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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
SUPREME COURT COSTS OFFICE

		Claim No: HQ 06 X 00279 Clifford's Inn, Fetter Lane London, EC4A 1DQ
		21st December 2007

Master Campbell:

1. This judgment sets out my reasons for allowing the Second Claimant ("Mrs Cullen") a success fee on her costs payable by the Defendant ("Dr Chopra") under a Conditional Fee Agreement ("CFA") which she signed with her solicitors, Gadsby Wicks, on 24 January 2005, from that date until Notice of Funding was served on 8 September 2005. At the hearing Ms Lambert represented Mrs Cullen and Mr Mallalieu appeared for Dr Chopra. At the conclusion of their submissions, I notified the parties of my decision and indicated that my full reasons would follow in writing.

The Facts

2. Mrs Cullen's claim against Dr Chopra arose following the death of her husband, David Cullen, on 17 November 2001. Dr Chopra had been Mr Cullen's general practitioner until he committed suicide by setting himself alight on 22^nd October 2001 within eyeshot of Mrs Cullen and their son Sam (the First Claimant) and passed away a month later. Following her husband's death, Mrs Cullen consulted Gadsby Wicks to advise her whether a claim lay in damages against Dr Chopra for failing to have referred Mr Cullen for an urgent medical assessment on the basis that had he done so, the events of 22 October 2001 would have been prevented. On 24 January 2005, she entered into the CFA with Gadsby Wicks which provided for a success fee of 100%.
3. A letter of claim was sent on 8 September 2005 (together with the Notice of Funding), the Medical Defence Union ("MDU") replied on behalf of Dr Chopra on 21 September 2005, the claim form was issued on 31 January 2005 and served on 1 March 2006. A five month extension was agreed for the defence; this was served on 4 August 2006 and denied breach of duty and causation. On 12 December 2006 the claim was settled on terms that Mrs Cullen would receive £23,000 and Sam £15,250 together with their costs to be assessed if not agreed.
4. On 14 May 2007 Mrs Cullen commenced proceedings for detailed assessment which sought base costs for Gadsby Wicks of £54,000 together with a success fee of 100%. In his Points of Dispute, Dr Chopra said this at Point 5:

"Preliminary Point – success fee pre notice of funding

The claimant has a duty to inform a defendant of the existence of a CFA and a potential claim for additional liabilities. This requirement is applicable during the pre-action protocol in accordance with paragraph 4A.1 of the Practice Directions on protocols. CPR 44.3B(1)(c) as referenced in the Practice Directions also prevents the recovery of a success fee for any period of the proceedings during which the claimant has failed to provide funding information. The first funding information provided to the Defendant was in the Letter of Claim dated 8 September 2005. The bill of costs has been drawn claiming a success fee from 24 January 2005 when Janice Cullen entered into her CFA. It is submitted that this is incorrect and that a success fee is only recoverable from the date when the funding information was served on 9 September 2005. ?? All success fees claimed before that date should therefore be disallowed."

5. The reference to CPR 44.3B(1)(c) is to the Civil Procedure Rules 1999 ("CPR"); the reference to the Practice Direction on Protocols is to the Practice Direction – Protocols ("PDP"). This applies pre-action protocols which the Head of Civil Justice has approved and include the pre-action protocol for the Resolution of Clinical Disputes ("the Clinical Negligence Protocol") which both parties agree applies in this case.

THE LAW

6. CPR 43.2(1) sets out the following definitions:

"(k) "Funding arrangement" means an arrangement where a person has:

(i) entered into a conditional fee agreement or collective conditional fee agreement which provides for a success fee within the meaning of Section 58(2) of the Courts and Legal Services Act 1990.

(o) "Additional liability" means the percentage increase, the insurance premium or the additional amount in respect of provision made by a membership organisation as the case may be."

7. CPR 44.3A provides:

"(1) The court will not assess any additional liability until the conclusion of the proceedings or the part of the proceedings to which the funding arrangement relates."

