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England and Wales High Court (Senior Courts Costs Office) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Senior Courts Costs Office) Decisions >> Sharratt v London Central Bus Co [2002] EWHC 9006 (Costs) (27 November 2002)
URL: http://www.bailii.org/ew/cases/EWHC/Costs/2002/9006.html
Cite as: [2002] EWHC 9006 (Costs)
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SUPREME COURT COST OFFICE
Clifford Inn Fetter Lane London EC4A 1DQ |
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B e f o r e :
____________________
| THE ACCIDENT GROUP TEST CASES SHARRATT |
Claimant |
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| - and - |
|
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| LONDON CENTRAL BUS CO AND OTHER CASES |
Defendant |
____________________
Mr Ian Burnett QC & Mr Benjamin Williams
(instructed by Messrs Carters & Messrs Vizards Wyeth) for the First Defendants
Ms Deborah Taylor
(instructed by Messrs Beachcroft Wansbroughs) for the Second Defendants
Hearing dates : 29 & 30 October 2002
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Crown Copyright ©
- In November 1999 The Accident Advice Bureau Ltd launched an insurance backed conditional fee agreement (CFA) in anticipation of the coming into force of the Access to Justice Act 1999 and the abolition of legal aid for personal injury claims. At that time after the event (ATE) insurance premiums and the percentage uplift on conditional fee agreements with success fees were not recoverable.
- On 1 April 2000 Part II of the Access to Justice Act 1999 came into force, as did the Conditional Fee Agreements Order 2000 and the Conditional Fee Agreements Regulations 2000. The Accident Advice Bureau Ltd became The Accident Group Ltd (TAG). The TAG scheme grew rapidly and the Group is now described by Datamonitor (in their report "Personal Injury Litigation 2001") as the market leader with a market share of 15% (see Neil Ross A/4/12 para 3).
- The current Test Cases arise because the liability insurers have taken the point that, for a number of reasons, the CFA is, in each case, unenforceable and the ATE premium irrecoverable. In particular it is argued that the information given by the TAG representative to a potential client does not comply with Regulation 4 of the CFA Regulations 2000, because, among other things, that representative is not a "legal representative" within the meaning of that Regulation. There are apparently some 211,000 cases in which this point arises (see Stewart McCulloch A/5/45 para 33). It is suggested that if the court finds that the Regulation has not been complied with this would result in a "windfall" of £1 billion or more to the liability insurers. It would also have a devastating effect on the 700 or more firms of solicitors that are TAG panel members (McCulloch para 32).
- There have already been decisions by Circuit Judges and District Judges, but I was told by counsel for the Claimants that there had been conflicting decisions and that the issues had not been fully argued. Accordingly on 20 September 2002 I gave Directions relating to the issues to be tried in these Test Cases (A/1/1).
- For the avoidance of doubt I should explain that the term "the Claimants" is used to describe the receiving parties and "the Defendants" the paying parties in these proceedings. The Test Cases being costs only proceedings, some have been commenced by the receiving party and some by the paying party. The Defendants fall into two groups, reflecting the different liability insurers standing behind the Defendants. One group is represented by Mr Burnett and Mr Williams (the First Defendants) and the other is represented by Ms Taylor the (Second Defendants).
- By far the most urgent issue in these Test Cases is the so called "legal representative" issue. The Order of 20 September 2002 set out the issues to be determined as follows:
- The Order of 20 September 2002 went on to give further general directions leading to a case management conference on 27 November 2002 to deal with subsidiary issues.
- A total of 19 Test Cases have been identified and are set out in a schedule (A/3/8). Of those test cases, case No.2 Orton v Thompson does not form part of the Test Cases for the purpose of this preliminary issue. Case No.17, Viegas v Hawker, may have to be treated differently from the other Test Cases because there is a suggestion that the relevant information was given to the client by a solicitor as well as by a TAG representation. That contention may have to be the subject of a further hearing if necessary.
- The purpose of this hearing was simply to decide the narrow issue of whether the Regulation 4 information is given by a "legal representative". For the purpose of this decision the fact that the information given may have been incomplete or inadequate, or given incompetently, is put to one side. I am assuming for the purpose of this decision that the TAG representative has carried out the steps required under the TAG scheme fully.
- In broad terms the Claimants rely on Sections 27 and 28 of the Courts and Legal Services Act 1990 (Rights of Audience and Rights to Conduct Litigation) as providing the complete answer to the Defendants' assertion that the TAG representative is not a legal representative. Alternatively, the Claimants assert that delegation is permissible under a statute unless the wording of the statute prevents such delegation, which they say is not the case here. Each set of Defendants adopts the arguments put forward by the other. Their first position, advanced by Ms Taylor, is that the duties imposed by the Regulations must be discharged by the "legal representative", and on its proper construction, the legislation brooks no delegation of this task. This means that the information can be given only by the specific person (a natural person) who is responsible for the conduct of the litigation. She suggests that the duty is non delegable and must be carried out by a person qualified in accordance with Sections 27 and 28 of the CLSA 1990. The Defendants' second position, put forward by Mr Burnett, is that delegation may be permissible unless some statutory or other provision necessarily excludes such delegation, or the act or duty is such as to require personal discretion or skill. The nature of the advice which Regulation 4 requires to be given is such that it is not delegable under the usual principles of law, calling as it does for personal discretion and professional skill. It therefore follows that delegation, if permitted, could only be to a "suitably qualified and experienced person" which the TAG representative clearly is not.
- Sections 27, 29 and 30 of the Access to Justice Act 1999 came into force on 1 April 2000. Section 27 inserted two new sections (58 (Conditional Fee Agreements) and 58A (Conditional Fee Agreements Supplementary)) in the Courts and Legal Services Act 1990. Section 29 deals with the recovery of insurance premium by way of costs and Section 30 with recovery where a body undertakes to meet costs liabilities.
- Sections 27 and 28 of the CLSA 1990, so far as relevant deal with rights of audience and rights to conduct litigation:
- Sections 58 and 58A of the CLSA 1990 provide as follows:
- Sections 29 and 30 of the Access to Justice Act 1999 I include for completeness:
- The definition of the terms used are set out in Section 119 of the 1990 Act:
- The Conditional Fee Agreements Regulations 2000 replace the Conditional Fee Agreements Regulations 1995, and, so far as relevant, provide:
- The evidence in this case is provided by two witness statements, one from Neil Ross the Operations Director for the Accident Group Ltd and one from Stewart McCulloch, an experienced personal injury litigation solicitor who has been a member of the panel of solicitors for TAG for approximately 3 years. Mr Ross exhibits extensive documents relating to the TAG scheme and Mr McCulloch exhibits three versions of the contract documentation, although this was not separately referred to during argument. The Defendants did not request the attendance of the witnesses for the purpose of cross examination, nor did the Defendants put in any evidence. In addition to the witness statements I have been provided with extracts from the documents relating to the individual test cases (bundles G and H).
- Mr Ross sets out the Accident Group Scheme in his witness statement (A/4/22 paras 33 to 55).
- The panel solicitor is required to enter into an agreement with TAG (D/468). The agreement explains that:
- The authorised representative is required to observe and perform its obligations as set out in the Operating Manual (D/475) (for the purpose of this exercise I am referring to Operating Manual No.5, the most recent manual although it has been pointed out that certain of the Test Cases were conducted under earlier versions of the operating manual). For present purposes it is sufficient to look only at the most recent version. The Accident Group agreement (D/468) is made between TAG and the "appointed representative", ie "a firm of solicitors" the duties of the appointed representatives include, at Clause 1.1(a): the requirement to "observe and perform its obligations set out in the Operating Manual". Under Clause 1.1(c) solicitors are required to observe and perform the obligations set out in the step by step procedures in Section 5 of the Operating Manual. Under Clause 1.1(d) they are required to use the standardised model client care letter and CFA.
- The step by step procedures (from inception to appointed representatives' retainer) (D/496) explain that the appointed representative will be contacted by a member of the TAG Claims Allocation Team (CAT) to review the allocation of cases for the month. The appointed representative may accept or reject the cases. If the cases are accepted the panel solicitor must send an unsigned client care letter, CFA, AIL (Accident Investigations Ltd) questionnaire and fact find oral examination sheet to TAG. A copy of the client care letter, CFA terms and conditions must also be sent to the client using the TAG standard letter SLOPS5 (D/590).
