[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Kilby v Gawith [2008] EWCA Civ 812 (19 May 2008) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2008/812.html Cite as: [2009] 1 WLR 853, [2008] EWCA Civ 812

[New search] [Context] [View without highlighting] [Printable RTF version] [Buy ICLR report: [2009] 1 WLR 853] [Help]

		Neutral Citation Number: [2008] EWCA Civ 812
		Case No: A2/2007/2073; A2/2007/2073(A); A2/2007/2073(B)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LIVERPOOL COUNTY COURT
(HIS HONOUR JUDGE STEWART QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		19th May 2008

B e f o r e :

SIR ANTHONY CLARKE MR
LADY JUSTICE ARDEN DBE
LORD JUSTICE DYSON
and
MASTER HURST (Senior Costs Judge)
____________________

Between:

	JANIE KILBY	Claimant/ Respondent
	- and -
	DONALD GAWITH	Defendant/ Appellant

____________________

(DAR Transcript of
WordWave International Limited
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

____________________

Mr J Morgan QC (instructed by McCullagh & Co) appeared on behalf of the Appellant.
Mr N Bacon (instructed by Camps Solicitors) appeared on behalf of the Respondent.
____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

Sir Anthony Clarke MR:

Introduction.

1. This is the hearing of an appeal against an order dated 14 August 2007 made by HHJ Stewart QC sitting in the Liverpool County Court in which he dismissed an appeal by the defendant from the order of District Judge Peake on a detailed assessment made in the Birkenhead County Court on 23 March 2007. The appeal to this court was brought with the permission of Sir Henry Brooke.
2. The appeal concerns the interpretation of the fixed recoverable costs regime under Section II of CPR Part 45. The issue is whether the court has a discretion under Rule 45.11(1) whether or not to award a claimant, who has entered into a conditional fee agreement ("CFA") with his solicitor, the fixed success fee of 12.5%. The claimant had before-the-event ("BTE") insurance. The defendant's case is that given that the claimant had BTE insurance it was unreasonable to order the defendant to pay any part of the success fee under a CFA. His point, which has been advanced with skill and persistence on his behalf by Mr Jeremy Morgan QC, is the point neatly summarised by Sir Henry Brooke in his written reasons for granting permission for a second appeal to this court. He said:

"This appeal raises a very important point of practice. If the judge is right, it means that a claimant's solicitor can recover a success fee as high as 12.5% as a matter of course on a very simple road traffic accident claim even though there is perfectly satisfactory BTE insurance in place.

The case therefore raises important points of policy fit for the Court of Appeal."

The CPR.

3. Part 44 provides, as far as relevant:

"44.3(1). The court has discretion as to --

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid

…

44.4(1). Where the court is to assess the amounts of costs (whether by summary or detailed assessment) it will assess those costs --

(a) on the standard basis; or

(b) on the indemnity basis

but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.

…

44.12A. This Rule sets out a procedure which may be followed where --

(a) the parties to a dispute have reached an agreement on all issues (including which party is to pay the costs) which is made or confirmed in writing; but

(b) they have failed to agree the amount of those costs; and

(c) no proceedings have been started."

4. Neither Rule 44.3 nor Rule 44.4 applies directly here because this case falls within Section II of Part 45 which introduced a fixed recoverable costs regime for claims arising out of some classes of road traffic accidents where the accident occurred on and after 6 October 2003. Section II was initially brought into force pursuant to the Civil Procedure (Amendment No 4) Rules. Rule 44.11(2) in those rules was substituted by Rule 45.11(2) in its present form with effect from 1 March 2004 by the Civil Procedure (Amendment No 5) Rules 2005. In its original form it contained a discretion. Section II of Part 45 thus provides, so far as relevant, as follows:

"Scope and interpretation

45.7(1) This Section sets out the costs which are to be allowed in --

(a) costs-only proceedings under the procedure set out in rule 44.12A; or

(b) proceedings for approval of a settlement or compromise under rule 21.10(2),

in cases to which this Section applies.

(2) This Section applies where --

(a) the dispute arises from a road traffic accident;

(b) the agreed damages include damages in respect of personal injury, damage to property, or both;

(c) the total value of the agreed damages does not exceed £10,000; and

(d) if a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim
…

Application of fixed recoverable costs

45.8 Subject to rule 45.12, the only costs which are to be allowed are --

(a) fixed recoverable costs calculated in accordance with rule 45.9;

(b) disbursements allowed in accordance with rule 45.10; and

(c) a success fee allowed in accordance with rule 45.11.

