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England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Holmes v Alfred McAlpine Homes (Yorkshire) Ltd  EWHC 110 (QB) (07 February 2006)
Cite as:  3 Costs LR 466,  EWHC 110 (QB)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
sitting with MASTER O'HARE and MR TONY GIRLING as Assessors
| JOHN HOLMES
|- and -
|ALFRED MCALPINE HOMES (YORKSHIRE) LTD
Roger Mallalieu (instructed by Berrymans Lace Mawer) for the Defendant
Hearing dates: 6 December 2005
Crown Copyright ©
Mr Justice Stanley Burnton :
2. On the 8 November 1999 the Claimant suffered severe personal injuries, as the result of an accident at work. Mr Holmes was a member of the Union of Construction Allied Trades and Technicians ('UCATT') and they passed his case to a firm of solicitors, O H Parsons, who accepted Mr Holmes' instructions to endeavour to recover damages from his employers, Alfred McAlpine Holmes (Yorkshire) Limited (the "Defendants"). Although it was a matter of dispute, I have decided that there was a valid retainer between Mr Holmes and O H Parsons. On the 15 June 2000 Mr Holmes decided to change his solicitors and instructed Stewarts. By the time Stewarts were instructed, liability had been admitted by the Defendants, although, there was an issue with regard to contributory negligence.
3. Proceedings for damages were issued by Stewarts on behalf of the Claimant, on the 16 October 2002 and the case was settled shortly before trial on the 19 November 2003, when the Claimant accepted the sum of £1,615,000.00 in settlement of his claim. The Court Order recording the terms of settlement provided that the Defendants pay the Claimant's costs on a standard basis.
4. On the 15 June 2000 the Claimant met with Mr Dench of Stewarts and on the 21 June 2000, Mr Dench wrote to Mr Holmes, the first two paragraphs of his letter, reading as follows:
"I write further to our meeting on the 15 June 2000 and confirm that my firm will be happy to handle your personal injury claim.
I have discussed your claim with the Partners and they will offer you a Conditional Fee Agreement with a nil success fee. I have not yet prepared this contractual documentation, as I will firstly attempt to secure funding through the Trade Union. However, it is my experience that the Trade Union will be reluctant to transfer the funding to another firm of solicitors. I will keep you advised."
5. Mr Dench then proceeded to correspond with UCATT. Mr Dench was unwilling to deal with the case on the basis suggested by UCATT as he considered that basis would be in breach of the indemnity principle. (That issue does not form part of this Judgment). In the second paragraph of his letter to the General Secretary of UCATT dated 27 July 2000, Mr Dench wrote:
"It is for this reason that I propose to deal with the matter on a Conditional Fee Agreement, a "no win no fee" agreement, with a "nil" success fee which puts Jack in the same position as he would be if he was on an ordinary private contract."
6. On the 28 July 2000, Mr Dench wrote to the Claimant and in his letter under the heading "Legal Costs" Mr Dench wrote:
"I have now discussed this at length with UCATT. The case will be funded by way of a No Win No Fee agreement with a nil success fee. This means that if the case does not succeed you will not have to pay our costs, nor will UCATT. In the event that you succeed then you will be responsible for our legal costs, but the majority of these costs will be paid by the Defendant. UCATT have insisted they will not be responsible for our fees in the event of an unsuccessful outcome and therefore the matter must proceed on a No Win No Fee Agreement for technical reasons. In the event that you lose the case or are ordered to pay costs then UCATT will provide you with appropriate cover. I am preparing the contractual documentation and will go through this with you in detail in the next few days."
7. There has been produced to me an attendance note dated 22 August 2000 identifying the fee earner as being Stuart Dench and the attendance note states:
"SHD engaged 18 minutes conducting a file review
The Conditional Fee Agreement with the success fee of nil must be sent out to the client. This has not yet been sent out. In addition, clarification is required from the Trade Union with regard to the insurance cover available."
8. On the 23 August 2000 Mr Dench wrote to the Claimant as follows:
"I have enclosed the Conditional Fee Agreement for your perusal ahead of our forthcoming meeting. I will take you through the agreement in detail at that meeting and explain all of its implications to you. I will ask Gillian to sign this document on your behalf following the meeting."
9. On the 25 August 2000, Mr Dench met with the Claimant and his wife at the Princess Royal Spinal Injuries Unit at Sheffield. Part of Mr Dench's attendance note of that meeting records the follows:
I discussed in detail with Mr Holmes the position with regards to the Conditional Fee Agreement. Following a long discussion and explanation of each cause (sic) Gillian Holmes signed the CFA on Jack's behalf as he was unable to sign due to the injuries he sustained in the accident."
10. The Conditional Fee Agreement was dated 15 July 2000 and included a claim for success fee of 25% of basis charges.
11. Following settlement of the claim, on the 5 November 2004 Stewarts served Notice of a Commencement of Assessment of a Bill of Costs on the Defendant's solicitors together with a Bill of Costs for assessment. The bill totalled £260,705.25 and included a claim for a success fee amounting to £33,052 which was 25% of Stewart's basic costs. The Defendant served Points of Dispute and the matter was listed before me for a Detailed Assessment hearing on 10-11 March 2005.