- Step 9 explains that "The Accident Group Instructions Team" will then contact the client to make an appointment for a home visit. Mr Charlton asserted that TAG "instructors" were in some way different to TAG "representatives", but there is no evidence to explain what that difference may be or whether TAG instructors are more highly trained or experienced than mere representatives. For the purposes of this decision I do not distinguish between TAG instructors and TAG representatives. Step 9 then states:
- In the introduction letter to the client SLOPS5 (D/590) the solicitors explain:
- The client care letter explains to the client at the outset:
- In the client care letter (D/560 at 563) the solicitor informs the client:
- After the client has signed and returned the letter, the authorised representative subsequently signs under the following statement:
- The solicitor receives the client care letter, CFA, AIL questionnaire, TAG file check list and fact find and oral explanation sheet signed by the client from TAG. This is under cover of the Solicitors' Confirmation of Instruction Form SFOPS1 (D/586). The appointed representative is then required to sign the CFA, send it to the client, keeping a copy for himself and must endeavour to speak to the client about the case within seven days. Prior to this the appointed representative has had no direct contact with the client. Once the appointed representative has received the confirmation of instruction it must be signed by an authorised signatory of the Practice and be faxed back to TAG within 24 hours. At that point the TAG system shows the policy of insurance as being active.
- I was taken to a number of specimen cases by Mr Charlton to illustrate how the scheme worked in practice. In case number 12, Pollock (H/17), it is evident from the client care letter that the person dealing with the case, a Mr Oxley, is a Fellow of the Institute of Legal Executives (H/17/277). All the other client care letters indicated that the case would be handled by a solicitor.
- Provision is also made by the step by step procedures to deal with the Consumer Credit Agreement which is necessary to deal with the loan in respect of the ATE premium. Step 10(a) states:
- The "other points" referred to in the client care letter are contained in the body of the CFA itself, which I should add is based on the Law Society's model form of CFA and which incorporates the Law Society's conditions (D/569). The "other points" set out the information required to be provided by Regulation 4(2) of the CFA Regulations 2000. Whether that objective has been achieved is not a question to be answered in this judgment. The "other points" set out in the CFA (D/567) state:
- The Schedule 2 referred to deals with the insurance policy in these terms (D/569):
- The CFA has clauses dealing with the solicitor's success fee but in all cases the success fee is zero percent of the solicitor's basic charges (D/566).
- The final part of the package sent to the authorised representative is the Fact Find and Oral Explanation Sheet (D/577). The Fact Find and Oral Explanation Sheet has the following preamble:
- The fact find is a series of questions designed to establish whether the client has before the event insurance or any other form of legal expense insurance or is a member of a trade union. Question 4 of the fact find enquires:
- The oral explanation (D/578) was described by Mr Charlton as "the script". It is clearly an attempt to ensure that all relevant information is given to the client in accordance with the CFA Regulations.
- Regulation 4(1)(b) requires the legal representative to provide any further explanation, advice or other information about the matters set out in Regulation 4(2) as the client may reasonably require. Paragraph 10 of the oral explanation states:
- Although this is a relatively late addition to the Operating Manual I find it curious that this statement is included as part of the script rather than as a confirmation by the client, who is required to sign the oral explanation after it has been given. It implies an inability on the part of the TAG representative giving the oral explanation to answer any further questions. I was told that if there were further questions these could always be referred to the authorised representative.
- Once the fact find has been carried out and the oral explanation given, the TAG representative signs the document confirming:
- The client in turn confirms:
- It is the Claimants' case that this sequence of events establishes that authority is given by the authorised representative for the explanation to be given by the TAG representative and that, for reasons which appear in the Claimants' submissions below, the TAG representative is within the description "the legal representative".
- In his witness statement Neil Ross explains (A/4/25 para 44) that it is rare for solicitors in fast track personal injury cases physically to meet their clients and he suggests that communication is usually by way of correspondence and/or telephone. He suggests that solicitors cannot or will not operate outside normal office hours because they are not equipped to do so and would have to employ out of office hours staff. There is no direct evidence to counter that assertion, and it is supported by Stewart McCullogh (A/5/42 para 23), it seems clear therefore that solicitors do not find it economically viable to provide an out of hours service.
- In the statements of both Mr Ross and Mr McCulloch reference is made to correspondence with Helen Williams, an official in the Lord Chancellor's Department. [Ross NR8 exchange of letters E/8/909/10] In his letter of 21 November 2000 Mr Ross explains:
- The letter goes on to say that Mr Ross is enclosing the copy documents used to explain the CFA in more layman's terms and asks Helen William for her comments. The reply is dated 29 November 2000, and, so far as it is relevant, states:
- It is evident from the letter quoted at paragraph 42 that some panel solicitors were not persuaded that the CFA Regulations were being complied with. Mr McCullogh in his statement [A/5 para 22 & 23] explains the doubts which he had at the outset of the Scheme:
- He then refers to his own discussions with Helen Williams [paras 24, 25]:
- In relation to the views expressed by Helen Williams, Mr Charlton sought to rely on a passage from Bennion on Statutory Interpretation 3rd Edition, [Authorities/2/39 page 537]:
- The commentary to that paragraph includes the following:
- The main text continues:
- Mr Burnett suggested that Bennion was overstating the position, and that in any event the views expressed by Helen Williams had no standing whatsoever. Certainly in my judgment neither her letter nor any views which she may have expressed to Mr McCulloch can be regarded as "official statements". Thus, although her letter throws some light on the way in which the Lord Chancellor's Department might hope that conditional fees would develop, I do not take her views as persuasive authority on the meaning of the legislation.
- The Access to Justice Act when published was accompanied by 16 pages of Explanatory Notes which I would regard as an official statement. In addition the Courts and Legal Services Act 1990 itself set out the legislative objective at Section 17, which was:
- Mr Ross in his witness statement (A/4 paras 4 & 5) stated that TAG's business objective was that stated in the Government's conclusions to the Consultation Paper entitled "Conditional Fees: Sharing the Risks of Litigation" published in February 2000 which stated that the Government's objectives were to make "justice affordable to all, discouraging weak claims and encouraging early settlement". The paper stated that the provisions of the Access to Justice Act 1999 were designed to:
- The Master of the Rolls explained the purpose of the statutory requirements in Factortame (The Queen on the Application of Factortame v Secretary of State for Transport [2002] EWCA Civ 932) [2002] 3 WLR 1104 [Authorities 1/8]:
- In Callery v Gray (No.1 and 2) [2002] UK HL 28 [Authorities 1/3] Lord Nicholls pointed out that Claimants now operate in a cost free and risk free zone, criticisms which "give cause for serious concern" (see paras 12 and 16). Against that background no assistance can be derived from the correspondence with Helen Williams.
- Mr Charlton argues that in order to ascertain the extent of the meaning of "legal representative" in Regulation 4 of the CFA Regulations 2000 it is necessary to go beyond the definition in Regulation 1(3) which merely states that it means "the person providing the advocacy or litigation services to which the conditional fee agreement relates". To ascertain the meaning of the words used there it is necessary to go to Section 119 of the Courts and Legal Services Act 1990 which I have set out at paragraph 15.
- A "person with the right to conduct litigation" is further defined by Section 28 CLSA and Section 27 defines who may exercise rights of audience (see paragraph 12). Mr Charlton suggests that "the person" in the definition of "legal representative" is not restricted to individuals who accept instructions to act for a client. He relies in turn on Sections 5, 11 and Schedule 1 of the Interpretation Act 1978 which indicate that the word may include "a body of persons, corporate or unincorporate" and on Regulation 4(4) of the CFA Regulations which refers to a situation where "the legal representative is a body to which Section 30 of the Access to Justice Act … applies".
- Ms Taylor points out that Section 58(2)(a) CLSA refers to "a person" as does the definition in Regulation 1(3) of the CFA Regulations. It therefore follows she argues that the words "the person" in Section 58A(3)(a) and Regulation 1(3) is the specific person who is responsible for the conduct of the litigation. She argues that the use of the definite article makes it clear that the duty imposed by Regulation 4 is non delegable, a view which is she says justified by the nature and importance of the information, explanation and advice required to be given. In response to this Mr Charlton relied on his argument that the Regulation expressly contemplated that "a body" as opposed to a natural person could be a legal representative.
- The "body" referred to in Regulation 4(4) is a prescribed membership organisation (a recognised body) which includes numerous trade unions and other organisations approved by the Lord Chancellor (see Regulation 2 of the Access to Justice (Membership Organisations) Regulations 2000). "A recognised body" falls within the meaning "qualified litigator" in Section 27(9) CLSA 1990. This is reflected in Regulation 4(4) of the CFA Regulations which expressly contemplates the situation "where the legal representative is a [recognised] body …". The legislation clearly contemplates that a recognised body may be authorised to conduct litigation or to exercise rights of audience. So far as I am aware no bodies or organisations of any sort have themselves been authorised to conduct ligitation or exercise rights of audience; such authorisation is always given to individuals either by specific authorisation or by the issue of practising certificates. Given the clear intention of the legislation in relation to recognised bodies the argument that a legal representative must be an individual fails. Mr Charlton's argument that the legal representative can mean the firm of solicitors handling the litigation therefore succeeds. It follows from this that Ms Taylor's argument, that the legal representative can only be the individual person responsible for the conduct of the litigation, also fails, as does her argument that the inevitable conclusion is that the legal representative cannot delegate to another legal representative.
