Claim No: 5BO03433
SCCO Ref:  0606751
Neutral Citation Number: [2007] EWHC 90077 (Costs)
IN THE SUPREME COURT COSTS OFFICE
ON TRANSFER FROM BOW COUNTY COURT 

Clifford’s Inn, Fetter Lane
London, EC4A 1DQ

Date:  6 July 2007 

Before :

MASTER ROGERS, 
SITTING AS A DEPUTY DISTRICT JUDGE OF BOW COUNTY COURT

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Between :

	MR HARRY BERNARD MYERS	Claimant	
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	BONNINGTON (CAVENDISH HOTEL) LIMITED	Defendant	

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Mr Jamie Carpenter (instructed by Wiseman Lee) for the Claimant
Mr Robert Marven (instructed by Turner Debenhams) for the Defendant

Hearing date: 29 May 2007
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 Judgment

Master Rogers: 

THE ISSUE 
1.	The issue in this case directed to be heard as a preliminary issue before the full detailed assessment takes place, is whether the Claimant’s CFA is unenforceable, because his Solicitors, Wiseman Lee, failed to satisfy Regulation 4(2)(e) of the Conditional Fee Agreements Regulations 2000 (“CFAR 2000”).    
2.	That issue is squarely raised in the Defendant’s Points of Dispute as the second preliminary point:
“In respect of Part 2 the Defendant requests service of the Insurance Certificate and details of the steps taken to comply with paragraph 4 of the Conditional Fee Agreement Regulations, in particular paragraph 4(2)(e).    Subject to further information the Defendant reserves the right to further challenge in respect of the Claimant’s retainer and/or additional liabilities claimed in the bill of costs and, refer to the case of Garrett v Halton Borough Council and the court’s determination in respect of an “interest” within the meaning of the CFA Regulations which includes an insurance company panel membership.    In the circumstances the Claimant is put to strict proof of an enforceable retainer with his solicitors and subject thereto the Defendant makes no offer in respect of the costs claimed in reliance of (sic, this should I think read on) the conditional fee agreement dated 29 September 2004.” 
THE BACKGROUND
3.	The Claimant, then aged 83, and an established client of Wiseman Lee, sustained quite severe personal injuries on 20 June 2004, when he slipped on a ramp on the second flight of stairs at the Cavendish Hotel in Eastbourne, owned and/or controlled by the Defendant, causing him to lose his balance.    This led to his placing his foot in a hole in the ramp before falling heavily.    He fell on his left hand, hit his forehead, shoulders and knee on the floor. 
4.	The Claimant suffered a horrific hand injury.   The middle and ring fingers of his left hand were grossly deformed, with bones protruding through the torn skin.    He was extremely shocked.    He was taken to hospital where x-rays revealed dislocation of the PIP joint of the middle finger, and the subluxation of the proximal interphalangel joint of the ring finger.    In addition he had deep lacerations which were cleaned and sutured under anaesthetic.   
5.	He required overnight bed rest, and stayed at the Cavendish Hotel as a guest of the Defendant.    He subsequently attended his GP and fracture clinic, and was referred for extensive physiotherapy.   For nearly a month after the accident he was profoundly handicapped, and depended entirely upon his wife for virtually everything, including washing and bathing. 
6.	The Claimant’s hand remained painful and weak, with extremely limited grip strength.    He required help in dressing, and was unable to use a fork.   He was also unable to undertake household chores or gardening, and was unable to use a handbrake when driving, and was also unable to get out of the car unaided.    The reduction in his hand function was assessed at 15% to 20%.
7.	It was the Claimant’s case that the Defendant was negligent, and/or in breach of statutory duty, in that it either caused or permitted the stairs to be poorly lit;  failed properly to secure the ramp;  failed to warn of impending hazards;  failed to cordon off or otherwise secure the stairs, and, contrary to Section 2 of the Occupiers Liability Act 1957, to take such care as was in all the circumstances reasonable, to see that the Claimant was reasonably safe when using the premises.
8.	The Claimant consulted his Solicitors in the summer of 2004, some months after the accident, and after he had completed a pre-arranged cruise, and a letter before action was sent by them to the Defendant on 10 December 2004, but the response was a total denial of any accident having occurred. 
9.	In response to further correspondence the Defendant, on 2 March 2005, indicated that, in its view, the claim was a fraud.
THE COURSE OF THE PROCEEDINGS 
10.	Proceedings, as settled by Mr Andrew Roy of Counsel, were served on 3 November 2005, and, in the absence of an acknowledgment of service, an application for judgment in default of defence was filed on 29 November 2005, but this crossed with the acknowledgment of service, and, following an extension of time being agreed between the parties, the defence was served on 20 December 2005. 