8. The Notes to CPR 44.3A(1) say this:

"Because it was felt that disclosure of full details of funding arrangements, particularly the percentage success fee in a conditional fee agreement, was prejudicial, the rules provide for limited information to be given to opposing parties until the final assessment (summary or detailed) is made. The rule provides that the court will not assess any additional liability until the conclusion of the relevant part of the proceedings."

9. CPR 44.15 provides as follows:

"(1) A party who seeks to recover an additional liability must provide information about the funding arrangement to the court and to other parties as required by a rule, practice direction or court order."

10. The notes to CPR 44.15 at 44.15.1 say this:

"The rule provides that any party who seeks to recover an additional liability must provide certain information about it and must also provide information where the funding arrangement changes. The information to be provided in the notice of funding and in the estimate of costs is limited. Much fuller disclosure of information is required when the final assessment of costs takes place. See Section 19 of the Costs Practice Direction ("CPD")."

11. CPR 44.3B limits recovery under a funding arrangement. Sub-section (1) says this:

"A party may not recover as additional liability;

(c) any additional liability for any period in the proceedings during which he failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order."

12. Section 19 of the CPD says this:

"(1) A party who wishes to claim an additional liability in respect of a funding arrangement must give any other party information about that claim if he is to recover the additional liability. There is no requirement to specify the amount of the additional liability separately nor to state how it is calculated until it falls to be assessed."

13. Section 19.2 of the CPD sets out the method of giving information. Sub-section (1) says this:

"In this paragraph "claim form" includes a petition and application notice and the notice of funding to be filed or served is a notice containing the information set out in Form N251.

(a) A claimant who has entered into a funding arrangement before starting the proceedings to which it relates must provide information to the court by filing the notice when he issues the claim form.

(b) He must provide information to every other party by serving the notice. If he serves the claim form himself he must serve the notice with the claim form. If the court is to serve the claim form, the court will also serve the notice if the claimant provides it with sufficient copies for service."

14. Sub-section (3) is not relevant to the issue I have to decide but Section 19 continues as follows:

"(4) In all other circumstances the party must file and serve notice within seven days of entering into the funding arrangement concerned.

(5) There is no requirement in this Practice Direction for the provision of information about funding arrangements before the commencement of proceedings. Such a provision is however recommended and may be required by a pre-action protocol."

15. Section 19.4 CPD sets out the information which must be provided. It says this:

"(1) Unless the court otherwise orders, a party who is required to supply information about a funding arrangement must state whether he has entered into a conditional fee agreement which provides for a success fee within the meaning of Section 58(2) of the Courts and Legal Services Act 1990.

(2) Where the funding arrangement is a conditional fee agreement, the party must state the date of the agreement and identify the claim or claims to which it relates (including Part 20 claims if any)."

16. The reference to Section 58(2) of the Courts and Legal Services Act is to that act as amended by s.27 Access to Justice Act 1999.

PRE ACTION PROTOCOLS

17. It is common ground that the Clinical Negligence Protocol applies in this case. This protocol outlines the steps which parties should take in order to seek information from and to provide information to each other about a prospective legal claim.
18. It is also agreed that the PDP applies to the Clinical Negligence Protocol. The objectives of pre action protocols are set out in PDP paragraph 1.4 which says this;

"(1) To encourage the exchange of early and full information about the prospective legal claim.

(2) To enable parties to avoid litigation by agreeing a settlement of the claim before the commencement of proceedings.

(3) To support the efficient management of proceedings when litigation cannot be avoided."

19. PDP 2 deals with compliance with protocols and says this:

"2. The Court will expect all parties to have complied in substance with the terms of approved protocols."

20. PDP 4 deals with "Information about Funding Arrangements" and says this:

"A.1 Where a person enters into a funding arrangement within the meaning of rule 43(2)(1)(k) he should inform all the potential parties to the claim that he has done so.