(Rule 45.12 provides for where a party issues a claim for more than the fixed recoverable costs)


Amount of fixed recoverable costs

45.9 (1) Subject to paragraphs (2) and (3), the amount of fixed recoverable costs is the total of --

(a) £800;

(b) 20% of the damages agreed up to £5,000; and

(c) 15% of the damages agreed between £5,000 and £10,000.

(2) Where the claimant --

(a) lives or works in an area set out in the relevant practice direction; and

(b) instructs a solicitor or firm of solicitors who practise in that area,

the fixed recoverable costs shall include, in addition to the costs specified in paragraph (1), an amount equal to 12.5% of the costs allowable under that paragraph.

(3) Where appropriate, value added tax (VAT) may be recovered in addition to the amount of fixed recoverable costs and any reference in this Section to fixed recoverable costs is a reference to those costs net of any such VAT.


Disbursements

45.10 (1)  The court --

(a) may allow a claim for a disbursement of a type mentioned in paragraph (2); but

(b) must not allow a claim for any other type of disbursement.

(2) The disbursements referred to in paragraph (1) are --

(a) the cost of obtaining --

(i) medical records;

(ii) a medical report;

(iii) a police report;

(iv) an engineer's report; or

(v) a search of the records of the Driver Vehicle Licensing Authority;

(b) the amount of an insurance premium; or, where a membership organisation undertakes to meet liabilities incurred to pay the costs of other parties to proceedings, a sum not exceeding such additional amount of costs as would be allowed under section 30 in respect of provision made against the risk of having to meet such liabilities;

('membership organisation' is defined in rule 43.2(1)(n))

(c) where they are necessarily incurred by reason of one or more of the claimants being a child or protected party as defined in Part 21 --

(i) fees payable for instructing counsel; or

(ii) court fees payable on an application to the court;

(d) any other disbursement that has arisen due to a particular feature of the dispute.

('insurance premium' is defined in rule 43.2)


Success fee

45.11 (1) A claimant may recover a success fee if he has entered into a funding arrangement of a type specified in rule 43.2(k)(i).

(2) The amount of the success fee shall be 12.5% of the fixed recoverable costs calculated in accordance with rule 45.9(1), disregarding any additional amount which may be included in the fixed recoverable costs by virtue of rule 45.9(2)."

….

"45.12(1). The court will entertain a claim for an amount of costs (excluding any success fee or disbursements) greater than the fixed recoverable costs but only if it considers that there are exceptional circumstances making it appropriate to do so."

5. Section III of Part 45 was subsequently introduced with effect from 1 June 2004 under the Civil Procedure Amendment Rules 2004. I shall first consider the appeal without reference to Section III but will return to it at the end.

Common ground.

6. It is common ground (1) that these are costs-only proceedings within Rule 44.12(a); (2) that the dispute arises from a road traffic accident within Rule 45.7(2)(a); (3) that the total agreed damages include damages in respect of personal injury and do not exceed £10,000; (4) that the claimant entered into a funding agreement of a type specified in Rule 43.2(c)(i); (5) that if the claimant recovers a success fee it must be 12.5% of the fixed recoverable costs in accordance with Rule 45.11(2); and (6) that the sole issue in this appeal is whether the claimant is entitled to recover that success fee or whether the court has a discretion whether or not to permit him to do so.

The facts.

7. The facts are straightforward. The claimant was injured in a road traffic accident on 1 August 2004 for which the defendant admitted liability. The claimant entered into a CFA with his solicitor on 16 August 2004. The validity of the CFA is not in dispute. The parties reached agreement on quantum and the defendant paid the claimant £3068.84 in full and final settlement of the claim. The defendant also agreed to pay the claimant's costs. There is no dispute that this was a case to which Section II of Part 45  applied. Costs were agreed in the sum of £1718.18 save for two items which the defendant disputed. They were first the success fee of £177.47 claimed under Rule 45.11, namely 12.5% of the fixed recoverable costs calculated in accordance with Rule 45.9, and secondly £352.50, which was the amount claimed for the medical report. The claimant brought costs-only proceedings on 25 November 2005 under the procedures set out in Rule 44.12A.