11.	Following the usual early interlocutory exchanges, the Claimant’s Solicitors wrote to the Defendant’s Solicitors on 24 April 2006, making a Part 36 offer to settle the claim in the sum of £10,000.    
12.	Although this offer was rejected at that point by the Defendant, the latter did offer to agree quantum, subject to liability, in the sum of £9,000, but the Claimant rejected that proposal.
13.	Following disclosure, and exchange of witness statements, six on behalf of the Claimant, and three on behalf of the Defendant, a hearing date had been fixed for 17 August 2006. 
14.	On 9 June 2006 the Defendant offered to settle liability on a 50/50 basis, and also agreed quantum at £10,000, and therefore put forward an offer of £5,000, though subsequently on the telephone its Solicitors indicated that its best offer might be £7,000. 
15.	On 27 June 2006 the Defendant paid into court £5,000, but once again this offer was rejected.
16.	Following the completion of listing questionnaires, the court was advised that the trial was likely to last between 1½ and 2 days.
17.	On 4 July 2006 the Defendant’s Solicitors made their third Part 36 offer to resolve liability on a 70/30 basis, and paid into court the sum of £7,000. 
18.	Two days later the Claimant’s Solicitors wrote to the Defendant’s Solicitors with a counter-offer, namely that liability should be resolved 90% against the Defendant, 10% against the Claimant, and that quantum was worth £12,000. 
19.	On 11 July 2006 the Defendant’s Solicitors served notice of payment into court in the sum of £7,000, but, this not being accepted, a week later they increased the Part 36 offer to £9,000.   
20.	The Claimant’s Solicitors rejected that offer, and two days later, on 20 July 2006, invited the Defendant’s Solicitors to accept the Claimants Part 36 offer made as long ago as 24 April 2006. 
21.	The following day the Defendants Solicitors offered £9,500, but this offer was also rejected, and, on the same day, the Defendants Solicitors accepted the Part 36 offer of £10,000. 
22.	In those circumstances the Claimant sought an order for indemnity costs from the latest date from which their Part 36 offer would have been accepted, but the Defendants Solicitors refused to agree to that, and Counsel was accordingly instructed to deal with that issue before the Circuit Judge, which involved the settling of a skeleton argument.   Following argument from both parties, the Circuit Judge granted the Claimant his costs on the indemnity basis, from 15 May 2006, and directed detailed assessment. 
THE DETAILED ASSESSMENT PROCEEDINGS 
23.	As is now laid down in the Rules, although this was a Bow County Court case, the detailed assessment proceedings had to be issued in the Supreme Court Costs Office, and were balloted to a Costs Officer.   On examining the file, however, the latter decided that, because of the nature of the challenge to the CFA, and no doubt because any decision that he might take would inevitably be appealed to a Costs Judge, recommended that the matter be referred straightaway to a Costs Judge, and, on that basis, it was re-allocated to me. 
24.	I directed that there should be a directions hearing, which took place on 26 February this year, and, on that day, I directed that the Claimant’s Solicitors should make, file and serve by 19 March a witness statement dealing fully with the point raised by the Defendant in relation to compliance with Regulation 4(2)(e)(ii) of the CFAR.    
25.	The Order went on to direct that the witness statement should exhibit all relevant letters and other documents, but suitably redacted to exclude privileged material, so far as service on the Defendant was concerned.    It also provided for the Defendant, if so advised, to serve a witness statement in answer, and finally it directed that the preliminary issue should take place on Tuesday 29 May at 10.30 am, with a half day time estimate. 
26.	In accordance with that Order the Claimants Solicitor, Mr Paul Alexander Wershof, duly made a very full witness statement, in which he exhibited the relevant CFA, the Accident Line Manual, and the attendance notes relating to his compliance with other parts of the 2000 Regulations.    It was agreed by both advocates before me that those attendance notes demonstrated exemplary, perhaps almost unique, care and compliance with all the Regulations, save for Regulation 4(2)(e), and Mr Marven made it very clear that no point was taken about non compliance with any Regulation, other than Regulation 4.2(e).   There was some dispute at the outset of the hearing between Counsel as to whether, on the strict wording of the Points of Dispute and the Order which I had made, it was open to the Defendant to argue, as the Claimant suggested the Defendants Counsel’s skeleton sought to do, that there had been a breach of Regulation 4(2)(e)(i). 
27.	Mr Carpenter argued on that preliminary point, that although there was some reference to it in the Defendant’s skeleton, it would be wrong for me to entertain any argument based on Regulation 4(2)(e)(i), without giving Mr Wershof the opportunity to file additional evidence as to his state of mind.    
28.	As Mr Carpenter agreed that it would not be sensible for there to be an adjournment, he asked me to rule that the Defendant should not be entitled to rely on a breach of Regulation 4.2(e)(i).    
