Belsner may have killed off costs challenges for good, says expert

Two Court of Appeal rulings on the long-running issue of recovering monies deducted from clients’ damages could spell the death knell for this growing industry.

That was the view of one costs expert after appeal judges in Belsner and also Karatysz v SGI Legal LLP found in favour of the solicitors in both cases.

The Belsner case has had a bigger profile as lawyers watch with trepidation to find out if their client care letters and business models stand up to scrutiny from the court.

But the connected Karatysz, heard immediately after Belsner by the same judges, was equally as relevant for many firms, being a decision on whether the solicitors should be limited to base costs recovered from third party insurers.

What linked the cases was that they were claims brought by former clients of personal injury firms who were now represented by checkmylegalfees and its director Mark Carlisle, who has argued that people did not give their informed consent to deductions being taken from their damages.

Hundreds of similar cases are thought to be on hold awaiting a decision in Belsner and Karatysz, and the Court of Appeal made clear its dissatisfaction with a business model ‘that allows them to bring expensive High Court litigation to assess modest solicitors’ bills in cases of this kind’.

Master of the rolls Sir Geoffrey Vos said in Belsner that clients with a grievance about deductions by their solicitors should take the matter to the Legal Ombudsman.

In Karatysz, Vos said the matter had incurred ‘massive’ sums in costs and that lessons should be taken from the case by firms pursuing costs recovery.

He added: ‘Firms such as checkmylegalfees.com and their clients should be in no doubt that the courts will have no hesitation in depriving them of their costs under section 70(10) if they continue to bring trivial claims for the assessment of small bills to the High Court, even if those bills are reduced on the facts of the specific case by more than one fifth under section 70(9).

‘The critical issue is and always will be whether it is proportionate to bring this kind of case to the High Court. In this case, it was not.’

Nick McDonnell, a director and costs lawyer with Kain Knight who acted for the successful solicitors in Belsner, said the decision is very much a victory for the legal profession.

‘The judges used this case to express their view that significant costs reform is needed. Until then, what of the hundreds of cases brought by checkmylegalfees.com (and those brought by JG Solicitors, who operate a similar business model), currently stayed pending the outcome of Belsner? We will see.

‘But with the court’s note summarising the connected case of SGI Legal LLP v Karatysz indicating that firms like checkmylegalfees.com and JG Solicitors are unlikely to get their costs of proceedings brought to challenge ‘trivial’ sums irrespective of the outcome, surely the death knell of such challenges has sounded?’

In a statement, checkmylegalfees.com said it was 'disappointed' with the outcome and suggested it was 'illogical' that the Court of Appeal found in favour of solicitors given the court's comments about how Belsner had been treated.

It continued: 'Unfortunately, the decision, rather than providing the clarity that we had understood that the Court of Appeal wished to achieve regarding the assessment of historic and current costs between solicitor and client in portal cases, has raised more questions than it has provided answers, and has made it very clear that this decision, particularly regarding the amount of such costs, turns on its own facts. 

'It has found that the correct test for the assessment of solicitors’ profit costs in portal cases will now be the 'fair and reasonable having regard to all the circumstances of the case' test applicable to non-contentious business rather than the far narrower test of “reasonableness” alone that is applicable to contentious business.  What is 'fair' will, of course, need to be determined on a case by case basis but may well result in a less mechanistic approach than hours multiplied by rate.'

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