SUPREME COURT COSTS OFFICE
London, EC4A 1DQ
B e f o r e :
| NICOLA IBBERTSON
|- and -
|- and -
MFI & HOWDENS JOINERY
Benjamin Williams (instructed by Keoghs LLP) for the Defendants
Hearing date: 8th January 2009
Crown Copyright ©
1. On the 21 August 2004 the Claimant suffered serious personal injuries whilst she was a passenger in a car that was being driven by the First Defendant. The claim was settled without the issue of proceedings in March 2007 upon the Claimant accepting the Defendants' insurers' offer of £100,000 inclusive of interest and benefits. The Defendants agreed to pay the Claimants costs and an order for detailed assessment of those costs was made in costs only proceedings on the 5th June 2008.
2. Messrs Pattinson and Brewer acted for the Claimant pursuant to a Conditional Fee Agreement dated the 21 January 2005 ("the CFA") and this judgment primarily relates to the question of the enforceability of the CFA.
The Relevant Regulations
3. The Conditional Fee Agreement Regulations 2000 (as amended).
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 reasonable require.
(2) Those matters are -
(a) – (d) ….
(e) whether the legal representative considers 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 effects to the client.
(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 given about the matters in paragraph (2) (e) and the explanation required by paragraph (3) must be given both orally and in writing.
4. I have been supplied with a bundle of documents containing a witness statement from Linda Levison a partner with Pattinson & Brewer, the Claimant's solicitors, which is dated the 23 December 2008, the Conditional Fee Agreement dated the 21st January 2005, a Part 18 Request for Information served by the Defendants' solicitors together with its reply, and copies of correspondence passing between the Claimant and Pattinson & Brewer from 14 October 2004 up to the date the CFA was signed. I have also seen a copy of an attendance note dated the 30 November 2004.
5. Paragraph (e) on page 4 of the CFA reads as follows:
(i) In all the circumstances, on the information currently available to us, we believe that a contract of insurance with Freeclaim IDC 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 disbursements in case you lose.
(iii) We confirm that we do not have an interest in recommending this particular insurance agreement."
6. The fifth paragraph on page 2 of a letter from Pattinson & Brewer to the Claimant dated 14 October 2004 reads as follows:
I can recommend an insurance policy to cover the Defendants' costs which is provided by Freeclaim IDC. The premium for this policy will be £418.95 including Insurance Premium Tax.
Whilst we are not insurance brokers, and cannot advise you as to all available Insurance products, it is our experience that the Freeclaim IDC premiums are very competitive and the policy provides an appropriate level of indemnity cover.
It is my professional duty to advise you that Freeclaim IDC does refer some cases to this Firm, however, this has not influenced my recommendation to take out this particular insurance policy which I am satisfied is entirely appropriate in your case.
Please feel free to make your own enquires should you so wish."
7. The issue I am being asked to decide is whether the Claimant's solicitors acted in sufficient compliance with Regulation 4 of the Conditional Fee Agreements Regulations 2000 to enable the CFA to be enforceable between solicitor and client and therefore as between the paying and receiving parties.
8. Both Mr Nicol and Mr Williams have submitted skeleton arguments which I have read. They both attended before me at the hearing in order to make oral representations.
The Witness Statement
9. Miss Levison's witness statement is very short. The first three paragraphs simply confirm that she was the fee earner with the conduct of the matter. She attaches copies of correspondence relating to the CFA and confirms that the policy on offer was the best policy available in the circumstances. In paragraph 4 she states:
"The Conditional Fee Agreement was produced from a standardised precedent and I always check these documents very carefully to ensure that there are no technical or other errors enabling the defendants to say that there is something wrong with the agreement. Despite this, in this case I obviously made an error by not removing the offending word "not" from the sentence "we confirm that we do not have an interest in recommending this particular insurance agreement". I explained the correct position to the stepfather of the client to whom she asked me to speak on her behalf and so both he and my client were both well aware of our interest. "
There then follows the usual statement of truth.
The Defendants' Submissions
10. Mr Williams referred me to the recent Accident Line Protect cases which are now cited as Tankard v John Fredericks Plastics Ltd  EWCA Civ 1375. He referred specifically to the obiter dicta of the Court of Appeal in that case under the heading "Disclosure of Interest" and to the Court of Appeal's guidance set out in paragraph 40 of the judgment as to what a solicitor must do to declare his interest in any insurance policy so as to satisfy the requirements of Regulations 4(1) (a) and 4(2) (e) (ii) of the Conditional Fee Agreement Regulations 2000. In paragraph 43 of the judgment the Master of the Rolls stated:
"43. In approaching this issue, we bear in mind that the purpose of the Regulations is consumer protection. This means that in general terms they must be construed in a way which will promote, rather than detract from, such protection. It means in particular that regulation 4(1)(a) and 4(2)(e)(ii) must be construed in a way which will ensure that the solicitor discloses to the client the true nature of his interest in recommending the insurance so that the client can make the necessary informed decision. This entails explaining to the client the nature of the benefits to the solicitor in remain on the ALP Panel with sufficient clarity for the client to understand what they are and to be able to asses their significance."
