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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 >> Duffy v Port Ramsgate Ltd. [2004] EWHC 9008 (Costs) (25 February 2004)
URL: http://www.bailii.org/ew/cases/EWHC/Costs/2004/9008.html
Cite as: [2004] EWHC 9008 (Costs)
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SUPREME COURT COSTS OFFICE
Strand, London, WC2A 2LL |
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B e f o r e :
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| JAMES JOSEPH DUFFY |
Claimant |
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| - and - |
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| PORT RAMSGATE LIMITED |
Defendant |
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Mr Blaber (of Messrs Holman Fenwick & Willan) for the Defendant
Hearing date : 22 January 2004
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Crown Copyright ©
- The bill of costs in this case relates to a personal injury claim in the Mayors & City of London County Court which settled in June 2002. Detailed assessment proceedings commenced in October 2002. A hearing date was not requested until May 2003 and, in July 2003, an order was made transferring the proceedings to the Supreme Court Costs Office. It was first listed for hearing before Mr O'Riordan, Principal Costs Officer, but, at the request of the Defendants, was assigned to me and listed for hearing on 22 January 2004.
- As a result of the hearing and some further negotiations between the parties all questions in this case have been determined subject to my decision upon three points of principle which were argued before me and subject to any consequential decision as to the costs of the detailed assessment. Before setting out these points of principle it is convenient to summarise the course of the proceedings in the County Court and then to describe the funding arrangements between the Claimant and his legal representatives.
- The Claimant was employed as a fire fighter by the Kent County Council. In September 1994 he attended the disaster which occurred at Port Ramsgate when a walkway collapsed, killing six people and severely injuring many others. As a result of his experiences at that disaster he later suffered the onset of Post Traumatic Stress Disorder. In November 1997 he sought the assistance of his trade union, the Fire Brigades Union, in bringing a claim for damages against the Defendant. The union instructed Messrs Thompsons to act on his behalf and that firm sent a letter to the Claimant dated 3 December 1997 explaining that they would act for him under the Union's legal aid scheme and that the Union would indemnify him as to the costs provided he acted reasonably and obeyed the conditions of the Union rule book.
- County Court proceedings were commenced just over one year later, in January 1999. In September 1999 the case was allocated to the multi track. In October 2000 the Defendant made a payment into court of £6,000 which was increased in June 2001 to £85,000 and again in March 2002 to £120,000. The matter was listed for a three day trial commencing on 22 July 2002. On 17 June 1002 it settled for the sum of £130,000 plus costs.
- The bill is divided into three parts. The first part covers the period from the outset of instructions to the commencement of the CPR in April 1999. The second part covers the period from then until the date upon which the Claimant's solicitors allege that additional costs are payable under a collective conditional fee agreement (CCFA) they entered into with the Fire Brigades Union. Part 3 of the bill covers the costs claimed as payable under the CCFA, ie base costs plus a success fee.
- Copies of the CCFA were disclosed to the Defendant and to me in advance of the hearing. The agreement was signed by Mr Gilchrist for the union and Mr Christie for Messrs Thompsons. It was made on 30 November 2000 which is the date of the coming into force of the Collective Conditional Fee Agreements Regulations 2000 (SI 2000/2988) ("CCFA Regulations"). It is convenient to set out three passages from those Regulations. Regulation 1 contains definitions including as follows:
- Regulation 2 is entitled "Transitional provisions" and provides as follows:
- Regulation 4 is entitled "Requirements for contents of collective conditional fee agreements: general". In this case questions arise as to paragraphs (2) and (4) which are as follows:
- Turning now to the CCFA in this case, paragraphs 1.3 and 1.4 purport to comply with Regulation 4, ie, they require Messrs Thompsons to "inform the member as to the circumstances in which the member may be liable to pay Thompson's charges" and to give certain further explanations if sought. They also provide that Thompsons must confirm their acceptance of instructions in writing to the "member" (see below).
