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

IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		31st March 2006

Master Gordon-Saker

The background

1. Mr Brierley, the Claimant, worked part time as a taxi driver. While driving a taxi on 7^th January 2000, he was involved in a head-on collision with a motor car driven by Mr Prescott, the Defendant. It would appear that Mr Prescott was driving on the wrong side of the road. Mr Brierley suffered significant physical injuries.
2. The owner of the taxi, a Mr Arthur, had the benefit of an uninsured loss recovery service provided by an organisation called "Cabcare". Cabcare instructed Pinto Potts, a firm of solicitors in Aldershot, in relation to the claims of the owner of the taxi and of the Claimant. I was told that Cabcare's policy will cover the cost of legal representation up to the issue of Court proceedings, but will not cover the cost of proceedings.
3. The car that the Defendant was driving at the time of the collision was hired by him from Hertz (UK) Limited. It would appear, from what I was told by the Defendant's representatives, that the Defendant's third party liability was insured by a company within the Hertz group.
4. Accordingly Pinto Potts wrote to Hertz in relation to their clients' claims and the matter was thereafter dealt with by "Hertz Claim & Risk Management", which is described on its stationery as "A Division of Hertz (UK) Ltd.".  The Defendant's liability for the accident was admitted on his behalf by Hertz and the claim of the owner of the taxi was settled by Hertz. It was explained in a letter dated 28^th January 2003 from Morgan Cole, the Defendant's solicitors, to Pinto Potts that "Hertz are self insured, and therefore are able to admit liability on behalf of their Hirer". While this statement would appear to ignore the finer points of the Road Traffic Act 1988,  what I think was being conveyed is that a Hertz group company was the insurer and that Hertz (UK) Limited (through its claims and risk management department) was dealing with the matter as the insurer's agent.
5. The Claimant's claim was rather more complicated than that of the owner of the taxi; and it became apparent that it would not be settled before the expiry of the limitation period. On 13^th November 2002 the Claimant and Pinto Potts entered into a conditional fee agreement. The agreement provided that it covered:

 "Your claim against Hertz UK Limited Car Hire for damages for personal injury suffered on 7 January 2000".

6. The conditional fee agreement incorporated the Law Society's Conditions which included the following definitions:

"(j)      Lose: the court has dismissed your claim or you have stopped it on our advice.

  (l)       Win: your claim for damages is finally decided in your favour whether by a court decision or an agreement to pay you damages"

and further provided that "if you win your claim, you pay our basic charges, our disbursements and a success fee."

7. Proceedings were issued in the Aldershot & Farnham County Court on behalf of the Claimant against "Hertz (UK) Limited". In paragraph 1 of the Particulars of Claim it was pleaded that Mr Prescott was driving the hire car as servant or agent of Hertz.
8. When the error of this reasoning was pointed out, it was agreed that Mr Prescott should be substituted as Defendant. On 14^th March 2003 a Defence was served on his behalf by Morgan Cole which admitted his negligence.
9. The claim was transferred to Wrexham County Court and in September 2004 it was settled on terms that the Defendant should pay the Claimant damages in the sum of £101,085.48 and that the Defendant should pay the Claimant's costs of the action "subject to detailed assessment in default of agreement".
10. I was told by the Defendant's representatives that the cheque for the balance of the damages was drawn on the account of a company within the Hertz group.
11. In due course Pinto Potts commenced detailed assessment proceedings and submitted their bill to Morgan Cole. The bill included a success fee under the terms of the conditional fee agreement. On 31^st January 2005 Morgan Cole served their Points of Dispute.
12. As a preliminary issue in relation to Part III of the bill (which followed the date of the conditional fee agreement) they contended that:

"… the Claimant has not "won" against Hertz UK Limited but, rather, has "won" against a Mr Jeffrey Prescott, the true and actual defendant in this matter. As such the terms of the CFA between Claimant and solicitor have not been fulfilled in that the Claimant has not succeeded against the person/body named in the CFA. The Defendant therefore contends that the Claimant is in fact therefore, not liable to pay any costs under this CFA and therefore, that by virtue of the indemnity principle, neither is the Defendant".

13. On about 18^th May 2005 Mr Brierley and Pinto Potts signed a further conditional fee agreement. That was in similar terms to the agreement signed in 2002 (and indeed bore the same date). The only difference was in the wording under the question "What is covered by this agreement". The amended wording read:

"Your claim against Hertz UK Limited Car Hire and Mr Jeffrey Prescott for damages for personal injury suffered on 7 January 2000".

14. I was provided with a witness statement of the Claimant dated 25^th July 2005. But I am going to ignore it completely. Patently it was drafted by a solicitor at Pinto Potts and is not in the ipsissima verba of the witness. The Claimant did not attend the hearing before me to give evidence or to be cross-examined. In any event, it seems to me that the statement would be inadmissible as an aid to the construction of the agreements.

The issues

15. The issues addressed in this judgment are:

(1)        under the terms of the 2002 conditional fee agreement is the Claimant liable to pay the costs of Pinto Potts for the work done thereafter; and if not

(2)        did the Claimant become liable to pay those costs by reason of the 2005 conditional fee agreement.

