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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Tankard v John Fredricks Plastics Ltd [2008] EWCA Civ 1375 (11 December 2008) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2008/1375.html Cite as: [2008] EWCA Civ 1375, [2009] 1 WLR 1731, [2009] WLR 1731 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE LIVERPOOL COUNTY COURT
Claim No 7LV50506
THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE
Case No HQ05X00067
THE SOUTHAMPTON COUNTY COURT
Claim No 6SO08237
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE DYSON
and
LORD JUSTICE JACKSON
____________________
(1) KIER TANKARD |
Appellant/ Claimant |
|
- and - |
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JOHN FREDRICKS PLASTICS LIMITED |
Respondent/Defendant |
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and between (2) FAWCETT OLD LIMITED and MICHAEL JANE HAIR & BEAUTY |
Appellants/Defendants |
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- and - |
||
YVONNE HIBBERD |
Respondent/Claimant |
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and between (3) MARK JONES |
Appellant/ Claimant |
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- and - |
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KARL JOSEPH ATTRILL and with THE LAW SOCIETY |
Respondent/Defendant Intervening |
____________________
Mr Robert Marven (instructed by Messrs QM Solicitors) for the Respondent
(2) Mr Robert Marven (instructed by Messrs QM Solicitors) for the Appellant
Mr Benjamin Williams (instructed by Messrs Leigh Day & Co) for the Respondent
(3) Mr Michael Pooles QC and Mr Roger Mallalieu (instructed by Messrs Walton Mills & Co) for the Appellant
Mr Jeremy Morgan QC and Mr Alexander Hutton (instructed by Beachcroft LLP) for the Respondent
Mr Richard Drabble QC and Mr David Holland (instructed by The Law Society) for the Intervenor in each case
Hearing dates: 17, 18 and 19 November 2008
____________________
Crown Copyright ©
Sir Anthony Clarke MR:
This is the judgment of the court to which all its members have contributed.
Introduction
The Regulations and the statutory framework
"4(1) Before a conditional fee agreement is made the legal representative must
(a) inform the client about the following matters; and
(b) if the client requires any further explanation, advice or other information about any of those matters, provide such further explanation, advice or other information about them as the client may reasonably require.
(2) Those matters are –
(a) the circumstances in which the client may be liable to pay the costs of the legal representative in accordance with the agreement,
(b) the circumstances in which the client may seek assessment of the fees and expenses of the legal representative and the procedure for doing so,
(c) whether the legal representative considers that the client's risk of incurring liability for costs in respect of the proceedings to which agreement relates is insured against under an existing contract of insurance,
(d) whether other methods of financing those costs are available and, if so, how they apply to the client and the proceedings in questions,
(e) whether the legal representative considers that any particular method or methods of financing any or all of costs is appropriate and, if he considers that a contract of insurance is appropriate or recommends a particular such contract -
(i) his reasons for doing so, and
(ii) whether he has an interest in doing so.
(3) Before a conditional fee agreement is made the legal representative must explain its effect to the client.
…."
(5) Information required to be given under paragraph (1) about matters in paragraph (2) (a) to (d) must be given orally (whether or not it is also given in writing), but information required to be so given about matters in paragraph (2)(e) and the explanation required by paragraph (3) must be given both orally and in writing.
…."
The previous regulations, which were the Conditional Fee Agreements Regulations 1995, were revoked by regulation 7.
The Accident Line Scheme
"1. Two versions of the AL manual appear in the Core Bundle: [CB/44-123] applies to Hibberd; [CB/124-211] applies to Jones and Tankard. Where appropriate, references relate first to the earlier version and second to the later version.
2. ALP is a membership scheme, with an annual fee. Solicitors may join if they meet quality standards, eg having a Personal Injury Panel member within each relevant office.
3. Membership includes the following benefits [CB/33]:
a) Delegated authority to issue ALP insurance.
b) A right to receive referrals of cases from AL.
c) Access for clients to a dedicated disbursement and premium funding facility with the Bank of Ireland ['BoI'] (optional).
d) Access to ancillary services related to training, marketing, administrative support and advice and continuing professional development.
4. To support (b), AL conducts marketing activities (eg television, leaflets in post offices and CABs and other advertising), and has a nationwide telephone number connected to call centres. There is an initial consideration of the potential case by an AL trained adviser. Prospective clients are then passed to member firms on grounds of proximity. No referral fees were payable at any material time [CB/51;CB/153].
5. It is a condition of membership that an ALP policy must be effected in all qualifying cases which the solicitor conducts on a CFA, save where those cases were referred by a third party which specifies use of a different insurance. Essentially all personal injury cases qualify for ALP cover, except clinical negligence cases, those funded by other means, including BTE and cases where the client or solicitor does not wish to use a CFA. See [CB/52-61; CB/134 & 142/3].