The first instance decision.

8. The District Judge reduced the amounts claimed for the medical report to £250. There was no appeal against that aspect of his decision and we are not concerned with it. As to the success fee, the defendant contended that the court had a discretion whether or not to allow it and also at what level. The defendant's principal submission was that it followed from the use of the word "may" in Rule 45.11(1) that the court had a discretion whether or not to award the success fee. The claimant submitted that, once it was accepted that the CFA had been entered into, she had a right to the success fee of 12.5% under Rule 45.11 and that there was no discretion to disallow it in whole or in part. The claimant relied upon the decision in Nizami v Butt [2006] EWHC 159; [2006] 1 WLR 3307.
9. The District  Judge rejected the defendant's submission as wholly unmeritorious. He held that the recoverability and amount of the 12.5% success fee were not discretionary. The intention of the draftsman in drafting Section II of Rule 45 was to provide a self-contained set of rules designed to fix the costs recoverable as much as possible in order to further the overlying objective and to ensure proportionality in small cases. If a success fee under Rule 45.11 were discretionary this object would be defeated. Further, he held that the word "may" in Rule 45.11(1) is an alternative to, ie meant, "is entitled to" and did not imply that the court had a discretion.

First appeal.

10. The defendant appealed and the appeal was heard jointly with another case which raised the same issue, namely Patel v Cotton, claim number 5B108106. On appeal the defendant renewed his contention that Rule 45.11(1) gives the court a discretion whether or not to allow this, relying on the following grounds: (a) there was a difference in language between Rule 45.8(a), which describes fixed recoverable costs being "calculated", an expression admitting of no discretion, and Rule 45.8(b) and (c) which describes disbursements and success fee as being "allowed", which implies a discretion; (b) the use of the word "may" in Rule 45.11(1) itself implies a discretion; (c) the use of the word "may" in Rule 45.11(1) is to be contrasted with the use of a word such as "shall", eg in Rule 45.11(2), when providing the amount of the success fee and "is", eg in Rule 45.9(1), when setting out the method of calculation on fixed recoverable costs which exclude a discretion; (d) the provision in paragraph 25A.10 of the costs Practice Direction made under Section II of Part 45, which makes provision for disputes as to success fees, would be otiose if the court had no discretion whether or not to allow them; (e) Rule 45.11(1) should not be construed as overruling the dicta in Sarwar v Alam [2001] EWCA Civ 1401; [2002] 1 WLR 125 to the effect that in straightforward motor claims of modest value a claimant who has BTE insurance should generally use it and will not act reasonably in incurring additional costs such as success fees instead; (f) the references to Rule 45.16 were irrelevant since that provision was not applicable; (g) reliance on Nizami v Butt was inappropriate both because it dealt with a different issue, namely whether the indemnity principle applies to costs assessed under Section II of Part 45 and because it was in any event wrongly decided.
11. The judge gave permission to appeal but dismissed the appeal. The judge rejected the defendant's submission based on the wording of Rule 45.8. He said at [7]:

"The base costs fixed recovery costs are truly a calculation under rule 45.9 having regard to the various factors contained in that rule. However there is no magic in the words 'allowed in accordance with' in rule 45.8(b) and (c) which necessarily imports a discretion into both. It is to Rules 45.10 and 45.11 themselves that I must have regard."

12. As to Rule 45.11(1) the judge noted that it was common ground that the rule could have been more clearly drafted. Rule 45.11(1) could have put the issue beyond doubt if the word "shall" had been used instead of "may". He continued at [8]:

"However the word 'may' is often capable of meaning 'shall' and particularly so if it follows a precondition which has to be fulfilled. It seems to me that there is no obstacle in the language to my finding that there is no discretion if that is the proper construction."

