CFAs Enforceable With 25% Damages Cap But Success Fees And Hourly Rates Reduced For Lack Of Informed Consent

RICHARDSON V SLATER & GORDON UK LIMITED [2025] EWHC 1220 (SCCO)

In Richardson v Slater & Gordon UK Limited [2025] EWHC 1220 (SCCO), Senior Costs Judge Rowley addressed multiple costs issues arising from the enforceability and fairness of conditional fee agreements (CFAs) between 224 claimants and the defendant firm. The judgment examined whether the CFAs constituted unenforceable damages-based agreements (DBAs) under s58AA(3) of the Courts and Legal Services Act 1990, concluding they did not, as they complied with CFA regulations and lacked evidence of an intent to cap recovery at 25% of damages. The court rejected claims that the defendant failed to comply with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, finding the key terms—including the 25% damages cap, success fee, and liability for unrecovered costs—were communicated clearly in documentation and oral explanations. The judge held that CPR 46.9(2) permitted charging above recoverable costs, as the CFAs explicitly outlined this arrangement, though informed consent under CPR 46.9(3) was required for unusual costs, such as the success fee. The success fees were deemed unreasonable due to inadequate risk explanation, with reductions applied (e.g., 10% for passenger claims, 15% for straightforward driver claims, and 35% for workplace accidents). The defendant’s uniform £217 hourly rate was found unusual and unjustified, with guideline rates substituted. The court dismissed challenges under the Consumer Rights Act 2015, ruling the terms were transparent and prominent. Ultimately, the CFAs were upheld as enforceable, subject to adjustments to success fees and hourly rates.

The claimants' argument is based entirely on the proposition that these agreements are designed to take 25% of the claimant's damages, come what may. There is no direct evidence to support this proposition. The documentation refers to the deduction being "up to 25%" as, for example, Mr Rabinovitch very fairly accepted under cross examination. The claimants need an adverse inference to be drawn from the use of an agreement where base costs are calculated on time spent multiplied by an hourly rate. But, that is the standard method of all solicitors charging fees. Even where a fixed fee is agreed, the underlying documentation invariably sets out default charges by reference to time spent which is overridden where a fixed fee has been agreed. In my judgment, there would need to be some express statement or documentation regarding an intention to incur costs which justify the 25% deduction on each case for this argument to get off the ground. In their absence, it does not seem to me that this point gains any traction.

Citations

Gestmin SGPS SA v Credit Suisse (UK) Ltd & Anor [2013] EWHC 3560 (Comm) Courts must be cautious of the fallibility of human memory in litigation; oral evidence based on recollection, particularly of historic events, must be critically evaluated against contemporaneous documents, especially in the context of costs disputes where witnesses claim to misunderstand or forget solicitor-client agreements. Holcroft v Thorneycroft Solicitors [2024] EWHC 1473 (KB) Where a claimant accepts a settlement during representation by solicitors, this may affect subsequent claims for costs against those solicitors, although the impact remains unresolved pending appeal. Herbert v HH Law Ltd [2019] EWCA Civ 527 A properly drafted CFA must clearly state the client’s liability for success fees and solicitor’s charges; a uniform 100% success fee not tailored to the risk in individual cases is unreasonable and unenforceable without appropriate explanation. Saint James v Wilkin Chapman LLP [2024] EWHC 1716 (KB) Cost terms dispersed across multiple retainer documents must be consistent and comprehensible to be enforceable in solicitor-client cost assessments. Diag Human SE v Volterra Fietta (a firm) [2023] EWCA Civ 1107 Solicitors cannot rely on quantum meruit to claim costs under an agreement held to be unenforceable or void, especially following breach of statutory requirements in solicitor-client retainers. Belsner v Cam Legal Services Ltd [2022] EWCA Civ 1387 Where section 74(3) of the Solicitors Act 1974 does not apply, a solicitor may charge more than recoverable costs if the client agrees in writing; informed consent is not required for disapplying section 74(3) under CPR 46.9(2), but is required for costs presumed reasonable under CPR 46.9(3). Callery v Gray [2001] EWCA Civ 1117 In straightforward personal injury claims, a two-stage success fee is appropriate, with an initial uplift reflecting minimal identifiable risk and a higher contingent percentage only if the case proceeds to trial. Halloran v Delaney [2002] EWCA Civ 1258 In extremely simple personal injury claims with virtually certain prospects of success, a success fee above 5% is generally unreasonable due to the lack of risk justifying higher uplifts. Claims Direct Test Cases [2003] EWCA Civ 136 Success fees must correspond to the risk profile at the inception of the CFA for each individual case; standardised or pre-determined uplifts lacking specific justification are subject to reduction on assessment. Nizami v Butt [2006] EWHC 159 (QB) The fairness of cost arrangements under a CFA must align with the client’s understanding and the reasonableness of fees charged, especially where success fees or hourly rates impact the proportionality of the claimant’s liability. A and M v Royal Mail Ltd (No. 1) [2015] 8 WLUK 182 In personal injury claims, success fees must be proportionate to the litigation risk actually undertaken; excessive uplifts lacking clear justification are liable to be reduced on solicitor-client assessments. Glaser KC v Atay [2024] EWCA Civ 1111 Terms central to the subject matter of a solicitor-client agreement that determine price must be both prominent and transparent to benefit from the exemption from fairness review under the Consumer Rights Act 2015. The Office of Fair Trading v Foxtons Ltd [2009] EWHC 1681 (Ch) For a contractual term to be fair and enforceable against a consumer, it must be both prominent and written in such a manner that it does not require detailed or specialist analysis (“legal mining”) to understand its financial consequences.