- Clause 2 of the agreement is entitled "Coverage of the agreement". Sub-clause 1 limits it to claims conducted by Thompsons for members in England and Wales, and, at least for the time being, to claims for damages for personal injuries. Sub-clause 2 purports to apply the agreement to all such cases, whether existing or future and, in the case of existing cases purports to apply the agreement retrospectively, ie for work already done in those cases. Sub-clause 2.2 is as follows:
- Clause 3 of the agreement is entitled "Definitions" and includes the following:
- Clause 4 of the agreement is entitled "Success" and, amongst other things, provides as follows:
- Sub-clause 4.3 purports to limit Thompsons' entitlement to charges by making them coterminous with any order for costs made against an opposing party. It provides as follows:
- Clause 5 is entitled "Success fees" and contains largely standard provisions including this:
- In order to comply with their obligations under sub-clauses 1.3 and 1.4 of the agreement Messrs Thompsons sent the Claimant a letter dated 30 November 2000 informing him that they were now instructed under the terms of the CCFA and stating as follows:
- Mr Christie stated that, on 30 November 2000, he and his colleagues sent out 20,000 such letters.
- The first point of principle taken by the Defendant is that Thompsons have failed to comply with their contractual obligation to inform the Claimant as to his liability for their costs and that such failure by them is of so serious a nature as to entitle the Claimant and the trade union and therefore the Defendant to treat the contract as discharged so far as this Claimant's case is concerned. Although I characterise the accusations about failure to give information as a breach of contract rather than as a non-compliance with the CCFA Regulations I have not overlooked the statements made on this topic in Hollins v Russell [2003] EWCA Civ 718 (paras 110 to 112). That case makes clear that, in the case of an ordinary CFA, the failure to give pre-contract warnings may lead to a conclusion that an ordinary CFA does not satisfy the conditions applicable to it and is therefore unenforceable. However, the CCFA Regulations, although similar to the ordinary CFA Regulations on many points, are different on this point. Also, I do not accept that a failure by Thompsons to give adequate information to the Claimant in this case should lead to a conclusion that the CCFA they made with the Fire Brigades Union is unenforceable in all cases.
- The Defendant complains that the letter sent to the Claimant gave him no information as to how Thompsons would calculate their charges, whether by way of a fixed hourly rate or by some other method, nor did it give any estimate of the overall costs of the action. In Mr Blaber's submission the amount of information which should have been given is indicated by Rule 15 of the Solicitor's Practice Rules 1990 and the Solicitor's Costs Information and Client Care Code referred to in rule 15. The Code does indeed refer to the giving of "realistic estimates" (para 4(c)(ii)) and of explanations as to how fees are calculated (para 4(f)). So far as the CCFA in this case is concerned Mr Blaber emphasised the importance of giving this information to the Claimant. This Claimant already had an existing indemnity from the trade union which was free from any liability to pay success fees on top. The change to CCFA terms offered no benefit to him but could cause him severe disadvantage should his right of indemnity from the trade union become unenforceable. Organisations which are larger and apparently stronger than the Fire Brigades Union have collapsed in the past (for example Barings Bank). Mr Blaber submits that, by failing to explain the change from their original retainer to CCFA terms with a success fee, Messrs Thompsons have failed to explain to the Claimants the substantial increase in his liability for their costs.