- It is necessary in these Test Cases to bear in mind that the costs of the successful Claimants belong to them, and they are entitled to recover their reasonable costs to the extent of their liability for those costs to their solicitors. The CFA entered into by the client is based largely on the Law Society's model form of CFA. The form of the Law Society's model clearly contemplates that the agreement may be entered into by an individual solicitor or a firm. The end of the model form reads as follows:
- The CFA used in the Test Cases uses the following wording (D/563):
- It seems therefore that it was contemplated by the Law Society in drafting their model form of CFA, and by TAG in drafting their CFA, that the contracting parties would be the client and the particular firm of panel solicitors. The agreement between the panel solicitor and TAG makes it clear that the "authorised representative" is the firm of solicitors. This may of course be a sole practitioner or a firm of two or more partners. In the light of what I have decided above the "legal representative" may be an individual, a firm or a recognised body. I will consider the question of delegation later on.
- Although in his original skeleton Mr Charlton stated that it was within the definition of "litigation services" rather than "advocacy services" that the person providing the Regulation 4 information fell, he chose to argue that since the definition of "legal representative" in Regulation 1(3) of the CFA Regulations also refers to the person providing "advocacy services" it was necessary and permissible to look at the definitions attaching to the provision of advocacy services. "Advocacy services" are defined by Section 119, CLSA 1990 (see paragraph 15). Section 27(2) of the 1990 Act sets out those who have a right of audience and they include those engaged to assist in the conduct of litigation (S27(2)(e) (see paragraph 12)). Mr Charlton argues that the status of those who can be instructed under Section 27 CLSA is just as important as the status of people qualified under Section 28 (the right to conduct litigation).
- Mr Burnett argues that the exception to the general rule as to those having a right of audience set out in Section 27(2)(e) of the 1990 Act is no more than a statutory recognition of the long established custom that unadmitted staff may appear on behalf of their qualified employers at certain less formal court hearings. In my judgment that submission is correct and the provisions of Section 27 of the 1990 Act do not of themselves make a TAG representative a legal representative.
- The question then arises: to what extent, if any, can the legal representative delegate for the purpose of giving the Regulation 4 information? The Defendants' prime contention is that no delegation at all is possible and that this work must be done by the legal representative and nobody else. They accept that, in the conduct of the litigation itself delegation is possible, provided the legal representative exercises adequate supervision. The Defendants say that the Regulations lay down a strict requirement and that, applying the statutory definitions, no delegation is possible.
- The Defendant's alternative case is that the duties under the CFA Regulations may be delegated within a limited scope, namely to a person who would himself be capable of falling within the Regulation 1(3) definition if instructed as a principal. They argue that the TAG representative would not come within this definition, since he is clearly not a person capable of providing the litigation services to which the CFA relates. The TAG representative does not come within the class of person with a right to conduct litigation. These are restricted to those granted such rights by an Authorised Body.
- Mr Charlton relies on a passage in Bowstead v Reynolds on Agency 17th Edition and Mr Burnett also refers to two passages, all of which I quote (Authorities 2/37 para 2/01/7, 2/01/8, 5/001):
- Mr Charlton's position, put simply, is that a person may delegate unless there is some indication that the principal is required to do the act in person. He referred to the judgment of Lloyd J in St Ermins Property Co v Tangy [2002] EWHC 1673 (Ch) (Authorities 2/21) where he said at paragraph 8:
- Mr Charlton relied on a further passage in Bennion on Statutory Interpretation (Authorities 2/39/890):
- Mr Charlton drew my attention to the cases of Stringer v Copley and Smith Graham v Lord Chancellor (Authorities 2/23 & 24). Those decisions merely confirm the well established principle that where solicitors in litigation (both civil and criminal) delegate certain tasks they are entitled to charge for the work done and to make a profit rather than charge for the delegated work at cost. Mr Charlton sought to rely on these decisions as demonstrating that if it was permissible to delegate in those cases it must also be permissible under Regulation 4.
- Mr Burnett relies on the proposition set out in paragraph 2.017-18 in Bowstead and points out that a similar approach can be seen elsewhere in the law of agency, as described at paragraph 5-001. His underlying point is that where the act to be done calls for personal skill or discretion, delegation by principal to agent, or by agent to sub agent is ordinarily forbidden.
- It is necessary to look in rather more detail at the case of Law Society v Waterlow [1883] 8 App Cas 407 HL (Authorities 1/9). In that case the question was whether Waterlows the law stationers had fallen foul of the provisions of the Attorneys and Solicitors Act which made it an offence to impersonate a solicitor. Section 20 of the Solicitors Act 1974 contains similar provisions preventing unqualified people acting as, or pretending to be solicitors. The court ultimately found that no offence had been committed because Waterlows were acting only as "intermediate channels of communication". Lord Selborne continued (at 412):
- Mr Burnett drew particular attention to the speech of Lord Blackburn at 415:
- Mr Charlton also referred to the decision in Arbiter Group Plc v Gill Jennings [2000] PNLR 680 CA (Authorities 1/10). The question in that case concerned the alleged negligence of a firm of American patent searchers who had been instructed by a firm of English patent agents.
- This last passage is relied on by Mr Burnett.
- Mr Charlton argues that in the Arbiter judgment there is no displacement of the presumption in favour of delegation. He suggests that the fact that the solicitor remains responsible for the work of the TAG representative, both as a matter of agency law and through his professional duty of supervision, is a complete answer to the suggestion that the Regulation 4 task cannot be delegated beyond the legal representative.
- Given that a "legal representative" may be an individual, a firm or a recognised body it has to be accepted that delegation within the firm or recognised body is permissible. It is not in my view realistic to interpret Regulation 4 as meaning that the explanation can be given only by a partner in the firm. All other tasks in litigation are capable of delegation to the appropriate level of fee earner and I can see no reason why there should not be delegation of the task of giving the Regulation 4 explanation. Swinton Thomas LJ suggests (when deciding a question of tortious liability) that delegation must be to a suitably qualified and experienced person. Certainly if the task is delegated to someone incompetent the firm will suffer the consequences when it is found that the requirements of the CFA Regulations have not been complied with. The answer to the underlying question is however that delegation by the legal representative is permissible.
- While some of the advice relating to a CFA, to be provided to the client will be uniform, much must be individually tailored to his personal circumstances. Advice may be required on the suitability of his existing contracts of insurance; on what alternative sources of funding might be available to him personally (rather than to litigants as a class); and thereafter which of those sources of funding might be appropriate for his particular case. The Court of Appeal in Sarwar v Alam [2001] EWCA Civ 1401; [2002] 1 WLR 125 at 45-51 [Authorities 1/7] has stated that a solicitor performing the obligations imposed by Regulation 4 should himself procure and read any pre-existing policy of insurance which might cover the clients legal expenses, in order properly to advise his client. He is also urged in the preliminary interview to explore his client's conditions of employment and trade union membership so as to give advice on any entitlement to funding which might arise. These tasks, argues Mr Burnett, call for individual discretion and skill.
- Mr Burnett points out that the Operating Manual (D/610) deals with this under the heading: "Pre existing BTE and Sarwar v Alam". The manual states:
- Mr Burnett argues that this demonstrates that TAG abjure the duty to give advice contemplated by the Regulations and by the Court of Appeal in Sarwar v Alam. He argues further that the duties imposed are ones which include the provision of formal legal advice and call for real professional discretion and skill. He submits that the TAG scheme undermines the protective statutory regime.
- Mr Charlton was able to tell me, on instructions, that when a BTE insurer responds to an enquiry from the authorised representative and agrees to indemnify the client, the case is removed from the TAG system.
- The Claimants' submission is that the legal representative of an individual claimant (who is in each individual case the firm of solicitors offering to act for the individual claimant) is entitled to delegate the Regulation 4 task to any person who is capable of exercising Section 27 and 28 CLSA rights. They do not suggest that the person to whom the legal representative may delegate is actually contemplating the exercise of those rights in any particular case, nor is it suggested that the TAG representatives were contemplating the actual exercise of a Section 27(2)(e) right in any given case.
- The Claimants' case takes as its starting point the Defendants' own alternative case that the legal representative in an individual case is entitled to delegate. The Claimants naturally accept that that delegation may be to others who are capable of acting themselves as legal representatives but go on to say that those who are so capable are people whom the individual representative could select to perform the Section 27(2)(e) tasks. The Claimants emphasise that the legal representative remains responsible for the conduct of the person to whom the delegation is made. Mr Charlton argues that it would be nonsensical to exclude automatically from the category of persons whom the legal representative may select, for instance a managing clerk of 22 years experience of litigation, but to include a newly qualified solicitor who may have had no experience whatsoever in the relevant field.