6. The ALP premium is payable immediately. It may be funded by the client personally (from his own savings or by borrowing, eg under the ALP facility with BoI) [CB/63; CB/145], or paid by solicitors as a disbursement. In the 3 appeals before the court it was paid by the solicitors, although this was not the case in Puksis [P/12/237].
7. The premium is insured, and an amount equal to it will be paid as an insured benefit if the insured fails to recover costs. If costs are recovered, then any shortfall on recovery of the premium on assessment is not insured. It is a matter between solicitor and client as to whether the unrecovered element is withheld from damages, or absorbed by the solicitor. If the client borrows to fund the premium, including from the BoI facility, the borrowing cost is irrecoverable, and is borne by the client if the claim is successful. The ALP policy covers borrowing charges under the BoI facility if the claim is lost. The cost of borrowing from BoI is a £50 administration fee plus interest of base + 2.5 pc. None of the clients in these 3 appeals borrowed. See [CB/110; CB/197].
8. AL is entitled to suspend or terminate membership if a solicitor breaches conditions of membership, including the condition at para 5 above [CB/48; CB/130].
9. Solicitors pay the membership fee in 2 instalments. The 2nd instalment is payable after 6 months, but is rebated in increments of 25 pc if more than a certain number of policies are issued in that period. See [JB/146-147] for the arrangements applicable to Hibberd. For subsequent years, the numbers involved in the rebate scheme were different and included a potential for rebate of the 1st as well as the 2nd instalment if the numbers were high enough. See para 9 of the Jones judgment [JB/83], for the figures for 2003/4.
10. Where an ALP policy is to be issued, solicitors must use the model CFA set out in the AL manual [CB/59; CB/141]. The model CFA [CB/71; CB/156] states that the policy is recommended as appropriate for the client, and under "Other points at paragraph (e)(iii): "We confirm that we do not have an interest in recommending this particular insurance agreement". A list of 6 reasons for recommending the policy is then given at Schedule 2.
11. Specimens of the relevant policies are at [CB/67/8] for Hibberd and [CB/152/3] for Jones and the actual policy for Tankard at [T/247A/B]. The underwriters differ from time to time, but no one suggests that that is relevant to these appeals."
'Interest'
The meaning of 'interest'
"If the legal representative recommends a particular product, but also has an interest in doing so, for example because he or she will receive a commission or is a member of the insurer's panel of solicitors, then this must be disclosed to the client".
"Nor do we accept that the Regulations should be construed narrowly because of their potentially draconian effect on solicitors. The purpose of the Regulations is to protect clients, not the financial interests of solicitors. In our judgment, the Regulations should be construed by giving the plain language in which they are expressed its normal and natural meaning. We do not accept that the word "interest" is ambiguous. For the reasons that we shall give, it seems to us to be clear that it includes membership of a panel such as the Ainsworth panel."
"While the older cases speak of disqualification if the judge has an interest in the outcome of the proceedings "however small", there has in more recent authorities been acceptance of a de minimis exception: BTR Industries South Africa (Pty) Ltd v. Metal and Allied Workers' Union 1992 (3) SA 673 at 694; R. v. Inner West London Coroner, ex parte Dallaglio [1994] 4 All ER 139 at 162; Auckland Casino Ltd v Casino Control Authority [1995] 1 NZLR 142 at 148. This seems to us a proper exception provided the potential effect of any decision on the judge's personal interest is so small as to be incapable of affecting his decision one way or the other; but it is important, bearing in mind the rationale of the rule, that any doubt should be resolved in favour of disqualification. In any case where the judge's interest is said to derive from the interest of a spouse, partner or other family member the link must be so close and direct as to render the interest of that other person, for all practical purposes, indistinguishable from an interest of the judge himself."
'Interest' – application to the facts
"But the crunch averment in the points of dispute was that failure to comply with recommending the NIG policy would lead to termination of panel membership, and I accept from the lack of response to that direct matter that it is a proper inference that in fact it would have done so, in the sense that the claimant solicitors, Websters, recommended to some clients to go elsewhere for their ATE insurance, then they would have been taken off the panel, or, as the deputy district judge put it slightly differently, "I am not satisfied that the claimant has established that the claimant solicitors have no interest in recommending this policy". Although not a direct financial interest, it would be a perfectly understandable indirect financial incentive, if by not recommending a particular policy, a solicitor was taken off a panel of solicitors where there was a not insubstantial amount of work fed through to them because they were members of that panel."