29.	In response Mr Marven said that his primary case would be that reference to Regulation 4(2)(e)(i) could be used as an aid to the construction of Regulation 4(2)(e)(ii), but that in any event the Points of Dispute quoted in paragraph 2 above were wide enough to allow such an argument to be developed.  
30.	He further submitted that it was clear from the Claimant’s Counsel’s skeleton that a new argument, not previously canvassed, was being advanced by the Claimant, namely that even if there was a technical breach of the Regulations in the events which happened, the doctrine encapsulated in the Roman maxim, de minimis non curat lex, applied to excuse any such breach. 
31.	At the end of those short submissions I decided to hear the arguments in any event, because, as Mr Marven submitted, it was only when the full arguments had been deployed that I could come to a conclusion, reserving to the end of those arguments any question of whether or not to exclude submissions in relation to paragraph 4(2)(e)(i). 
32.	In the event, and in the light of my decision, it was not necessary to make any ruling on that point.    
THE CLAIMANT’S CFA 
33.	This was dated 29 September 2004, and, as already indicated, followed two attendances by Mr Wershof on the Claimant and his wife, at which the full implications were fully explained. 
34.	The CFA is in a fairly standard form, and provided for a 100% success fee, and incorporated the Law Society’s conditions.    
35.	It would, I think, be helpful if I were to quote certain selected parts of the CFA in this judgment: 
“Accident Line “Protect” Insurance 
Accident Line “Protect” is an insurance policy only made available to you by solicitors who have joined the Accident Line Protect Scheme. 
You agree to pay a premium of £855.75 [these figures have been written into the typed document], for Accident Line “Protect” insurance when you sign this agreement.   We undertake to pay this to Accident Line on your behalf.    If you lose or your case is abandoned Accident Line “Protect” will cover our disbursements and your opponent’s charges, disbursement and the cost of the insurance premium.    It will not cover fees to your barristers or advocates.   The maximum cover is £100,000.
If this agreement ends before your claim for damages ends, Accident Line “Protect” ends automatically at the same time.
Other Points 
Immediately before you signed this agreement, we verbally explained to you the effect of this agreement and in particular the following: 
(a)	the circumstances in which you may be liable to pay our disbursements and charges; 
(b)	the circumstances in which you may seek assessment of our charges and disbursements and the procedure for doing so; 
(c)	whether we consider that your risk of become liable for any costs in these proceedings is insured under an existing contract of insurance; 
(d)	other methods of financing those costs, including private funding, Community Legal Service funding, legal expenses insurance, trade union funding; 
(e)	(i)	In all the circumstances, on the information currently available to us, we believe the contract of insurance with Accident Line “Protect” is appropriate.   Detailed reasons for this are set out in Schedule 2.
(ii)	In any event, we believe it is desirable for you to insure your opponent’s charges and disbursement in case you lose. 
(iii)	We confirm that we do not have an interest in recommending this particular insurance agreement.”
36.	A CFA was entered into between the Solicitors and Counsel, also providing for a 100% success fee, but that was not an issue to be dealt with on this preliminary issue. 
37.	It is at this point, I think, helpful if I were to quote from the two very full attendance notes which Mr Wershof made of his visits to the Claimant and his wife, on 20 July and 24 September 2004 respectively: 
“(a)	The 20 July Attendance Note
Maisie telephoned her house insurers and motor insurers who do not provide legal expense cover.   She will check the position with her credit card company and let me know.   I said that I would accept instructions on a no win no fee subject to hearing from her.   Maisie and Harry are not members of a trade union.
(b)	The 24 September Attendance Note
There is no other method of funding available.   The car insurance in Maisie’s name and household insurance does not provide legal expense cover.   The credit card providers do not have legal expense cover (see previously legal expenses questionnaire already completed).   Neither of them have trade union membership.   There is no other form of funding.   They do not wish to fund this case privately.   I am prepared to accept instructions on a No Win/No Fee basis.
I recommend Accident Line as legal expense insurers.   I have no interest in recommending them.    They are however administered by the Law Society and it is my practice to recommend them as a first option.”
38.	In his submissions Mr Marven relied heavily on the wording of Schedule 2 to the CFA:
“In all the circumstances and on the information currently available to us, we believe, that a contract of insurance with Accident Line Protect is appropriate to cover your opponent’s charges and disbursements in case you lose. 
This is because: 
-	the cover is comprehensive and designed to meet the financial exposures you are likely to meet if you lose
-	we receive no commission from this insurance.”
39.	Turning to the manual, Mr Marven drew my attention to certain parts of the Accident Line terms and conditions of membership.   For instance on page 101 of the agreed bundle he referred me, in the section under “Your duties”, to the following paragraphs in particular: 
“To issue an Accident Line Protect insurance policy in all eligible CFA cases.
