SCCO Ref: TSB 0307009
SUPREME COURT COST OFFICE
London, EC4A 1DQ
B e f o r e :
| RASHID GHANNOUCHI
|- and -
|(1) HOUNI LIMITED
(2) AHMED SALHIN EL-HOUNI
(3) AL ARAB PUBLISHING HOUSE LIMITED
Mr Jeremy Morgan QC (instructed by Dean & Dean) for the Defendants
Hearing dates : 16 December 2003
Crown Copyright ©
Master Seager Berry
i. Whether the CFA failed to comply with Regulation 3(2)(c) of the Conditional Fee Agreements Regulations 2000 ("the Regulations") – the Regulation 3(2)(c) issue.
ii. Whether the CFA failed to comply with Regulations 4(3)&(5) of the Regulations (the Regulation 4 issue).
"Requirements for contents of conditional fee agreements: general
2-(1) A conditional fee agreement must specify –(a) the particular proceedings or parts of them to which it relates (including whether it relates to any appeal, counterclaim or proceedings to enforce a judgment or order),(b) the circumstances in which the legal representative's fees and expenses, or part of them, are payable,(c) what payment, if any, is due –(i) if those circumstances only partly occur,(ii) irrespective of whether those circumstances occur, and(iii) on the termination of the agreement for any reason, and(d) the amounts which are payable in all the circumstances and cases specified or the method to be used to calculate them and, in particular, whether the amounts are limited by reference to the damages which may be recovered on behalf of the client.
(2) A conditional fee agreement to which regulation 4 applies must contain a statement that the requirements of that regulation which apply in the case of that agreement have been complied with.
Requirements for contents of conditional fee agreements providing for success fees
3.- (1) A conditional fee agreement which provides for a success fee –(a) must briefly specify the reasons for setting the percentage increase at the level stated in the agreement, and(b) must specify how much of the percentage increase, if any, relates to the cost to the legal representative of the postponement of the payment of his fees and expenses.
(2) If the agreement relates to court proceedings, it must provide that where the percentage increase becomes payable as a result of those proceedings, then –(a) if –(i) any fees subject to the increase are assessed, and(ii) the legal representative or the client is required by the court to disclose to the court or any other person the reasons for setting the percentage increase at the level stated in the agreement,he may do so,(b) if –(i) any such fees are assessed, and(ii) any amount in respect of the percentage increase is disallowed on the assessment on the ground that the level at which the increase was set was unreasonable in view of facts which were or should have been known to the legal representative at the time it was set,that amount ceases to be payable under the agreement, unless the court is satisfied that it should continue to be so payable, and(c) if –(i) sub-paragraph (b) does not apply, and(ii) the legal representative agrees with any person liable as a result of the proceedings to pay fees subject to the percentage increase that a lower amount than the amount payable in accordance with the conditional fee agreement is to be paid instead,the amount payable under the conditional fee agreement in respect of those fees shall be reduced accordingly, unless the court is satisfied that the full amount should continue to be payable under it.
(3) In this regulation "percentage increase" means the percentage by which the amount of the fees which would be payable if the agreement were not a conditional fee agreement is to be increased under the agreement."
"… The other party to the litigation has no legitimate interest in seeking to avoid his proper obligations by seizing on an apparent breach of the requirement which is immaterial in the context of the other two purposes of the statutory regulation."
The other two purposes were: the protection of the administration of justice and the protection of the client. The Defendants had a legitimate interest in drawing attention to matters which were material in one or other of these two statutory purposes.
"107. The key question, therefore, is whether the conditions applicable to the CFA by virtue of Section 58 of the 1990 Act have been sufficiently complied with in the light of their purposes. Costs Judges should accordingly ask themselves the following question:"Has the particular departure from a regulation pursuant to Section 58(3)(c) of the Act or a requirement in Section 58, either on its own or in conjunction with any other such departure in this case, had a materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice?"
If the answer is "yes" the conditions have not been satisfied. If the answer is "no" then the departure is immaterial and (assuming that there is no other reason to conclude otherwise) the conditions have been satisfied."
A yes answer would mean that the CFA was unenforceable. If the Law Society have produced a defective form of CFA clients are not afforded the protection which the Regulation said the client should have, the agreement should be declared unenforceable.
THE DEFENDANTS' ARGUMENTS
"Construction as a whole requires that, unless the contrary appears, every word in the Act should be given a meaning, the same word should be given the same meaning, and different words should be given different meanings."
i. In 3(2)(c) the words "the amount" immediately after the indented section referred back to the success fee and to the use of the words "that amount" in 3(2)(b) after the indented passage.
ii. In the Law Society's response it stated that the reference in 3(2)(c)(ii) to "fees subject to the percentage increase" was a reference to base costs.
That analysis was incorrect. It did not deal adequately with the words "in respect of those fees" in 3(2)(c). It was necessary to consider what was meant by the words "the amount payable under the conditional fee agreement" by reference to the words "in respect of those fees". The reduction imposed by 3(2)(c) was a reduction of the amount payable under the CFA in respect of those fees, ie base costs and success fee. It could only refer back to the immediately preceding use of fees in 3(2)(c)(ii), namely fees subject to the percentage increase. In 3(2)(b)(ii) the words used were "any amount in respect of the percentage increase is disallowed on the assessment", whereas in 3(2)(c)(ii) the reference was to "fees subject to the percentage increase". These phrases could not mean the same thing. "Percentage increase" referred to the success fee, which was defined in paragraph 3(3).
