QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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Case No 1: 2010 Folio 614 |
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(1) CHRISTINE BROWN-QUINN |
First Claimant |
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(2) WEBSTER DIXON LLP |
Second Claimant |
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(1) EQUITY SYNDICATE MANAGEMENT LTD |
First Defendant |
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(2) MOTORPLUS LTD |
Second Defendant |
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Case No 2: 2010 Folio 622 |
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WEBSTER DIXON LLP |
Claimant |
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EQUITY SYNDICATE MANAGEMENT LTD |
Defendant |
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Case No 3: 2010 Folio 1429 |
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(1) JANINE BAXTER |
First Claimant |
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(2) WEBSTER DIXON LLP |
Second Claimant |
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(1) EQUITY SYNDICATE MANAGEMENT LTD |
First Defendant |
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(1) MOTORPLUS LTD |
Second Defendant |
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Dr Mark Friston (instructed by Horwich Cohen Coghlan) for the Defendants
Hearing dates: 7 & 8 October 2011
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Crown Copyright ©
MR JUSTICE BURTON :
"1. [WD] is a London-based firm of solicitors, established in 1998. Amongst other areas, [WD] specialises in employment law. It is situated in the City of London
2. [WD] is rated at Band Three (employment) in Chambers and Partners and is noted therein as being "tailored to suit the needs of City professionals, bankers, accountants, traders, lawyers, IT specialists and directors". It is also rated at Band Three in Legal 500 as a Claimant firm acting in the field of employment law; in the recent past it was described therein as having "a focus on acting for executives and professionals, tailoring advice to their needs"; it is currently described as being a firm that "takes on complex cases involving multiple strands of discrimination, unfair dismissal and TUPE"."
"Your entitlement to recover reasonable costs in cases will be subject to:
(a) an hourly rate of £125 plus VAT which is expected to be fully inclusive of any relevant mark up;
(b) letters out and in at one tenth and one twentieth of the hourly rate respectively;
(c) travelling and waiting time to be charged at two thirds of the agreed hourly rate."
In the case of CBQ and JB, this rate of £125 was increased to £139. I shall call them "non-panel costs".
i) There was a fixed hourly rate, irrespective of the importance or complexity of the matter.
ii) It was a flat rate chargeable in respect of whoever should carry out the work on behalf of the firm, be it partner, associate, assistant or trainee. The rates which WD have sought to charge are very much more than that, in respect respectively of a claim against a very substantial global investment bank for redundancy, unfair dismissal and sex discrimination (CBQ), race discrimination, constructive unfair dismissal, victimisation, breach of Part Time Workers Regulations and breach of Flexible Working Regulations against a very large foreign investment bank (CJ) and unfair dismissal and disability discrimination against her former employer, an educational establishment (JB). WD put forward hourly rates for a partner or associate (Grades A/B) of £274, for a solicitor £210 and for a trainee solicitor £105.
"Freedom to choose lawyer.
6.(1) Where under a legal expenses insurance contract recourse is had to a lawyer (or other person having such qualifications as may be necessary) to defend, represent or serve the interests of the insured in any inquiry or proceedings, the insured shall be free to choose that lawyer (or other person).
(2) The insured shall also be free to choose a lawyer (or other person having such qualifications as may be necessary) to serve his interests whenever a conflict of interests arises.
(3) The above rights shall be expressly recognised in the policy."
"Article 4(1)(a) of [the] Council Directive on the co-ordination of laws, regulations and administrative provisions relating to legal expenses insurance must be interpreted as not permitting the legal expenses insurer to reserve the right, where a large number of insured persons suffer loss as a result of the same event, itself to select the legal representative of all the insured persons concerned."
"45. As is apparent from the entirety of Articles 4, 6 and 7 of [the] Directive the rights of insured persons recognised by those Articles seek to broadly protect the interests of the insured person without being restricted to situations in which a conflict of interests arises.
59. It should be noted that whilst Article 5 of [the] Directive authorises the Member States to provide exemption from the application of Article 4(1) to certain cases arising from the use of road vehicles, that exemption to the right to freely choose one's representative must be interpreted restrictively and cannot therefore serve as a basis for a reasoning by analogy."
"Definitions
COSTS and EXPENSES
Legal and professional fees for which you are responsible, including reasonable fees, costs and expenses incurred by the Appointed Representative acting for you in connection with the pursuit or defence of legal proceedings.
[There is a limitation to such costs and expenses of a maximum of £50,000, provided for by the Terms and Conditions.]
APPOINTED REPRESENTATIVE
A solicitor, firm of solicitors, barrister or any other suitably qualified person appointed to act on your behalf.
