England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ROMFORD COUNTY COURT
HIS HONOUR JUDGE PLATT

		Royal Courts of Justice Strand, London, WC2A 2LL
		28/07/2006

Lord Justice Dyson:

Introduction

1. The issue arising in this case is the meaning of a conditional fee agreement ("CFA") as defined by section 58(2)(a) of the Courts and Legal Services Act 1990 (as amended by the Access to Justice Act 1999) ("the 1990 Act"). It turns on the true construction of a retainer letter sent to the claimant by Messrs Sherringtons, her solicitors, on 20 November 2002. His Honour Judge Platt held that it was a CFA and that, because it did not satisfy the relevant statutory conditions, it was unenforceable: see section 58(1). The result was that the solicitors were not entitled to any remuneration for their work for the claimant. The importance of this case to the solicitors is that the retainer letter is their standard client care letter. We are told that a letter in similar terms is in common use in the profession.

The facts

2. On 8 November 2002, the claimant was injured while travelling on one of the defendant's buses which was involved in a collision with another of its buses. She consulted Messrs Sherringtons, solicitors, who sent her a retainer letter dated 20 November 2002. The letter lies at the heart of this appeal. The defendant admitted liability soon after the accident. The claimant eventually issued proceedings in the Romford County Court on 22 January 2004 and on 24 February she entered judgment in default of acknowledgement of service. On 26 February, the defendant offered to pay £3750 in respect of the claim for general damages and the sum claimed as special damages. This offer was accepted on 1 March. On 5 April, the compromise was embodied in a consent order which also provided that the defendant should pay the claimant's costs to be assessed, if not agreed, on the standard basis.
3. The parties were unable to agree costs and the matter proceeded to a detailed assessment before the master. Before Master Berry, the defendant argued that the retainer was a CFA within the meaning of section 58(2)(a) of the 1990 Act and that it was unenforceable by reason of section 58(1) of the 1990 Act because it failed to comply with certain of the Conditional Fee Agreements Regulations 2000 ("the Regulations").

The 1990 Act

4. Section 58 of the 1990 Act provides, so far as material:

"(1) A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement; but (subject to subsection (5)) any other conditional fee agreement shall be unenforceable.

(2) For the purposes of this section and section 58A-

(a) a conditional fee agreement is an agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances; and

……….

(3) The following conditions are applicable to every conditional fee agreement-

(a) it must be in writing;

(b) it must not relate to proceedings which cannot be the subject of an enforceable conditional fee agreement; and

(c) it must comply with such requirements (if any) as may be prescribed by the Lord Chancellor."

5. Section 119(1) defines "litigation services" as "any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or any contemplated proceedings, to provide."

The retainer letter

6. There is no evidence as to whether the claimant accepted the terms of the retainer letter, but the argument has proceeded on the basis that she did. The issue of costs is addressed in the middle of the second page. The letter gives the firm's hourly rates and estimates that if the case goes to a full hearing the fee is likely to be £6000 plus VAT and disbursements. It says that if the claimant wins, she will recover the majority of her costs from the defendant, and if she loses, she is likely to be ordered to pay the defendant's costs. On the third page, the letter says that the solicitors will not seek a payment on account of costs, except possibly for experts' reports. So far, the letter contains nothing exceptional.
7. The last five paragraphs on the third page are in these terms:

"Although it is the usual practice of all Solicitors to obtain a payment on account of costs and disbursements in your particular matter we shall not be doing so. If your opponent admits liability his/her insurers will pay your legal costs.

However and where liability is not admitted and you decide to pursue your case further then you may be liable to pay for the cost of medical reports, police reports and other expert reports as are required. If you succeed and recover compensation from your opponent you will be reimbursed your outlay.

If your claim is disputed by your opponent and you wish to pursue your claim through litigation then we will require a payment on account of costs and disbursements. Before requesting any payment we will discuss the alternative methods of funding your case with you. You may have the funds to pay for the cost of litigation. You may wish to enter into a Conditional Fee Agreement with us and apply for after sthe event legal expenses insurance to cover your opponent's cost in litigation. If you and your partner already have legal expenses insurance, through possibly your household contents policy of insurance, motor car policy of insurance or stand alone before the event legal expenses policy of insurance, tell us and we will assist you in applying to them for cover. In any event and when we next meet please bring along your policies of insurance for us to check through on your behalf.

