England and Wales High Court (Senior Courts Costs Office) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
SUPREME COURT COSTS OFFICE
In the Slough County Court

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		5 July 2006

Master Rogers, Deputy District Judge

 

THE ISSUE

1. The issue in this matter is a now familiar one, namely whether the Claimant's then solicitors, Messrs Ascots, sufficiently complied with Regulation 4 of the Conditional Fee Agreements Regulations 2000 in connection with the CFA under which this litigation was conducted on behalf of the Claimant.
2. Mr Lambert, a Principal Costs Officer, held on 10 April this year that, as there was no evidence before him to satisfy him that there had been compliance with Regulation 4, he had no alternative but to assess the Claimant's bill, so far as it related to Part 1, that is to say the costs of Messrs Ascots, at nil. Ascots appeal that decision to me.

THE BACKGROUND

3. On 23 June 2000 the Claimant was riding his bicycle across a roundabout at Whitehorse Lane and Ben Johnson Road in Whitechapel, London, when the First Defendant, driving a Vauxhall car, registration number V403 RAR, drove onto the roundabout, colliding with the Claimant, who was already proceeding around that roundabout. As a result the Claimant sustained injuries, and subsequently brought proceedings arising out of the accident and those injuries.
4. Ultimately, on 20 October 2005, an order was made by consent that there should be judgment for the Claimant against the First Defendant in the sum of £42,500, inclusive of interest, but subject to deduction of CRU benefits, and subject to credit for all interim payments already received on behalf of the Claimant.

THE ASSESSMENT PROCEEDINGS

5. Messrs Ascots represented the Claimant in those proceedings, from 13 September 2000 to the 31 October 2004, and Messrs Daybells for the period from then until the completion of the matter.
6. Obviously there was one bill, but it was divided into parts, and the part relating to Messrs Ascots' costs was Part 1.
7. However, as Messrs Ascots had been involved in the matter previously, there had to be liaison between them and Messrs Daybells, who were conducting the detailed assessment proceedings, and I will need to refer to at least one letter in that connection later in this judgment.
8. The point in issue, namely alleged non compliance with Regulation 4, is clearly set out in the Points of Dispute, which I set out below:

"4. General Funding and

Regulation

4 Advice The Defendants put the Claimant to strict proof that no BTE insurance existed prior to entering into the CFA and refers to Section 27 of the Access to Justice Act 1999 substituted a new section 58 of the Courts and Legal Services Act 1990 wherein Conditional Fee Agreements were made lawful as long as they satisfied the statutory conditions.

 

On this occasion the Defendants refer to Conditional Fee Agreements Regulations 2000 and puts the Claimant's solicitors to strict proof that Regulation 4 advice was given to the Claimant. In the event that this was not given the Defendants refer to Culshaw v Goodliffe [2003] LTL 23/09/04 where the receiving party had the benefit of BTE insurance the Conditional Fee Agreement was unenforceable.

 

Additionally, the Claimant's solicitors are put to strict proof that sufficient enquiries were made as to the existence of legal expenses insurance.

 

The Claimant's solicitors are put to strict proof that sufficient enquiries were made as to the existence of legal expenses insurance Samonini v London General Transport Services Ltd [2005]. The Defendants seek clarification that a material breach has not occurred and that the appropriate documentation was requested to be considered Myatt Others v National Coal Board [2005].

 

Furthermore, the Defendants refer to Garrett v Halton Borough Council [2005] and puts the Claimant's solicitors to strict proof that any interest has been declared."

 

 

9. Amongst the papers in support of the appeal was an annotated copy of the Points of Dispute, and against heading number 4, in manuscript, appeared the following words:

"Enquiries were made at the time of instruction, no BTE was in existence. These enquiries confirmed the position."

Mr Somerville who was the experienced legal executive who conducted this action at Messrs Ascots was present in court with Mr Stacey and was able formally to identify that handwriting as his.

10. As indicated, the detailed assessment was conducted by Messrs Daybells, and another document, which was drawn to my attention during the course of the hearing, was a letter written by Mr Somerville to Messrs Daybells, clearly in answer to a query from them about this particular point. It is dated 29 March 2006, and the relevant paragraph reads as follows:

"We have checked our papers and unfortunately cannot find a copy of our note in relation to the discussion that we would undoubtedly have had with the client at the outset in relation to whether he had any legal expense insurance in place. Those enquiries were undoubtedly undertaken at the time. The client has no legal expense insurance in place hence the reason why the formal retainer was by way of Conditional Fee Agreement. It does need to be recalled that at the time of our original instruction regulations were not as strict or as in place as is now required by the cases which the Defendants refer to. Nevertheless, the fact remains that the client does not have the benefit of any legal expense policy and those enquiries would have been made at the time."