13. At [10] the judge distinguished the language in Rule 45.10 and 45.11. Rule 45.10 used the formulation "the court may allow a claim", which clearly gave the court discretion whether or not to allow the claim for disbursements. The judge noted that the same formulation was used in giving the court its general discretion as to costs in Rule 44.3. By contrast Rule 45.11 did not use this formulation. This answered the defendant's submission about how Rule 45.10 and Rule 45.11 were to be distinguished and suggested that the award of a success fee was an entitlement and was not discretionary.
14. As to paragraph 25A.10 of the Costs Practice Direction, 45PD, the judge noted that the Practice Direction had not been amended in accordance with the rule change in March 2004. It referred to the old version of Rule 45.11(2) which was no longer in force but which had provided that where parties could not agree the amount of the success fee it was to be assessed by the court. It had been rendered otiose by the rule change in March 2004. In the light of this analysis paragraph 25A.10 supported the claimant's case rather than the defendant's because it suggested that the Practice Direction did not contemplate, and had not even under the old version of Rule 45.11 contemplated, any challenge to payment of a success fee under Rule 45.11 as opposed to the amount of the success fee. See the judgment at [11].
15. As to the decision in Nizami v Butt, the judge accepted that the decision did not concern the point before him but rather whether the indemnity principle applied to Section II of Part 45 (see [12]). However the judge was fortified in his conclusion that Rule 45.11(1) did not give the court a discretion to disallow a success fee by the reasoning adopted by Simon J in Nizami v Butt as to the intention underlying Section II of Part 45. I will return to Nizami v Butt in a moment.

This appeal.

16. The points advanced by Mr Morgan on behalf of the defendant are essentially those made to and rejected by the judge. In short they may be summarised in this way: (1) There is a difference in language between Rule 45.8(a), which describes fixed recoverable costs being "calculated", an expression admitting of no discretion, and Rule 45.8(b) and (c), which described the disbursements and success fee as being "allowed", which implies a discretion. (2) The use of the word "may" in Rule 45.11(1) is to be contrasted with the use of words such as "shall" in Rule 45.11(2) and "is" in Rule 45.9(1). (3) The judge was wrong to rely on paragraph 25A.10 in the costs Practice Direction as an aid to interpreting Rule 45.11 since a Practice Direction does not have the force of law and cannot be used as an aid to determine the intention of parties in enacting a statutory instrument such as the CPR. (4) The judge was correct to identify that Nizami v Butt was on a different point but was incorrect to regard the reasoning in that case as fortifying his view in the present case. Nizami v Butt was concerned with the satellite litigation engendered by an inquiry into the enforceability of a CFA. Such satellite litigation was rarely productive for paying parties. The present case is concerned with satellite litigation of a different kind, which is not likely to result in any real complexity but which is likely to be productive for paying parties in every case where the claimant had BTE insurance. (5) The judge was wrong to reject the submission that to uphold the claimant's construction of Part 45 Section II will act as an incentive to claimants' solicitors to enter CFAs where they are not reasonably required. Given that the vast majority of personal injury claims fall within Part 45 Section II and the widespread availability of BTE insurance this will add a substantial but wholly avoidable extra cost to premium payers. (6) In this connection regard should be had to the enormous extra costs which premium payers will have to pay if this appeal succeeds. While it is true that in each case the range of success fees under Rule 45.11 is between £100 and £318.75, when multiplied across the market the numbers are likely to run into millions of pounds. (7) By contrast, if the appeal is allowed, the claimant's solicitors acting under BTE insurance will recover reasonable sums including profit costs, such that to award a success fee would be wholly unreasonable and contrary both to the principle in Rule 44.4 and to traditional principles of the common law.
17. In the course of his oral argument Mr Morgan accepted, as indeed he had done in his skeleton argument, that the construction preferred in the courts below was permissible as a matter of language, but he submitted that the defendant's construction is also permissible as a matter of language and is to be preferred if the rules are given a purposive construction, as principle requires should be done. He referred us to page 943 of the recent fifth edition (2008) of Benyon on Statutory Construction and to the quotation of this statement by Lord Steyn in Attorney General's Reference No 5 of 2002 [2004] UKHL 40, [2005] 1AC 167 at [31]:

"No explanation for resorting to purposive interpretation of a statute is necessary. One can confidently assume that Parliament intends its legislation to be interpreted not in the way of a black letter lawyer, but in a meaningful and purposive way giving effect to the basic objectives of the legislation."

I entirely accept that it is appropriate to adopt that approach here and I will return to the purpose of section II of Part 45 in a moment.

Discussion.