- In response Mr Christie challenged the assertion that the change to CCFA terms had no benefit for individual members of the union. The trade union is an unincorporated association, ie a collection of members. The risk sharing now undertaken by solicitors in respect of their charges will therefore be of benefit to every member. He also challenges the assertion that the Fire Brigades Union or any trade union may later disappear because of financial disaster. Trade unions are not profit making organisations. The normal solution for any catastrophic financial problems besetting them is a merger with other, financially stronger, unions. He makes the strong point that giving the information about their potential liability for costs which Mr Blaber thinks should be given would be likely to disconcert, frighten or alarm members for no purpose. That danger might well be enhanced in the case of a claimant suffering Post Traumatic Stress Disorder. In answer to the charge that his firm failed to comply with the Solicitors Costs Information and Client Care Code he draws my attention to paragraph 2(b) of the Code which states as follows:
- Mr Christie accepts that neither (i) or (ii) apply directly to this case. However, in his submission, they are no more than examples of cases in which full compliance with the Code is inappropriate. He would offer a third example, any trade union funded case. He invited me to accept that, even between his firm and the trade union, it is not appropriate for the solicitors to be giving the detailed advice Mr Blaber requires be given to the Claimant. Because the agreement is a national one and is intended to endure for many years, it is not possible to be more specific as to the hourly rates payable other than to say they shall be such as are "allowable for the work in the court in which the claim in question is conducted or would be conducted if proceedings were to be issued" (see agreement para 3.2.1). Mr Christie scorns Mr Blaber's reliance upon these points as being yet another example of the trench warfare in costs which has been described as a blot upon our civil justice system.
- In my judgment the Defendants have failed to show a breach of clauses 1.3 or 1.4 of the CCFA, the requirements to give costs information to the Claimant, which were obviously inserted in order to comply with the CCFA Regulation 4. I do not think the Claimant in this case has been misled as to his liability for costs or has been let down by his solicitors in explaining that liability to him. The obligation of the solicitors acting under a CCFA is to explain to the litigant the consequences of the CCFA so far as the litigant is concerned. By emphasising his costs free position Messrs Thompsons appear to have done that correctly. In my judgment it would have been unreal, bordering upon the absurd, for them to have attempted to give the full information which another litigant, not funded by a trade union, should be given.
- The second point of principle which Mr Blaber relied on concerns the decision of MacPherson of Cluny J in Customs & Excise Commissioners v Vaz [1995] STC14. In that case the successful party's advocate had agreed to limit his fee to the amount, if any, which was recovered by way of costs from the losing party. It was held that the litigant had no liability to his advocate unless an order for costs was made and that, in such circumstances, the tribunal in question could not make an order for costs since its order had to be limited to the amount for which the successful party was already liable to pay. The tribunal in that case was a VAT tribunal and the advocate in question was a Mr Rayner, a VAT consultant who had conducted the proceedings on behalf of the successful party, Mr Vaz. It is convenient to set out a short passage from the judgment:
- For the Claimant, Mr Christie answers the Vaz point in two ways. First he says that the CCFA in this case does not provide fees limited to sums actually recovered. Secondly, even if it does, agreements of the type described in Vaz are nowadays permitted and effectual if made as part of a conditional fee agreement which is otherwise valid. In support of the second point he relies upon the decision of Master Hurst, the Senior Costs Judge, in The Accident Group Test Cases Tranche 2 (15 May 2003, unreported). Master Hurst's decision was in respect of an agreement made by solicitors on the TAG panel. These solicitors agreed that although disbursements would be deducted from certain loans arranged for their clients, if a case was successful but a disbursement was not recovered, the solicitor would repay it to the client.
- In reply Mr Blaber respectfully doubted the decision made by Master Hurst on this point. In his submission agreements limiting fees to the amount of costs recovered did not become valid until 2 June 2003, the date upon which Section 31 of the Access to Justice Act 1999 was implemented (the Access to Justice Act 1999 (Commencement No.10) Order 2003 (SI 2003/1241)). As to the rule amendments referred to by Master Hurst, the statutory instrument which brought them into force (the Civil Procedure (Amendment No.2) Rules 2003 (SI 2003/1242) contained a transitional provision as follows:
- In my judgment Mr Blaber is wrong to say that the CCFA in this case suffers from the defect described by MacPherson of Cluny J in the Vaz case. Clause 3.2.1 describes Thompson's charges in relation to the work they have done not in relation to the amounts of costs which may or may not be recovered. Calculating charges "on the basis of the hourly rates allowable" is not the same as calculating charges on the basis of hourly rates allowed. The CCFA entitles Thompsons to charges even where the costs are not fixed by a court. Clause 3.2.1 also applies in cases where the claim is settled before the issue of court proceedings and the amount of costs are agreed between the parties. Clause 5.5 limits Thompsons to the amount of any agreed costs if those costs were in fact agreed by Thompsons. However, they are not so limited if those costs were agreed eg, by the Claimant acting in person. It is true that clause 4.3 limits Thompsons' entitlement to costs whenever the Claimant recovers only a percentage or proportion of his costs from his opponent. However, if an order was made allowing some costs to the claimant and other costs to the defendant, Thompsons would be entitled to charges for all the work covered by the order in favour of the Claimant. They would not be limited to the net sum actually paid by the Defendant.