General Conditions
1. You [defined in the Definitions section as "You, the insured" (plus certain dependants)] must:
1.1 Keep to the terms and conditions of this policy.
1.2 Take reasonable steps to keep any amount we have to pay as low as possible.
2.3 If we agree to start legal proceedings and it becomes mandatory for you to be represented by a lawyer, or there is a conflict of interest, you can choose an appointed representative by sending us the suitably qualified person's name and address. We may choose not to accept the choice of representative, but only in exceptional circumstances. If there is a disagreement over the choice of appointed representative another other suitably qualified person can be appointed to decide the matter. Before you choose a lawyer, we can appoint an appointed representative.
2.4 An appointed representative will be appointed by us and represent you according to our standard terms of appointment. The appointed representative must co-operate fully with us at all times.
5. If an appointed representative refused to continue acting for you or if you dismiss an appointed representative, the cover we provide will end at once, unless we agree to appoint another appointed representative.
7. If we and you disagree about the choice [of] appointed representative we and you can choose another suitably qualified person to decide the matter. We and you must both agree to the choice of this person in writing. Failing this we will ask the President of a relevant national Law Society to choose a suitably qualified person "
Outset Cases
i) the Regulations do not apply once proceedings have commenced.
ii) the Claimants are not entitled to be covered under the insurance if they instruct solicitors (such as WD) who have not accepted the non-panel terms.
iii) the Claimants are restricted to recovery of solicitors' fees at the rate of £125 or £139 per hour.
"1. Where the court assesses (whether by the summary or detailed procedure) costs which are payable by the paying party to the receiving party under the terms of a contract, the costs payable under those terms are, unless the contract expressly provides otherwise, to be presumed to be costs which
(a) have been reasonably incurred, and
(b) are reasonable in amount, and the court will assess them accordingly."
i) The Claimants submit that the Regulations are plainly applicable, because otherwise there will be a substantial fetter on his freedom to choose a suitable solicitor for a particular case, local or in the City of London as appropriate, specialist or qualified to assess and pursue a claim against, at least in the case of CBQ and CJ, substantial international institutions, and in relation to complex claims of employment or discrimination law, with which many firms might be unable to deal. Although the Defendants have resiled from a complete declinature of cover, their present position that the entitlement of the client to recover his legal costs and expenses under the policy must depend not upon their reasonableness on the ordinary basis, but their assessment on the policy basis, will leave the client at substantial risk of liability for uninsured fees if he were to instruct a non-panel firm which was not prepared to accept the non-panel costs. This is the very concern which the Law Society expressed to Jackson LJ, as referred to in paragraph 5 above. Not only do they rely on Eschig, but also on the decision of HH Judge Seymour QC in Pine v Das Legal Expenses Insurance Co Ltd [2011] EWHC 658 QB, in which the insurers sought to say that their insured was not covered for the fees of a barrister instructed by direct access, first on the basis that such barrister was alleged not to be a lawyer within the terms of the policy, and secondly by reference to a clause similar to our Clause 2.3 that such arrangements amounted to "exceptional circumstances", such as to allow the insurer not to accept the insured's choice of representative. Such arguments were rejected by Judge Seymour, who, obiter (at paragraph 43), opined that a case in which an insured wished to instruct solicitors who were not prepared to enter into a standard form of agreement with the insurer would also not amount to "exceptional circumstances". Mr Wynter submits that, even though the Defendants in this case do not now pursue such a suggestion, the same logic would apply to the argument which the Defendants now put forward.
ii) The Defendants raise three fundamental points:
a) The Court should not take steps to discourage BTE insurance in circumstances where access to justice is being continually restricted to litigants in respect of all other forms of funding: legal aid is almost unavailable, and the Jackson Report, if, as seems likely, it is put into effect, will result in the two other methods of funding of clients' costs, After the Event ("ATE") insurance and Conditional Fee Agreements ("CFAs") becoming considerably more unattractive, and hence likely to become progressively more unavailable.
b) The premiums have been calculated on the basis of special rates being negotiated with panel firms, and the non-panel firms being required to agree to non-panel costs; and to allow non-panel firms to be instructed and to have their fees covered under the insurance on a basis simply restricted by the usual concepts of reasonableness/assessment under CPR Part 44, is bound to render it uneconomic for insurers to continue with BTE insurance, at any rate without a considerable increase in the premiums.
c) The existence of a cohort of claimants in the fortunate position of having BTE insurance, who would, if instructing a non-panel firm, be entitled to claim under the policy the non-panel firm's reasonable fees just as if they were a (solvent) paying party, will render that cohort a substantial target for predatory solicitors, who will take steps to snap them up, so as to be in a position to charge their usual rates, with the confidence that such clients, unlike the majority, will be able to pay.