18. The answer to the question in this appeal is essentially one of construction of CPR Part 45. Like any provision of the CPR, the relevant rules in Part 45 must be construed by reference to their ordinary meaning when viewed in their context. That is, in the context of section II of Part 45, which must, in its turn, be construed in the context of the CPR as a whole. Consistently with the principal summarised by Lord Steyn, this involves a consideration of the statutory purpose of the relevant rules. In my opinion the judge and the district judge reached the correct conclusion on the construction of section II of Part 45, essentially for the reasons they gave. I will, however, shortly express my own reasons for reaching that conclusion.
19. I consider first the language. The key provision is Rule 45.11(1). I accept, of course, that the draftsman of that rule could have used the word "shall" instead of "may". However, I agree with the judge that there is an important distinction between the language of Rule 45.10(1)(a) and that of Rule 45.11(1). Rule 45.10(1)(a) which provides that "the court (a) may allow a claim for a disbursement" of a specified type, expressly gives the court a discretion in a way that Rule 45.11(1) does not. Rule 45.11(1) does not provide that the court may allow a claim for a disbursement but that "a claimant may recover a success fee" if he has entered into a specified type of arrangement. In my opinion the natural meaning of that paragraph is that in such a case the claimant is entitled to recover a success fee. Just as the expression "the claimant may recover damages" means that he has a right to recover damages, so, as I see it, does the expression "the claimant may recover a success fee" mean that he has a right to recover the success fee, provided of course that the condition precedent is satisfied.
20. Rule 45.12(2) then provides that the amount of the success fee "shall be to 12.5%". In the light of that language and the express language of Rule 45.12(1), Mr Morgan correctly concedes that, where a success fee is recovered, it must be 12.5%, no more and no less. It seems to me to be almost inconceivable that, if the draftsman had intended to give the court a discretion in respect of success fees, he would have fettered the discretion by providing that the recovery was to be all or nothing. To my mind that would be very odd indeed. I can see no reason why, if the court were to have a discretion, it should not have a discretion to award less than 12.5% but more than nought. Yet it is common ground that any discretion is all or nothing. Moreover, there is obvious force in Mr Bacon's point that, whether articulated as a challenge to the success fee or to its amount, the effect is the same, namely that the success fee is reduced to nil. That would be very odd because, as Mr Bacon observed, by Rule 45.12(1) not even "exceptional circumstances" can justify a reduction of a success fee.
21. I should add that I do not accept the submission made on behalf of the defendant to the effect that the word "allowed" in the introduction to Rule 45.8 and in Rule 45.8(b) and (c) is to be contrasted with the word "calculated" in paragraph (a). I would accept Mr Bacon's submission that since the costs calculated under Rule 45.8(a) are to be allowed under Rule 45.8, just as much as the success fee referred to in Rule 45.8(c), it cannot be inferred that the draftsman intended the use of the word "allowed" to indicate a discretion in paragraph (c). Moreover, the use of the word "calculated" in paragraph (a) is readily understandable because Rule 45.9 involves a pure calculation, whereas Rule 45.11(1) although, as Arden LJ observed in argument, it involves a calculation, it does not involve a pure calculation, but first involves a determination of whether the claimant has entered into an arrangement of the specified type.
22. Although I would accept Mr Morgan's submission that no assistance can be derived from the language of the unamended paragraph 25.10A of the Costs Practice Direction, the judge's reasoning is in my opinion otherwise persuasive. The natural contrast between the expressions "the court may allow" in Rule 45.10(1)(a) and "a claimant may recover" in Rule 45.11(1) strongly points the way, as does the extreme improbability that the draftsman would have conferred an 'all or nothing' discretion on the court.
23. I will return to policy and purpose in a moment, but will first refer to the authorities most directly in point.

The authorities.