A.2 Paragraph 4A.1 applies to all proceedings whether proceedings to which a pre-action protocol applies or otherwise.

(Rule 44.3B(1)(c) provides that a party may not recover any additional liability for any period in the proceedings during which he failed to provide information about a funding arrangement in accordance with a rule, practice direction or court order.)"

THE SUBMISSIONS FOR DR CHOPRA

21. On behalf of Dr Chopra, Mr Mallalieu submitted that Mrs Cullen should not be permitted to recover a success fee on her costs until his client had received notice that the claim was being funded by a CFA with a success fee. Accordingly, the success fee claimed in the bill for the period 25 January 2005 (when the CFA was signed) until 8 September 2005 (when notice was given in the letter of claim) should be disallowed.
22. To make good this submission, Mr Mallalieu took me to CPR 44.15(1) which requires a party who seeks to recover a success fee to provide information about "the funding arrangement to the court and to other parties as required by a rule, practice direction or court order".
23. A party who fails to comply with CPR 44.15(1) cannot recover a success fee for any period in the proceedings during which he failed to provide information about a CFA in accordance with the rules, practice direction or court order – CPR 44.3B. In Mr Mallalieu's submission, Mrs Cullen, as a party to a CFA with a success fee, had failed to provide information to which Dr Chopra was entitled under a practice direction.
24. In making this submission, Mr Mallalieu accepted that Section 19.2(5) CPD did not apply before the issue of proceedings and was not sufficient to "get Dr Chopra home" as he expressed it; he contended that the provision of information about funding arrangements before the commencement of proceedings in Section 19.2(5) is a matter of good practice rather than being mandatory.
25. That said and to clinch his argument, Mr Mallalieu took me to the PDP, as it applies to the Clinical Negligence Protocol, which itself only applies before the issue of proceedings rather then after. He submitted that it is plain from PDP 2.2 that the court expects all parties to comply in substance with the terms of an approved protocol (here the Clinical Negligence Protocol) and that where a party enters into a funding arrangement, notice should be given to other potential parties to the claim that he has done so. This obligation is contained in paragraph 4A.1; in Mr Mallalieu's submission, a paragraph such as this would be superfluous unless it was intended to apply where funding arrangements are entered into pre-issue; the reason for this is that CPR 44.3B(1)(c) covers post-issue cases. It follows that if the word "should" in paragraph 4A.1 was not meant to be a requirement, there would have been no reason for the draftsman of the Practice Direction to have included in paragraph 4A.1, a specific reference to a requirement in a practice direction (here the Clinical Negligence Protocol) to provide the details of funding pre issue and to the existence of a sanction for omitting to do so. In short, the provision of information is a requirement not a recommendation otherwise there would be no reason for the inclusion of paragraph 4A in the PDP and for the reference to a sanction.
26. Mr Mallalieu also contended that the words used in the PDP ("should inform"), whilst not stating "must" in terms, was nonetheless a requirement. He submitted that "should" could not be taken as any indication that such a step was voluntary rather than obligatory. In this respect, Mr Mallalieu took me by way of analogy to the Practice Direction to CPR 17 which deals with amendments to statements of case where permission is required to do so. He told me that although the word "should" is used, a party amending must carry out the steps set out in the Practice Direction and sanctions are likely if this is not done. The position was no different here.
27. Mr Mallalieu further submitted that a paying party was entitled to be told if a claim was being funded by an agreement which provided for a success fee, so that he would know that his potential outlay in costs might be double the sum that he would pay if there was no additional liability. Such a party should be notified at the earliest time so that appropriate adjustments could be made to its reserves . This factor was particularly in point in the present case because Gadsby Wicks had run Mrs Cullen's case for three years without the MDU ever knowing about it. There was considerable disadvantage to the MDU in being in ignorance of the claim and a great advantage to the MDU were it to have had knowledge of the case, so that appropriate reserves could have been provided.