- Ms Taylor submits that the Regulation 4 information can only be given by the person having conduct of the case, or alternatively by somebody qualified within Sections 27 and 28 CLSA. Although the information given by the TAG representative purports to be given on behalf of the solicitors, in her submission the representative remains the agent of TAG. One of the functions of the TAG representative is "monitoring the conduct of the panel solicitor during the course of the legal proceedings". (C/194) Furthermore the Operating Manual (at D/610) describes TAG as "an insurance intermediary" which "is not bound by the Solicitors Costs Information and Client Care Code 1999". The solicitor has no control over the representative, the solicitor does not meet the agent, he has no control over him, as far as one can see, the agent does not report back to the solicitor, he sends the documents back to TAG. The agent is not remunerated by the solicitor, his remuneration comes from TAG, presumably based on the level of business which he generates. In relation to the Consumer Credit Agreement the TAG representative is acting on behalf of TAG as brokers for the credit scheme and also possibly on behalf of the bank.
- Ms Taylor argues that there can be no delegation even between solicitors because it is the person who is conducting the litigation who must give the explanation. In respect of the solicitor in Leeds who has a client in Penzance, Ms Taylor would not accept that there could be delegation, and suggested that in a scheme employing 700 firms of solicitors that situation should not occur. In my view the interpretation sought by Ms Taylor is unnecessarily narrow and restrictive. It is clear that the purpose of the legislation and the intention of Parliament is to protect the client. This protection can in my view be given by the legal representative or his duly appointed agent giving the necessary information under Regulation 4. To say that one legal representative cannot ask another to undertake that task on his behalf is not justified by the wording of the Regulations or the authorities which I have quoted relating to delegation.
- Given my finding that the legal representative may be an individual, a firm or a recognised body it follows that there can be delegation within the firm or recognised body. It must also follow that there can be delegation to a duly authorised agent. Questions may arise as to whether the agent is competent to carry out the required task, or indeed whether the task has actually been carried out competently. These however are questions of quality which are not for this judgment. As with internal delegation to an incompetent member of staff it is the legal representative who bears the consequences if the appointed agent does not carry out the task correctly. Incompetence by the delegate does not invalidate the delegation.
- The Defendants argue that the TAG representative is not a person of sufficient discretion and skill to give the relevant Regulation 4 information. This is because the solicitors have no control whatsoever over the TAG representative. Although solicitors purport to authorise the TAG representative to give the requisite information and also accept responsibility for the TAG representative, there is an obvious aura of unreality about the whole arrangement. The solicitor has had no contact with the client other than to send the client care letter and accompanying documents to the name and address supplied by TAG. No specific instructions are given by the solicitor to the TAG representative. The TAG representative is left to deliver the required information without any supervision whatsoever from the legal representative.
- The Blackwell Report (LC Report 18 April 2000) [Authorities 1 tab 9] enquired into the activities of unqualified claims assessors. The authors found that the principal safeguard against the twin dangers of the public evil of champerty and private evil of mis-selling to consumers was the integrity and independence of the solicitors profession because of its strict rules of professional conduct, including the Solicitors Costs Information and Client Care Code 1999 (Regulation 4 closely follows this Code). Mr Burnett points out that TAG representatives who conduct the Regulation 4 duties do not have these professional obligations and so a vital filter is stripped out of the TAG scheme. They cannot be expected to give free and impartial advice, nor it seems are they in a position to do so. The Defendants submit that using the TAG representatives in the way described undermines the protective statutory regime. The Defendants rely on Dimond v Lovell [2002] 1 AC 384 HL, affirming [2001] QB 216 CA as justifying the liability insurers relying on this protective legislation in seeking to mitigate their exposure to adverse costs orders.
- Mr Burnett argues that the TAG representative is entirely unknown to the solicitor for whom he is acting. He receives no instructions from the solicitor, nor is there any possibility of real supervision by the solicitor. The question is: can the TAG representative in those circumstances discharge the obligations of Regulation 4 simply by reading out a prepared statement? If that proposition is correct he suggests, then it follows that anybody capable of reading could read out the Fact Find and Oral Explanation Sheet and thereby discharge the obligations imposed by Parliament. Mr Burnett suggests that the Claimants' case overlooks entirely that the person who complies with the Regulation 4 requirements is not to act as a parrot reading out information but is expected to enter into a discussion with the client and to advise.
- Can it be, he asked, that Parliament intended, when it enacted that CFAs which failed to comply with delegated legislation would be unenforceable, and when it had improved delegated legislation imposing mandatory requirements to give information and provide such explanation, advice or information as the client may require, that a TAG representative or someone similar would give the information required by Regulation by using the wording set out in the Fact Find and Oral Explanation Sheet? The answer to that question is that there is nothing in the general law of delegation and agency or in the CFA Regulations which prevents delegation of the Regulation 4 task to a properly appointed agent. The essential question is one of quality, ie was there sufficient explanation given by or on behalf of the legal representative? If the answer to that question is yes: was that information given by a duly appointed agent? If the answer to the essential question is no, it is immaterial who gave the explanation.
- Mr Charlton emphasised that, with the introduction of legislation making success fees recoverable, taking into account also the protection afforded by the CFA Regulations 2000, and bearing in mind that under the TAG scheme the success fee was nil, the client was effectively not at risk, and the need for consumer protection referred to in Factortame had reduced. The client's only potential liability in these cases is for base costs and disbursements, or disbursements in certain events. Mr Charlton posed the question: What is the consumer protection need to render the CFA agreement unenforceable if the information was given by a TAG representative? The only reason why the TAG scheme agreements come within the scope of the Regulations is because the agreement provides that there shall be no liability if the claim is lost. Mr Charlton pointed out that there was no question of champerty in these cases because the success fee is nil. The problem is therefore one of maintenance. If the TAG scheme was not supported by a CFA agreement and the client was liable for base costs and disbursements in any event, the CFA Regulations would not apply at all and the client would be protected by the professional obligation on the solicitor to provide the client with proper information through a client care letter under Rule 15 of the Client Care and Costs Information Code. He submits therefore that there is no consumer protection element involved.
- Mr Charlton referred to Factortame (at para 57) where the Court of Appeal refers to the definition of "legal representative" reciting the definition and saying:
- Mr Charlton suggests that the real question should be: What is the advice that was given and whether that advice meets the requirements of Regulation 4 of the CFA Regulations? That is certainly a question which will have to be addressed, but as I have explained, for the purpose of this decision I am assuming that the information given complies with the requirements of Regulation 4 and that the TAG representative giving it gave it in proper form.
- Mr Charlton argues that since the panel solicitor authorises and adopts the TAG instructor's fact find and oral explanation, the solicitor is therefore fully responsible for what is done in his name by the TAG agent and the agency is fully established through the documents to which I have already referred. He maintains that the panel solicitors remain fully liable for any default in the provision of adequate information. He asserts that this is so as a matter of professional obligation on the part of the solicitor as well as a matter of agency law (see the Solicitors General Duty of Supervision, para 3.07 of the Law Society's Guide to Professional Conduct 1999 Edition). [Authorities 2/34/72] The note to the Practice Rule states:
- He submits that consumer protection is no longer a serious concern because the client is at virtually no risk, nor is the imparting of that information a difficult task. He accepts that it is time consuming and involved but suggests that the TAG representatives are delivering the work of legally qualified draftsmen when they carry out the fact find and oral explanation.
- It is clear that the purpose of the CFA Regulations 2000 is to protect consumers. The 1995 Regulations which they replaced were very much simpler and dealt with a situation where the successful client was expected to pay the success fee out of the damages recovered. The introduction of recoverable success fees led to the drafting of very much more stringent requirements, thus the consumer was given a greater level of protection at a time when the need for that protection had declined significantly. Clients are now faced with the extremely confusing situation that legal representatives inform them that they will never have to pay anything win or lose, but then take them through a series of extremely complicated documents in which, effectively, they agree to be liable for the legal representative's costs and expenses in the event of success (they also have to be taken through the ATE insurance policy which will protect them against claims for costs from a winning opponent and, if the ATE premium is financed by a loan, through consumer credit documents as well). The Defendants argue that the need to protect consumers entering CFAs is still pressing. The documents involved are complex and many lay people have difficulty understanding them. Research carried out by Yarrow and Abrams (Nothing to Lose: Clients' Experience of Using Conditional Fees) disclosed a high level of consumer misconception and misunderstanding. The Defendants point out that clients still face potentially onerous obligations, so that a client with an unsatisfied judgment is still liable to pay the entirety of the costs and success fee from his own resources. The client will also be liable if he decides to terminate the agreement. The Defendants argue that the serious sanction of unenforceability of a CFA which has not complied with the Regulations demonstrates Parliament's anxiety to protect consumers.