iii) Further Dr Friston refers to Stark v DAS Oesterreiche Algemeine Rechtsschutzversicherung AG [2011] Case C-293/10 ("Stark"), a case produced by the Claimants. In Stark there was an Austrian legislative provision in their Law on rates for lawyers' fees, which validated a clause included in the insurance entitling the legal expenses insurer to limit benefits under that cover to reimbursement of the amount normally claimed by a lawyer established in the place of the court before which the relevant proceedings had been brought; with the result that the client in question was left, in a position in which his lawyer would be appearing in an "away" court, for which he was charging higher fees, with such additional fees irrecoverable under the insurance. Stark was, submitted Dr Friston, plainly a case in which the European Court was allowing a similar fetter on the freedom of a client to choose his own lawyer. Mr Wynter however pointed out that what was in issue in Stark was the validity of a national provision, and in paragraphs 31 to 33 of its judgment, the Court, addressing Eschig, recorded that "the Member States remain free to determine the body of rules applicable to [legal expenses insurance contracts], on condition that those comply with EU law, and in particular with Article 4 of Directive 87/344". The Court's conclusion was that Article 4(1)
" must be interpreted as not precluding a national provision under which it may be agreed that a person covered by legal expenses insurance may select only persons professionally authorised to represent parties who have their chambers at the place of the court or administrative authority having jurisdiction at first instance, on condition that that restriction relates only to the extent of the cover by the legal insurance provider in respect of costs linked to the involvement of a representative and that the reimbursement actually provided by that insurer is sufficient, this being a matter for the referring court to determine."
i) There is an obligation on the insured to "take reasonable steps to keep any amount [the Insured has] to pay as low as possible". I do not accept Dr Friston's submission that there is an obligation thereby which also applies to the Appointed Representative: it is plainly "you" [the insured] as defined in the Definitions, and as opposed to the Appointed Representative (also as there defined), who must do so. I consider that it relates primarily to the obligation of the client not to overload the solicitor with instructions, or overtask him, and not to the selection of the solicitor at the outset (or for that matter on transfer). There is an obligation to have the Appointed Representative's costs and expenses taxed if required by the insured (Clause 4.1). The entitlement of the insured under these policy provisions is to recover reasonable fees, as per the definition of Costs and Expenses in paragraph 13 above. There may be cases in which the obligation might extend to restricting cover for the instruction of 'Rolls Royce' solicitors on 'Rolls Royce' fees, but such would in any event not be likely to be 'reasonable' fees.
ii) By Clause 2.4, the Appointed Representative will be appointed by the insured (subject to the provisions of Clause 2.3) and will represent the insured "according to our standard terms of appointment". Such Terms of Appointment are not annexed to the Policy. I consider it wholly unlikely that they would ever be seen by the insured, certainly not in the absence of an express request, which would appear unlikely. There is no reference to the fact that such "Standard Terms of Appointment" contain any costs provisions which have any impact on the Insured.
i) The powerful submissions of the Defendants, set out in paragraph 19(ii) above, are of obvious importance. It is plainly the case that the premiums are set at present by reference to an expectation that the reduced charges of panel solicitors, and the non-panel costs of non-panel solicitors, will keep down the quantum of legal costs and expenses (always subject to the limitation of £50,000).
ii) Non-panel costs are bound to be less than the usual rate charged by such solicitors, i.e. less than the reasonable costs assessed in accordance with CPR 44, even taking account of the fact that there may be some swings and roundabouts involved in the flat rate (insofar as trainees are used) and in the favourable provision for their being able to charge for letters in.
iii) Subject to the point that Mr Wynter makes, as set out in paragraph 19(i) above, I note what the European Court said, at paragraph 33 of Stark:
"Consequently, freedom of choice, within the terms of Article 4(1) of Directive 87/344, does not mean that Member States are obliged to require insurers, in all circumstances, to cover in full the costs incurred in connection with the defence of an insured person, irrespective of the place where the person professionally entitled to represent that person is established in relation to the court of administrative authority with jurisdiction to deal with a dispute, on condition that that freedom is not rendered meaningless. That would be the case if the restriction imposed on the payment of those costs were to render de facto impossible a reasonable choice of representative by the insured person. In any event, it is for the national courts, if an action is brought before them in this regard, to determine whether or not there is any such restriction. "
iv) Dr Friston submits that, if, as the Claimant submits, the test is simply to be that which is reasonable (what he calls the "ordinary basis"), as opposed to that which is provided for in the contract ("the policy basis") then the Court will be rewriting the contract under the guise of making an assessment of costs due pursuant to CPR 48.
