England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(DIVISIONAL COURT)

		Royal Courts of Justice The Strand
		9 November 1998

1. LORD JUSTICE ROSE: This appeal by way of case stated on 11 May 1998, is, in my experience, unique. It involves the presentation to this court of arguments of a crucial character not presented to the Deputy Stipendiary Magistrate and it involves this court being invited to say that a decision of the Court of Appeal, reached subsequently to the argument before the Deputy Stipendiary Magistrate, but the existence of which was being known at the time that the case was stated, was decided per incuriam by reason of a previous decision of the House of Lords which was not cited to the Court of Appeal.
2. The decision which is challenged by way of appeal is that of the Deputy Stipendiary Magistrate, Stephen Vickers, sitting at Kingston upon Hull. On 7 July 1997 an information was preferred by the appellant against the respondent council who were his landlords. The information alleged that the premises occupied by the appellant gave rise to a statutory nuisance as defined in section 79(1)(a) of the Environmental Protection Act 1990, a statutory notice having been served by the appellant's solicitors and, it was said, the works not having been completed.
3. The Deputy Stipendiary heard the case on 5 February 1998 and, according to the case stated, the works required by the appellant had been completed in September 1997. In consequence, on 15 December 1997, no evidence was offered on the prosecution of the respondent authority and the proceedings were withdrawn. The purpose of the hearing on 5 February was to decide whether the appellant was entitled to an order for costs against the respondent in accordance with section 82(12) of the Environmental Protection Act and, in particular, whether such an order was appropriate in the light of the decision in British Waterways v Norman [1993] 22 HLR 232. The Stipendiary heard evidence from the appellant and from two other witnesses on behalf of the respondent. There was no material contest between the evidence of those witnesses. The Deputy Stipendiary annexed, as part of the case stated, the judgment which he gave in relation to this matter on 19 February. I mention that matter because, in the course of the judgment, there is a finding of fact which is of some significance in relation to this appeal. The material facts found, as stated by the case, were these. The appellant was a tenant of the respondent council. Early in 1997, a female representative of a housing action trust visited the appellant at his home in Kingston upon Hull and made inquiries about the physical state of the property. It suffered from dampness. The female representative said she would "sort it out". Shortly afterwards the appellant was visited by a representative of Sydney Mitchell Solicitors, a firm based in Birmingham. He had not asked for that visit but he had had a letter saying that they would be coming.
4. On 8 April, a few days after the first visit from the solicitors, the appellant signed a form of retainer which the solicitors had prepared. That is included as an appendix to the case stated.
5. The Stipendiary accepted from the appellant that he was not made aware of any liability as to the costs of the proceedings. He accepted that, although the appellant expected to pay some costs, he did not know for what costs he could be liable. He was not aware that he may be liable for the respondent's costs should the prosecution fail. The Stipendiary found that at no stage was the appellant informed by his solicitors of the level of costs already incurred by them. The Stipendiary expressed the view that the retainer had been specifically worded by the solicitors in order to seek to avoid the difficulties set out in British Waterways Board v Norman. The retainer clearly stated what would happen if the appellant was successful but it made no mention of what the position would be if he were unsuccessful.
6. The case was initially fixed to be heard at the beginning of August 1997 but was adjourned on a number of subsequent occasions until, as I have said, on 15 December the proceedings were withdrawn. The appellant did not attend any of the hearings, though he was on each occasion represented by the solicitors. The Stipendiary accepted that the appellant was unaware of the time of the court hearings, but he was aware that court proceedings were being taken in his name. He was not aware that his case had been chosen as a test case, nor was he aware that a second expert witness had been instructed on his behalf. The Stipendiary concluded that the appellant had not been kept informed of the costs as they arose and there was no express agreement with the solicitors regarding the incurring of further costs. He concluded that the solicitors did not intend to pursue a claim for costs against the appellant if his case failed. The Stipendiary further found that the appellant is a man of advanced years in receipt of state benefit each week and he concluded that the solicitors were aware of that impecuniosity from the very beginning and must have realised that they would be unable to recover any substantial amount of costs from him. He said this at paragraph F of page 3 of the case:

"In view of my findings I concluded as a matter of fact that the appellant was never expected to pay any of the costs incurred by [the solicitors]."

7. He also found this, as appears from page 3 of the judgment which he delivered:

"I am satisfied that there was never any intention on the part of the solicitors to create any liability for their own costs if these proceedings failed. It therefore follows that they sought to conduct this matter on a contingency basis, such basis being contrary to public policy in any criminal trial such as this."

