded by the bill”

So the solicitors did not have to pay the costs…

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