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Key Points

A conditional fee agreement (CFA) that calculates recoverable costs by reference to time spent and hourly rates, and limits a client’s liability to 25% of damages, is not a damages-based agreement (DBA) under section 58AA Courts and Legal Services Act 1990 where there is no express linkage between solicitor remuneration and the amount of damages recovered. [81–84]
In order to disapply section 74(3) of the Solicitors Act 1974 in proceedings in the county court, the solicitor and client must enter into a written agreement which expressly permits payment of costs exceeding those recoverable inter partes; informed consent is not required for the agreement to be valid for the purposes of CPR 46.9(2). [126–130]
A success fee must be supported by a contemporaneous, case-specific risk assessment to attract the protection of CPR 46.9(3)(a); otherwise, it falls to be assessed for reasonableness and may be reduced accordingly if not justified by the actual risks inherent in the matter. [159–160]
A fixed hourly rate charged indiscriminately across all fee earners—irrespective of grade or role—is of an unusual nature and unlikely to be recoverable inter partes; absent explanation, such a rate is liable to be replaced with banded guideline hourly rates on a solicitor and own client assessment. [177–180]
Where the client has been provided with a clear oral explanation of the principal terms of a CFA alongside comprehensive written documentation, and where those materials use plain language and are prominently presented, the terms relating to fees and charges are capable of satisfying the requirements of transparency and prominence under section 64 of the Consumer Rights Act 2015, thereby excluding them from review for fairness under section 62. [69–70, 148–149]

“I do not consider that the claimants had to provide informed consent rather than mere agreement to the fees being paid by them exceeding the costs that might be recovered in a successful claim. It seems to me that this conclusion disposes of the claimants' arguments regarding fixed recoverable costs.... a time spent or hourly rates agreement with a client is the most common basis for a retainer, even if a fixed fee is agreed with the client (and not simply potentially recoverable from an opponent.) As such, I do not consider such an agreement to be unusual in nature or amount. With regard to the question of whether the success fee was unusual in amount or extent, I have dealt with these arguments specifically in my decision on preliminary issue 8."

Key Findings In The Case

The defendant provided claimants with oral explanations of the key terms of the CFA agreement, including the 25% damages cap, the potential recovery of costs from opponents, and the “no win, no fee” structure, which were supported by comprehensive written documents; the judge found this satisfied the transparency and prominence requirements under the Consumer Rights Act 2015 and regulations governing distance contracts [69–70, 104–105, 148–149].
The single hourly rate of £217 charged across all fee earners, regardless of seniority or qualification, was held to be of an unusual nature; the court found that this approach would likely be deemed unreasonable in a solicitor and own client assessment and substituted Guideline Hourly Rates for National Band 1 due to the lack of explanation for the uniform rate [177–180].
The success fees charged in several test cases were not adequately justified by individualised or case-specific risk assessments; in the absence of sufficient explanation, the court found the success fees unreasonable and reduced them accordingly—e.g., to 15% in straightforward RTA cases and to 10% in uncomplicated passenger cases [157–160].
The claimant witnesses were found not to have read or meaningfully engaged with the retainer documentation despite being sent the documents and being given the opportunity to review them; the evidence showed that they relied primarily on oral assurances and failed to challenge material points contemporaneously, even when documentation clearly set out key fees and liabilities [24–25, 31–33].
The onboarding telephone scripts used by the defendant’s staff were followed closely in practice, as evidenced by the recorded explainer call with a claimant, and the judge found that the defendant’s process for executing retainers with consumers complied in substance with regulatory standards for electronic distance selling and disclosure of information [41–44].

