The recent High Court decision in McDaniel & Co (a Firm) v Clarke  EWHC 3826 (QB) concerned a claim by solicitors against a former client for their costs of just over £57,000 incurred under a CFA. Despite the fact that the claim was a “success” under the terms of the CFA, the court held that the solicitors were entitled to no costs at all. This was because they had failed, at the outset, to advise the client of alternative forms of funding.
The client, Ms Clarke, fell down some steps in June 2007. She suffered injury to her right anterior cruciate ligament and subsequently depression. Having instructed McDaniel & Co on another matter, she instructed them in April 2010 to handle her personal injury claim.
In May 2010 she entered into a CFA. In April 2011, dissatisfied with the progress made, she transferred her instructions to a second firm. In December 2011 the second firm negotiated a settlement on her behalf for £40,000, plus costs. McDaniel & Co then presented her with a bill for c. £56,000 (subsequently revised up to c. £57,000), as the claim had been a “success” within the meaning of the CFA.
Ms Clarke disputed the solicitors’ bill on 22 grounds. The challenge under ground 3 was that the costs should be reduced to nil because McDaniel & Co had failed to comply with rule 2.03(1) of the Solicitors’ Code of Conduct 2007. This provides inter alia that the solicitor must “discuss with the client how the client will pay, in particular... whether the client's own costs are covered by insurances or may be paid by someone else, such as an employer or trade union...”.
Ms Clarke submitted that she had not been advised about alternative means of funding. In particular she had not been advised of the option of instructing solicitors through her trade union, GMB. GMB confirmed (by way of letter) that she would have been entitled to free legal representation and a free indemnity against the other side's legal costs had they been approached before the claim was issued and had the prospects of success been at least 60%.
McDaniel & Co admitted that Ms Clarke had not been advised properly as to the terms of the CFA and the alternative methods of funding and that they were in breach of rule 2.03(1). But they submitted that the consequence of this should be a reduction in the costs of just £100.
At the detailed assessment Master Gordon-Saker assessed the bill of costs at nil. He found, based on the advices of counsel produced later in the case, that the case had had prospects of 60%. He further found it probable that, had Ms Clarke been presented with what GMB were offering, she would have taken advantage of that arrangement rather than rendering herself liable to pay her own solicitors under the CFA. He concluded that the retainer arrangements between McDaniel & Co and Ms Clarke created a liability she ought not to have incurred and that those costs were therefore unreasonable and, in effect, wasted.
McDaniel & Co appealed. They contended that there was insufficient evidence before the Master to support his conclusions that: Ms Clarke was entitled to union funding, that she would have availed herself of it had she been advised of it, or that there were prospects of 60%. They further contended that the Master should have based his assessment on the loss of the chance that Ms Clarke would have availed herself of GMB's offer, not on a “yes/no” or binary assessment of whether she would have done so.
All these challenges were rejected by Hickinbottom J (sitting with a Master as an assessor). The Master was entitled to assess the bill at nil as he did.
The Judge found that the Master was entitled to make the factual findings he did. Further, the Judge (relying on the decision in Allied Maples v Simmons & Simmons  1 WLR 1602, 1610D-H) rejected the argument that the assessment of costs should be based on the loss of a chance. The facts in this case were sufficiently clear for the court to be able to decide what would, on a balance of probabilities, have happened if the client had been given the appropriate advice at the outset. There was to be no discount.
The decision is a reminder of the importance of the obligation under rule 2.03(1) of the Solicitors' Code of Conduct 2007. It is vital to ensure both that the discussion mandated by the rule takes place and that it is recorded. Solicitors should bear in mind also that alternative means of funding come in different forms. The discussion will therefore need to be wide-ranging. In this case the alternative funding was through a trade union. However, in other cases it could be legal expenses insurance as part of a home contents policy.