- If I am wrong upon that question then I would still find this point in favour of the Claimant. Although, strictly, Master Hurst's decision in the TAG case is not binding upon me, I nevertheless reach the same conclusion he reached. The CFA law first introduced in 1995 was wide enough to cover agreements similar to the agreement made in the Vaz case. The implementation of Section 31 of the 1999 Act did not change the law but merely clarified it. Similarly, the CPR change which affects CFAs introduced on and after 2 June 2003 clarifies the procedural law for the future but did not bring about any change in the law.
- As Mr Christie confirms clause 2.2 of the CCFA was intended to make it retrospective in respect of all cases covered by the agreement. Thus, in a case such as this, Thompsons are entitled to recover a success fee on all work done since the start of instructions in 1997. In fact the bill in this case makes no claim for a success fee on work done before the date of the CCFA. Thompsons acknowledge, without accepting, the force of certain arguments which might lead a court to conclude, perhaps for policy reasons, that no success fees are allowable for work done prior to the date of the agreement or perhaps prior to the date of the notice of funding. For the time being Thompsons are willing to accept the worst of both worlds: they lose all entitlement for charges for pre CCFA work in cases which fail and they do not receive a corresponding success fee on any pre CCFA work in cases which succeed. (Although this point was not argued before me it must follow that, if I am wrong as to the first point of principle and Thompsons should be held in repudiatory breach of the CCFA, they are not now entitled to any profit costs or unpaid disbursements claimed in any part of the bill. Because of clause 2 of the CCFA they have lost all rights to claim against the Claimant under their previous retainer with him.)
- In Mr Blaber's submission the indication of policy against retrospectivity is to be found in Regulation 2 of the CCFA Regulations which states that the Regulation shall apply only to agreements entered into on or after 30 November 2000. Parties entering into a CCFA should not be permitted to side step that restriction by making a valid CCFA which takes effect from an earlier date. Even if he is wrong upon this point Mr Blaber remains confident that, as between litigants, the only proper start date for liability for success fees is the date of giving notice of funding required by the Rules and by the Pre Action Protocol Practice Direction.
- I am not asked to decide in this case whether CCFA's can validly operate retrospectively. For the Defendant, Mr Blaber does not seek to argue that the retrospective effect of the CCFA is fatal to its validity. In his submission the purported entitlement to success fees on pre CCFA work is simply ineffectual and that is the reason the Claimant has not sought them in this case.
- The question concerning retrospectivity which I am asked to decide is this. Does Thompsons' willingness to make a retrospective agreement with the Fire Brigades Union make it proper for me to infer that, even before that agreement was made, Thompsons were acting on "no win no fee" terms. If I were to draw that inference then, as is now well known, no win no fee terms for legal representatives outside the statutory provisions of CFA law are illegal and therefore invalid and therefore no costs are recoverable in respect of them. This argument, if successful, would lead me to disallow all profit costs and all unpaid disbursements claimed in Parts 1 and 2 of the bill.
- For the Claimant Mr Christie argued that it is neither fair nor sensible to assume that, because Thompsons are willing to agree conditional terms now, therefore they must have been willing to agree conditional terms before. Had they wanted conditional fee terms before it was open to them to have entered into thousands of ordinary CFAs with each of the individual trade union members for whom they acted.