- Mr Burnett identified three separate areas where the Claimant was vulnerable even when the claim succeeded. The first was where only a partial recovery of the insurance premium is achieved; the second in respect of interest payable to the finance company in respect of the loan to fund the premium is not recoverable and is payable out of any damages; and thirdly if the solicitor fails on detailed assessment to recover all of the base costs the claimant will be liable to make up the difference. Mr Burnett demonstrated these propositions by reference to the cases of Sharratt G/4/12, Little G/6/48 and Ashmore G/7/85. Only the third of Mr Burnett's propositions is relevant to CFAs.
- Since I have found that the legal representative may be an individual, a firm or a recognised body, and that there may be delegation, either internally or to a duly appointed agent, the consequences are that the CFA remains enforceable in principle. The quality of the information given is still to be tested. In case I am wrong in my judgment about delegation to a TAG representative I examine below the alternative consequences.
- The starting point, when ascertaining the consequences if a TAG representative is not permitted to provide the necessary information under Regulation 4 of the CFA Regulations, is Section 58(1) of the Courts and Legal Services Act 1990 as amended by the Access to Justice Act 1999 (see paragraph 12). A CFA which does not satisfy all the conditions is unenforceable.
- The requirements prescribed by the Lord Chancellor are those set out in the Conditional Fee Agreements Regulations 2000. Mr Charlton argues that merely because Section 58(1) renders the CFA "unenforceable" it is not void. The liability of the client remains even if it is unenforceable. If the liability remains, he argues the indemnity principle is not breached. None of the Claimants has chosen to repudiate their obligations towards their solicitors for failure to meet the Regulation 4 requirements. The choice whether to do so rests with the client not with the Defendants. Mr Charlton went on to argue that public policy would not be offended by recognising that the court could still award costs against the Defendants. He sought to argue that the indemnity principle was a common law creation and that the principle should be applied intelligently not mechanically. He points out that the terms of the CFA itself do not contain or reflect any breach of the indemnity principle.
- There is considerable doubt as to whether the indemnity principle is in fact a common law creation, it appears to have its roots in the Statute of Marlborough 1267, the Statute of Westminster 1275 and the Statute of Gloucester 1278 which allowed the award of damages and costs to a successful claimant in certain actions. Successful defendants later became entitled to costs as a result of statute, for example 52 Henry III C6. It was not until a decision of the court in Tyte v Globe [1797] 7 TR 267 that it was established that costs could be recovered by a successful claimant even though there was no express provision to that effect in a statute. The ability of defendants to recover costs was extended by a number of statutes culminating in 1607 (4 James I C3) which provided that defendants were in general allowed to recover costs. The application of the indemnity principle today follows the judgments of Bramwell B in Harold v Smith [1865] H & N 381 at 385 and Sir Richard Mallins VC in Smith v Buller [1875] LR 19 EQ 473.
- Mr Burnett relies on the decision of the House of Lords in Dimond v Lovell [2001] 1 AC 384 HL [2001] 2 WLR 1121 (Authorities 1/ 4 & 5). He relied in particular on the headnote at page 1122:
- Mr Burnett also refers to the speech of Lord HoffmanN at page 1133 where he said:
- Mr Burnett argues, correctly in my view, that the Claimants in this case are putting forward arguments about enforceability in exactly the same way in respect of the Courts and Legal Services Act:
- Mr Burnett also referred to the judgment in Factortame (Authorities 1/8) where the court said at paragraph 36:
- Mr Burnett submits that where Parliament has stepped into an area which has been recognised as being contrary to public policy and legislated the legality of a limited class of agreements that provides the boundaries of public policy in the area in which it has legislated. In my judgment that submission is correct.
- Notwithstanding the historical background, I am firmly of the view that if Parliament has laid down that a CFA shall be unenforceable if it does not comply with the requirements laid down by the Lord Chancellor, it is not for the court to try and find a way round that sanction. The fact that none of the Claimants have sought to repudiate their agreements is of no assistance, since they are not being asked to make any payment under the agreements and would be entitled to take advantage of the unenforceability were they asked to make any payment. Mr Burnett referred to the CFA provisions as "an island of legality" in "a sea of illegality" created by Section 58 of the CLSA. The matter is put beyond doubt by Awwad v Geraghty [2001] QB 570 CA 593; 599 to 600. An unenforceable CFA is also unenforceable at common law for illegality and the court must not permit itself to be the instrument by which an illegal contract is enforced: Snell v Unity Finance Co Ltd [1964] 2 QB 203 CA 221 to 223, 225. The inescapable conclusion is therefore that, if the CFA regulation 4 has not been complied with, the CFA is unenforceable and that no costs are recoverable under it.
- One final point was made by Mr Charlton, namely that even if the CFA failed the Claimants might still be able to recover their additional liabilities in respect of ATE insurance premiums. It is accepted that this premium is not part of the retainer under the CFA and is not therefore within the terms of this preliminary issue. Thus, although there may be arguments as to the recoverability of all or part of the premium it does not fall to be considered now. The premium is not rendered irrecoverable by my decision on the second aspect of the preliminary issue before me.
- I summarise my findings as follows:
- Statements of Helen Williams of LCD are not official statements as to the legislative intention behind Section 48 of the Courts and Legal Services Act 1990 as amended and the CFA Regulations 2000.
- A "legal representative" may be an individual, a firm or a recognised body. In this context that means the person entering into the CFA with the client.
- The provisions of Section 27(2)(e) CLSA 1990 are a statutory recognition of the custom that unadmitted staff may appear at certain less formal court hearings. These provisions do not of themselves make a TAG representative a legal representative.
- Delegation by the legal representative is permissible.
- The law relating to delegation and agency does not restrict the class of persons to whom tasks may be delegated but the principal will be vicariously liable for the delegate's failures.
- There can be delegation by one legal representative to another.
- There is nothing in the legislation which prevents delegation of the Regulation 4 task to a properly appointed agent. The essential question is one of quality, ie was there sufficient explanation given by or on behalf of the legal representative? If the answer to that question is yes: was that information given by a duly appointed agent? If the answer to the essential question is no, it is immaterial who gave the explanation.
- It is not for this court to seek to circumvent the will of Parliament expressed in Section 58 CLSA 1990. Therefore a CFA which does not comply with the conditions laid down is unenforceable and this in turn means that no costs are recoverable from the paying party.
- The recoverability of the ATE insurance premium is not affected by this decision.
| Paragraph No. | |
| BACKGROUND | 1 |
| THE ISSUES | 5 |
| THE TEST CASES | 8 |
| THE STATUTORY FRAMEWORK | 11 |
| THE TAG SCHEME | 17 |
| THE STATUS OF THE TAG REPRESENTATIVES | 38 |
| What is a "legal representative"? | 54 |
| Advocacy Services | 61 |
| Can there be delegation? | 63 |
| If delegation is permissible what are the permitted limits? | 76 |
| Does the client need protection? | 89 |
| WHAT ARE THE CONSEQUENCES? | 96 |
| The CFA | 96 |
| The ATE insurance premium | 106 |
| SUMMARY | 107 |
Chief Master: Hurst
BACKGROUND
THE ISSUES
"Whether under The Accident Group Scheme the Regulation 4 information is given by a "legal representative" within the meaning of Regulation 1 and 4 of the Conditional Fee Agreement Regulations 2000.
If the answer is in the negative, what are the consequences of that for the Claimants' claims for costs?"
THE TEST CASES
THE STATUTORY FRAMEWORK
"27 Rights of audience
(1) The question whether a person has a right of audience before a court, or in relation to any proceedings, shall be determined solely in accordance with the provisions of this Part.
(2) A person shall have a right of audience before a court in relation to any proceedings only in the following cases –
(a) where -
i. he has a right of audience before that court in relation to those proceedings granted by the appropriate authorised body; and
ii. that body's qualification regulations and rules of conduct have been approved for the purposes of this section, in relation to . . . that right;
(b) where paragraph (a) does not apply but he has a right of audience before that court in relation to those proceedings granted by or under any enactment;
(c) where paragraph (a) does not apply but he has a right of audience granted by that court in relation to those proceedings;
(d) where he is a party to those proceedings and would have had a right of audience, in his capacity as such a party, if this Act had not been passed; or
(e) where –
i. he is employed (whether wholly or in part), or is otherwise engaged, to assist in the conduct of litigation and is doing so under instructions given (either generally or in relation to the proceedings) by a qualified litigator; and
ii. the proceedings are being heard in chambers in the High Court or a county court and are not reserved family proceedings.