24. The only authorities which are of any real assistance are, to my mind, Nizami v Butt and Lamont v Burton [2007] EWCA Civ 49; [2007] 3 All ER 178. Nizami v Butt was not a case on all fours with this, because it was a case in which the defendant or (as here) in reality his insurers refused to pay the success fee under Rule 45.11 on the ground that the CFA was unenforceable and that if the claimants had no liability to their solicitor the defendant could not be liable by reason of the indemnity principle. Simon J who, like us, had the considerable benefit of sitting with the Senior Costs Judge, Master Hirst and indeed the further benefit of sitting with a solicitor assessor, held that the indemnity principle did not apply and rejected the defendant's submissions.
25. In the course of his conclusions the judge said this at [19]:

"19. I am advised by the assessors that until the Court of Appeal decision in Hollins v Russell [2003] 1 WLR 2487 numerous technical challenges were made to the validity of conditional fee agreements. As Mr Mallalieu put it in the course of argument, "the history of litigation in this field indicates that disproportionate points were taken". The challenges sought to show that conditional fee agreements did not comply with primary and secondary legislation; and were therefore unenforceable between solicitor and clients. On this basis the paying party was able to rely on the indemnity principle so as to argue that it could avoid liability for the receiving party's costs. It is clear that such challenges had a significantly detrimental effect on the efficient conduct of personal injury litigation and were inconsistent with the overriding objective of enabling the court to deal with cases justly. As Judge LJ noted in Bailey v IBC Vehicles Limited [1998] 3 All ER 570, 575: 'The defendants' request that the plaintiff be required to provide information proving that the indemnity principle has been observed represents pointless satellite litigation.' The problem was addressed in three ways."

26. The judge then considered the three ways in which the problem was addressed, including the modification of the indemnity principle by section 51(2) of the Supreme Court Act 1981. He then said this at [22 to 24]:

"22. Thirdly, changes were made to the Rules of Court. Some of these changes, and in particular the provisions of sections II-V of CPR Pt 45, were introduced following 'industry wide' discussions under the aegis of the Civil Justice Council. Agreement was reached on the recoverable costs in the different situations covered by the various sections.

23. It seems to me clear that the intention underlying CPR rules 45.7-45.14 was to provide an agreed scheme of recovery which was certain and easily calculated. This was done by providing fixed levels of remuneration which might over-reward in some cases and under-reward in others, but which were regarded as fair when taken as a whole.

24. It is clear that in making this change the draftsman of the rules intended that the indemnity principle should not apply to the figures which were recoverable."

27. Although I recognise that this case is not on all fours with Nizami v Butt on the facts, Simon J there made it clear that the purpose of the new rules was to provide fixed levels of remuneration which might operate on a swings and roundabouts basis, which was regarded as fair taken as a whole. That approach was subsequently approved as correct by this court in Lamont v Burton, in which Dyson LJ gave the judgment of the court which also comprised May and Smith LJJ. The facts were again different. The court held that CPR Part 44 could not be used to circumvent, either directly or indirectly, the mandatory provisions of Part 45. In that case the problem arose in connection with Part 36 and might in some respects have been regarded as arriving at an unfair or unreasonable result, but the court refused to construe section 3 of Part 45, otherwise than in accordance with its terms, for that reason. Dyson LJ set out the relevant provisions of Section III of Part 45 at [5] and then set out the history of the negotiations which led to Sections III to IV of Part 45 [6]-[8]. I shall not therefore repeat that account here but simply adopt it. He said at [9] that at [2] and [23] Simon J correctly summarised the effect of the negotiations which I have already quoted. As I read the judgment in Lamont, this court was approving the reasoning and judgment of Simon J in this regard.
28. The approach of Simon J seems to me to support the construction of the rule adopted by the judge when viewed against the statutory policy which Simon J identified. The reasoning which led to the decision in Lamont is also important here. The defendant there, as here, relied upon the provisions of Part 44, albeit different provisions. Here Mr Morgan relies upon the general provision in Rule 44.4(1) that, to be recoverable, costs must not be unreasonably incurred. That is an important principle but, as in Lamont, must yield to the fixed costs scheme in Part 45. Costs may be unreasonable in the particular case, but the scheme is intended to iron out fluctuations and, importantly, to cut out argument which is itself potentially very costly.
29. Finally I note that in Lamont the court said at [34]:

"We have no evidence about the details of the negotiations that were the progenitor of section III of CPR Pt 45. In the light of the Fenn and Rickman report, it seems probable that the effect of Pt 36 was not reflected in the agreement that resulted from the negotiations. Whether that represents a lacuna as Mr Morgan submits depends on whether the effect of Pt 36 calls for special treatment. The Pt 36 issue is one of some difficulty, although we accept that there may well be a case for deciding that, where a claimant fails to better a Pt 36 offer or payment, he should be allowed the same success fee that he would have recovered if he had accepted the offer. For the reasons that we have given, that is not the effect of the rules in their present form. It will be a matter for the Rules Committee and the Civil Justice Council to consider whether to amend CPR Pt 45 to make special provision to deal with the Pt 36 issue."

