Judges will open the floodgates to thousands of costs claims from former clients of law firms if they allow a landmark challenge to pass, the Court of Appeal heard today.

Claimant firm HH Law Limited told the court that hundreds of other firms operated a similar billing policy to the one brought into question by the High Court last year.

For the firm, Nicholas Bacon QC said the court was ‘on the precipice’ of inviting thousands of people whose damages had been reduced by legal costs to contest their bill.

This was despite the original claimant, who had been injured in an RTA, having made no complaint about the firm's services and producing no evidence as to why they considered the deductions were too high.

The court heard that Herbert’s £3,400 settlement had been reduced by almost £1,200 based on the firm’s success fee and an ATE insurance premium.

In the county court, a district judge had opted to slash the success fee and treat the insurance as a solicitor’s disbursement. On appeal, the High Court in Herbert v HH Law Limited agreed the firm had failed to conduct a risk assessment of the level of success fee and that the 100% uplift was out of step.

Before the Court of Appeal today, Bacon said the lower courts had made a ‘fundamental error’ by finding in favour of a party who brought no evidence forward as to whether they understood the terms of the retainer.

Bacon said the client had made a legally binding contract with the firm and was told very clearly that some costs would be recovered.

He said there was no statutory requirement of solicitors to explain the terms as set out in the contract, other than obligations contained in the SRA handbook. ‘My solicitors tried to simplify it by saying ‘we will charge you up to 25% plus the ATE premium’,’ added Bacon. ‘That is the business model and something hundreds of solicitors have done.’

He continued: ‘The client has a statutory right to challenge the fees and can set aside assumptions about what has been agreed, but they need to have some evidence why.’

Bacon stated that taking out ATE was optional to the client, and described it as ‘odd’ that the High Court had said it should be subject to assessment.

The district judge, he said, found the solicitors had little or no contact with the client and had made no assessment of risk – therefore it was possible to overcome assumptions about reasonableness.

Bacon added: ‘We simply disagree flatly with that conclusion. We were not charging 100% [success fee].’

The case continues.