Supreme Court gives green light to claim legal costs pre proceedings.
In Bott & Co Solicitors Ltd v Ryanair DAC [2022] UKSC 8 (16 March 2022) is an important decision in relation to flight delay claims and alternative dispute resolution. The decision allows solicitors to deduct their fees for bringing a claim from compensation recovered from the airline, or for that matter any compensation claim.
Previously it was restricted to cases where court proceedings had started, except in road traffic portal cases. This meant that defendants could undermine the process by paying compensation direct to the client bypassing the lawyer who would be left without any payment for the costs of the claim. This would encourage lawyers to issue proceedings to make sure they did receive their fee. Following this case, that tactic has been curtailed because defendants must not pay the customer or client direct when they know that a lawyer has been instructed and Claimant lawyers can have confidence that they will be paid even if they don’t start court proceedings. So the effect is to encourage out of Court settlements and alternative dispute resolution pre
proceedings.
The Court found that the costs could be recovered from the compensation as long as there is a dispute, existing or reasonably anticipated in connection with the services provided. It was left open as to whether this just applies to solicitors, but it is difficult to see why it should.
The Court stated that “It would be inconsistent with the policy of encouraging dispute resolution without resort to litigation to confine the solicitor’s equitable lien to cases where formal proceedings have been commenced before a claim is settled. Such a restriction would give solicitors a financial incentive, in direct conflict with this policy, to issue a claim form at an early stage to make sure that they get paid. It also would deter solicitors from offering services on credit to clients who lack financial resources to help them obtain an appropriate settlement without having to bring proceedings. This would undermine the aim of facilitating access to justice that underlies the imposition of the lien.
This is so whether a claim is settled following participation in a formalised and judicially approved scheme, such as the scheme established by the RTA Protocol; or after engaging in a process such as a mediation without participating in such a scheme; or simply through a negotiation without engaging in any formal process. In each case the policy of encouraging the resolution of disputes without resort to litigation is promoted. Nor is there any reason to deter solicitors from negotiating settlements for clients, where they can, without invoking a formal system for dispute resolution or where no scheme comparable to the RTA Protocol scheme is available. The principle underlying the equitable lien of facilitating access to justice is equally applicable in all these cases.
Times have moved on …. There is today an enormous pressure on court resources, human and physical. Accordingly, the courts in certain circumstances encourage parties to seek to resolve their disputes in other ways, if that is appropriate, before pursuing court proceedings. So, for example, in a dispute about financial services, the client may be encouraged to use some mediation service, or process involving an ombudsperson, before bringing any court proceedings.
… The work of the solicitors in this case, while inconvenient to Ryanair, is entrepreneurial and clearly results in solicitors providing a service which people find useful, and that it is now financed in part by the ability to use the solicitor’s lien. If the service is not one people find beneficial, the business model will cease to be viable. Furthermore, it is an important aspect of the role of the solicitor these days in contentious matters that he works as much to keep his client out of court as to support him when he is in court. That is now reflected in the solicitor’s lien. It is noteworthy that the response by Ryanair has been to make the collection of compensation for flight delay more convenient for the consumer. Where that is so, it is not for us to express any judgment on whether the industry of claims advisers should in these circumstances be discouraged or encouraged, or whether laypeople should be required to do straightforward work for themselves.”
The Court has therefore approved consumers using lawyers, or indeed other bodies like claims management companies, to make claims and negotiate settlements through ADR rather than going through the Courts. It means that airlines like Ryanair cannot avoid paying the costs of a claim by paying a customer direct.