The solicitors' problems in that case were exacerbated by their failure to explain the matter fully to the court. The critical point was that Ainsworth were what have been called claims farmers and, although it was unclear to what extent Websters were dependent upon them for the referral of cases, it is implicit in the decision that the dependency was substantial.
"In the circumstances of this case, the interest which the legal representative has in recommending the policy is (as Ms Moore's evidence demonstrates) simply that it is a good policy. To be able to recommend it, the legal representative is obliged to join the scheme and obey its rules. Those rules, as described in the documentation, appear to be designed to avoid adverse selection (a perfectly acceptable aim by the insurer) and to ensure the quality of those who recommend the policy (another acceptable aim in my judgment)."
"113. Mr Williams, who appeared for the defendant, boldly asserted that in tying himself to DAS in the way he did, Mr Cater was in breach of Section 4(1) of the Solicitors' Introduction and Referral Code 1990, which reads:
"4(1) If a solicitor recommends that a client use a particular firm, agency or business, the solicitor must do so in good faith, judging what is in the client's best interest. A solicitor should not enter into any agreement or association which would restrict the solicitor's freedom to recommend any particular firm, agency or business."
114. This was a surprising submission, given that the success of ATE insurance has been dependent from the outset on arrangements like these. They are designed to prevent "cherry-picking" and to ensure that very many low risk cases are available as a counterweight to the few high risk cases. Mr Cooksley immediately disavowed this proposition on behalf of the Law Society. He told us that solicitors had been advised by the Law Society that they would not act in breach of the Code if they made reasonable contractual arrangements of this kind with ATE insurers. The use of the milder word "should", as opposed to the more prescriptive word "must", shows that this approach by the Law Society to the construction of this part of its own Code was not an unreasonable one.
Like Master Wright, we too would accept Mr Williams' submission made to Master Wright in this regard.
Exclusivity
Referrals
Rebates
Other
Conclusions on 'Interest'
Disclosure of interest
"103. Under a quite different legislative regime from that governing CFAs, the requirements imposed on solicitors by way of disclosure in relation to insurance policies which they recommend to their clients changed on 14 January 2005. With effect from that date, the Solicitors' Financial Services (Conduct of Business) Rules 2001, made by the Law Society in its capacity as a recognised professional body under the Financial Services and Markets Act 2000, were amended so as to introduce new provisions in this respect. By virtue of rule 8A and Appendix 1, if a firm recommends a contract of insurance to a client, and does not conduct a fair analysis of the market for such policies, it must advise the client, among other things, whether it is contractually obliged to conduct insurance mediation activities only with one or more insurance undertakings. "Insurance mediation activities" is defined in a European Directive on Insurance Mediation, 2002/92/EC. It includes the activities of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance. Thus, from 14 January 2005, a solicitor who proposes that his client should enter into an ATE insurance policy, and who recommends a particular policy because it is the only policy which, consistently with his firm's membership of a panel, he is allowed to recommend, must tell the client that he is contractually obliged to recommend a policy with that insurer. That would give the client notice of the particular interest which the firm has in recommending the policy, whereas just to tell the client that the firm is on a particular panel does not convey that information. If that obligation was observed from 14 January 2005, the problem which we have had to consider in relation to the Garrett case will not have arisen between that date and the revocation of the Regulations on 1 November 2005."
Material breach and de minimis
CONCLUSIONS
Postscript
"224. The court should be watchful when it considers allegations that there have been breaches of the Regulations. The parliamentary purpose is to enhance access to justice, not to impede it, and to create better ways of delivering litigation services, not worse ones. These purposes will be thwarted if those who render good service to their clients under CFAs are at risk of going unremunerated at the culmination of the bitter trench warfare which has been such an unhappy feature of the recent litigation scene.
225. In Burstein v Times Newspapers Ltd [2002] EWCA Civ 1759 at [29] Latham LJ ended the judgment of the court with these words:
" … The Deputy Costs Judge is to be commended for ensuring that the detailed assessment did not become an excuse for further expensive litigation at the behest of a disappointed but persistent litigant. Satellite litigation about costs has become a growth industry, and one that is a blot on the civil justice system. Costs Judges should be astute to prevent such proceedings from being protracted by allegations that are without substance."
226. In future district judges and costs judges must be equally astute to prevent satellite litigation about costs from being protracted by allegations about breaches of the CFA Regulations where the breaches do not matter. They should remember that the law does not care about very little things, and that they should only declare a CFA unenforceable if the breach does matter and if the client could have relied on it successfully against his solicitor."
We agree. We have concluded here that the client could not successfully have relied upon a breach of the Regulations against his solicitor.