To comply with all requirements in the manual or published form Accident Line from time in relation to your delegated authority to issue policies and conduct cases.”
40.	He also referred to the paragraph dealing with termination of membership:
“Accident Line, Abbey Legal Protection Limited, 1st Floor, 17 Lansdowne Road, Croydon, Surrey, CR0 2BX.  DX 84219 Croydon 1
We may terminate Your membership by giving one month’s written notice to your registered Practice Office in the following circumstances: 
•	if You are deemed insolvent
•	if there is an intervention into Your Practice Office by the Office for the Supervision of Solicitors 
•	if for any reason You are suspended from practice by The Law Society 
•	if by your actions, conduct or otherwise You breach any of the conditions of membership including the procedures, responsibilities and duties set out in The Manual.”
41.	Mr Wershof deals with the nature of the Accident Line Scheme in paragraphs 8 to 15 of his witness statement:
“8.	Accident Line is the Law Society’s personal injury insurance and referral service managed by Abbey Legal Protection (a division of Abbey Protection Group Limited) and FSA authorised insurance intermediary.   Accident Line is a “membership scheme” and is not a “panel” arrangement.    Member firms must have a member of the Law Society’s Personal Injury Panel.    I am a member of the panel.   The Accident Line Manuel in force in 2004 is attached as exhibit ‘HBM6’.
9.		Accident Line was set up in 1995 and endorsed by The Law Society as an alternative method of financing legal proceedings after legal aid ceased to be available for personal injury claims.    Accident Line offered after the event insurance at a fixed premium.   At that time they were the sole providers of such insurance.   Membership was based upon quality criteria and as a result a firm’s inclusion on the panel was seen as a mark of quality by the general public and other service providers.   Wiseman Lee have been members of the Accident Line panel since it began. 
10.	The Accident Line referral service began on 1 October 2000.    It was added as an additional benefit for Accident Line members.    Membership of the panel meant that we could issue after the event insurance on a delegated authority basis.   It seemed to this firm that membership of the panel meant that we were recognised by members of the public as having particular expertise in personal injury claims.   Our membership would have continued regardless of the referral scheme.
11.	The membership of Accident Line includes the following services:-
a)	Access to ATE insurance providing quality cover at competitive rates 
b)	Full policy and insurance administration support and advice 
c)	Access to practice funding 
d)	Referrals at no additional cost 
e)	A marketing support service 
f)	Communication support and regular e-briefs on legal insurance and business developments 
g)	A secure website exclusive to APIL members
h)	Advice and guidance on current issues
i)	Annual CPD accredited training with a free delegate place
j)	FSA insurance mediation regulatory compliance advice and guidance 
12.	Unlike claims management companies there is no contractual relationship at all with an injured person who may make contact with the Accident Line call centre.  The call centre will take details from the injured party and then send the information gathered on to the nearest member solicitor.   It acts as a signpost to the most appropriate local specialist solicitor.   No fee is paid or payable to Accident Line by the member solicitor for an individual referral. 
13.	Unlike claims management company arrangements there is no contractual obligation to insure referrals or even to accept them but only to give independent advice on both the merits of the case and funding options in accordance with the Accident Line “Standards Charter”. 
14.	If a member solicitor decides to act for the injured person they would treat them in the same way as any other personal injury client that may have been obtained from any other source existing clients or through our own marketing activities.    It is only if the client chooses to pursue the claim by means of a conditional fee agreement that the obligation to insure with Accident Line arises but only if otherwise the case is eligible for Accident Line Protect after the event insurance.   The obligation to issue a policy arises not because the matter is a referral but because of the “exclusive” nature of the ALP insurance scheme.   A client is free to instruct us without insurance but only on a privately paying basis.
15.	As the Law Society’s scheme, the insurance arrangements have always been compliant with the Solicitors Practice Rules.  The exclusive nature of the scheme is the same as it has always been since 1995 when conditional fee agreements and after the event insurance started.   My understanding of the Ashley Ainsworth scheme referred to in Garrett v Halton BC is that it was a “panel” arrangement unlike the membership scheme with Accident Line.”
42.	It is also right that I should quote from exhibit HPM5 to Mr Wershof’s witness statement, where, under the heading “Funding”, the following paragraph appears at the end: 
“I am happy to recommend Accident Line.   I have no interest in recommending them.    They are however administered by the Law Society and it is my practice to recommend them as a first option.”