11. It appears that that was the totality of the "evidence" in relation to this matter when it came before Principal Costs Officer Lambert on 10 April. On that occasion the Claimant was represented by a costs draftsman, who could do no better than refer to the documents. Mr Lambert decided, and as both sides I think now accept, reasonably on the evidence before him, that there simply was no evidence, either way, of compliance with Regulation 4, and accordingly, in line with the authorities, he had no option but to declare it unenforceable, and to assess the costs of Messrs Ascot in Part 1 of the bill at nil.
12. Mr Somerville, in order to remedy this glaring defect in the Claimant's case, made a very detailed witness statement, which is dated 21 April 2006, and this was served on the Defendant/Respondents' solicitors well before the hearing of this appeal.
13. However, in a letter written just five days prior to the hearing of the appeal, Messrs Lyons Davidson, on behalf of the Defendants, said that they did not accept the statement of Mr Somerville, and did not consider that it was admissible, because no application had been made for it to be admitted.
14. This remained the position when the appeal was opened by Mr Stacey, although in fact opening submissions were made by Mr MacBean, Counsel for the Defendant, on the basis that firstly there had been no formal application made to admit the evidence of Mr Somerville, and that it should not be so admitted, applying the well known principles set out in the case of Ladd v Marshall [1954] 1 WLR 1489.
15. Mr Stacey accepted that CPR 52.11(2)(b) meant that he needed permission for Mr Somerville's witness statement to be admitted, and he made that application orally to me at the hearing.
16. The form and nature of applications is governed by CPR 23, and in particular 23.3(1) and (2), which read as follows:

"23.3 – (1) The general rule is that an applicant must file an application notice.

(2) An applicant may make an application without filing an application notice if –

(a) this is permitted by a rule or practice direction; or

(b) the court dispenses with the requirement for an application notice."

17. It seemed to me that it would be appropriate to allow Mr Stacey to make his application in that way, and that is what I did.
18. In passing I would comment that neither party suggested to me that because this appeal is brought as of right, and amounts to a rehearing, there was no need for the Claimant/Appellant to obtain permission to put in the witness statement.
19. In his skeleton argument, as developed by him in his oral submissions, Mr MacBean argues strongly that the conditions laid down in Ladd v Marshall had not been complied with, and accordingly I ought not to admit the witness statement of Mr Somerville.
20. Without formally conceding the point, Mr Stacey seemed to think that if I were to rule against him, that would effectively be the end of the appeal.
21. Although now over 50 years old, the case of Ladd v Marshall is still regularly quoted when permission is sought to adduce fresh evidence on an appeal, and I quote from page 1491 of the judgment of Denning LJ, as he then was:

"The principles to be applied are the same as those always applied when fresh evidence is sought to be introduced. To justify the reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed or in other words it must be apparently credible, though it need not be incontrovertible."

22. Mr MacBean's primary submission was that those three pre-conditions were still the applicable law, even after the introduction of the CPR, and, by analysing the documents in the way that he did, Mr MacBean submitted that the witness statement ought not to be admitted. He also contended that the first of the three conditions was the most important, and indeed it was conceded on behalf of the Claimant, by Mr Stacey, that the first condition could not be fulfilled in this case. The witness statement that is now before the court could quite readily and easily have been obtained and put in before the original hearing, and indeed I venture to suggest that had that happened there might not have had to be this appeal.
23. Mr Stacey, in his submissions on this point, said that whilst it appeared from the authorities that the Ladd v Marshall case was still good law, it was not perhaps quite as decisive post CPR, as it apparently had been treated pre CPR.
24. To support that contention he cited two Court of Appeal decisions, Hertfordshire Investments Ltd v Bubb [2000] 1 WLR 2318, and Hamilton v Al-Fayed, decided on 21 December 2000.
25. So far as the Hertfordshire case is concerned, Mr Stacey relied on the part of the judgment of Lady Justice Hale, as she then was, to be found at page 2325, letter H:

"It follows from all of this that it cannot be a simple balancing exercise as the Judge in this case seemed to think. He had to approach it on the basis that strong grounds were required. The Ladd v Marshall criteria are principles rather than rules but, nevertheless, they should be looked at with considerable care and in this particular case, of course, the first of those principles was not fulfilled: the evidence could clearly have been available readily at trial."