"(c) If –(ii) the legal representative agrees with any person liable as a result of the proceedings to pay [ ] the percentage increase that a lower amount than the amount payable in accordance with the conditional fee agreement is to be paid instead, the [percentage increase] payable under the conditional fee agreement [ ] shall be reduced accordingly unless the court …"
"(ii) … is to be paid instead the amount shall be reduced accordingly."
"Fees" did not refer to "success fees" at any part of Regulation 3(2). 3(2)(c) must be taken at face value. The limitation was the amount payable in respect of those fees, ie fees subject to a percentage increase.
THE CLAIMANTS' ARGUMENTS
"And secondly, however, on our interpretation of Section 58(1) (see paragraphs 106 to 109 below) there will be far less incentive for paying parties to raise an issue of non compliance."
"… But that is not to say that attention should be confined and a literal interpretation given to the particular provisions which comprised the difficulty. Such an approach not only encourages immense prolixity in drafting, since the draftsman will feel obliged to provide expressly for every contingency which may possibly arise."
"The method by which Parliament chose to proceed was by repealing Section 58 of the 1990 Act and substituting two new sections, 58 and 58A. This Parliamentary device meant that these new provisions found themselves in Part II of the 1990 Act which takes its signature tune from its opening sub-section:"17(1) The general objective of this part is the development of legal services in England and Wales (and in particular the development of … litigation … services) by making provision for new or better ways of providing such services and a wider choice of persons providing them, while maintaining the proper and efficient administration of justice."
"We would, however, draw from both ex p Jeyeanthan  1 WLR 354 and the Factortame (No.8) case  QB 381 the principle that sufficiency or materiality will depend upon the circumstances of each case. This is not to encourage paying parties to trawl through the facts of each case in order to try to discover a material breach. Quite the reverse. At the stage when the agreement has been made, acted upon and success for the client has been achieved, it is most unlikely that any minor shortcoming which the paying party might discover in the agreement or the procedures leading to its making will amount to a material breach of the requirement or mean that the applicable conditions have not been sufficiently met."
THE REGULATION 4 ISSUE
"Information to be given before conditional fee agreements made
4. – (1) Before a conditional fee agreement is made the legal representative must –(a) inform the client about the following matters, and(b) if the client requires any further explanation, advice or other information about any of those matters, provide such further explanation, advice or other information about them as the client may reasonably require.
(2) Those matters are –(a) the circumstances in which the client may be liable to pay the costs of the legal representative in accordance with the agreement,(b) the circumstances in which the client may seek assessment of the fees and expenses of the legal representative and the procedure for doing so,(c) whether the legal representative considers that the client's risk of incurring liability for costs in respect of the proceedings to which agreement relates is insured against under an existing contract of insurance,(d) whether other methods of financing those costs are available, and, if so, how they apply to the client and the proceedings in question,(e) whether the legal representative considers that any particular method or methods of financing any or all of those costs is appropriate and, if he considers that a contract of insurance is appropriate or recommends a particular such contract –(i) his reasons for doing so, and(ii) whether he has an interest in doing so.
(3) Before a conditional fee agreement is made the legal representative must explain its effect to the client.
(4) In the case of an agreement where –(a) the legal representative is a body to which section 30 of the Access to Justice Act 1999 (recovery where body undertakes to meet costs liabilities) applies, and(b) there are no circumstances in which the client may be liable to pay any costs in respect of the proceedings,paragraph (1) does not apply.
(5) Information required to be given under paragraph (1) about the matters in paragraph (2)(a) to (d) must be given orally (whether or not it is also given in writing), but information required to be so given about the matters in paragraph (2)(e) and the explanation required by paragraph (3) must be given both orally and in writing.
(6) This regulation does not apply in the case of an agreement between a legal representative and an additional legal representative.
Form of agreement
5.-(1) A conditional fee agreement must be signed by the client and the legal representative.
(2) This regulation does not apply in the case of an agreement between a legal representative and an additional legal representative."
"If the amount agreed or allowed by the court in respect of our basic charges and disbursements does not cover all our basic charges and disbursements you will be liable to pay the difference."
The Regulation 3(2)(c) Issue
"any person liable as a result of the proceedings to pay fees subject to the percentage increase."
i. Who was to make the payment of the fees which were to be the subject of the percentage increase.
ii. An agreement to pay a lower amount.
iii. A reduction in the amount payable subject to any application to the court.
The Regulation 4 Issue
If you win the case, you are liable to pay our disbursements, basic charges and a success fee. The amount of these is not based on or limited by any damages you may recover. You may be able to recover from your opponent our disbursements, basic charges, success fee and the premium for any insurance policy you take out for your potential liability for your opponent's charges and disbursements. For full details, see conditions 4 and 6.
The court will decide how much you can recover if you and your opponent cannot agree the amount. If the amount agreed or allowed by the court does not cover all our basic charges and disbursements, you will be liable to pay the difference."