“I have no doubt that to charge the same rate for all work done by all fee earners is unusual in itself. A "blended rate" is sometimes employed where a range of fee earners are used but it is not common in my experience and I would expect there to be some explanation of this approach to the client. It would also require an appreciable amount of higher grade fee earner work to complement the lower grade fee earners charging an enhanced rate. In such circumstances, a blended rate agreed with the client would be perfectly acceptable. However here, given the nature of the cases being dealt with, and in the absence of any explanation for its imposition, it has the appearance of being simply an attempt to charge lower grade fee earners at a higher rate."

Background

The case of Richardson & Others v Slater & Gordon UK Limited [2025] EWHC 1220 (SCCO) involved a group litigation claim by 224 claimants against their former solicitors, Slater & Gordon UK Limited, concerning the enforceability and fairness of Conditional Fee Agreements (CFAs) entered into for personal injury claims. The claims arose from road traffic accidents and workplace injuries occurring between 2016 and 2020. The claimants alleged that the defendant’s retainers were unenforceable as Damages Based Agreements (DBAs), failed to comply with consumer contract regulations, and contained unfair terms. The court was tasked with determining nine preliminary issues, primarily focusing on costs-related matters, including the validity of the CFAs, the adequacy of information provided to clients, and the reasonableness of success fees and hourly rates.

Costs Issues Before the Court

The court was required to determine the following key costs issues:

Whether the CFAs were unenforceable as DBAs under s58AA of the Courts and Legal Services Act 1990.
Compliance with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CC(ICAC)R).
Whether the defendant adequately informed claimants about potential liability for costs exceeding recoverable sums from opponents.
Whether claimants gave informed consent to terms permitting recovery of costs exceeding sums recoverable from opponents.
The fairness of terms under the Consumer Rights Act 2015.
The reasonableness of success fees and hourly rates charged.

The Parties’ Positions

Claimants’ Submissions: The claimants argued that the CFAs were effectively DBAs but did not comply with DBA regulations, rendering them unenforceable. They contended that the defendant failed to provide clear and prominent information about costs, particularly the 25% cap on damages deductions, ATE premiums, and the potential for costs to exceed recoverable sums from opponents. The claimants also alleged that the success fees and hourly rates were unreasonable and lacked informed consent.

Defendant’s Submissions: The defendant maintained that the CFAs were compliant with the CFA Regulations 2013 and were not DBAs. They argued that the information provided to claimants was clear and comprehensive, both orally and in written documentation. The defendant asserted that the success fees were justified by risk assessments and that the hourly rates were standard and agreed upon in the retainer documents.

The Court’s Decision

1. Enforceability as DBAs: The court rejected the claimants’ argument that the CFAs were unenforceable DBAs. It held that the agreements complied with CFA regulations and did not meet the definition of DBAs under s58AA of the Courts and Legal Services Act 1990. The 25% cap on damages deductions was a statutory feature of CFAs, not a DBA mechanism.

2. Compliance with Consumer Contract Regulations: The court found that the defendant had provided sufficient information in a clear and prominent manner, as required by the CC(ICAC)R. The oral explanations and written documentation adequately covered the key terms of the retainer, including the 25% cap and potential liability for unrecovered costs.

3. Informed Consent and Reasonableness of Success Fees: The court held that the claimants had agreed to the terms of the CFA, including the potential for costs to exceed recoverable sums from opponents. However, it found that the success fees required reassessment due to a lack of detailed explanation of their calculation. The court reduced the success fees to 10% for passenger claims, 15% for straightforward driver claims, and upheld the 100% fee for cases proceeding to trial.

4. Hourly Rates: The court ruled that the defendant’s uniform hourly rate of £217 for all fee earners was unusual and lacked justification. It applied the Guideline Hourly Rates (GHR) for National Band 1, allowing differentiated rates based on fee earner seniority.

5. Fairness of Terms: The court concluded that the terms of the CFA were fair and transparent under the Consumer Rights Act 2015. The key terms, including the 25% cap, were prominently displayed and explained in plain language.

In summary, the court upheld the validity of the CFAs but adjusted the success fees and hourly rates to reflect reasonableness and fairness. The judgment provides clarity on the standards for informing clients about costs in CFAs and the importance of transparency in solicitor-client agreements.

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