THE SUBMISSIONS FOR MRS CULLEN

28. For Mrs Cullen, Ms Lambert submitted that it was common ground that CPR 44.15 imposes a requirement on a party to provide information about funding arrangements and that CPR 44.3B permits the court to disallow a success fee during any period in which notice is not given. However those rules only apply where Notice of Funding is required by a rule, court order or practice direction; in Mrs Cullen's case, no rule, court order and in particular, no practice direction had required her to serve any information about funding on Dr Chopra between the date of the CFA on 24 January 2005 and the letter of claim on 8 September 2005 when she had done so voluntarily.
29. So far as protocols were concerned, Ms Lambert agreed with Mr Mallalieu that the relevant protocol was the Clinical Negligence Protocol and that the PDP applied to it. It was common ground that the Clinical Negligence Protocol did not contain any requirement for Notice of Funding to be given pre-issue, still less did it specify a time at which this must be done. Any such obligation, if it existed at all, was to be found in the PDP and Ms Lambert argued that it contained no such requirement.
30. With regard to PDP 4.4, Ms Lambert drew attention to the word "where" and submitted that Mr Mallalieu had equated "where" with "when". She contended that the question of "when" the notice needed to be provided had already been given; the answer lay in the practice direction to CPR 44 at Section 19.2, namely:

- to the court on issue of the claim form (Section 19.2(a)); or

- to every other party when the claim form is served (Section 19.2(b)); and

- in all other circumstances within seven days of entering into the funding arrangement concerned, there being no requirement in the practice direction to do so before the commencement of proceedings (Section 19.2(4) and (5).

31. Accordingly, there was no ambiguity in any rule or practice direction and it was the intention of the CPR that Notice of Funding should be given on issue of the claim, (or within 7 days of the funding agreement, if later), and not before.
32. Ms Lambert also referred to the Notes to the Clinical Negligence Protocol at paragraph C3A-027 (Supreme Court Practice Volume 1, page 2363) which say this:

"This protocol was in place in April 1999 with the implementation of the CPR … no changes have been made to the protocol as at January 2003. Some are likely in the next year, including a requirement [emphasis added] to notify the other party of a conditional fee agreement (but not the success fee) in the letter of claim or response, or within seven days of entering the agreement."

33. Ms Lambert submitted that if made, these amendments would bring the Clinical Negligence Protocol within the second sentence of CPD 19.2(5) by making it a requirement in a pre-action protocol that an opponent be notified in the letter of claim of the existence of a CFA with success fee, or if made subsequently, within 7 days of making the funding arrangement. This would reflect in the Clinical Negligence Protocol an outcome, the future possibility of which is already provided for in CPD 19.2(5) and curtails the argument advanced by Mr Mallalieu that Notice of Funding currently has to be given before the issue of proceedings.
34. Ms Lambert also submitted that there is a practical reason why the PDP and Clinical Negligence Protocol do not require Notice of Funding to be given pre-issue. Quite simply, if such a notice was required to be given to prospective defendants within seven days of signing the CFA, its recipients would be deluged with Notices of Funding in matters that never proceeded any further. Moreover, the insurers for prospective defendants who received such notices, would not settle claims based upon letters that did not contain any allegations, still less any indication of the level of damages involved and where the only information to be given was that there might be a claim at an undefined date in the future, in which event the CFA would seek an additional liability. In short, even if pre-issue, defendants' insurers did receive Notice of Funding within seven days of the date of any CFA, they would not act any differently than if they did not.
35. Finally, Ms Lambert referred to my decision in Metcalfe v Clipston (2004 EWHC 9005 (Costs)). In that case, the claimant had signed a CFA at his first interview with his solicitors on 10 January 2001 and had recovered £25,000 damages without proceedings. I had held that the Claimant had been under no obligation to serve any notice of funding since the dispute had been settled without proceedings and that Section 19.2(5) CPD only recommended that notification be given. This fell short of requiring a party to do so. Ms Lambert relied on Clipston, indicating that it is a "much touted about decision" (as she put it), which had not been the subject of an appeal .

