Findley v Motor Insurers' Bureau & Anor, Court of Appeal - Supreme Court Cost Office, January 13, 2009, [2009] EWHC 90130 (Costs)

Issuing Organization:Supreme Court Cost Office
Actores:Findley v Motor Insurers' Bureau & Anor
Resolution Date:January 13, 2009
 
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Case No: HQ4X00991

SCCO Ref: CCD 0707416

IN THE HIGH COURT OF JUSTICE

SUPREME COURT COSTS OFFICE

Clifford's Inn, Fetter Lane

London, EC4A 1DQ

Date: 13 January 2009

Before :

THE SENIOR COSTS JUDGE

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Between :

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Mr Richard Power (instructed by Lucas McMullan Jacobs) for the Claimant

Mr Roger Mallalieu (instructed by McCullagh & Co) for the Second Defendants

Hearing dates: 27, 28 and 30 October 2008

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Approved Judgment

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TABLE OF CONTENTS

Chief Master Hurst:

BACKGROUND

1. On 22 April 2001 the Claimant, an unemployed drug addict of no fixed abode, who had previously served a prison sentence for robbery, was the front seat passenger in a car which collided with a stationary van. The Claimant sustained severe head injuries in the collision. The driver of the vehicle, the First Defendant, was uninsured, and accordingly the Motor Insurers' Bureau became involved in the claim.

2. The main issues in relation to the claim concerned the Claimant's contributory negligence, since he was not wearing a seatbelt, and the value of the claim, bearing in mind the effect of his previous drug use. A Litigation Friend, the Claimant's sister, was appointed at the end of March 2004, and the claim was issued in April 2004. The Second Defendant conceded liability on 6 January 2005 and judgment for damages to be assessed was entered on 21 March 2005. The claim was ultimately settled by consent for the sum of £1 million on 25 June 2007. The Defendants were ordered to pay the Claimant's reasonable costs, to be assessed if not agreed.

3. The litigation was funded under The Accident Group (TAG) scheme. The Claimant entered into a conditional fee agreement (CFA) with his solicitors on 20 July 2001. Following the judgment in English v Clipson, dated 5 August 2002 (in which District Judge Wharton decided that the requirements of the Conditional Fee Agreements Regulations 2000 could not be met by delegating the task of giving the relevant information to the client to a TAG representative), some time between 1 September 2002 and 4 December 2002 the Claimant signed a second CFA. The Claimant's solicitor Mr McMullan first met the Claimant and his sister, who later became the Litigation Friend, on 28 January 2003, all previous contact had been by telephone and letter. A conference with counsel was arranged for 4 February 2004, when counsel advised that the Claimant needed to have a Litigation Friend. Shortly after that, on 9 March 2004, the Claimant's general practitioner certified that he was incapable of managing his own affairs because of permanent mental disability. Mrs Findley Clarke was subsequently appointed the Claimant's Litigation Friend.

4. This sequence of events led the Second Defendant to raise a number of issues as to the validity of the two CFAs, the capacity of the Claimant and sundry subsidiary issues.

THE ISSUES

5. The issues fall into five main headings namely:

i) the conditional fee agreement dated 20 July 2001;

ii) capacity;

iii) the letter of 4 May 2006;

iv) the second conditional fee agreement;

v) the indemnity principle and the legal expenses insurance (LEI) policy.

6. The issues, which have been agreed between the parties, are in the following terms:

The Conditional Fee Agreement dated 20th July 2001

1. Is the Conditional Fee Agreement dated 20th July 2001 unenforceable because of a material breach of Regulation 4(2)(a) to (e) and 4(3) of the Conditional Fee Agreement Regulations 2000 in that the Claimant's solicitor failed to provide any or any adequate oral explanation of the matters required by those regulations before the CFA was entered into?

2. Is the CFA dated 20th July 2001 unenforceable because of a material breach of Regulation 4(2)(c), (d) and/or (e) in that the Claimant's solicitor failed to provide the Claimant with the information required by those regulations, namely:

i. Whether the solicitor considered that the Claimant's risk of incurring a liability for costs was insured under an existing contract of insurance

ii. Whether other methods of financing the costs were available and, if so, how they applied to the Claimant and the proceedings in question

iii. Whether the solicitor considered any particular insurance product was appropriate and, if so, his reasons for doing so.

because he wrongly considered himself unable to do so and had concluded that the Claimant was `contractually bound' to effect an insurance policy with TAG?

