Insurance – Collective fee agreement – Success fee – Insurer settling claim but requiring respondent to pursue appellants for loss under collective conditional fee agreement (CFA) – Whether respondent entitled to claim success fee under CFA – Appeal dismissed
The respondent’s property had suffered subsidence damage caused by the roots of a tree that belonged to the appellant local authority. He claimed against his household policy. His insurer settled the claim and, in the exercise of its rights of subrogation, required the respondent to pursue a claim against the appellants in respect of the loss and to instruct a specific firm of solicitors with which it had negotiated a collective conditional fee agreement (CFA).
The solicitor negotiated a settlement of the claim on terms that included an agreement that the appellants would pay the respondent’s costs, which were to be assessed on a standard basis in default of agreement. At the assessment hearing, the appellants challenged the respondent’s attempt to recover a success fee, contending that he had been fully indemnified by his insurer. The costs judge determined that the courts should reflect the reality of the situation and concluded that because the respondent had never been at risk as to costs, it would be unreasonable for him to rely on a CFA. Accordingly, the judge disallowed the success fee.
The respondent appealed to the county court, arguing that if the claim had been vested in the insurer by assignment rather than by subrogation, pursuant to a CFA with the solicitor, it could have recovered a success fee and it would be anomalous if the recoverability of a success fee depended on whether the insurer chose to recover its losses by virtue of its rights of subrogation rather than by assignment. He further contended that, as an insured person, he enjoyed the right to pursue a claim for his remedy in tort with the benefit of a CFA and if the judge was correct that right had been denied.
The county court, in allowing the respondent’s appeal, held that a solicitor acting under a collective CFA with an insurance company was entitled to claim a success fee against the defendant to a claim by the insured and that it would be anomalous if an insurer with an assigned cause of action could take advantage of a CFA when an insurer with a subrogated claim could not. The appellants appealed.
Held: The appeal was dismissed.
(1) The respondent was entitled to recover his costs, including a success fee. If an assured ratified the acts of a solicitor that was so acting at the instigation of his insurer, he had to be taken as ratifying all the instructions given by his insurer to the solicitor in pursuing the claim in his name. Where a collective CFA was in force, the solicitor would clearly be acting pursuant to it and the client was to be taken as instructing it on the same basis as had the insurer, that is, on CFA terms: Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495 and Thornley v Lang [2003] EWCA Civ 1484; [2004] 1 WLR 378 applied.
(2) The collective CFA had therefore to be treated, at least notionally, as being that of the respondent. Whether the success fee was recoverable and with what uplift rate depended on the application of the rules to the facts of the case. The court had to ask whether the costs had been unreasonably incurred or were unreasonable in amount. In considering that, the court had to take into account all the circumstances of the case and, in particular, had to have regard to CPR PD 44, which required the court, in deciding whether a percentage increase was reasonable, to take into account the other methods of financing the costs that were available to the receiving parties.
(3) The court was required to have regard to the reality of the situation when deciding what order to make as to costs pursuant to CPR 44.3(4). As such, the court had to look at the insurer’s position and consider how reasonable it was of the insurer to enter into the collective CFA. Since CFAs were open to all, the court could not conclude that they were none the less unreasonable by virtue only of the fact that they were also open to rich and powerful insurance companies that accepted the price of litigation as a necessary incident of their business. It had to be reasonable for the rich as well as the poor to take advantage of that which the law permitted.
Nicholas Bacon QC (instructed by Barlow, Lyde & Gilbert LLP) appeared for the appellants; Benjamin Williams (instructed by Plexus Law LLP, of Leedss) appeared for the respondent.
Eileen O’Grady, barrister