…
(9) In this section—
"advocate", in relation to any proceedings, means any person exercising a right of audience as a representative of, or on behalf of, any party to the proceedings;
"authorised body" means—
(a) the General Council of the Bar;
(b) the Law Society; and
(c) any professional or other body which has been designated by Order in Council as an authorised body for the purposes of this section;
…
"qualified litigator" means—
i. any practising solicitor [(that is, one who has a practising certificate in force or is employed wholly or mainly for the purpose of providing legal services to his employer)];
ii. any recognised body; and
iii. any person who is exempt from the requirement to hold a practising certificate by virtue of section 88 of the Solicitors Act 1974 (saving for solicitors to public departments and the City of London);
"recognised body" means any body recognised under section 9 of the Administration of Justice Act 1985 (incorporated practices);
…
(10) Section 20 of the Solicitors Act 1974 (unqualified person not to act as a solicitor), section 22 of that Act (unqualified person not to prepare certain documents etc) and section 25 of that Act (costs where an unqualified person acts as a solicitor), shall not apply in relation to any act done in the exercise of a right of audience.
28 Rights to conduct litigation
(1) The question whether a person has a right to conduct litigation, or any category of litigation, shall be determined solely in accordance with the provisions of this Part.
(2) A person shall have a right to conduct litigation in relation to any proceedings only in the following cases—
(a) where -
i. he has a right to conduct litigation in relation to those proceedings granted by the appropriate authorised body; and
ii. that body's qualification regulations and rules of conduct have been approved for the purposes of this section in relation to . . . that right;
(b) where paragraph (a) does not apply but he has a right to conduct litigation in relation to those proceedings granted by or under any enactment;
(c) where paragraph (a) does not apply but he has a right to conduct litigation granted by that court in relation to those proceedings;
(d) where he is a party to those proceedings and would have had a right to conduct the litigation, in his capacity as such a party, if this Act had not been passed.
[(2A) Every person who exercises in relation to proceedings in any court a right to conduct litigation granted by an authorised body has—
(a) a duty to the court to act with independence in the interests of justice; and
(b) a duty to comply with rules of conduct of the body relating to the right and approved for the purposes of this section;
and those duties shall override any obligation which the person may have (otherwise than under the criminal law) if it is inconsistent with them.]
…
(5) In this section—
"authorised body" means—
(a) the Law Society; . . .
[(aa) the General Council of the Bar;
(ab) the Institute of Legal Executives; and]
(b) any professional or other body which has been designated by Order in Council as an authorised body for the purposes of this section;
"appropriate authorised body", in relation to any person claiming to be entitled to any right to conduct litigation by virtue of subsection (2)(a), means the authorised body—
(a) granting that right; and
(b) of which that person is a member;
…
[(5A) Nothing in this section shall be taken to require the General Council of the Bar or the Institute of Legal Executives to grant a right to conduct litigation.]
(6) Section 20 of the Solicitors Act 1974 (unqualified person not to act as a solicitor), section 22 of that Act (unqualified person not to prepare certain documents etc) and section 25 of that Act (costs where unqualified person acts as a solicitor) shall not apply in relation to any act done in the exercise of a right to conduct litigation."
"58 Conditional fee agreements
(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
(b) a conditional fee agreement provides for a success fee if it provides for the amount of any fees to which it applies to be increased, in specified circumstances, above the amount which would be payable if it were not payable only in specified circumstances.
(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.
(4) The following further conditions are applicable to a conditional fee agreement which provides for a success fee—
(a) it must relate to proceedings of a description specified by order made by the Lord Chancellor;
(b) it must state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased; and
(c) that percentage must not exceed the percentage specified in relation to the description of proceedings to which the agreement relates by order made by the Lord Chancellor.
(5) If a conditional fee agreement is an agreement to which section 57 of the Solicitors Act 1974 (non-contentious business agreements between solicitor and client) applies, subsection (1) shall not make it unenforceable.
58A Conditional fee agreements: supplementary
(1) The proceedings which cannot be the subject of an enforceable conditional fee agreement are—
(a) criminal proceedings, apart from proceedings under section 82 of the Environmental Protection Act 1990; and
(b) family proceedings.
(2) In subsection (1) "family proceedings" means proceedings under any one or more of the following—
(a) the Matrimonial Causes Act 1973;
(b) the Adoption Act 1976;
(c) the Domestic Proceedings and Magistrates' Courts Act 1978;
(d) Part III of the Matrimonial and Family Proceedings Act 1984;
(e) Parts I, II and IV of the Children Act 1989;
(f) Part IV of the Family Law Act 1996; and
(g) the inherent jurisdiction of the High Court in relation to children.
(3) The requirements which the Lord Chancellor may prescribe under section 58(3)(c)—
(a) include requirements for the person providing advocacy or litigation services to have provided prescribed information before the agreement is made; and
(b) may be different for different descriptions of conditional fee agreements (and, in particular, may be different for those which provide for a success fee and those which do not).
(4) In section 58 and this section (and in the definitions of "advocacy services" and "litigation services" as they apply for their purposes) "proceedings" includes any sort of proceedings for resolving disputes (and not just proceedings in a court), whether commenced or contemplated.
(5) Before making an order under section 58(4), the Lord Chancellor shall consult—
(a) the designated judges;
(b) the General Council of the Bar;
(c) the Law Society; and
(d) such other bodies as he considers appropriate.
(6) A costs order made in any proceedings may, subject in the case of court proceedings to rules of court, include provision requiring the payment of any fees payable under a conditional fee agreement which provides for a success fee.
(7) Rules of court may make provision with respect to the assessment of any costs which include fees payable under a conditional fee agreement (including one which provides for a success fee)."
"29 Recovery of insurance premiums by way of costs
Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in those proceedings, the costs payable to him may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy.
30 Recovery where body undertakes to meet costs liabilities
(1) This section applies where a body of a prescribed description undertakes to meet (in accordance with arrangements satisfying prescribed conditions) liabilities which members of the body or other persons who are parties to proceedings may incur to pay the costs of other parties to the proceedings.
(2) If in any of the proceedings a costs order is made in favour of any of the members or other persons, the costs payable to him may, subject to subsection (3) and (in the case of court proceedings) to rules of court, include an additional amount in respect of any provision made by or on behalf of the body in connection with the proceedings against the risk of having to meet such liabilities.
(3) But the additional amount shall not exceed a sum determined in a prescribed manner; and there may, in particular, be prescribed as a manner of determination one which takes into account the likely cost to the member or other person of the premium of an insurance policy against the risk of incurring a liability to pay the costs of other parties to the proceedings.
(4) In this section "prescribed" means prescribed by regulations made by the Lord Chancellor by statutory instrument; and a statutory instrument containing such regulations shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(5) Regulations under subsection (1) may, in particular, prescribe as a description of body one which is for the time being approved by the Lord Chancellor or by a prescribed person."
"119 Interpretation(1) In this Act—
…
"advocacy services" means any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right of audience in relation to any proceedings, or contemplated proceedings, to provide;
"authorised advocate" means any person (including a barrister or solicitor) who has a right of audience granted by an authorised body in accordance with the provisions of this Act;
"authorised body" and "appropriate authorised body"—
(a) in relation to any right of audience or proposed right of audience, have the meanings given in section 27; and
(b) in relation to any right to conduct litigation or proposed right to conduct litigation, have the meanings given in section 28;
"authorised litigator" means any person (including a solicitor) who has a right to conduct litigation granted by an authorised body in accordance with the provisions of this Act;
…
"litigation services" means 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 contemplated proceedings, to provide;
…
"proceedings" means proceedings in any court;
…
"right of audience" means the right to [appear before and address a court including the right to call and examine] witnesses;
"right to conduct litigation" means the right—
(a) to [issue] proceedings before any court; and
b) to perform any ancillary functions in relation to proceedings (such as entering appearances to actions);
"solicitor" means solicitor of the Supreme Court; …"
"1 Citation, commencement and interpretation(1) These Regulations may be cited as the Conditional Fee Agreements Regulations 2000.
(2) These Regulations come into force on 1st April 2000.
(3) In these Regulations—
"client" includes, except where the context otherwise requires, a person who—
(a) has instructed the legal representative to provide the advocacy or litigation services to which the conditional fee agreement relates, or
(b) is liable to pay the legal representative's fees in respect of those services; and
"legal representative" means the person providing the advocacy or litigation services to which the conditional fee agreement relates.
2 Requirements for contents of conditional fee agreements: general
(1) A conditional fee agreement must specify—
(a) the particular proceedings or parts of them to which it relates (including whether it relates to any appeal, counterclaim or proceedings to enforce a judgement or order),
(b) the circumstances in which the legal representative's fees and expenses, or part of them, are payable,
(c) what payment, if any, is due—
(i) if those circumstances only partly occur,
(ii) irrespective of whether those circumstances occur, and
(iii) on the termination of the agreement for any reason, and
(d) the amounts which are payable in all the circumstances and cases specified or the method to be used to calculate them and, in particular, whether the amounts are limited by reference to the damages which may be recovered on behalf of the client.
(2) A conditional fee agreement to which regulation 4 applies must contain a statement that the requirements of that regulation which apply in the case of that agreement have been complied with.