3. Did the Claimant solicitor have any discloseable interest in the TAG policy in the sense required by Regulation 4(2)(e)(ii)? If so, is the CFA dated 10th July 2001 unenforceable because of a material breach of Regulation 4(2)(e) in that the Claimant's solicitor failed to disclose that interest adequately or at all before the Claimant entered into the CFA?

Capacity

4. Did the CFA with the Claimant come to an end as a result of a lack of capacity on the part of the Claimant at any stage during the conduct of the claim?

5. If so, is there any alternative basis on which the Claimant or his Litigation Friend can seek to recover costs claimed in the bill after the date on which the CFA came to an end?

6. If so, is any such alternative basis in any event a contingent retainer which does not comply with s.58 Courts and Legal Services Act 1990 and/or the Conditional Fee Agreement Regulations 2000 (if applicable) and is therefore unenforceable?

7. In any event, if the original CFA was terminated at any stage prior to the case being `won' is the claimant liable for any costs under that CFA and accordingly is the claimant able to recover any such costs inter partes?

The letter of the 4th May 2006

8. What is the status and effect of this letter (if and in so far as it is relied on by the Claimant)? In particular, does it amount to a reasonable variation of the retainer (if any) between the Claimant and the solicitor so as to allow the solicitor to vary the hourly rates unilaterally and without apparent limit in circumstances where the original CFA provides for any increase to be by no more than the increase in the Retail Price Index?

9. Does the letter amount to any wider variation of the terms of the retainer, in particular by:

i. Providing that the client will be charged for work done and expenses incurred even if the matter does not proceed to completion

ii. Including a provision for charging the Claimant interest, which was not present in the original CFA

iii. Including provisions in relation to the Claimant's liability to the solicitors on termination of the agreement that are more onerous to the Claimant than those originally provided for by the CFA?

If so, is the varied contract binding on the Claimant so as to allow the recovery of fees and expenses inter partes, whether at the rates claimed or at all?

The second CFA

10. Did the claimant enter into a second CFA in autumn 2002?

11. If so:

(i) Does the second CFA comply with the regulations? In particular is the claimant able to show compliance with regulation 4, especially (but not limited to) regulation 4(2)(d)?

(ii) Is the second CFA void because of undue influence, abuse or confidence and/or lack of consideration? In particular, was the claimant advised in relation to the potential unenforceability of the first CFA and was the claimant advised to seek independent legal advice?

(iii) Was the first CFA terminated when the second CFA was entered into? What is the effect of the second CFA on the client's liability for costs under the first CFA?

The indemnity principle and the LEI policy

12. Was the claimant's liability for the own disbursements limited by reference to the extent of his legal expenses insurance cover and his potential liability for adverse costs? If so, what is the effect on his ability to recover costs inter partes?

13. In any event does any failure to explain to the client any potential liability for own and/or adverse costs in excess of the limits of the legal expenses insurance policy amount to a (further) breach of regulation 4(2)(a) and/or 2(1)(b) such as to render the CFA unenforceable?

THE TAG SCHEME

7. The TAG scheme was examined by me in some detail when dealing with the issue of delegation to TAG representatives of the solicitor's duties under the CFA Regulations 2000 (judgment dated 27 November 2002), and dealing with premium issues (judgment dated 15 May 2003), and also swing premium (judgment dated 30 July 2003). My decision in respect of the delegation issue was upheld by the Court of Appeal in Hollins v Russell & Other Appeals [2003] EWCA Civ 718, and in respect of the premium issues in Sharratt v London Central Bus Co Ltd (No.2) [2004] EWCA Civ 575.

8. My judgment of 27 November 2002 set out, at paragraphs 11 to 16, the statutory framework governing CFAs, and I do not propose to repeat it here.

9. The Statutory Objective of the Courts and Legal Services Act 1990 is set out at Section 17(1):

``The general objective of this part is the development of legal services in England and Wales (and in particular the development of advocacy, litigation, conveyancing and probate services) by making provision for new or better ways of providing such services and a wide choice of persons providing them, while maintaining the proper and efficient administration of justice.''

Sections 58 and 58A of the 1990 Act were inserted into Part 2 of that Act by the Access to Justice Act 1999 and are thus covered by the Statutory Objective.

10. In my judgment of 15 May 2003 the TAG contractual framework is fully set out at paragraphs 16 to 80. In this case that framework is essentially unchanged.

11. TAG went into administration in May 2003.

THE LAW

12. So far as relevant, the provisions of Regulation 4 of the Conditional Fee Agreements Regulations 2000 are as follows:

``4(1) Before a conditional fee agreement is made the legal representative must -

(a) inform the client about the following...

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