26. Turning to the Al-Fayed case, Mr Stacey drew my attention to paragraphs 11 to 14, which read as follows:

"11. Mr Beloff, QC, on behalf of Mr Al Fayed, submitted that, in considering whether there were 'special grounds' for permitting the introduction of fresh evidence we were bound by the decisions governing the introduction of fresh evidence on appeal that predated the introduction of the CPR. Mr Boswood, QC, on behalf of Mr Hamilton, did not challenge this contention. We consider that under the new, as under the old, procedure special grounds must be shown to justify the introduction of fresh evidence on appeal. In a case such as this, which is governed by the transitional provisions, we do not consider that we are placed in the straightjacket of previous authority when considering whether such special grounds have been demonstrated. That question must be considered in the light of the overriding objective of the new CPR. The old cases will, nonetheless remain powerful persuasive authority, for they illustrate the attempts of the courts to strike a fair balance between the need for concluded litigation to be determinative of disputes and the desirability that the judicial process should achieve the right result. That task is one which accords with the overriding objective. In adopting this approach we are following the guidance to be found in the judgment of May LJ in Hickey v Marks (6 July 2000), of Morritt V-C in Banks v Cox (17 July 2000) and of Hale LJ in Hertfordshire Investments Ltd v Bubb [2000] 1 WLR 2318.

12. In Ladd v Marshall [1954] 1 WLR 1489 at p.1491 Denning LJ summarised the test for introducing fresh evidence on appeal as follows:

"To justify the reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible."

13. These principles have been followed by the Court of Appeal for nearly half a century and are in no way in conflict with the overriding objective. In particular it will not normally be in the interests of justice to reopen a concluded trial in order to introduce fresh evidence unless that evidence will probably influence the result.

14. Often the fresh evidence relied upon demonstrates that perjured evidence was given at the trial. In such circumstances, provided that the requirements of Ladd v Marshall are satisfied, the practice of the Court of Appeal has been to order a new trial without resolving the issue of whether the alleged fraud in fact occurred. That issue is best resolved on the retrial."

27. In reply Mr MacBean suggested that of the three tests laid down by Lord Denning, and effectively accepted by the more recent cases cited above, the first was by far the most important, and indeed ought to be conclusive in his favour.
28. Mr Stacey conceded throughout that the statement could have been made earlier, and when I pressed him during the submissions as to why it had not been, he told me that Mr Somerville (who was with him and gave him direct instructions) had not considered the matter to be as important as it clearly became.
29. Turning to the second heading, the statement, as conceded by Mr MacBean in his skeleton, will play an important part in the appeal if it is admitted, but he sought to persuade me, by careful analysis and comparison of the wording used by Mr Somerville in his statement with that used in previous communications, that it should not be given the credibility which it might otherwise attract.
30. Thus, Mr MacBean drew my attention to the vague nature of the letter of 26 March from Mr Somerville to Messrs Daybells, which clearly suggests that, although there is no attendance note in existence, the conversation must have taken place, because that was the firm practice of his firm at that time.
31. However, when one looks at paragraph 5 of his statement, this is much more specific, stating:

"5. I telephoned the Claimant on 7 August 2000 and spoke to the Claimant at some length concerning the accident circumstances, the type of injuries he sustained and other general enquiries about the accident circumstances generally …"

32. Mr MacBean suggested it was very strange that, whereas on 26 March Mr Somerville was relying on the normal practice in the firm, by the 21 April he was saying he definitely remembered a conversation which he had had nearly six years previously, at least in so far as the date is concerned. It appears that the date is the date on which the CFA was signed.
33. Mr Stacey protested that this was effectively seeking to undermine the credibility of Mr Somerville, and that this should not be allowed, unless there was an application for him to be cross-examined, and no such application was mounted by Mr MacBean.
34. During the course of the submissions I made the point that the events in relation to this case took place very shortly after the end of the so called "twilight zone" in 2000 that occurred between the change in the statute allowing CFAs, and the introduction, some two or three months later, of the 2000 Regulations. Everybody dealing with these matters is now familiar with the pitfalls that Regulation 4 provides, and normally take elaborate steps to avoid those pitfalls. However, in 2000, although the wording of the Regulations may well have been available, the importance that the words were going to assume at a later stage was perhaps not as well appreciated as it should have been.
35. Mr Somerville is a legal executive of some considerable experience, and a Fellow of the Institute of Legal Executives, and it was urged on me by Mr Stacey that I ought to accept his witness statement at its face value, and not seek to undermine it, unless and until his evidence was destroyed in cross-examination.
36. I have not found the decision on this point altogether easy, but in the end I have concluded that it would be unduly harsh to exclude Mr Somerville's statement, simply because it was served late, and indeed because permission to rely upon it was not made until the opening of the appeal.
37. Accordingly, it seems to me that the discrepancies, which were quite rightly pointed out to me by Mr MacBean, do not outweigh the apparent credibility of Mr Somerville's statement.
38. I consider that the three heads that have to be considered under the Ladd v Marshall principle are of equal weight, and although the Claimant has failed on the first head, he is entitled to succeed on the second and third heads.
39. Accordingly, on the preliminary application, I admit the evidence of Mr Somerville, though I am very much open to argument as to the costs of this part of the application in view of its lateness.