THE DEFENDANT’S SUBMISSIONS
43.	Mr Marven on behalf of the Defendant submitted that in the light of the Court of Appeal’s decision in Garret v Halton Borough Council and Myatt v NCB [2007] 1 All ER 147;   [2006] Costs LR 798, the CFA is unenforceable.   In support of that submission he referred firstly to the documents which I have quoted above, and then continued in paragraph 5 of his skeleton: 
“5.	Hence Wiseman Lee have an indirect financial interest in recommending the Accident Line Protect policy namely maintaining referrals from Accident Line.   Wiseman Lee failed to disclosure this interest contrary to Regulation 4(2)(e)(ii) of the CFAR 2000 and hence the CFA is unenforceable.”
44.	In his very helpful submissions, Mr Marven quoted paragraphs 89 and 97 of Garrett as being particularly supportive of his argument, these read as follows: 
“89.	On behalf of the Law Society, Mr Drabble supports Mr Bacon in submitting that the judge was wrong to hold that Websters were in breach of reg 4(2)(e)(ii).  He advances a number of arguments.   First, he submits that the word “interest” in reg 4(2)(e)(ii) should be construed narrowly so as to mean only a direct financial interest such as commission (a direct profit arising from the payment of the premium).   He acknowledges that the Lord Chancellor’s consultation paper of February 2000 purported to “draw on the example of the Solicitors’ Client Care Code” to require the legal representative “to provide explanations of the different possibilities open to the client on the insurance front”:   see para 29 of Hollins v Russell.  This part of the paper concluded, at para 83: 
“if the legal representative recommends a particular product, but also has an interest in doing so, for example because he or she will receive a commission or is a member of the insurer’s panel of solicitors, then this must be disclosed to the client” (emphasis added)
97.	We do not accept the first of these submissions.  There was a close relationship between Websters and Ainsworth.  Websters were dependent on Ainsworth for referrals of cases, although it is unclear to what extent.   As Mr Morgan points out, cases are the lifeblood of solicitors.   The profit generated by cases is likely to be of greater significance to solicitors than commissions paid on insurance premiums paid for ATEs in connection with CFAs.   The indirect financial interest in maintaining a flow of work through membership of a panel of solicitors is greater than the direct financial interest in commissions paid for insurance premiums.  The advice to use the Ainsworth insurance product came in a CFA that it had apparently supplied to its panel solicitors and which bore its livery.    As the judge pointed out at para 7 of his judgment on the application for permission to appeal the decision of the district judge: 
“But the crunch averment in the points of dispute was that failure to comply with recommending the NIG policy would lead to termination of panel membership, and I accept from the lack of response to that direct matter that it is a proper inference that in fact it would have done so, in the sense that the claimant solicitors, Websters, recommended to some clients to go elsewhere for their ATE insurance, then they would have been taken off the panel, or, as the deputy district judge put it slightly differently, “I am not satisfied that the claimant has established that the claimant solicitors have no interest in recommending this policy”.   Although not a direct financial interest, it would be a perfectly understandable indirect financial incentive, if by not recommending a particular policy, a solicitor was taken off a panel of solicitors where there was a not insubstantial amount of work fed through to them because they were members of that panel.”
45.	However, significantly, Mr Marven conceded that the de minimis principle was a principle of general application, and could, in appropriate circumstances, be applicable to this sort of situation, but he contended that, despite the evidence of Mr Wershof, to which I will come when dealing with the Claimant’s submissions, the interest in fact could not be so classified. 
46.	In Garrett the Court of Appeal referred to the DCA consultation paper concerning conditional fees, and of course rejected the submissions by Mr Drabble on behalf of the Law Society, that no reference should be made to that document by the court in arriving at its decision, and in particular he relied on paragraph 83 of that document, which reads as follows: 
“83.	In addition to ensuring the client is made aware of his potential liability for costs the new regulations will draw on the example of the Solicitors Client Care Code to require the legal representative to explain how a client’s liability might be minimised through the use of insurance cover, including explaining whether the client’s liability for costs (including the costs of the party) may be covered by insurance, the types of insurance products which are available, and why he or she thinks a particular type of product might be suitable to the client’s needs.   If the legal representative recommends a particular product, but also has an interest in doing so, for example because he or she will receive a commission or is a member of the insurers panel of solicitors, then this must also be disclosed to the client.”
47.	He concluded his submissions by contending that there was clearly, in this case, an interest in the solicitors recommending the Accident Line Scheme; they did not tell the client about that interest, and it was not so trivial as not to come within the Regulations, and accordingly there was a plain breach of Regulation 4(2)(e)(ii), rendering the CFA unenforceable.
THE CLAIMANT’S SUBMISSIONS 
48.	Mr Carpenter’s skeleton preceded that of Mr Marven, and was helpfully full.    Mr Marven’s skeleton was prepared before he saw Mr Carpenter’s and exchange was simultaneous.   In paragraph 7 of his skeleton, after quoting the exact wording of paragraph 4(2), Mr Carpenter continued in paragraph 8: 
“If there has been a breach of statutory requirement, it will only render the CFA unenforceable if it is a material breach.    The breach is material if it has had “a materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice”.    (Hollins v Russell [2003] 1 WLR 2487;   [2003] 3 Costs LR 423 at paragraph 107). 
