PIBULJ Articles

A guide to summary assessment in CFA cases

In a non-CFA fast track case often the only issue of principle will be proportionality, if it arises at all. CPR 44.5(3) sets out the factors to which the court must have regard in deciding whether the costs incurred are proportionate and most readers will be familiar with the guidance given at paragraphs 11.1 to 11.3 of the Costs Practice Direction (“CPD”) and by the Court of Appeal in Lownds v. Home Office [2002] 1WLR 2450.

Where there is a CFA, additional issues likely to arise are the reasonableness of the success fee and ATE insurance premium. Some District Judges have little experience of summary assessment in CFA cases and one cannot rely to the same extent on the Judge’s own experience in practice or instinct as to what is reasonable and proportionate.

For obvious reasons funding information provided in advance including the costs schedule need not disclose the percentage success fee (CPD 13.5(5)). The fact that there are additional liabilities to be assessed is not sufficient reason not to proceed with summary assessment (CPD 14.1). The risk assessment should have been filed at court before the hearing in accordance with CPD 14.9, along with the Form N251 and the full costs schedule. There is no requirement to file a copy of the CFA itself for summary assessment but Defendant’s counsel is entitled to see it and the ATE insurance policy.

It may be appropriate to seek a detailed assessment if an issue arises under CPR 44.3B, i.e. where there may be a reason why an additional liability cannot be recovered because for example a Notice of Funding may not have been served. If there has been an omission the solicitor should apply for relief from sanctions under CPR 3.9 (CPD 10.1). If there is serious argument about whether the CFA itself is valid and enforceable, detailed assessment is probably inevitable.

Proportionality in CFA cases
The costs to be considered in terms of proportionality are the base costs only before any additional liability or VAT (CPD 11.5, 11.9 and Giambrone v. JMC Holidays [2003] 2 Costs LR 189.) This is important to bear in mind (and to remind the Judge) because otherwise the final amount of costs might appear grossly disproportionate.

Reasonableness of success fee
A non-exhaustive list of factors to be taken into account is set out at CPD 11.8. Further points to note:

• It is reasonable for the success fee to be set at the first meeting with the client . For straightforward RTA claims where liability is seems clear, 20% is the maximum that can reasonably be agreed (Callery v. Gray [2001] EWCA Civ 1117, [2001] 1 WLR 2112).
• For claims arising out of RTAs on or after 6 October 2003 and for employer’s liability claims arising out of injuries sustained on or after 1 October 2004, the percentage increase to be allowed is fixed under CPR 45 Section II. It has been held that the indemnity principle does not apply to cases under this part, and therefore the receiving party does not have to demonstrate a valid and enforceable CFA (Butt v. Nizami (2006) 2 All ER 140).
• The court should not apply hindsight but should have regard to the facts and circumstances as they appeared, or ought to have appeared to a reasonably careful solicitor, at the time the CFA was entered into (CPD 11.7, Atack v. Lee & Ellerton v. Harris (2005) PIQR Q6). A success fee of 20% was imposed in the latter case because the main uncertainty could have been resolved with a single phone call before entering into the CFA.
• A success fee of 87% was held to be reasonable in a mesothelioma claim where “it was possible to be very optimistic that some liability would be established, but it was not certain”, liability was admitted only shortly before trial and advising on quantum was complicated (Smiths Dock Ltd v. Jill Mary Edwards and others [2004] EWHC 1116 (QC)).
• In a RTA case where there was a strong possibility of success but also some uncertainties and difficulties creating a significant element or risk, the appropriate success fee was held to be 50% (reduced from 100%) (Burton & Haynes v. Kingsley & Harper (2006) PIQR P2).
• The court has no power to impose a two-stage success fee, contrary to CPD 11.8(2). To allow this would be contrary to the purpose of assessing the risks as they appeared at the outset (Ku v. Liverpool City Council ([2005] EWCA Civ 475 Times, 16 May 2005).

Reasonableness of ATE premium
The factors to be taken into account are set out at CPD 11.10. Further points to note:

• The Court of Appeal held in Callery v. Gray (No.2) [2001] EWCA Civ 1246, [2001] 1 WLR 2112 that the court should not start from a presumption that an ATE premium is reasonable. The court should consider the relationship between the premium, the risk and the cost of alternative cover and use its own judgment based on experience. A premium of £350 plus IPT was found to be reasonable in that case, although that was not intended to indicate that such a premium would always be reasonable.
• Staged insurance premiums were approved in Tyndall v. Battersea Dogs Home as giving the parties incentive to settle, and in that case a premium of £1,890 was held to be reasonable (RTA where liability was disputed up to trial).
• A premium of £45,937.50 (about two-thirds of the damages awarded in the substantive proceedings) was allowed in Ashford v. Peterborough United Football Club where the policy was not taken out at the outset of proceedings, the insurer provided evidence that it would not have provided cover for any less and it was unlikely that the Claimant would have been able to find alternative cover. Another insurer had already rejected the proposal and the market for ATE insurance was undeveloped