DECISION

36. It is common ground the Clinical Negligence Protocol applies and that it does not require Notice of Funding to be given pre-issue nor does it state when any such notice is to be given. Accordingly, the outcome of the preliminary point hinges upon whether Mr Mallalieu is correct in his submission that paragraph PDP 4A requires a party who has entered into a funding agreement before he issues proceedings, to inform other potential parties that he has done so. Such a step is recommended (see CPD 19.2(5)) but as Mr Mallalieu has recognised, a recommendation is not a requirement and he must go further and persuade me that PDP 4A imposes an obligation to do so.
37. Mr Mallalieu contends that there would have been no purpose to PDP 4 unless it was included in the PDP with the intention of requiring Notice of Funding to be served pre-issue, since CPR 44.15 and Section 19 CPD exist to deal with the situation post-issue . I do not share that view for the following reasons. First, Mr Mallalieu has not persuaded me that the conclusions I reached and the reasons I gave in Clipston at paragraphs 48 to 49, are wrong. I continue to believe that the view that I expressed in paragraph 49 remains correct:

"For Miss Ward to succeed, I consider the obligation on the receiving party to give notification of funding pre issue must be absolute but in my judgment, the word "should" in the PDP does not impose such an obligation. On the contrary, I would construe "should" as meaning "ought to" which is not the same as "has to" or "must"…..The PDP at paragraph 4.A.1 is of no assistance either because the requirement to provide information is optional not compulsory."

38. I would add that I did not find Mr Mallalieu's reference to CPR 17 to be of assistance in this respect. In other practice directions, for example the Costs Practice Direction, in dealing with applications to set aside default costs certificates at CPD 37, the word "must" is used. This leaves no room for doubt, in contrast to the situation here where I remain satisfied that "should" in the PDP does not mean "must" and accordingly does not impose the obligation for which Mr Mallalieu contends. In short, if the draftsman had intended "should" to mean "must", the Practice Direction would have said so, as has been the case with CPD 37.
39. I also accept the good sense and logic in Ms Lambert's submissions about what would happen if Notice of Funding was to be given in respect of all CFAs signed pre issue of proceedings. Suppose there is a large firm of solicitors which specialises in bulk civil litigation claims and funds its case load by signing up clients to CFAs at the earliest opportunity ( for example, as happened in Clipston, during the first interview). Were Mr Mallalieu's submissions to be correct, such a firm would be required to serve Notice of Funding on all potential opponents on signing the CFA, at a time when only outline advice on prospects and quantum could be given and where many of the claims would never proceed, for example due to lack of merits or a change of heart by the client. Nonetheless, prospective defendants' insurers would be compelled to record notifications of numerous putative claims, a significant proportion of which would never progress any further. I agree with Ms Lambert that it is in order to avoid such situations arising that Notice of Funding pre-issue is not obligatory..
40. I also share Ms Lambert's view that insurers for prospective defendants on receiving notice pre-issue, would be unlikely to act any differently since the notification in question would not be required to contain any particularisation of the claim, still less its value. In my opinion, these are persuasive reasons why the rules, the practice direction, and the protocol, do not state that Notice of Funding must be served before the claim form is issued.
41. As to the note at page 2363 of the White Book, this contemplates changes to the Clinical Negligence Protocol but I understand that there have been no amendments so far. It follows that, in my judgment, the position continues to be governed by CPD 19.2 as Ms Lambert has contended.

CONCLUSION

42. For the reasons I have given, Mrs Cullen is permitted to recover a success fee on Gadsby Wicks' fees claimed in the CFA from the date it was signed on 24 January 2005, rather than only from 8 September 2005 when Notice of Funding was given.