30. The same is true here. It may well be that in the negotiations which led to Section II of Part 45 the interested parties did not discuss the significance of a claimant having the benefit of BTE insurance, the existence of which is the only real basis upon which Mr Morgan submits that it is unreasonable to allow a success fee. However, just as in the case of Part 36, that does not seem to me to be a reason why a special construction should be given to the terms of Section III of the Part 45.
31. In these circumstances the authorities most nearly in point seem to me to support the decision of the judge and not to support the submissions made on behalf of the defendant.

Policy, purpose and BTE insurance.

32. Mr Morgan has drawn our attention to the emphasis placed by the courts and others on BTE insurance, notably in the judgment of Lord Phillips of Worth Matravers MR giving the judgment of the court in Sarwar v Alam (the court also comprising Brooke and Longmore LJJ): see especially at [20 - 23, 41, 42 and 46]. Mr Morgan also referred to Callery v Gray [2001] EWCA Civ 1117; [2001] 1 WLR 2112 per Lord Woolf CJ, giving the judgment of the court (which comprised Lord Phillips and Brooke LJ) at [8]. I quote only from [46] of Sarwar, where Lord Phillips said this:

"If these simple steps are taken, they ought to reduce the burden and extent of the inquiries about which some of the interveners expressed concern. The solicitor will then be able to read through the policy, and if BTE cover is available, if the motor accident claim is likely to be less than about £5,000 and if there are no features of the cover that make it inappropriate (for instance, if there are a number of potential claimants and the policy cover is only, say, £25,000), the solicitor should refer the client to the BTE insurer without further ado. The solicitor's inquiry should be proportionate to the amount at stake. The solicitor is not obliged to embark on a treasure hunt, seeking to see the insurance policies of every member of the client's family in case by chance they contain relevant BTE cover which the client might use."

Mr Morgan relies upon that and other paragraphs in Sarwar to show that the reasonable course in most if not all cases is for a solicitor for a claimant who has BTE cover to ensure that the BTE cover is activated.

33. Mr Morgan also referred us to a number of government documents stressing the importance of BTE and indeed to the work of the Civil Justice Council ("the CJC"). I recognise the importance of BTE insurance. However, I am not persuaded that its importance or the general approach to it set out in either Sarwar or in the documents we have seen leads to the conclusion that Section II should be construed any differently. In these circumstances I express no view on the evidence as to the use of CFAs with or without success fees in BTE insurance. If the industry, whether through the CJC or otherwise, wishes to have the terms of Section II or indeed any other Part of the CPR reconsidered that is of course a matter for them.

Postscript.

34. We were referred to Section III of Part 45 which was introduced with effect from 2004. It applies to RTA cases where damages exceed £10,000. It includes Rule 45.16, which provides:

"Subject to Rule 45.18, the percentage increase which is to be allowed in relation to solicitors' fees is –

(a) 100 percent where the claim concluded at trial; or

(b) 12.5 percent where –

(i) the claim concludes before a trial has commenced; or

(ii) the dispute is settled before a claim is issued."

Rule 45.18(1) provides:

"This rules applies where the percentage increase to be allowed –

(a) in relation to solicitors' fees under the provisions of rule 45.16; or

(b) in relation to counsel's fees under 45.17, is 12.5 percent."

35. Mr Morgan submits that Section III should not be used as an aid to construction of Section II. I doubt whether that is so because Sections II and III are now part of Part 45 as a whole and it seems to me to be permissible in principle to construe the rule as a whole. However, lest that should be wrong, I merely express a view obiter based upon it. It appears to me to be improbable in the extreme that the rules committee intended the approach to RTA claims for less than £10,000 and the approach to RTA claims for more than £10,000 to be different in this respect. If Rule 45.16 were to be directly applicable here Mr Morgan's argument would to my mind be impossible, at any rate as a matter of construction.

Conclusion.

36. However that may be, for the reasons I have given, I would dismiss this appeal.

Lady Justice Arden DBE:

37. I agree.

Lord Justice Dyson:

38. I also agree.

Order: Appeal dismissed