- I have no hesitation at all in refusing to draw the inference Mr Blaber asks me to draw. The point which Mr Blaber seeks to make is technical in the extreme and wholly without merit. The retrospective provisions of the CCFA (which Mr Blaber argues are ineffective) do not lead me to assume that Thompsons were always acting upon a similar basis. I can more easily infer that, by entering into a new agreement in November 2000, the solicitors and trade union were entering into a new arrangement hoping to take full advantage of the then new legislation. Their attempt to backdate the effect of the agreement might show a certain amount of optimism as to how powerful their new agreement could be. However such optimism is part of the changed relationship. No impartial observer could reasonably infer that it shows what the relationship always had been.
- Having determined all three points of principle in favour of the Claimant I shall at the next hearing (25 February 2004) deal with any application the Defendant wishes to make as to permission to appeal and also deal with any application either party wishes to make as to the costs of the detailed assessment.
Master O'Hare
" "Client" means a person who will receive advocacy or litigation service to which the agreement relates."
"These Regulations shall apply to agreements entered into on or after 30 November 2000, and agreements entered into before that date shall be treated as if these Regulations had not come into force."
"(2) A collective conditional fee agreement must provide that, when accepting instructions in relation to any specific proceedings the legal representative must –(a) inform the client as to the circumstances in which the client may be liable to pay the costs of the legal representative; and(b) if the client requires any further explanation, advice or other information about the matter referred to in sub-paragraph (a), provide such further explanation, advice or other information about it as the client may reasonably require.
…
(4) A collective conditional fee agreement must provide that, after accepting instructions in relation to any specific proceedings, the legal representative must confirm his acceptance of instructions in writing to the client."
"The agreement applies to:2.2.1 instructions for such claims [ie personal injury claims conducted for members in England and Wales] received on or after November 30 2000;2.2.2 work done before November 30 2000 in cases for which instructions were received before, but which are not finally concluded at, that date;
2.2.3 work done from November 30 2000 in cases for which instructions were received before that date."
"3.1.1 "Member" means a member of the union or a member of the family of such union member.3.2 Thompson's charges include:
3.2.1 "Base charges", ie charges for work done by or on behalf of Thompsons, calculated on the basis of the hourly rates allowable for the work in the court in which the claim in question is conducted or would be conducted if proceedings were to be issued."
The rest of that clause defines success fees, disbursements and VAT.
"4.1 If the member wins a claim … the union is liable to pay Thompsons' charges for work done on that claim …"
In order to prevent any possible argument that this disentitles Thompsons to claim costs from the member an earlier part of the agreement provides as follows:
"All references to liability of the union are to be taken as including the liability of the member to Thompsons in respect of legal costs and insurance premiums and the liability of the union to indemnify the member against such costs and premiums."
"4.3 If, in relation to a claim … the member is only entitled to be paid by his/her opponent:4.3.1 a stated proportion or element of his/her costs, or
4.3.2 costs for a particular period, or
4.3.3 costs relating to particular steps taken in the proceedings, or
4.3.4 costs relating only to a distinct part of the proceedings, or
4.3.5 costs excluding any costs described in clauses 4.3.1 to 4.3.4
then the union's liability to pay Thompsons charges is correspondingly reduced, save that the union will continue to be liable for the full amount of disbursements and VAT thereon."
"5.5 If, in any situation other than that covered by clause 5.4 [5.4 makes standard provision for cases in which part of the success fee is disallowed by a court as being unreasonable] Thompsons agree with any person liable as a result of proceedings to pay fees subject to a success fee that a lower amount than the amount payable in accordance with this agreement is to be paid, the amount payable under this agreement shall be reduced accordingly, unless the court is satisfied that the full amount should continue to be payable."