The 2002 agreement

16. The Defendant does not challenge the validity of the 2002 agreement by reference to the Conditional Fee Agreements Regulations 2000. It is simply contended that, as the agreement covered a claim against Hertz rather than the claim against the Defendant, the Claimant is not liable to Pinto Potts for the costs of the claim against the Defendant and therefore cannot recover those costs from the Defendant. The claim against Hertz, which the agreement did cover, was "lost" when Mr Prescott was substituted as Defendant.
17. It was not argued on behalf of the Claimant that if he was not liable to Pinto Potts for the costs of the claim against the Defendant, he could nevertheless recover those costs from the Defendant. The effect of the indemnity principle was not challenged. Rather it was argued that, as a matter of construction of the 2002 agreement, the Claimant was liable for the costs of the claim against Mr Prescott.
18. In my view, it is therefore simply a matter of construction of the agreement.
19. For the Claimant, Mr Marven reminded me of the decision of the House of Lords in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. At p.912g Lord Hoffmann summarised "the principles by which contractual documents are nowadays construed" as:

"(1)      Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

 (2)       The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

 (3)       The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. …

 (4)       The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meaning of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749.

 (5)       The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had."

20. Applying those principles to the present case, what was the meaning of the words:

            "What is covered by this agreement

·        Your claim against Hertz UK Limited Car Hire for damages for personal injury suffered on 7 January 2000" ?

21. The Claimant wished to recover compensation for his injuries. He may or may not have been interested in the identity of the person who paid that compensation. The effects of the provisions of the Road Traffic Act 1988 and the Motor Insurers' Bureau agreements make it rare that a tortfeasor ever pays compensation for injuries arising from a road accident out of his own pocket. Such claims are invariably met by insurance companies who will defend or settle the claims against their insured as they see fit.
22. In the present case, at the time that the 2002 conditional fee agreement was entered into, the claim was being handled by Hertz (UK) Limited. If it had been settled before proceedings, it would have been settled by Hertz on behalf of Mr Prescott. Hertz was behaving as if it were Mr Prescott's insurer. Indeed when proceedings were issued Pinto Potts sent the notice required by s.151 of the 1988 Act to Hertz. There is nothing to suggest that Hertz thought this inappropriate.
23. Of course if proceedings had to be issued, Mr Prescott - rather than Hertz - would have to be the defendant. But the defence of the claim would be handled by Hertz and any compensation would be paid by Hertz or its associated insurer. In practical terms Mr Prescott's only involvement would be involuntarily to lend his name as part of the title of the proceedings.
24. Mr Gibbs, for the Defendant, conceded that if the agreement had been expressed to cover "your claim for damages for personal injury suffered on 7 January 2000" without identifying the opponent, he would have no argument. It is commonly the case that conditional fee agreements do not identify the opponent. There is no requirement that they should, provided that "the particular proceedings" to which they relate are specified: regulation 2(1)(a) of The Conditional Fee Agreements Regulations 2000. The sin therefore was one of addition: including an unnecessary detail.
25. In my view the words "your claim against Hertz UK Limited Car Hire for damages for personal injury suffered on 7 January 2000" meant "the claim for damages arising out of the accident and which was being handled by Hertz" and therefore must be taken to include the claim that was subsequently issued against Mr Prescott.  The intention of the parties is obvious. The 2002 agreement was to provide funding for the continuation of the claim which had been the subject of correspondence between Pinto Potts and Hertz for the preceding three years. There was only ever one "claim".
26. Accordingly in my judgment the Claimant is liable to pay the costs of Pinto Potts under the 2002 agreement and can therefore recover from the Defendant his costs claimed in Part III of the bill, to the extent that they are reasonable and proportionate.

The 2005 agreement

27. In the circumstances it is not necessary for me to consider the effect of the 2005 agreement, other than briefly.
28. It is clear that this agreement was nothing more than an attempt to put right the failure of the 2002 agreement in the event that it was held to have failed.
29. If the 2002 agreement did not cover the claim against Mr Prescott, in my opinion the 2005 agreement would not have filled the lacuna. Although this is perhaps not the right vehicle to decide the point, I think it likely that a conditional fee agreement can have retrospective effect. However for the reasons suggested by Colman J in Arkin v Borchard Lines Ltd (Costs Judgment) [2001] NLJR 970, an agreement made after the conclusion of the proceedings to vary a conditional fee agreement relating to those proceedings would be unenforceable as contrary to public policy.
30. Further, in circumstances where the proceedings had been concluded and all of the costs incurred it is difficult to see how the Claimant's solicitor could comply with the requirements of the 2000 regulations in relation to the 2005 agreement. On the assumption that the 2002 agreement had not imposed any liability on the Claimant to pay costs to his solicitors, how could any breach of the regulations in relation to an agreement which created such liability after success had been achieved not have a materially adverse effect on the protection afforded to the client by the regulations?
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