49.	Later in his skeleton, as developed in his oral submissions, Mr Carpenter submitted that the Court of Appeal decision in Garrett could be distinguished.   He submitted that the questions to be answered were:  (a) was there a discloseable interest?   (b) if so was the interest sufficiently disclosed? and   (c) if not was the breach material in the Hollins sense?    He went on to submit that the failure to declare insurance company panel membership was a totally misconceived point, and represented a misunderstanding of the decision in Garrett.    He nevertheless accepted that the Accident Line Scheme, in theory, provided a declarable interest, but submitted that, on the facts of this case, no such interest arose.    
50.	He quoted paragraphs 99 to 101 of Garrett:
“99.	The statement that Websters had no interest in the insurance premium “although we are on the AA Panel” did not disclosure to Ms Garrett that Websters had a financial interest in remaining on the panel which would be lost if she did not accept their recommendation that she enter into an ATE with NIG.  She could not have known from what she was told that Websters were recommending the NIG policy because this was dictated by their financial interests. 
100.	She would not have understood the significance of Websters being of the Ainsworth panel.   As Mr Morgan suggested in argument, most laypersons would be likely to believe that membership of a panel was a mark of quality control.   This is borne out by the evidence of Chris Ward, who is managing director of Abbey Legal Protection.  He explains that Accident Line is a scheme managed by Abbey Legal Protection on behalf of the Law Society.   It is a membership scheme for which firms pay a fee in return for a range of services, including referrals.   Membership is based on quality criteria, one of which is that solicitors must have an individual member of the Law Society’s Personal Injury Panel in their office. 
101:	At para 90 of Hollins v Russell, the court recorded the submission of Mr Drabble that the statutory regulation had two distinct aims.   The second, he submitted, was “to protect the client – to ensure so far as possible that she understands what she is letting herself in for and is able to make an informed choice amongst the funding options available to her”.   The court seems to have accepted this submission.   We certainly would.    In our judgment, by informing Ms Garrett that they were on the Ainsworth panel, the Websters representative did not disclose the real financial interest they had in recommending the NIG policy.”
but drew my attention to the contrast between paragraphs 100 and 101, and contended that mere membership of the panel did not constitute a declarable interest. 
51.	However, his principal submission was that the interest here was to be treated as de minimis.   As indicated he prepared his skeleton prior to that of Mr Marven, and therefore referred in a separate bundle to a number of important cases and references, which he said illustrated that the law does not concern itself with minor matters.     In view of Mr Marven’s concession that the de minimis principle could apply, it was unnecessary for him to go through those cases in as much detail as would otherwise have been the case, but he said that the starting point should be two judgments of the Court of Appeal, in the case of Wilkes v Goodwin [1923] 3 KB 86.     
52.	Mr Carpenter referred me in particular to the following extract from the judgment of Banks LJ, on page 94 of the report, where, quoting from Judge Granger in an earlier unreported case, he says: 
“Where he speaks of the question which he has to decide in reference to certain articles as a question of whether they were so trifling in value or amount as to be negligible.”
53.	He considered that the more recent case of Peake v Automotive Products Ltd [1977] 3 WLR 843, was very much in point.  The facts of that case were that the employers employed 3,500 men and 400 women in a factory, and, for some 30 years, had operated a “ceasing work” rule, by which both men and women workers stopped work at 4.25 pm, but the women were allowed to leave their place of work at any time during the 5 minutes before 4.30 pm when the men left.   The purpose of the rule, which had been approved by the relevant trade unions, was claimed to be in the interests of safety and good administration, to avoid women being jostled in the rush for the gates at 4.30 pm.
54.	After the Sex Discrimination Act 1975 came into force, a male manual worker applied to an industrial tribunal for a declaration that the practice was discriminatory against him, on the ground of sex within Section 1(1)(a), unnecessary and unlawful under Section 6 of the Act. 
55.	Both Lord Denning MR and Goff LJ decided the point of construction against the claimant, but both referred to the maxim in the following paragraphs (Lord Denning MR at page 858 letter B): 
“If this be wrong, and if the Act is to be construed literally, I would say that this discrimination is perfectly harmless.   If need be, I would apply the maxim de minimis non curat lex, but to my mind that is quite unnecessary.    I cannot think that this is discrimination within the Act, certainly not unlawful discrimination.    I think the appeal should be allowed.”
