Cost Cases Updates
Garbutt v Edwards [2005] EWCA Civ 1206
Nizami v Butt (2006) QBD 9/2/06
Garrett v Halton Borough Council - and - Myatt v National Coal Board (both 2005)
Lorna Robinson v Doselle (2005) Milton Keynes CC 19/12/2005
Traci Hughes v Newham London Borough Council (SCCO 28/7/2005 - Master O'Hare)
Richards v Davis (SCCO 25/11/2005 - Master Hurst)
This case represents a significant Court of Appeal decision on the application of the Law Society Rules and Code as to the enforceability of Conditional Fee Agreements and challenges by third parties.
Therefore a solicitor is fairly likely to be carrying out activities which constitute a regulated activity particularly when dealing with personal injury claims."
The Court confirmed that the Practice Rules had the force of subordinate legislation, following the case of Swain v Law Society (1983) AC 598.
Arden LJ said, "The inference I would draw is that the Code is there to protect the legitimate interests of the client and the administration of justice, rather than to relieve the paying parties of their obligations to pay costs which have been reasonably incurred."
The case turned on the interpretation of the word "shall" in Rule 15. Arden LJ held that "shall" was not a mandatory requirement in the sense that non compliance with the Code will always result in a breach of Rule 15. The Court held that a failure to provide an estimate of costs to the client in accordance with the Code did not render the contract of retainer unlawful.
It should be noted with some concern that this was not a case where the breach related to the pre-contractual requirements of a valid retainer. Whilst the Court held that a failure to provide an estimate of costs would not render the retainer unenforceable it did not consider whether a failure to comply with, say, the new requirements of the Code would do so.
Furthermore, of equal concern, is the fact that this particular breach was considered not to be a serious breach of the Code. However, Arden LJ did say that a serious breach, or persistent and material breaches, could amount to the contract of retainer being unlawful and therefore unenforceable. She did not say what sort of behaviour would amount to serious, or persistent and material, no doubt preferring to leave this to others to fight over and decide upon!
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At first instance, the costs judge decided that the entitlement to fixed recoverable costs under CPR r 45.9 and a success fee under CPR r 45.11 did not depend on the existence of a valid and enforceable conditional fee agreement.
The defendant's solicitors were concerned that the claimant's solicitors had failed to make appropriate enquiries about the availability of BTE insurance and sought a direction that the claimant's solicitors should certify compliance with the CFA Regulations 2000.
The costs judge refused, holding that whilst disbursements were subject to assessment the indemnity principle did not apply to the entitlement to fixed recoverable costs and the success fee so that it did not matter whether the CFA was valid and enforceable.
On appeal, it was held that the intention underlying CPR R 45.11 was to provide an agreed scheme of recovery that was certain and easily calculated by providing fixed levels of remuneration, that the indemnity principle should not apply to the figures that were recoverable and therefore had no application to CPR r 45.9 and r 45.11, and that the receiving party did not have to demonstrate there was a valid retainer between the solicitor and the client, merely that the conditions laid down under the rules had been complied with.
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The case of Garrett involved a failure by the claimant's solicitor to declare an interest in recommending a particular ATE policy. The solicitors were on a claims farmer's referral panel which meant that the solicitors were constrained to recommend a linked ATE policy, which in turn, according to HH Judge Stewart QC, meant that they had an interest in doing so since, if they did not, they would be removed from the panel.
The Judge held that the retainer was unlawful and therefore unenforceable because the solicitors had failed to declare their interest.
The case of Myatt involved the determination of a preliminary issue as to whether the claimants solicitors were entitled to enforce CFA's, in noise induced deafness cases.
The defendants challenged enforceability based upon the procedures adopted by the claimants solicitors to determine the existence of BTE insurance, involving simply asking the clients whether they had such insurance, and maintained that the solicitors should have asked their clients to provide documents in order to decide on their relevance and give proper advice.
It was held, by Master Wright, that the claimants solicitors had not complied with regulation 4(2)(c) because they had asked the wrong questions and should have made more thorough enquiries about the possibility of there being BTE insurance. He did not say what the case would have been if there had not actually been any BTE insurance in existence. This issue did not arise for consideration because there was no evidence on the point, thus giving rise to the questions -
(1) can you use hindsight?
(2) when should the breach be considered?
(3) can you take account of circumstances?
- in deciding whether the contract should be held to be enforceable.
Further information shall be posted as soon as a Judgment is handed down
Solicitors costs were assessed at nil where they had failed to adequately investigate whether BTE insurance was available to their client as required by the CFA Regulations 2000 reg. 4(2)(c) with the result that the CFA was unenforceable (Sarwar v Alam applied).
It was not sufficient for him to ask the client and rely on the answer unless for example the client was a barrister specialising in motor insurance claims.
It would not save the solicitor to show that the client had not in fact been prejudiced, if the investigation was sufficiently inadequate to amount to a breach of the regulations (Samonini v London General Transport considered).
CPR 45 did not disapply the indemnity principle or provide for a fixed sum to be recoverable by a claimant irrespective of the claimants liability to her own solicitors.
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The obligation under Rule 15 is not satisfied simply by making the client aware that a particular funding option is available. The solicitors should have ensured that the client understood the different options and different likely outcomes. Legal Aid was available through other solicitors. This failure rendered the CFA unenforceable.
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This case concerned a failure to conduct enquiries into existing legal expenses insurance. The claimant contended that the liability insurers were precluded from challenging the validity under the TAG Test Cases mediated agreement.
The Senior Costs Judge, Master P Hurst, concluded that the CFA was unenforceable because there had been a clear breach of Regulation 4(2)(c) in that the solicitors had failed to take active steps to enquire into existing insurance before entering into the CFA.
The TAG scheme was based upon the premise that the Solicitor accepted instructions at a time when the client had already purchased an ATE policy thereby the solicitor did not enquire into any available BTE beyond the Fact Find conducted by TAG.
The Court concluded, inter alia, that there had been a complete failure to consider alternative methods of funding under the TAG scheme and that the departure had a materially adverse effect on the protection afforded to the claimant who had lost a significant proportion of his damages as a result. The liability insurer in question had not been a party to the TAG Test Cases mediation agreement ergo not bound by the terms thereof.
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