11. Mr Williams also referred to paragraph 45 of the same judgment when the Court of Appeal considered the position where the solicitor actually asserts that he had no interest in recommending an insurance policy whilst elsewhere having stated that he was contractually bound to recommend it. The court held that this would not be a significant disclosure by saying in paragraph 45:
"On any view, the inclusion in the CFA of the confirmation that the solicitors have no interest in recommending the insurance means that there is no clear disclosure of the interest. In our view, the Regulations require clear disclosure of the interest. Anything less would mean that they fail in their objective of providing consumer protection."
12. Mr Williams submitted that the CFA clearly stated that the solicitors had no interest in recommending the policy. He accepted from the correspondence that had been disclosed that the client sought a much more detailed explanation of the CFA than is usual but, he submitted, that the disclosure in the letter of the 14 October 2004 that Freeclaim IDC did refer some clients to the firm was a totally inadequate disclosure of their interest. It was not a full disclosure. It did not state whether the solicitors were contractually obliged to recommend any insurance policy or what the effect would be with regard to their relationship with Freeclaim IDC if they recommended another insurance policy. It did not state as to whether the solicitors had to recommend that particular insurance policy but only said that the fact that they received work from Freeclaim IDC did not affect their recommendation.
13. While Mr Williams accepted that the correspondence showed that the client had carefully considered all aspects of the agreement and raised no issue with regard to the disclosure of interest it was unlikely that the client would do so as no disclosure of the actual and full extent of the nature of the interest had been disclosed.
14. In applying these facts to the dicta of the Court of Appeal in Tankard Mr Williams submitted that the regulations required a clear disclosure of the interest and that the inclusion in the CFA of the confirmation the solicitor had no interest in recommending the insurance meant that there was no clear disclosure of interest. Anything less than a full disclosure of interest meant that the solicitors failed in their objective of providing consumer protection.
15. Mr Williams's submission was that there had been no disclosure of interest and as a second submission that where there was a conflict between what was stated in the CFA and what had been stated earlier to the client it must be what had been stated in the CFA that must prevail.
16. Mr Williams also referred to the fact that the documentation produced showed that the only oral explanation of the issue of the insurance was given to the Claimants step father and not to the Claimant as required by the regulations.
The Claimant's Submissions
17. Mr Nicol's submitted that the Regulations were there for consumer protection and there was never any suggestion that this consumer was not fully protected. He pointed out that the solicitors had done an excellent job, the Claimant never had any cause for complaint and that the Claimant could not have relied on any alleged breach in respect of any claim made against her solicitor.
18. Mr Nicol submitted that one had to look at this particular client and the detailed correspondence passing between the client and her solicitors which showed that the Claimant and step father were intelligent and well educated people who were only content to enter into a CFA when the consequences of doing so had been explained to them in detail and thoroughly understood by them. Mr Nicol submitted that the client had been informed that the solicitors had an interest and that it was also clear that the fact that the solicitors had an interest had not influenced them at all.
19. Mr Nicol also submitted that any breach of the Regulations had no material effect on the protection afforded to the Claimant. He referred me to the cases of Hollins v Russell 1WLR2487, Garrett v Halton BC  1WLR554 and Jones v Wrexham BC 1WLR1590 to illustrate his submission that for a CFA to be unenforceable it must be shown that the departure from a particular regulation has had a materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice. In Garrett, Mr Nicol submitted that it was acknowledged that a relevant factor was the nature of the client and in this particular case the detail with which the client required explanation to be made to her prior to her entering into the CFA illustrated the fact that any failure to comply with the regulation had no material effect upon her.
20. Mr Nicol submitted that to find the CFA in this case unenforceable where there had been a technical breach would be an unjust result.
21. What I have found difficult to ascertain is what, if any, was the solicitor's interest in recommending this particular policy.
22. Paragraph 43 of the judgment of the Master of the Rolls in Tankard makes clear that the solicitor must disclose to the client the true nature of his interest in recommending the insurance so that the client can make the necessary informed decision. This would entail explaining to the client the nature of the benefits to the solicitor in receiving recommendations from Freeclaim IDC. I therefore accept the submission made by Mr Williams that there has been no full disclosure of interest.