3 Requirements for contents of conditional fee agreements providing for success fees
(1) A conditional fee agreement which provides for a success fee—
(a) must briefly specify the reasons for setting the percentage increase at the level stated in the agreement, and
(b) must specify how much of the percentage increase, if any, relates to the cost to the legal representative of the postponement of the payment of his fees and expenses.
(2) If the agreement relates to court proceedings, it must provide that where the percentage increase becomes payable as a result of those proceedings, then—
(a) If-
(i) any fees subject to the increase are assessed, and
(ii) the legal representative or the client is required by the court to disclose to the court or any other person the reasons for setting the percentage increase at the level stated in the agreement,
he may do so,
(b) if-
(i) any such fees are assessed, and
(ii) any amount in respect of the percentage increase is disallowed on the assessment on the ground that the level at which the increase was set was unreasonable in view of facts which were or should have been known to the legal representative at the time it was set,
that amount ceases to be payable under the agreement, unless the court is satisfied that it should continue to be so payable, and
(c) if -
(i) sub-paragraph (b) does not apply, and
(ii) the legal representative agrees with any person liable as a result of the proceedings to pay fees subject to the percentage increase that a lower amount than the amount payable in accordance with the conditional fee agreement is to be paid instead,
the amount payable under the conditional fee agreement in respect of those fees shall be reduced accordingly, unless the court is satisfied that the full amount should continue to be payable under it.
(3) In this regulation "percentage increase" means the percentage by which the amount of the fees which would be payable if the agreement were not a conditional fee agreement is to be increased under the agreement.
4 Information to be given before conditional fee agreements made
(1) Before a conditional fee agreement is made the legal representative must—
(a) inform the client about the following matters, and
(b) if the client requires any further explanation, advice or other information about any of those matters, provide such further explanation, advice or other information about them as the client may reasonably require.
(2) Those matters are—
(a) the circumstances in which the client may be liable to pay the costs of the legal representative in accordance with the agreement,
(b) the circumstances in which the client may seek assessment of the fees and expenses of the legal representative and the procedure for doing so,
(c) whether the legal representative considers that the client's risk of incurring liability for costs in respect of the proceedings to which agreement relates is insured against under an existing contract of insurance,
(d) whether other methods of financing those costs are available, and, if so, how they apply to the client and the proceedings in question,
(e) whether the legal representative considers that any particular method or methods of financing any or all of those costs is appropriate and, if he considers that a contract of insurance is appropriate or recommends a particular such contract—
(i) his reasons for doing so, and
(ii) whether he has an interest in doing so.
(3) Before a conditional fee agreement is made the legal representative must explain its effect to the client.
(4) In the case of an agreement where—
(a) the legal representative is a body to which section 30 of the Access to Justice Act 1999 (recovery where body undertakes to meet costs liabilities) applies, and
(b) there are no circumstances in which the client may be liable to pay any costs in respect of the proceedings,
paragraph (1) does not apply.
(5) Information required to be given under paragraph (1) about the matters in paragraph (2)(a) to (d) must be given orally (whether or not it is also given in writing), but information required to be so given about the matters in paragraph (2)(e) and the explanation required by paragraph (3) must be given both orally and in writing.
(6) This regulation does not apply in the case of an agreement between a legal representative and an additional legal representative."
THE TAG SCHEME
" "the appointed representative" is a firm of solicitors which specialises in personal injury litigation and who have agreed, subject to obtaining claimants' instructions to act on claimants' behalf, in bringing a claim for damages for personal injury against opponents."Claimants" are persons who have suffered personal injury where the appointed representative is satisfied that they have "in their reasonable opinion" a better than 50% prospect of success in a claim against a culpable third party ("opponents") in respect of injuries sustained in an accident where damages can reasonably be expected to exceed £1,500 ("a bona fide claim")."
"The TAG representative (as agent for the appointed representative) will orally explain the CFA and complete the fact find and oral explanation sheet".
"… a representative of The Accident Group will contact you by telephone … to arrange an appointment to call and see you on our behalf to ensure that you understand the nature of your agreement. Please do not sign or return the documentation until this visit has been carried out.
If you have any queries and would like to speak to me personally then please do not hesitate to contact me …"
"We have enclosed with this letter our form of conditional fee agreement (terms and conditions) (the "terms and conditions"). This letter, together with the enclosed terms and conditions, forms the basis of the agreement between us. Please make sure that you understand this letter and the enclosed terms and conditions before signing and return the letter to us;"
"Please note that signature of this letter by you:
(1) Constitutes confirmation of your instructions to us.
(2) Confirms that we have verbally explained to you the matter in paragraphs (a) to (e) under "other points" in the attached terms and conditions.
(3) Confirms the matters at (e) in writing in Schedule 2.
(4) Confirms that you have read and understood this letter (including the authority to deal with monies received on your behalf as set out in the section entitled "Your obligations to repay your loan") and the attached terms and conditions and that you accept the same as being the basis of the agreement between us."
"We confirm that prior to the signing of this agreement we and/or our duly authorised agent on our behalf verbally explained to the client the matters in paragraphs (a) to (e) under "other points" in the attached terms and conditions and confirm the matters at (e) in writing in Schedule 2.This agreement which comprises this letter and the attached terms and conditions complies with the Conditional Fee Agreements Regulations 2000 (SI 2000 No.692)."
"All staff will be fully trained in explaining this [the Consumer Credit Agreement] and in addition, the literature, which is retained by the prospective client, which will fully explain the CCA."
"Immediately before you sign this agreement we and/or the duly appointed agent 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 becoming liable for any costs in these proceedings is insured under an existing contract of insurance. In particular we drew to your attention that you had prior to our instruction agreed to purchase a legal expenses insurance policy from the underwriters;
(d) that you had also agreed to fund the purchase of the legal expenses insurance from the underwriters by a loan from the funder;
(e) other methods of funding your case may be available, including private funding, Community Legal Service Funding, other legal expenses insurance policies and trade union funding. However, in view of points (c) and (d) we note that you do not wish to use these;
(f) (i) having regard to the fact that you have already agreed to purchase the legal expenses insurance policy referred to in point (c) and (d) above it is unnecessary for us to recommend any other insurance product to you. Detailed reasons 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 just in case you lose.
(iii) We confirm that we do not have an interest in recommending that you maintain this particular insurance agreement save that we are an approved member of the Accident Group solicitors panel."
"As you have already agreed to purchase a legal expenses insurance policy from the underwriters, we do not feel it is necessary to recommend any other insurance product to you. As mentioned above we are a member of the Accident Group panel and you may in these circumstances, wish to obtain independent legal advice in this regard.In any event, in all the circumstances, and on the information currently available to us, we believe, that it is appropriate for you to purchase legal expenses insurance to cover our disbursements and your opponents charges and disbursements in case you lose.
We are not, however, insurance brokers and cannot give advice on all products which may be available."
"[the authorised representative] has authorised The Accident Group to obtain certain information from the claimant in relation to the claimant's funding options following an accident on … and to orally explain to the claimant as detailed below in connection with the appointed representative's conditional fee agreement …"
"Does the client understand that the information above and the explanation below is obtained/given on behalf of the appointed representative? Y/N"
If that explanation was not understood Mr Charlton thought it would be given again until the client did understand.
"We understand that you do not require any further explanation, advice or other information about these matters."
THE STATUS OF THE TAG REPRESENTATIVES
"That the above information was given to the claimant and that I orally explained the appointed representative's CFA and the legal expenses insurance policy as detailed above on behalf of the appointed representative."
"That the above information was provided by me to the TAG representative and that I received the oral explanation in relation to the appointed representatives CFA and the legal expenses insurance policy as detailed above. I am aware that the TAG representative is obtaining the above information and providing me with the above explanation on behalf of the appointed representative."
"A visit by a member of our staff is made to every potential client following the claim being independently vetted and then accepted by one of our panel solicitors. During this face to face visit the panel solicitor's CFA is orally explained to the client at the same time as the insurance cover and the funding of the scheme is explained. This allows our company to control this part of the process as the insurance cover cannot be provided until the CFA is signed by the client and a delay here would delay the claim moving forward.The difficulty for some of our panel solicitors is that they strictly interpret the rules that the oral explanation must be given by the legal representative."
"It is a general requirement that solicitors act in the best interests of their client. The Conditional Fee Regulations reinforce that requirement by introducing measures which aim to ensure that the client is aware of the consequences of entering into an agreement. Although the CFA Regulations 2000 require the legal representative to provide certain oral information to the client there is nothing to prevent the legal representative interpreting the requirement in the light of their professional rules of conduct with regard to the use of agents, interpreters or any other intermediary."