56.	Goff LJ came to the same conclusion at page 858 letter D: 
“But even if we were wrong on both those points, it seems to me that this is manifestly a case to which the rue de minimis non curat lex must be applied.   One is dealing with no more than five minutes each day, and I desire to stress that under the ceasing work provision all employees of both sexes cease work at the same time and are entitled to prepare themselves to leave, and it is only the actual step of leaving the premises in which there is any difference at all.   For these reasons I entirely agree with Lord Denning MR that this appeal should be allowed.”
57.	Mr Carpenter also referred me to Rule 10 of the current (until 1 July), Solicitors Practice Rules 1990, which reads: 
“10(1)	Solicitors shall account to their clients for any commission received of more than £20 unless, having disclosed to the client in writing the amount or basis of calculation of the commission or (if the precise amount or basis cannot be ascertained) an approximation thereof, they have the client’s agreement to retain it. 
(2)	Where the commission actually received is materially in excess of the amount or basis or approximation disclosed to the client the solicitor shall account to the client for the excess.”
58.	The published guidance in relation to Rule 10 recognises that the above is an application of the de minimis principle, and paragraph 8 of that guidance reads: 
“WHAT IS THE SIGNIFICANCE OF THE £20 FIGURE IN THE RULE?
The £20 figure set out in the rule attempts to define for practical purposes what would be acceptable in law as being de minimis.”
59.	Mr Carpenter argued strongly that the application of the de minimis principle, which is also recognised in the company law context in paragraphs 177 and 182 of the Companies Act 2006, supported his submissions. 
60.	Both are to the same effect, and paragraph 177(6) reads: 
“(6)	A director need not declare an interest – 
(a)	if it cannot reasonably be regarded as likely to give rise to a conflict of interest; 
(b)	if, or to the extent that, the other directors are already aware of it (and for this purpose the other directors are treated as aware of anything of which they ought reasonably to be aware);  or 
(c)	if, or to the extent that, it concerns terms of his service contract that have been or are to be considered – 
(i)	    by a meeting of the directors, or 
(ii)	by a committee of the directors appointed for the purpose under the company’s constitution.”
61.	He contended that, so far as Garrett was concerned, the heart of the decision was to be found in paragraph 97:
97.	We do not accept the first of these submissions.  There was a close relationship between Websters and Ainsworth.  Websters were dependent on Ainsworth for referrals of cases, although it is unclear to what extent.   As Mr Morgan points out, cases are the lifeblood of solicitors.   The profit generated by cases is likely to be of greater significance to solicitors than commissions paid on insurance premiums paid for ATEs in connection with CFAs.   The indirect financial interest in maintaining a flow of work through membership of a panel of solicitors is greater than the direct financial interest in commissions paid for insurance premiums.  The advice to use the Ainsworth insurance product came in a CFA that it had apparently supplied to its panel solicitors and which bore its livery.    As the judge pointed out at para 7 of his judgment on the application for permission to appeal the decision of the district judge: 
“But the crunch averment in the points of dispute was that failure to comply with recommending the NIG policy would lead to termination of panel membership, and I accept from the lack of response to that direct matter that it is a proper inference that in fact it would have done so, in the sense that the claimant solicitors, Websters, recommended to some clients to go elsewhere for their ATE insurance, then they would have been taken off the panel, or, as the deputy district judge put it slightly differently, “I am not satisfied that the claimant has established that the claimant solicitors have no interest in recommending this policy”.   Although not a direct financial interest, it would be a perfectly understandable indirect financial incentive, if by not recommending a particular policy, a solicitor was taken off a panel of solicitors where there was a not insubstantial amount of work fed through to them because they were members of that panel.”
62.	He submitted that both paragraphs, and the subsequent judgment of the Senior Costs Judge in Andrews v Harrison Taylor Scaffolding, decided on 9 February 2007, proceeded on the basis that in both cases there was a clear and very major dependence by the solicitors on the particular referral scheme, the Ainsworth Scheme.    This is perhaps best illustrated by paragraph 64 of the Senior Costs Judge’s judgment: 
“64.	In my judgment the conclusion is inescapable.   At the relevant time (April 2003) BLA were receiving 95% of their work from Ainsworth.    They had to comply with the Operations Manual, and, where disbursement funding was required, had to recommend the NIG policy.    Ms Cunliffe thought the NIG policy was the best available in any event, but it is beyond doubt that her interest in keeping the profitable joint venture going meant that she and her firm had a declarable interest in recommencing the NIG policy.    There may have been occasions when a disbursement funding loan was not required, when other policies of insurance were used.    It is possible that BLA had a declarable interest in respect of those other policies, because they were entitled to receive commission.    Although it was argued that it was possible to use a different policy where disbursement funding was provided by HBoS, it seems that no other policy was ever recommended.    In my view, therefore, BLA did have a declarable interest in recommending the NIG policy, even if the reason for the recommendation was that it was the best policy on the market, rather than they were forced to do so under the terms of the Operating Manual, but, as the Court of Appeal has pointed out, the profit generated by cases is likely to be of greater significance to solicitors than commissions paid on insurance premiums. ”
63.	In order to make good his submission, that the interest in this case was de minimis, Mr Carpenter referred me to exhibit 7 to Mr Wershof’s witness statement.    This consisted of a table showing a breakdown of his firm’s income from 2000 to 2006.   It is neither necessary nor desirable to exhibit that document in this judgment, but I accept the analysis of it, which was set forth in paragraph 28 of Mr Carpenter’s skeleton argument, as developed in his submissions. 