Were you to meet the cost of litigation from your own funds then we will bill you at regular intervals as your matter progresses and in certain cases we will allow you time for payment of bills or accept an instalment arrangement. Any such arrangement is at the discretion of Mr. Newman.

If your claim is disputed by your opponent and you decide not to pursue your claim then we will not make a charge for the work we have done to date."

The decisions below

8. On 8 February 2005, the master gave a short judgment in which he said that he was not persuaded that the retainer letter was intended to be a CFA. He said that, if required, he could give more detailed reasons. He was asked for further reasons which he gave in his judgment of 8 April 2005. He accepted the submissions made on behalf of the claimant that there was no CFA in this case because there was no intention to make one. It was plain from the language of the retainer letter that there was no intention to make a CFA by that letter. Without such an intention, there could be no CFA.
9. The defendant appealed. By a judgment given on 24 October, His Honour Judge Platt allowed the appeal. He agreed with the master that the retainer letter provided ample evidence to support the finding that the parties never intended to enter into a CFA (there was no other evidence). But he seems to have accepted the submission made on behalf of the defendant that, asking whether the parties intended to enter into a CFA, the master had asked himself the wrong question. The judge said that, as a result of section 58(2)(a) of the 1990 Act, there are only two kinds of fee agreement: those that fall within section 58(2)(a) and those that fall outside it. There is no scope for a third species of agreement (as was contended on behalf of the claimant), namely an agreement which, though it appears to fall within section 58(2)(a), in fact falls outside it by reason of a lack of intention to enter into a CFA. He concluded at para 22:

"There is no dispute that the terms of the retainer letter in this case do provide for the fees of the solicitor to be payable only in certain circumstances. It must follow that it is a CFA as defined by section 58(2)(a) and in my judgment the learned Costs Judge erred in law in holding that an intention to enter into a CFA was a necessary element of the agreement."

10. The basis for this conclusion must have been the last paragraph on the third page of the retainer letter: "If your claim is disputed by your opponent and you decide not to pursue your claim then we will not make a charge for the work we have done to date."

