Kenton v Slee Blackwell PLC

Factual and Procedural Background

The Defendant, a firm of solicitors based in Barnstaple, was retained by the Plaintiff to pursue a claim for professional negligence against another firm of solicitors ("Company A"). This claim arose after Company A had conducted a private prosecution against three individuals, alleging conspiracy to sell shares belonging to the Plaintiff's mother at an undervalue. The prosecution was discontinued following intervention by the Director of Public Prosecutions, with findings of material non-disclosure and lack of full and frank disclosure by the Plaintiff's side.

Subsequently, the Plaintiff instructed the Defendant under a conditional fee agreement (CFA) to bring a claim for damages for professional negligence against Company A and/or leading counsel. The CFA provided for a success fee of 90% if the claim proceeded to trial or 80% if settled earlier, with specified hourly rates for different grades of fee earners.

The claim against Company A was settled following mediation, with Company A agreeing to pay damages and costs. The Defendant issued a bill to the Plaintiff dated 13 May 2022, described as both "final" and "interim," amounting to over £340,000. The Plaintiff sought a detailed assessment of this bill, focusing on the profit costs and success fee charged by the Defendant.

Legal Issues Presented

1. What is the reasonable amount the Plaintiff should pay in respect of profit costs under the CFA?
2. What is the reasonable success fee payable by the Plaintiff?
3. Whether the Plaintiff reasonably relied on the initial costs estimates provided by the Defendant, and the impact of such reliance on the assessment of costs.
4. Whether the Defendant's risk assessment and calculation of the success fee were proper and justified.

Arguments of the Parties

Appellant's Arguments

• The Plaintiff was given clear initial cost estimates ranging from £5,000 to £20,000 for settlement before court proceedings and £30,000 to £50,000 if the case proceeded to trial.
• Once the Plaintiff signed the CFA, she was bound to pay the Defendant's legal charges except if she lost the claim, but the Defendant was obliged to provide accurate and updated cost information.
• The subsequent costs letters were identical and did not indicate that the initial estimate had been or would be exceeded. The Plaintiff relied on the initial estimate when deciding to proceed.
• The Plaintiff contended that the reasonable amount payable should not exceed £20,000, reflecting the top end of the initial estimate.

Defendant's Arguments

• The Defendant emphasized the qualifications and disclaimers in the initial estimates and subsequent cost information letters, which indicated that the figures were guides and could be higher or lower.
• The Plaintiff was regularly informed of the costs incurred, including a detailed spreadsheet before mediation, and did not object to these figures at the time.
• The significant increase in costs was due to unanticipated and extensive work required, especially the large volume of documents disclosed by Company A that had to be reviewed.
• The Plaintiff's reliance on the initial estimate was unreasonable as it was superseded by subsequent cost information.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by assessing the reasonableness of the profit costs charged by the Defendant. It found that the initial estimates provided to the Plaintiff were hopelessly unrealistic given the nature and complexity of the professional negligence claim, which was document-heavy and likely to involve significant work. The court reasoned that realistic estimates would have been substantially higher than those given, estimating reasonable profit costs before issue of proceedings at about £50,000 and to trial at least £150,000.

The court considered whether the Plaintiff relied on the initial estimate when entering the CFA. It acknowledged that the Plaintiff did rely on these estimates, which influenced her decision to proceed. The Plaintiff was not provided with proper or updated cost information throughout the case, receiving only confusing and standard form letters with figures that did not clearly explain the increasing costs.

Given the Plaintiff’s reliance on the inaccurate estimate and the failure of the Defendant to provide proper cost updates, combined with the fact that the claim settled before issue and mediation was required, the court concluded that the reasonable sum the Plaintiff should pay for profit costs was £40,000 plus VAT. This figure was aligned with the initial estimate adjusted for mediation costs.

Regarding the success fee, the court examined the Defendant’s risk assessment methodology and found it to be flawed and not a proper assessment of the prospects of success. The assessment applied arbitrary numerical scores to factors not strictly related to risk, leading to an inflated success fee of 80-90%. The court held that the Plaintiff’s approval of the success fee was not informed, removing the presumption of reasonableness under CPR 46.9(3).

The court determined that a reasonable success fee, reflecting a realistic assessment of the claim’s prospects (approximately 67%), would be 50% of the basic charges, amounting to £20,000 plus VAT.

Holding and Implications

The court made the following key rulings:

• The reasonable amount the Plaintiff should pay for profit costs is £40,000 plus VAT.
• The reasonable success fee payable by the Plaintiff is 50% of the basic charges, namely £20,000 plus VAT.

The direct effect of this decision is a substantial reduction in the Defendant’s claimed costs and success fee, reflecting the court’s findings on the inadequacy of initial cost estimates, the Plaintiff’s reliance on those estimates, and the improper risk assessment for the success fee. No broader precedent was established beyond the application of established principles regarding cost estimates, client reliance, and success fee assessments under conditional fee agreements.