"It was my view that in order to ensure that the client was fully informed of the nature of the agreement and had the ability to ask questions there had to be some kind of personal conversational contact. Whilst it might have been possible to provide this advice by telephone I had already reached the conclusion that to do this effectively without delaying progress was virtually impossible.Clients were frequently not available during my normal office hours and my practice in common with many others could not afford to provide a night time or weekend service. It was simply beyond our resources …"
"[Helen Williams] said that it was important that there should be person to person contact. During the conversation we spoke about using agents to go out to a client's home to give the oral explanation personally. She said that would be a very good idea and that the LCD would not have any difficulty themselves with it."
"In the period immediately following its enactment, the history of how an enactment is understood forms part of the contemporanea expositio, and may be held to throw light on the legislative intention. The later history may, under the doctrine that an ongoing act is always speaking, indicate how the enactment is regarded in the light of developments from time to time."
"… the concept of legislative intention is a difficult one. Contemporary exposition helps to show what people thought the act meant in the period immediately after it was passed. Official statements on its meaning are particularly important here, since every Act is supervised, and most were originally promoted, by a Government Department which may be assumed to know what the legislative intention was …"
"Official statements by the Government Department administering an Act or by any other authority concerned with the Act, may be taken into account as persuasive authority on the legal meaning of its provisions."
"17(1) The general objective of this Part is the development of legal services in England and Wales by making provision for newer and better ways for providing such services and a wider choice of person providing them while maintaining the proper and efficient administration of justice."
"… make sure that damages awarded to people winning cases were not significantly reduced by having: to pay their solicitors an uplift in the normal fee under the CFA for the risk of not being paid if the case was lost or having him or herself to meet disbursements; or meet the cost of insurance taken out to cover their risk in legal costs; make the use of CFAs and insurance suitable for defendants or those who are not claiming money, or only modest sums, by making the costs involved recoverable from the losing party."
"62 … the requirements appear designed to protect the litigants concluding conditional fee agreements who, when the section was first enacted, were required to pay any "uplift" out of their recoveries. Conditional fees are now permitted in order to give effect to another facet of public policy – the desirability of access to justice. Conditional fees are designed to ensure that those who do not have the resources to fund advocacy or litigation services should nonetheless be able to obtain these in support of claims which appear to have merit."
What is a "legal representative"?
"I specifically confirm that I verbally explained to the client the matters in paragraphs (a) to (e) under "other points" and confirm the matters at (e) in writing in schedule 2.Signed …………………………… solicitors
This agreement complies with the Conditional Fee Agreements Regulations 2000 (SI 2000/692)."
"We confirm that prior to the signing of this agreement we and/or our duly authorised agent on our behalf verbally explained to the client the matters in paragraphs (a) to (e) under "other points" in the attached terms and conditions and confirm the matters at (e) in writing in Schedule 2. This agreement which comprises this letter and the attached terms and conditions complies with the Conditional Fee Agreements Regulations 2000 (SI 2000 No.692).Signed …………………
[fee earner] for [insert name of firm]"
Advocacy Services
Can there be delegation?
"2-017 An agent may be appointed for the purpose of executing a deed, or doing any other act on behalf of the principal, which the principal might himself execute, make or do; except for the purpose of executing a right, privilege or power conferred, or of performing a duty imposed, on the principal personally, the exercise or performance of which requires discretion or special personal skill, or for the purpose of doing an act which the principal is required, by or pursuant to any statute or other relevant provision, to do in person.Comment:
2-018 The authorities cited for the proposition contained in this article indicate that it is a general rule of common law which will apply unless displaced. Similar considerations operate in the reverse situation, viz. Where it is sought to use the rule against a principal. Thus it has been held that a notice to quit may be served on an agent; but that a memorandum under the Money Lenders Act may not be.
…
5-001 When agent may delegate authority
(1) An agent may not delegate his authority in whole or in part except with the express or implied authority of the principal.
(2) …
(3) The above principles are inapplicable when the act done or to be done is purely ministerial and does not involve confidence or discretion."
"As a general proposition things that can be done by an individual may be done either personally or by a duly authorised agent. That is true under the common law generally and under statute. There are however exceptions. In some cases the provision which allows for or requires the thing to be done also prescribes that it must be done personally and not by an agent. In other cases the nature of the thing is such that it requires personal skill or discretion and cannot be delegated."
In that case certain notices could be given "by or on behalf of the tenant", others only "by the tenant". The Judge found there was a contrast in the Regulations and found that in the second instance the tenant could not delegate. In the CFA Regulations Mr Charlton argues there are no contrasts to be found and that the presumption should therefore be in favour of delegation.
"Unless the contrary intention appears, an enactment by implication imports the principle of the maxim … who acts through another, acts himself or herself ……
Agency principle. The agency principle is found in Coke (Co Litt 258). It mainly applies in the law of contract. However the acts or omissions of an agent may be relevant in statutory interpretation. Where an enactment refers to a person it is usually taken as intended to include that person's agent authorised either expressly or by implication."
"[Waterlows] have simply executed instructions to do ministerial acts in order to save the real solicitor from the trouble and expense of doing them."
"A solicitor taking out probate is not bound to do everything in his own person. There are some things which he cannot delegate, he is to give his personal responsibility and obligation to his client to use his own skill and his own judgment in some things which are to be done, and he ought not to delegate them at all. There are some matters as to which though he may delegate them and need not do them in person but may employ a clerk, yet he would be required to see that that clerk had competent knowledge"
and again, concluding that Waterlows could be used as a messenger to lodge or retrieve documents in the Probate Registry, Lord Blackburn commented further on what tasks might not be acceptably delegated (at pages 416-7):
"[It] was contended that it might be that a great deal more was done, - that … this messenger of Messrs Waterlows was to argue it and to advise upon it, and to discuss it, and to do various things which certainly I think [the solicitor] would not be doing quite his duty to his clients if he delegated to another person to do for him, and as to which certainly, if Messrs Waterlow did them (I think it is probable that there were too wise), if they incurred all the responsibility of advising on matters of law and things of that sort they would be doing a very foolish and rash thing. If they did all this it would be a plausible argument to say that in doing things like that, furnishing intelligence and legal advice and so on, which [the solicitor] ought not to have delegated to them to do, they were acting as solicitors [and were thereby committing the offence alleged]."
"… a professional man in appropriate circumstances is entitled to delegate tasks. Whether he is entitled to delegate a particular task will depend on the nature of the task. He is entitled to delegate some tasks to others but is not entitled to delegate others. It all depends on the nature of the task involved. If he does delegate he must delegate to a suitably qualified and experienced person." (Swinton Thomas LJ at 686F)
If delegation is permissible what are the permitted limits?
"The requirement placed on the solicitors by the case of Sarwar v Alam to investigate alternative funding options for the client before recommending the purchase of ATE cover does not apply in TAG cases when referred to you [ie, the solicitor]. The client will already have contracted to purchase from TAG the policy of insurance. Failure to complete this contract will leave the client liable to pay the premium regardless of whether or not the policy is utilised or paid. TAG is an insurance intermediary and as such is not bound by the Solicitors Costs Information and Client Care Code 1999. TAG does however, as a matter of best practice, enquire of its customers as to the existence of BTE cover and advised the potential client in the TAG service agreement that such existence may affect the recovery of the TAG premium. This is further enforced in the oral advice and fact find documentation which again repeats this advice."
Does the client need protection?
"It is appropriate to describe a person conducting the litigation or exercising rights of audience on behalf of the litigant. It is not appropriate to describe persons such as Grant Thornton who are accountants in the present case."
In that case, since the accountants were not providers of litigation services or advocacy services, their contingency fee arrangement was not rendered unlawful by any Rule or Regulation.
"The duty to supervise staff covers not only employees but also independent contractors engaged to carry out work on behalf of the firm, for example consultants, locums, solicitors clerks."
WHAT ARE THE CONSEQUENCES?
The CFA
"Parliament intended that if such an agreement [a Consumer Credit Agreement] was improperly executed it would be unenforceable and that the debtor should not have to pay."
"If Mrs Dimond is allowed to sue Mr Lovell as a trustee for 1st Auto Motive, the effect will be to confer legal rights upon 1st Auto Motive by virtue of an agreement which the Act of 1974 has declared to be unenforceable."
"This would be contrary to the intention of the Act. The only way therefore in which Mrs Dimond could recover damages for the notional cost of hiring a car which she has actually had for free is if your Lordships were willing to create another exception to the rule against double recovery. I can see no basis for doing so. The policy of the Act of 1974 is to penalise 1st Auto Motive for not entering into a properly executed agreement. A consequence is often to confer a benefit upon the debtor, but that is a consequence rather than the primary purpose. There is no reason of policy why the law should insist that Mrs Dimond should be able to retain that benefit and make a double recovery rather than that it should reduce the liability of Mr Lovell's insurers."
"Where the law expressly restricts the circumstances in which agreements in support of litigation are lawful, this provides a powerful indication of the limits of public policy in analogous situations. Where this is not the case then we believe one must today look at the facts of the particular case."
The ATE insurance premium
SUMMARY