DOES MR SOMERVILLE'S STATEMENT SATISFY ME THAT REGULATION 4 HAS BEEN COMPLIED WITH?

40. Mr MacBean deals with this issue in paragraphs 12 to 18 of his skeleton. He amplified these in his submissions, though it is fair to say that he had concentrated most of his fire on seeking to exclude Mr Somerville's statement on Ladd v Marshall principles.
41. He suggests that there is no evidence that enquiries were made of other members of the Claimants' household as to whether any of them had applicable cover, something which was considered important by Master Wright in his decision on Myatt v National Coal Board at paragraph 73. I was rightly reminded by both counsel that that case is on its way to the Court of Appeal, and indeed is listed, with another case, for 19 June. However, neither party wished me to reserve judgment until after that hearing, just in order to find out what the Court of Appeal might decide. This is doubtless caused by the fact that, though the hearing may be taking place on 19 June, it is at least probable that judgment may be reserved until well into July.
42. Mr MacBean also suggested that there was no evidence that Mr Oduvbu had been asked if he had any relevant credit cards which might provide cover, another aspect of the decision of Master Wright in Myatt v National Coal Board, which was considered to be of importance by Mr MacBean. Finally, he said that there was no evidence that Messrs Ascot themselves had reviewed any potential relevant policies, and in respect of that Mr MacBean relied on the dicta of Lord Phillips MR, as he then was, at paragraph 45 of Sarwar v Alam [2002] 1 Costs LR 37.
43. In that paragraph the learned Master of the Rolls said this:

"45. In our judgment, proper modern practice dictates that a solicitor should normally invite a client to bring to the first interview any relevant motor insurance policy, any household insurance policy and any stand alone BTE insurance policy belong to the client and/or any spouse or partner living in the same household as the client. It would seem desirable for solicitors to develop a practice of sending a standard form of letter requesting a sight of these documents to the client in advance of the first interview. At the interview the solicitor will also ask the client, as required by paragraph 4(j)(iv) of the Client Care Code (see paragraph 49) whether his/her liability for costs may be paid by another person for example an employer or trade union."

44. In response Mr Stacey reminded me that, as the case law stands at present, ultimately the issue depends upon the answer to the following questions:

Has there been a departure from a requirement of the relevant regulation?

If so has that departure had a materially adverse effect:

upon the protection afforded to the client; and/or

upon the proper administration of justice?

Those principles are of course derived from the now well known case in the Court of Appeal of Hollins v Russell [2003] 3 Costs LR 423.

45. He drew my attention to the relevant salient facts to be derived from the witness statement. Firstly, the fact that the Claimant was knocked off his bicycle. Although Mr Stacey conceded that there was no direct evidence about this one way or the other, he thought it unlikely that the Claimant would have had a car in respect of which an insurance policy might afford him cover for this sort of claim, as well as the bicycle.
46. Of course we know that the Leader of the Opposition cycles to work, but it appears that he is followed by someone in a car, bringing his papers and shoes! However, that is certainly not this case, and, taking into account the fact that the Claimant appears to be impecunious, because he is being chased by creditors, it seems very unlikely that he would be the owner of a car.
47. Similarly, if he had credit cards, which seems unlikely, they would appear to be, as it were, overdrawn, with him being chased by creditors, some of whom might well be credit card companies, and in those circumstances it is unrealistic to think that he would be able to derive cover from those credit cards.
48. Accepting as I do, at its face value, Mr Somerville's statement, I consider that adequate enquires were made of the Claimant as to the existence of relevant policies. I do not lose sight of the fact that this matter first arose in 2000, when the case law which has developed in this field had not begun to appear. I am not suggesting that for that reason the solicitors would not have conducted full enquires, though I would go as far as to say that if this were a case where the Regulations were still in force, and the client was now today instructing solicitors, they would probably carry out more detailed enquiries than they did in this case back in 2000.
49. Dealing with the specific submission by Mr MacBean, that Sarwar v Alam requires the solicitor in every case to examine the policies, I take account of the fact that the solicitors are based in Bracknell, and the Defendant lives in Whitechapel. Clearly his bicycle would have been out of action as a result of the accident, and it would have been difficult for him to get to Bracknell with the policies (if any).
50. Even if there was a technical breach of the Regulations, which I do not believe there has been, I do not consider that it has had any adverse effect on the administration of justice.
51. There did however remain one matter which I raised towards the end of the submissions, namely the failure of the Claimant solicitors to enquire as to the availability of legal aid. This is based on the decision of Master O'Hare in the case Nasreen Hussain v Leeds City Council. That case dealt with a number of connected housing disrepair cases brought by various tenants against Leeds City Council, and, in paragraph 46 of his judgment, after having recited the fact that the evidence that he had heard indicted that no indications were given to some of the claimants that they might qualify for legal aid with a nil contribution, Master O'Hare went on to say:

"In eight of the eleven cases before me the Claimants would have qualified for legal aid with a nil contribution. In those cases no good reason has been shown why those Claimants did not use legal aid. In particular I do not accept the evidence given by Mr Rodriguez that legal aid cases would proceed substantially more slowly than non legal aid cases. In my judgment in these eight cases there has been a material departure from the Regulations as a result of which those Claimants cannot recover from the Defendant any profit costs claimed by their solicitors or any disbursements, save only disbursements if any which the Claimants not the solicitors have already paid. Further, because they cannot justify the decision not to use legal aid, these Claimants cannot recover the ATE premium from the Defendant even if they have paid it."

52. As indicated that is a housing disrepair case, and I gave both parties leave to put in written submissions as to whether or not, at the relevant time, legal aid was still available to the Claimant for this sort of case.
53. Mr Stacey in his supplemental submission advised me that legal aid had, in 1999, been abolished for personal injury cases other than those arising from alleged clinical negligence.
54. I accept that submission which disposes of that point.
55. However, at the end of his reply, Mr MacBean suggested that paragraph 2 of the document accompanying the letter to Mr Oduvbu, of 7 August 2000, was misleading at best, and might well constitute a breach of the indemnity principle. I set out below the relevant extract from paragraph 2:

"Legal Expenses Insurance. You may have a policy of insurance that covers the legal costs of pursuing your claim arising from this accident. It is likely that any existing Legal Expenses Insurance will require you to pay on account any disbursement incurred on your behalf by your Legal Representative. These can run to several hundreds of pounds.

Furthermore, it is likely that under any existing Legal Expenses Insurance your Legal Representative would receive their fees whether you win, lose or draw your claim. Therefore, such Legal Representative has no added incentive to succeed with your claim and/or obtain for you the maximum amount of compensation.

Under a Conditional Fee Agreement, we only receive fees if your claim is successful. Furthermore, as we also receive a success fee, the more compensation you recover the greater amount of our success fee. Also, if you are successful, all our fees are recoverable from your Opponent.

Therefore we have a legitimate interest in obtaining for you the maximum amount of compensation that you are legally entitled to."

56. In order to raise this Mr MacBean would need to make an amendment to his Points of Dispute. The current rules state that amendments can be made to Points of Dispute without permission, but if objection is taken, then the court can disallow the proposed amendment (CPD 40.10(2)). In this particular case, because the point only occurred to Mr MacBean towards the end of his submissions, there was no amendment before me, but I gave him permission to put an amendment, in writing, and to serve it on the other side.
57. This he duly did, and no objection has been taken by the Claimant to such amendment.
58. In my judgment the Court of Appeal decision in Thornley v Lang [2004] 1 Costs LR 91, as applied by Mr Justice Simon in the more recent case of Butt v Nizami [2005] EWHC 159 (QB) is a complete answer to this point, and I do not consider that the wording quoted above amounts to a breach of the indemnity principle.

CONCLUSION

59. To pull the threads of this judgment together, therefore, I firstly allow in as evidence Mr Somerville's statement, and, having heard the submissions made thereon, I have concluded that there has been no material breach of the CFA Regulations in this case, or, if there has been such a breach, one that has any material effect on the administration of justice. Accordingly, this appeal will be allowed when this judgment is formally handed down.
60. With the agreement of the parties, I am allowing an unusually long period between the dispatch of this draft judgment, and the formal handing down, to enable the parties to see if they can negotiate a figure for the costs of Part 1 of the bill, in default of which the matter would need to be remitted to Principal Costs Officer Lambert for determination, something which, I think everybody is agreed, should be avoided in the interests of saving further costs.
61. I will of course hear any submissions on costs, and other issues, when this judgment is formally handed down.