i) As a result of the proper concession by Dr Friston that the Claimants are not bound by, and the Defendants are not entitled to insist upon, the £125 or £139 per hour, the assessment under CPR 48 must in any event inevitably move away from the express provisions of the Terms of Appointment for non-panel solicitors, and be assessing reasonableness of the hourly rate on some basis albeit a basis which Dr Friston contends should, by reference to his reliance upon Clause 1.2 of the General Conditions be far less generous than the test of "mere reasonableness", as he puts it, under CPR Rule 44.
ii) So far as the Claimants' case on absence of fetter on freedom of choice is concerned, there must inevitably be in any event a risk for the insured which he accepts in choosing his own solicitor, even if Mr Wynter's arguments were to succeed in their entirety, given that the insured would be renouncing a situation in which, by accepting a panel solicitor, or a solicitor on the basis of non-panel costs, he would not be at any risk of having to pay any excess of fees, while, by selecting his own solicitor, even if there were an assessment on a CPR 44 basis, he would (subject to his own right to challenge it on a solicitor-client basis) be at risk of being left with some excess to pay. Thus, such an exercise of choice cannot be risk-free.
i) The location of the chosen solicitors:
ii) Their specialisation, and in particular any special qualifications for taking on the instant claim:
iii) The complexity of the claim:
iv) The importance of the claim to the insured:
v) The substance and strength of the proposed defendant to such claim:
vi) The nature of the work required to be carried out, in particular whether it should sensibly be carried out by senior solicitors or partners, whose rates would inevitably be likely to be greater than the hourly rate provided for in the non-panel costs.
This to my mind leaves open a sufficient ambit for the interplay (necessary within these policy provisions) between the recovery of 'reasonable fees' and the requirement that the insured keep the costs 'as low as possible'.
i) The Insured has validly chosen, as her lawyer, to act in and about her claim, WD.
ii) WD is and has been since (the appropriate date) for the purposes of and within the meaning of the policy, the "Appointed Representative" appointed to act under the Policy in and about the Insured's claim.
iii) The Insurer is not entitled under the Regulations or otherwise to decline to accept the Insured's choice of lawyer to act for him under the Policy on the basis that the said lawyer's rates of remuneration are in excess of those stipulated by the Insurer in its "Terms of Appointment for non-panel solicitors".
iv) The fact that WD's rates of remuneration are and were in excess of those stipulated by the Insurer in such Terms of Appointment does not constitute "exceptional circumstances" within the meaning of the Policy such as might permit the Insurer to decline to accept the appointment of WD as Appointed Representative.
v) WD's fees for acting as such Appointed Representative are to be assessed pursuant to CPR Part 48, in accordance with the terms of the Policy, not restricted by the non-panel costs provided for in such Terms of Appointment, but such that:
a) Reference may be made in the course of such assessment to such non-panel costs, if and as appropriate, in the course of the assessment of the reasonableness of WD's fees.
b) The choice of WD by the Insured shall not of itself constitute the taking of an unreasonable step by the Insured or a breach of any term of the policy.
Transfer Cases
"Under the 1990 Regulations and in the context of these Policies:
1. Is the provision under Clause 5 an enforceable provision in the light of the right to choose a lawyer as expressed in the 1990 Regulations? Is the freedom to choose a lawyer limited to one choice?
2. On the facts of this case, was the Insurer's refusal to agree to JB's choice of WD unlawful?
3. Pursuant to Clause 6(2) of the Regulations, had a conflict of interest arisen because of the Insurer's interest in preventing the transfer of the case to WD and the interest of JB in maintaining continuity of representation? If so, was the refusal to agree to JB's choice of lawyer unlawful?
4. Is there an implied term to the insurance policy that there will be no unreasonable refusal by the Insurer to accept the transfer of a case to another Appointed Representative? If so, on the facts of the case, was the Insurer in breach of that implied provision, if found, to refuse to agree JB's choice of WD?
5. As a matter of fact, did the Defendant's agree to appoint WD as another Appointed Representative of JB, thereby affirming the policy and waiving any right under the policy to refuse to pay WD's costs, subject only to assessment of those costs?"
i) The freedom to choose a lawyer is not limited to one choice.
ii) Clause 5, as it stands, is in breach of Regulation 5, both in respect to the imposition of an absolute right to refuse and by reference to its failure to take into account the provisions of Regulation 6(2) with regard to a conflict of interest arising.
iii) Clause 5 is to be construed so as to incorporate an implied term that the insurer's agreement to the new Appointed Representative cannot be unreasonably refused.
iv) On the facts of this case, continued refusal by the Defendants in the case of JB (and insofar as it arises in the case of CBQ) is and was unreasonable.
v) Insofar as JB's case (and/or CBQ's case) has been treated differently as a transfer case, the same principles are to apply in such case (or cases) to an assessment as are set out in paragraphs 25 to 27 above, in that questions of duplication of costs, which might be relevant in other cases, will not arise.