23. Given the challenge made to the CFA in the points of dispute I would have expected Ms Levison's witness statement to have set out in detail the nature of the relationship between her firm and Freeclaim IDC. If there was in fact no relationship between Freeclaim IDC and the solicitors other than the fact that Freeclaim IDC freely recommend clients to them without any quid pro quo I would have expected to have seen mention of this in the witness statement.
24. The witness statement simply explains that the CFA would always be checked by Ms Levison and there was simply an error in not removing the offending word "not" from the sentence "we confirm that we do not have an interest in recommending this particular insurance agreement". I find this statement difficult to reconcile when it appears from the correspondence that a Conditional Fee Agreement was sent to the client on the 14 October 2004, an amended Conditional Fee Agreement was sent to the client on the 10 November 2004 and another amended Conditional Fee Agreement was sent to the client on the 30 November 2004. It would appear that on none of these occasions was the Conditional Fee Agreement sufficiently checked to ensure that the word "not" was deleted from the appropriate sentence.
25. It therefore would follow that if no full disclosure about the relationship between the solicitors and Freeclaim IDC had been made to the client it is not surprising that this issue was not raised by the client in the subsequent detailed correspondence and discussions concerning the wording of the Conditional Fee Agreement. Whilst it may be that the client was, in Mr Nicol's words, "a sophisticated client" it can not be assumed that the client was so sophisticated that she would have known that where work was provided by a claim farming company such as Freeclaim IDC there would likely to be a quid pro quo. It is therefore not surprising that any question concerning the relationship between Freeclaim IDC and the solicitors was not raised by the client as the information that had been provided to the client in this respect was so limited. As this client was clearly very cautious about entering into the CFA and required detailed explanations about it's terms and effect, it was even more important that a full disclosure was made to her to enable her to make an informed decision as to whether any interest which her solicitor had in recommending the particular insurance would affect their ability to act for her without any conflict of interest.
26. I reject Mr Nicol's submission that the breach of the regulations had no material effect on the protection afforded to the Claimant. The Master of the Rolls has made it clear in Tankard that the regulations must be construed in a way that will ensure that the solicitor discloses to the client the true nature of his interest in recommending the insurance so that the client can make the necessary informed decision. It seems to me that the obiter dicta given in Tankard are directed at cases of this nature. Notwithstanding the excellent work carried out by the solicitors, the failure to make a proper disclosure of their interest in recommending the insurance policy cannot be considered to be de minimus or an immaterial breach of the regulations.
27. I accept Mr William's submission, on the authority of Tankard, that where there is a conflict between the wording of the CFA and what the client had previously been informed, the wording in the CFA must prevail and that there has been no disclosure of interest.
28. For the above reasons the Conditional Fee Agreement dated the 21 January 2005 is unenforceable.
29. The other matter upon which I was requested to make a ruling was as to whether it was reasonable for the Claimant to have instructed Pattinson & Brewer who are based in the West End of London and who charge London rates in circumstances where the Claimant lived on the Isle of Wight.
30. Mr Williams submitted that it was unreasonable for the Claimant to have instructed London solicitors. He submitted that there were many solicitors in an area such as Southampton that could have dealt with a personal injury matter of this nature and that there were no reasons or any complexities within this case which required the attentions of a London solicitor charging at London rates.
31. Mr Nicol referred to the fact that the Claimants injuries were catastrophic. There was a major issue of contributory negligence which made the case complex and in all the circumstances it was reasonable for the Claimant to have instructed London solicitors.
32. I have seen no evidence as to the reasons as to why a London solicitor was instructed in this case. Where there is a dispute of this nature I would have expected the Claimant or at least her solicitors to have set out the reasons in a witness statement as to the facts surrounding the instruction of the London solicitors. The only information that I have been able to ascertain with regard to the facts is what has been contained in the solicitors file of correspondence and from the limited information within that file it appears that the Claimant instructed the solicitors originally through BTE Insurers, notwithstanding that it transpired that the BTE insurance cover was not in fact in place. Mr Nicol was unable to provide me with any further information.
33. All the relevant authorities indicate that the relevant test is to ascertain as to whether or not the Claimant acted reasonably in not instructing local solicitors. I accept Mr Williams submission that notwithstanding the seriousness of the injuries there are many solicitors in the Southampton area and in the South of England who deal with high value personal injury claims and, in the absence of any evidence to support the Claimant's submission that she acted reasonably in instructing London solicitors, in my judgment it was unreasonable for her to do so and if notwithstanding my decision with regard to the unenforceability of the Conditional Fee Agreement this assessment were to proceed further, the hourly rates that will be allowed will be based on those relevant to a firm of solicitors based in the Southampton area of England.