Accepting cap on damages deduction “equals informed consent”

McDonnell: Profession will prevail

A solicitor telling a client that they will deduct up to 25% of damages to cover costs not recovered in a low-value personal injury case amounts to informed consent, a regional costs judge has ruled.

District Judge Rouine in Birmingham was dealing with 15 test cases from a group of more than 400 Slater & Gordon matters on the same point.

He distinguished his decision from that of Mr Justice Lavender last year in Belsner – in which the High Court judge found the information provided did not amount to informed consent – because the retainer in that case did not cap the deduction.

As we reported last week, Belsner is now headed to the Court of Appeal.

In Swann v Slater & Gordon, DJ Rouine said the retainers were clear that the client had a potential liability to pay fees over and above whatever may have been recovered on an inter partes basis, limited to a maximum of 25% of the damages.

“The fact of the existence of a cap has a magnetic attraction to me, in the context of the concept of informed consent, for the purposes of these assessments,” he said.

“Being told that there is a cap, and what that cap might be, is more than sufficient information, in my judgment, for the purposes of obtaining informed consent from a client for deductions to be made from their award of damages.”

The judge rejected the claimants’ attempt to rely on provisions in the SRA code of conduct, finding on basis to say it formed any part of any of the retainers.

If he had found to the contrary and that the defendant had breached the code, DJ Rouine added, “there was likely to have been compelling force in the submissions that the claimants’ true remedy lay in an action for damages for breach of contract, rather than any remedy directly connected to the assessment proceedings”.

Further, he rejected the submission that Slater & Gordon was in breach of fiduciary duty, saying such a duty could not arise “whilst the process of negotiating the terms of the retainer relating to the solicitor’s remuneration remains ongoing”.

This might “conceivably” be different if it was a retainer for an existing client on a new matter, but that was not the position in any of the cases.

DJ Rouine added: “It seems to me that the deduction from damages is part of the price which the client has to pay to secure the solicitor’s service.

“Incidentally, I do not, in the context of any of these points of dispute, accept that there is an obligation on the part of any solicitor to explain to a prospective client that there may be different or alternative terms on offer from other alternative legal practices.”

He rejected other challenges to the retainers, including under consumer contracts legislation, saying there was no imbalance, “let alone a significant one”, between the parties.

Costs lawyer Nick McDonnell, a director at costs firm Kain Knight – which is acting in Belsner – said: “The judgment in Swann illustrates what I think many in the legal profession already see as being the correct position where a solicitor’s agreement provides for an overall cap on any shortfall on costs not recovered from a losing opponent.

“That cap, as it would seem was the intention of Parliament, is meant to be, of itself, the comfort blanket on legal fees for any claimant looking to instruct a solicitor to pursue a low-value personal injury claim.

“It cannot be correct that more information is needed at the outset of a claim when very little is known about a case’s circumstances and value.”

He added that, whilst “the wheels of justice may turn slowly, they do turn and we are confident the legal profession will eventually prevail”.

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