8. It is to be noted that there is before this court no challenge to any of the Stipendiary's findings of fact. The contention on behalf of the appellant before the Stipendiary was that the only issue which he had to decide was whether there was a binding contract between the appellant and his solicitors, the appellant contending that there was such a contract, namely the contents of the retainer letter dated 8 April. That submission the Stipendiary rejected.
9. It was contended by the respondent that the appellant was prohibited from pursuing any claim for costs under section 82(12) of the Environmental Protection Act as such a claim would fall foul of the decision in British Waterways Board v Norman. It was submitted that the retainer amounted to a contingency fee and was therefore unenforceable as being contrary to public policy, bearing in mind, in particular, that the proceedings were criminal in character. The Stipendiary was referred to the Norman case. Subsequently there was reported in The Times on 6 March 1998 a decision of the Court of Appeal in the Thai Trading Company case, to which in a moment I shall come, which the Stipendiary says, in the case stated, he "would have regarded as highly relevant had he been aware of the same".
10. The Stipendiary then posed two questions for this court: (1) Whether an agreement between the appellant and his solicitors which makes no mention of the appellant's liability for costs if the appellant should lose his case is champertous and against public policy following the Court of Appeal's decision in Thai Trading Company v Taylor, The Times (6 March)? (2) Further, whether following the principle of Stare Decisis, the decision in Thai Trading Company v Taylor, renders the decision of the Deputy Stipendiary Magistrate unlawful? It is to be noted from that rehearsal of the contents of the case that no reference was made before the Stipendiary to the provisions of the Solicitors' Practice Rules. It is conceded by Mr Findlay that the matter proceeded on behalf of the respondent before the Stipendiary Magistrate on the public policy submission dependent upon British Waterways Board v Norman.
11. Before this court the rival submissions, so far as they are presently material, are stark and can be shortly stated. Miss Easty on behalf of the appellant submits that, by virtue of Thai Trading Company v Taylor [1998] 2 WLR 893, the decision of the Stipendiary is totally undermined. That decision reflects, she submits, current public policy approaches to agreements in relation to fees of this kind and, in consequence, the appeal must be allowed and answers to the questions posed by the Stipendiary given in a manner favourable to the appellant. Not so, submits Mr Findlay for the respondent, because there was not cited to the Court of Appeal in the Thai Trading case the decision of the House of Lords in Swain v The Law Society [1983] AC 598. The significance of that non-citation, submits Mr Findlay, fundamentally undermines the whole basis on which the analysis of the Court of Appeal proceeded in the Thai Trading case. In Thai Trading, before embarking on an analysis of the common law authorities, including British Waterways Board v Norman, which was (at page 899) expressly disapproved of, Millett LJ, giving the principal judgment in the Court of Appeal, referred at page 896E to the Solicitors Act 1974 in these terms:

"It should be observed at the outset that there is nothing in the Solicitors Act 1974 which prohibits the charging of contingent fees."

12. Millett LJ went on to refer to the Solicitors' Practice Rules 1987 as providing, by contrast, that a solicitor should not enter into any arrangement to receive a contingency fee. Millett LJ then referred to the exception created by the Courts and Legal Services Act 1990 and he said this at 896G:

"Except as there provided, therefore, it is unprofessional conduct for a solicitor to enter into any agreement even for his normal fee where this is dependent on achieving a successful result in litigation. The plaintiffs placed much reliance on this. But the fact that a professional rule prohibits a particular practice does not of itself make the practice contrary to law."

13. There is then a reference to Picton Jones & Co. v Arcadia Developments Ltd and Millett LJ goes on:

"Moreover, the Solicitors' Practice Rules are based on a perception of public policy derived from judicial decisions the correctness of which is in question in this appeal."

14. It is to be noted that the respondents to the appeal in Thai Trading were unrepresented.
15. In Swain v The Law Society [1983] AC 598 Lord Diplock at page 608D said this by reference to the Solicitors Act 1974:

"The Act of 1974 imposes upon the Society a number of statutory duties in relation to solicitors whether they are members of the Society or not.... Such rules and regulations may themselves confer upon the Society further statutory powers or impose upon it further statutory duties,"

and just below F:

"The Council in exercising its powers under the Act to make rules and regulations and the Society in discharging functions vested in it by the Act or by such rules or regulations are acting in a public capacity and what they do in that capacity is governed by public law; and although the legal consequences of doing it may result in creating rights enforceable in private law, those rights are not necessarily the same as those that would flow in private law from doing a similar act otherwise than in the exercise of statutory powers."