"Technically, like all solicitors' clients you are liable for your legal costs, however the union will continue to indemnify you ie pay all legal costs for you – provided you continue to satisfy the conditions of the legal assistance scheme as set out in the union rule book."
REPUDIATORY BREACH OF THE CCFA?
"The full information required by the Code may be inappropriate, for example:(i) in every case, for a regular client for whom repetitive work is done, where the client has already been provided with the relevant information, although such a client should be informed of changes; and(ii) if compliance with the Code may at the time be insensitive or impracticable. In such a case relevant information should be given as soon as reasonably practicable."
THE CIRCULARITY ARGUMENT
"What faces the court for consideration in the circumstances of this case is whether Mr Vaz has any liability to pay Mr Rayner which would justify an award of costs. That is the stage in the situation at which we have to look. I fully understand the argument put forward by Mr Gibbons [counsel for Mr Rayner] about a conditional arrangement, to which I will refer in a moment. It seems to me vital, however, that one must note that the first thing to consider is whether there is any liability in the client to pay the person representing him. If there is none there is no basis for an award of costs at all, because costs are only awarded on an indemnity basis.Here the argument of Mr Gibbons is limited to this. When I say limited, I do not mean it has no force, because he has made it with emphasis and clarity. What he says is that there is a special arrangement here made by Mr Rayner, which he was entitled to make but which lawyers are at present not entitled to make, namely a conditional fee agreement which provides for a client's fees and expenses to be payable in specified circumstances. The specified circumstances can only be on the basis that the money is payable, as he said to the Chairman, on the basis that: "My charges to the client will equal the costs received." If there can be no award for costs made because there is nothing to be indemnified, then the situation which Mr Rayner envisages in that scenario never arises. The argument is circular. He says that if there is an award of costs in favour of Mr Vaz he will bill him in that amount. If, however, no award for costs can be made, then there is nothing which Mr Rayner can do."
"383. Mr Neish sought to rely on the decision in Customs & Excise Commissioners v Vaz [1995] STC 14 in which MacPherson of Cluny J held that an arrangement under which a client's fees and expenses were to be payable only if the client was successful and would equal the costs received, was a breach of the indemnity principle. That decision was given in 1994 before legal representatives were allowed to enter into conditional fee agreements. Although the agreement under consideration in Vaz was not made by a legal representative, it is my view that the provisions of Section 58 of the Courts and Legal Services Act 1990 are sufficiently wide (provided all the statutory requirements are complied with) to enable legal representatives to enter into just such an agreement. Section 58 provides:"(2) For the purpose 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 …"384. There appears to be no reason why the circumstances specified should not be the recovery of those costs and/or disbursements from the paying party. I am reinforced in that view by the fact that the Civil Procedure Rules Committee has recently agreed to amend CPR 43.2 to insert:
"(3) In Parts 44 to 48 costs are recoverable where –(a) advocacy or litigation services are provided to a party under a conditional fee agreement (within the meaning of Section 58 of the Courts and Legal Services Act 1990); and(b) the client is only liable to pay his legal representatives fees and expenses to the extent that those costs are –
(i) received from another person; or(ii) ordered or agreed to be paid to the client."
385. This Rule is not yet in force. In my view, when it is in force it will not alter the law. It will merely clarify it. In addition to the rule change, an amendment to the CFA Regulations is envisaged which will make very much simpler the steps required to be taken by a legal representative when entering into a CFA under which, in certain circumstances, the client's liability for fees and expenses is limited to costs recovered. Also the amendment to Section 51 of the Supreme Court Act 1981 by Section 31 of the Access to Justice Act 1999 will be implemented. This also, in my judgment will not alter the law. CFA's of all types have been regularly used and regularly upheld in all courts, including the House of Lords, without this amendment being implemented."
"6. Rule 5(b) of these rules[ie, the relevant rule amendments] has effect only where the conditional fee agreement which is in issue was entered into on or after 2 June 2003."
THE RETROSPECTIVITY ARGUMENT