Discussion

11. The last three paragraphs on the third page deal with the question of costs if the claim is disputed. It deals with the matter on alternative bases, namely (i) that the claimant wishes to "pursue her claim through litigation", and (ii) that she does not wish to do so. Absent the last paragraph on the page, it seems to me that it would not even have been arguable that the retainer letter was, or evidenced, a CFA. It would have been an agreement that did no more than offer the claimant a choice as to how to fund the claim in the event that she wished to pursue it. One option was to fund it herself; another was to enter into a CFA and apply for after the event insurance.
12. It seems to have been agreed before the judge that it was the existence of the last paragraph that rendered the agreement a CFA. Mr Jones seeks to uphold the judge's decision. He says that the retainer letter offers the claimant two alternatives in the event that her claim is disputed: (i) to pursue the claim and be liable for her solicitor's costs, or (ii) not to pursue the claim on the basis that she would have no liability to pay costs to her solicitor. He submits that the agreement is for the provision of advocacy and litigation services and it provides for her solicitor's fees and expenses to be payable only in certain specified circumstances, namely in all circumstances except where she decides not to pursue the claim. It follows that the agreement satisfies the requirements of section 58(2)(a) and is a CFA.
13. I cannot accept this submission. It is important to bear in mind that the object of section 58 of the 1990 Act and the Regulations is to provide protection to clients: see Hollins v Russell [2003] EWCA Civ 718, [2003] 1 WLR 2487, paras 100, 105, 107. The need for that protection is predicated on the assumption that the solicitor will in fact provide litigation or advocacy services. If such services are not provided, the client has no need of protection. Section 58(2)(a) defines a CFA as an agreement with a person providing advocacy or litigation services, which provides for his fees and expenses for those services, or any of them, to be payable only in specified circumstances. The words that I have emphasised are critical to this appeal. A provision in an agreement as to the costs payable in respect of services which are not advocacy or litigation services as defined in section 119(1) is irrelevant to whether an agreement is a CFA. This is consistent with regulation 1(3) of the Regulations which defines "client" as including, except where the context otherwise provides, a person who "(a) has instructed the legal representative to provide advocacy or litigation services to which the conditional fee agreement relates".
14. It follows that the central question in this case is whether "the work we have done to date" referred to in the last paragraph on the third page of the retainer letter comes within the definition of "litigation services": no question of "advocacy services" arises in this case. This is a question of construction. It does not involve considering what work was in fact done by the solicitor. It involves a consideration of whether work done by the solicitor before the claimant decided not to pursue her claim, if that is what she decided to do, should properly be characterised as the provision of litigation services.
15. The letter does not spell out when the claimant must decide whether or not to pursue her claim in order to take advantage of the waiver of fees. I would hold, as a matter of construction, that it requires the decision to be taken before proceedings are issued. This emerges clearly from the fact that in the pre-penultimate paragraph, the letter refers to pursuing the claim "through litigation" and there are references thereafter to funding and meeting "the cost of litigation". The phrase "pursue your claim" must bear the same meaning as in the pre-penultinate paragraph ie "pursue the claim through litigation". I would add that it is unlikely that the solicitors would have intended to waive their charges "for the work we have done to date" if it were contemplated that this might be substantial.
16. In my judgment, the last paragraph on the third page is an offer to waive fees for modest pre-litigation services. Could such services be "litigation services" within the meaning of the 1990 Act? More particularly, could such services be "services which it would be reasonable to expect a person who is….contemplating exercising a right to conduct litigation in relation to….contemplated proceedings, to provide" (section 119(1))? As I have said, this is a question of construction of the letter. It does not depend on whether the claimant decided not to pursue the claim or what services had been rendered by the solicitor when that decision was made (if indeed it was made).
17. Approaching it as a matter of construction, I would hold that the work done before a decision is made not to pursue the claim pursuant to the last paragraph on the page is not the provision of litigation services. In my judgment, "contemplated proceedings" are proceedings of which it can be said that there is at least a real likelihood that they will be issued. Until the potential defendant disputes the claim, it is not possible to say that proceedings are contemplated. Advising a client as to whether he or she has a good prima facie case and writing a letter of claim are not enough to amount to litigation services.
18. This approach to the meaning of "litigation services" is consistent with the statutory purpose of protecting clients to which I have referred at para 13 above. A client who, having received limited pre-litigation services, decides not to pursue a claim by litigation has no need for the panoply of protection afforded by the conditions stated in section 58(3) of the 1990 Act. In my view, it was not intended by Parliament that this statutory regime should apply to agreements to provide such limited services. This agreement is a far cry from the most obvious application of section 58(2)(a), namely a "no win, no win" arrangement.
19. It is clear that the retainer letter has been drafted with care. As Mr Foy QC points out, it increases access to justice. It enables a potential claimant to obtain legal advice and take a few steps towards litigation in order to see whether the defendant will admit liability at an early stage without exposure to a serious risk of costs. It is of benefit to claimants to enter into such agreements. The defendant benefits as well if avoids the potential liability to pay a success fee and insurance premium that a CFA is likely to entail. It would be unfortunate if such retainers were to be unenforceable because they were CFAs and did not satisfy all the conditions imposed by the 1990 Act and the Regulations.
20. For completeness, I should point out that the Regulations do not apply to CFAs that have been entered into since 1 November 2005: see Conditional Fee Agreements (Revocation) Regulations 2005. But no doubt many CFAs were entered into before 1 November 2005 in respect of claims whose costs consequences have not yet been resolved.
21. For the reasons that I have given, however, I would hold that the retainer letter was not, and did not evidence, a CFA and would allow this appeal.

Sir Martin Nourse:

22. I agree.

Lord Justice Auld:

23. I also agree.