Introduction

The case of Herbert v. H H Law Ltd ([2019] EWCA Civ 527) addresses significant issues concerning the assessment of solicitor and client costs under the Solicitors Act 1984 and the Civil Procedure Rules (CPR). The appellant, H H Law Limited trading as Hampson Hughes ("HH"), challenged decisions made by lower courts regarding the application of conditional fee agreements (CFAs) and the classification of After The Event (ATE) insurance premiums. Central to the dispute were the interpretation of CPR 46.9(3) concerning success fees and whether ATE insurance premiums should be considered solicitor disbursements or entries in a client account.

Summary of the Judgment

The Court of Appeal dismissed part of HH's appeal while allowing another. Specifically, the court upheld the reduction of the success fee from 100% to 15%, aligning with the District Judge Bellamy's assessment. However, the appeal regarding the classification of the ATE insurance premium was successful, ruling that such premiums should not be treated as solicitor's disbursements.

The judgment emphasizes the necessity for informed client consent regarding success fees and clarifies the delineation between disbursements and cash account entries, particularly concerning ATE insurance premiums.

Analysis

Precedents Cited

The judgment heavily references several key cases and statutory provisions to underpin its reasoning:

• Re Remnant (1849) 11 Beav. 603: Established the distinction between professional disbursements and mere cash payments.
• Re Buckwell & Berkeley [1902] 2 Ch 596 and Re Blair & Girling [1906] 2 KB 131: Reinforced the principles from Re Remnant regarding disbursement classification.
• Hollins v Russell [2003] 1 WLR 2487 and Rogers v Merthyr Tydfil CBC EWCA Civ 1134: Addressed the treatment of ATE insurance premiums.
• The Courts and Legal Services Act 1990 and Conditional Fee Agreements Order 2013 (SI 2013 No. 680): Influenced the cap on success fees.
• Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO): Abolished the recovery of success fees from the losing party in certain claims.

Legal Reasoning

The court dissected CPR 46.9(3) and (4), highlighting that the presumption of reasonableness for costs hinges on informed client consent. In the context of success fees, the court scrutinized whether HH had adequately informed Ms. Herbert about the 100% uplift and its implications. The lack of a risk assessment and the unconditional application of the uplift undermined the presumption of informed consent, justifying the reduction of the success fee.

Regarding the ATE insurance premium, the court adhered to the precedent set by Re Remnant, distinguishing between professional disbursements and client-incurred expenses. The premium was deemed an agent's payment, not a solicitor's professional disbursement, thus excluded from the solicitor's bill of costs.

Impact

This judgment sets a critical precedent for solicitors in structuring CFAs, particularly emphasizing the necessity for clear, informed consent when determining success fees. It also clarifies the treatment of ATE insurance premiums, potentially limiting the recoverability of such premiums through solicitor assessments. Future cases will likely reference this decision to evaluate the reasonableness of success fees and the classification of related expenses.

Complex Concepts Simplified

• Conditional Fee Agreement (CFA): An arrangement where a solicitor's fees are contingent upon winning the case.
• Success Fee: An additional fee over standard charges, contingent on the case's success.
• After The Event (ATE) Insurance: Insurance that covers legal costs if the case is lost.
• Disbursements: Money spent by the solicitor on behalf of the client, such as court fees or expert reports.
• Cash Account: A separate account where clients' funds are held and managed by the solicitor.
• Detailed Assessment: A comprehensive evaluation of the solicitor's costs to ensure they're reasonable and properly categorized.

Conclusion

Herbert v. H H Law Ltd serves as a pivotal case in delineating the boundaries of success fee assessments and the treatment of ATE insurance premiums within solicitor-client cost assessments. By affirming the necessity of informed consent and clarifying the classification of certain expenses, the judgment enhances transparency and fairness in legal fee structures. Solicitors must ensure that clients are thoroughly informed about fee arrangements, especially concerning success fee calculations and associated insurance premiums, to uphold ethical standards and comply with statutory requirements.

This decision underscores the importance of clear communication and documentation in CFAs, ensuring that clients are fully aware of their financial obligations. The distinction made regarding ATE insurance premiums also prompts solicitors to reevaluate how such costs are presented and categorized, potentially influencing billing practices across the legal profession.