16. Lord Brightman (with whose speech, as indeed in relation to Lord Diplock's speech, the other members of the House agree) said this at page 614D:

"... The Law Society was incorporated by royal charter in 1831, and was granted its present charter in 1845. Its purposes are defined in the preamble to the 1845 charter as the promotion of professional improvement and the facilitation of the acquisition of legal knowledge. The Society has a number of important statutory functions under the Solicitors Act 1974, which affect not merely the solicitors' profession but also the public well-being; for example, power to make regulations, with the concurrence of the Lord Chancellor, the Lord Chief Justice and the Master of the Rolls, ... ; power, with the concurrence of the Master of the Rolls, to make rules for regulating the professional practice, conduct and discipline of solicitors (section 31);"

17. At page 621G Lord Brightman said this, and it is at the heart of Mr Findlay's submission in relation to the Thai Trading case:

"The rules have the force of a statute, and the form of master policy and the form of certificate of insurance have statutory authority, just as much as if the rules, master policy and certificate were set out in a Schedule to the Act."

18. Mr Findlay submits that had Swain been before the Court of Appeal in the Thai Trading case the passage which appears at page 896G of Millett LJ's judgment which we have already read could not have appeared in that form. Indeed, Miss Easty conceded that that must be so, although she did make a valiant attempt to suggest that, the observations relied on by Mr Findlay in Swain were obiter and therefore would not have affected Thai Trading. In the light of R v Northumberland Compensation Tribunal ex parte Shaw [1951] 1 KB 711, per Lord Goddard at 724, we must follow the House of Lords in Swain.
19. There are further submissions made by Mr Findlay which I simply identify without particularising. He submits that nothing said by the Court of Appeal in the Thai Trading case casts doubt upon the indemnity principle, namely that costs can only be recovered by a party if he is liable to pay them. In the present case he submits there was no liability on Mr Hughes to pay the solicitors and so no order for costs should in any event be made. He further submits that this court ought to prefer the reasoning at first instance of Garland J in the Aratra Potato Company case [1995] 4 All ER 695 to that of Millett LJ in the Thai Trading case, namely that it is unlawful to instruct solicitors to prosecute on a contingency fee basis, especially in the case of a criminal prosecution.
20. The significance of Swain and what there appears in relation to the statutory status of the solicitors rules is that the current Solicitors' Practice Rules 1990 provide, in rule 8, that a solicitor shall not enter into any arrangement to receive a contingency fee in respect of contentious proceedings. By virtue of rule 18(2)(c) contingency fee is defined as meaning:

"... any sum (whether fixed, or calculated either as a percentage of the proceeds or otherwise howsoever) payable only in the event of success in the prosecution or defence of any action, suit or other contentious proceeding;..."