“28.	If the de minimis principle can apply to Reg 4(2)(e)(ii) in general terms, then it is submitted that it applies in this case.   Mr Wershof has exhibited a table showing a breakdown of his firm’s income from 2000 to 2006 (at p.185).   That table demonstrates the following: 
(a)	Out of 26,217 new files opened during that period (both contentious and non-contentious), only 24 were Accident Line referrals (less than 0.1% of the total files opened). 
(b)	Even as a percentage of claimant PI files opened during that period (653 total), Accident Line referrals constituted less than 0.04%.
(c)	The total number of Accident Line policies issued (94) shows that in general less than 15% of the firm’s claimant PI cases were funded by a CFA together with an Accident Line policy. 
(d)	Over the entire period, Accident Line referrals provided 0.3% of the firm’s total income.”
64.	Mr Carpenter submitted that, even if there was a breach of the Regulations, it was not material in the Hollins sense, as he put it in paragraph 31 of his skeleton: 
“31.	It is submitted that any breach was not material in the Hollins sense, for the following reasons:
(a)	The size of the interest must also be relevant to the issue of materiality:  the greater the undeclared interest, the more consumer protection is undermined.    Given the size of the financial interest in this case, any breach in not declaring it can properly be described as “literal, but trivial” (see Garrett at [31]).
(b)	The “protection” afforded to the Claimant by knowing of such a tiny interest in the choice of premium was negligible in any event.   The purpose of the protection is to avoid a claimant taking out a bad insurance policy and to enable him to make an informed choice (see Garrett at [101]).  However, in this case, the firm’s financial interest in the policy could not conceivably have been a factor which the Claimant would have taken into account when deciding whether to take out the premium.   Much more important to him would have been that: 
(i)	He had used the solicitors in the past and trusted their judgment.   The likelihood is that he would have followed any recommendation made to him whatever the circumstances. 
(ii)	He had made a personal injury claim in the past using the very same premium (see paragraph 5 of Mr Wershof’s statement at p.44). 
(c)	Therefore there was no materially adverse effect on the protection afforded to the Claimant by Reg 4(2)(e)(ii).    Neither was there a materially adverse effect on the administration of justice generally.”
MY CONCLUSION
65.	I am greatly indebted to both Counsel for their concise, and yet helpfully full, submissions on what is clearly a difficult point, but, at the end of the day, I have come to the very clear conclusion that Mr Carpenter’s arguments should prevail.    
66.	There was, in my judgment, a breach of the Regulations, in that the Solicitors did not make it very clear to Mr Myers that there was an obligation on them to recommend the Accident Line scheme.    However, I do not believe that it would have made any difference if this disclosure had been made to the client.   
67.	After all, he was an established client of the firm, and would have no idea of how any better or different type of policy could be obtained, other than through Accident Line. 
68.	I think it is significant that the Claimant, using the same solicitors, had previously brought a personal injury claim, using the very same policy, as Mr Wershof makes clear at paragraph 5 of his witness statement. 
69.	Although Mr Marven criticises the table referred to in exhibit 7 to Mr Wershof’s witness statement, because it does not descend to specific figures, and sought to construct a different scenario, which would show a higher percentage.   I appreciate the commercial sensitivity of quoting actual figures and reject Mr Marven’s submission on this point.  I am clear in my own mind that this case can be very easily distinguished from the Garrett and Andrews cases.    I consider that the interest not declared in this case was de minimis, and that it had no adverse effect on the Claimant’s protection, or the administration of justice generally. 
70.	Accordingly, I decide the preliminary issue in favour of the Claimant, and declare that there has been no breach of paragraph 4(2)(e)(ii) sufficient to invalidate the CFA, which can accordingly be relied upon by the Claimant.
71.	When this judgment is formally handed down, I will obviously hear submissions on costs, etc, and will give directions for the conclusion of the detailed assessment, unless, of course, in the light of this draft, the two very experienced costs draftsmen involved in the case are able to come to an agreement on the figures, which clearly would be desirable.