Crane v Canons Leisure Centre – success fee payable on costs consultants’ fees [2007] EWCA Civ 1352

The claimant's solicitors were appointed under a Collective Conditional Fee Agreement (CCFA) which in the usual way entitled them to recover a success fee in respect of "base costs" (profit costs) but not disbursements. The dispute was settled pre-action but the costs were not agreed. The claimant's solicitors appointed a firm of costs consultants to represent the claimant at the detailed assessment hearing. The Court of Appeal (by a majority) held that this work was solicitors’ work which they had undertaken to their client to do and over which they had not relinquished control. They were entitled to make their own direct charge for this work and it followed that the costs were "base costs" and the success fee was therefore payable. The majority also expressed the view that policy considerations (in particular the need for simplicity) favoured the use of single success fees, applicable to all stages of proceedings, including costs-only proceedings (see Halloren v Delaney).

Comment: success fees are only payable on base, or profit, costs. It has become essential therefore to distinguish between base costs and disbursements in cases funded by a CFA. Solicitors are allowed to delegate part of their role to a duly authorised agent whether or not they employ them. In Stringer v Copley HHJ Cook (author of Cook on Costs) held that solicitors who use agents to carry out their work, such as litigation and medical support agencies, should be allowed to recover costs as though the agents were acting as the solicitors. Solicitors are entitled to charge for these services as a profit cost and not as a disbursement, provided the charges do not exceed those had the work been done by the solicitors. Since solicitors invariably cost more (in Stringer they charged more than double the litigation support agency for the work done by the latter), this means that any cost saving obtained by using an agency is not passed on to the losing party.

The distinction between base costs and disbursements became particularly important following the introduction of the predictable or fixed costs regime for personal injury claims falling within CPR 45. Under this scheme a claimant can recover a fixed sum as legal profit costs plus disbursements as defined in CPR 45.10. In Woollard v Fowler Senior Costs Judge Hurst differed from the approach taken in Stringer, holding that the fees of medical support agencies should be treated not as a profit cost but as a disbursement. Although part of the work carried out by the agencies could have been done by solicitors, a large part of the fee is that charged by the medical expert which could not form part of the solicitor’s profit costs. The defendant’s insurers argued that claimant solicitors should not be able to get round the fixed costs limit by delegating part of their role to an medical support agency and claiming the latter’s fee as a disbursement. The judge rejected the insurers’ argument on policy grounds. These fees have been treated as disbursements in cases outside the predictable fee regime “by general and established custom” and it would be unfair to draw a distinction between those within and those outside the regime since until a case has been settled it is not known whether or not the predictable costs regime will apply. The defendant insurers are withdrew their appeal against this decision following a mediation in 2007.

Crane takes this debate one step further by adding in the complication of a CFA. Costs consultants, unlike medical support agencies, perform work which could have been done by the solicitor. The Court of Appeal could have disapproved Stringer and Woollard but chose not to – the fact that Senior Costs Judge Hurst was sitting with them is not unimportant here since he will have been able to defend his previous analysis of the legal position in Woollard and the Claims Direct test cases. The Court of Appeal’s approval of the earlier cases will encourage solicitors to delegate parts of their role to agencies or consultants, since they can claim a profit cost over and above the fee they paid to their agent and where acting under a CFA, claim a success fee on the higher figure. Defendants and their insurers are left picking up the bill but, to be fair, only to the extent that it is not higher than it would have been had the solicitors done the work themselves.