21. The submission by Mr Findlay therefore is that the Stipendiary's finding of fact at page 3 of his judgment which I have identified (amplifying, as it does, the finding at page 3, paragraph F in the case stated) means that there was here a contingency fee, contrary to the statutory provisions of the Solicitors' Practice Rules and therefore the resultant arrangement was unenforceable. He therefore submits that this appeal must fail. For my part, I am satisfied that that submission is unanswerable. As I indicated at the outset of this judgment, it is, certainly with the benefit of hindsight, extremely unfortunate that the learned Stipendiary Magistrate's attention was not drawn to the provisions of the Solicitors' Practice Rules and that the matter proceeded before him solely by reference to public policy considerations and the authority of British Waterways Board v Norman.
22. For my part, I would dismiss this appeal. I would answer the first of the questions posed by the Deputy Stipendiary Magistrate on the basis that the agreement which he found to exist was contrary to the Solicitors' Practice Rules of 1990. But, as to the second question that the Thai Trading case, for the reasons already given, does not render his decision incorrect: he uses the word "unlawful". For my part, I would dismiss this appeal.
23. MR JUSTICE MITCHELL: I agree.
24. MR FINDLAY: The appellants were legally aided, this being an appeal and I would ask for my costs against the Legal Aid Board, subject to the usual order that they can appear within whatever time limit your Lordship says to dispute whatever order should be made against them. My Lord, that is my application.
25. MISS EASTY: My Lord, I would ask that such an order should not be made for the simple reason that a much more expeditious and cheaper way was offered by the prosecution in this case which was simply for it to go back to the Magistrate for him to consider in the light of his factual findings the influence of Thai Trading again. It was the defence who refused that much cheaper course and therefore forced the prosecution to continue an appeal which I say is of some real public importance because of the Thai Trading situation thereof. It is in no way, in my submission, an appeal which can be considered frivolous and so forth.
26. LORD JUSTICE ROSE: We shall make no order as to costs.
27. MR FINDLAY: Could I not have a right to reply to my learned friend's submission?
28. LORD JUSTICE ROSE: Certainly.
29. MR FINDLAY: The right test is not whether they are frivolous or vexatious.
30. LORD JUSTICE ROSE: No, of course, it is not.
31. MR FINDLAY: With respect, I have succeeded on appeal. The points that I have put to your Lordship in the skeleton argument were put in fact to the learned Stipendiary Magistrate asking him to frame the case appropriately and were well known to my learned friend and, presumably, the Legal Aid Board when they founded their resistance. Your Lordships found that our submissions were unanswerable and, in my submission, this is a case where costs should follow the event.
32. LORD JUSTICE ROSE: We have also found that they should have been canvassed before the Stipendiary Magistrate.
33. MR FINDLAY: I accept that, but the same point could have been said by all parties before the Court of Appeal in Thai Trading and, my Lord, the state of the law as it was when it was before the Stipendiary Magistrate it was not necessary to -----
34. LORD JUSTICE ROSE: There is an argument that if you have two strings to your bow it is unwise to select just one of them and forget the other entirely.
35. MR FINDLAY: If one is aware of both strings, absolutely. But, my Lord, the finding of fact in this case that was plainly made and on the law, as your Lordship has now found it to be, the answer is clear. That is the submission that we were making from the outset. It has been no part of the respondent's case to this appeal that the decision in Thai Trading did not have an effect or was not highly relevant to that question before the Magistrate but we argued that it was wrong primarily and I raised subsidiary arguments on the basis that it has found favour with your Lordship. In my submission, the respondent council in this case is entitled to have its costs. My Lord, I cannot put it any further than that.
36. LORD JUSTICE ROSE: Is it right, Mr Findlay, that you were given the opportunity by the appellant to reargue the matter in front of the Stipendiary?
37. MR FINDLAY: My Lord, yes, it was. If I can explain why that course was not taken. My Lord, it seemed to me on a clear finding of fact from the Stipendiary it was highly likely that we were going to end up in this court in any event. The reason I did not take that course was to avoid further litigation which would have entailed us ending up in this court because, as your Lordship can imagine, it is one thing to appear before this court and to make submissions that this court should not follow the Court of Appeal; it is another thing to make the same submission to a Deputy Stipendiary Magistrate and whatever decision he comes to the indications were at the time the decision was made that he would have been appealed. Certainly the view taken by the respondent at the time which was seriously considered was that that would lead to extra costs not less costs. That is my submission as far as that, my Lord.
38. LORD JUSTICE ROSE: Thank you. The answer is still no, Mr Findlay.
39. MR FINDLAY: I am much obliged to your Lordships.
40. MISS EASTY: My Lords, I did ask for guidance in relation to impecunious tenants and I wonder if that can be given, my Lords? If you wish to, it would assist.
41. LORD JUSTICE ROSE: I think you can assume that for a variety of reasons, only one of which is the other cases we have in our list, today is not the day for guidance.
42. MISS EASTY: Then all that remains for me is to ask for leave to appeal. This is a point of considerable public importance and should be taken further.
43. LORD JUSTICE ROSE: Not from us. If you can excite the attention of the Court of Appeal, so be it.
44. MR FINDLAY: My Lord, I hesitate to encourage my learned friend in her application, but if she is trying to excite the Court of Appeal it is a precondition that she asks this court to state a point of law of public importance.
45. LORD JUSTICE ROSE: But is this a criminal case?
46. MR FINDLAY: It is, yes.
47. LORD JUSTICE ROSE: Of course, it is, yes. I am sorry, I was responding to your application on the basis that it was a civil case.
48. MISS EASTY: No.
49. LORD JUSTICE ROSE: In order to get leave to go to the House of Lords you would need to get us to certify a question, a point of law of general public importance. If you have such a draft question we will look at it now; if not, if you would like to produce it at some time when Mr Findlay knows about it and before we cease to sit together at the end of a three week period, so be it.
50. MISS EASTY: I say the question -----
51. LORD JUSTICE ROSE: I do not think it would be a very good idea if you start drafting it off the top of your head. You may also like to bear in mind something that we were told by Mr Findlay was that Thai may be going to the House of Lords anyway out of time. We know nothing of that but what we were told.
52. MISS EASTY: Finally, may I have legal aid taxation?
53. LORD JUSTICE ROSE: You may indeed.
54. MISS EASTY: Thank you my Lord.