12. In my reading of Stewarts files prior to the Detailed Assessment hearing, I became concerned with regard to the fact that the conditional fee agreement appeared to have been backdated and that the correspondence leading up to the signing of the conditional fee agreement had indicated that there would be a nil success fee. At the Detailed Assessment Hearing on the 10 March 2005 I expressed these concerns to the parties and after a short adjournment, the Defendants requested that the Detailed Assessment be adjourned further to enable the Claimants to give a disclosure of all relevant documentation. This was not opposed by the Claimants. I accordingly ordered that the Detailed Assessment be adjourned to the 12 July 2005 and that any further evidence be served by the 11 April 2005. The Claimants duly served a copy of the Conditional Fee Agreement, together with the relevant correspondence on the Defendant's solicitors and Mr Dench has filed a witness statement, dated 20 April 2005, in which he deals with the background to the entering into of the Conditional Fee Agreement, the Conditional Fee Agreement itself and the Success Fee. The witness statement also deals with the question of hourly rates, which issue does not form part of this judgment.
3(2) If the Agreement relates to court proceedings, it must provide that where the percentage increase becomes payable as a result of those proceedings, then:
(ii) the legal representative agrees with any person liable as a result of the proceedings to pay fees subject to the percentage increase that a lower amount than the amount payable in accordance with the conditional fee agreement is to be paid instead,
the amount payable under the conditional fee agreement in respect of those fees shall be reduced accordingly, unless the court is satisfied that the full amount should continue to be payable under it.
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 question,
(3) Before a conditional fee agreement is made, the legal representative must explain its effect to the client.
(5)(1) The conditional fee agreement must be signed by the client and the legal representative..
A key question therefore is whether the conditions applicable to the conditional fee agreement by virtue of section 58 of the 1990 Act have been sufficiently complied with in the light of their purposes. Costs Judges should accordingly ask themselves the following question:
Has the particular departure from a Regulation pursuant to section 58(3)(c) of the 1990 Act or a requirement in section 58, either on its own or, in conjunction with any other such departure in this case had a materially adverse effect, either on the protection afforded to the client or upon the proper administration of justice?
If the answer is "yes" then the conditions have not been satisfied. If the answer is "no" then the departure is immaterial and assuming that there is no other reason to conclude otherwise the conditions have been satisfied.
Master Simons' findings
24. I accept the basic proposition of Mr Williams that a contract can be retrospective in effect, if that is the intention of the parties, on the assumption that a contract would ultimately be agreed on lines known to both parties, though, with the final form of various constituent terms of the proposed contract still under discussion. However, in this case at the date of the contract, Mr Dench had already written one letter to the client informing him that there would be a nil success fee and would subsequently write a further letter to Mr Holmes providing the same information, before the contract was actually signed. Mr Dench states that the probable explanation of the backdating of the Conditional Fee Agreement was that the form was adapted by his colleague in connection with another case where the date of signature was 15 July 2000. This is speculation and not fact. The 15 July 2000 appears to have no significance whatsoever in this matter. There is no evidence of any common intention that the parties should be bound from the 15 July 2000.
25. Whilst I do not disagree with the editor of Butterworths that work done before a conditional fee agreement can be subject to a success fee, the difficulty in this case is identifying what such work would be. On page three of the Conditional Fee Agreement under the heading "Basic Charges", it states:
"These are for work done from now until this agreement ends."
26. The question that has to be asked is what does " ..from now" mean. Mr Williams submits that "now" should be 15 July 2000, but it seems to me that that date is of no significance whatsoever. Why that date? Why not the date when Mr Dench was first instructed? Why not the date when Mr Dench "changed his mind" about the level of success fee? Why not the date when the Conditional Fee Agreement was signed on behalf of Mr Holmes?
27. I must also make a distinction between this case and Trollope and Coles Ltd v- Atomic Power Construction Ltd. That case envisages a commercial contract. In this case, whilst there is a commercial contract, it is a commercial contract that is subject to statutory regulations which require that an adequate explanation must be given to the client, as to the effect of the Agreement. The contract in Trollope and Coles Ltd does not appear to be a contract that was subject to statutory regulations. There is no evidence before me that the question of retrospectivity was ever discussed with the client. The 15 July 2000 is a date that has no significance and if the Conditional Fee Agreement is to be backdated to that date, there has to be an explanation as to why that date and not another date. There is no explanation other than that date may have been inserted in error.
28. The corollary to this, is that I am not satisfied that the reason for the backdating of the agreement has been properly discussed with the client. Mr Dench in his statement said he had very little memory of the sequence of events. The date "15 July 2000" is clearly printed in bold on the first page of the agreement and it therefore must be questionable, as to whether Mr Dench gave or was able to give an explanation to the client, as to why that date was chosen. If he does not know the reason himself, how could he have given an explanation to Mr or Mrs Holmes. I therefore accept Mr Mallalieu's submission that the attempt at retrospectivity taints this agreement, in that it provokes an inevitable confusion on part of the Claimant, as it purports to impose a greater liability on him than he actually has. I am not satisfied that regulation (4) (3) has been complied with in this respect, as it raises a serious doubt as to the adequacy of the explanation, that is required by the regulation, that has been given to the client.
29. I am also satisfied that there have been further breaches of Regulation 4. I accept Mr Mallalieu's submission that there is a primary liability on the Claimant to his solicitors to pay a success fee. On two occasions, the client was informed that there would be a nil success fee. Mr Dench has reported to UCATT that liability has been admitted. On the 22 August 2000, Mr Dench has spent eighteen minutes conducting a file review and has recorded that "a conditional fee agreement with a success fee of nil must be sent to the client". Three days later, the Conditional Fee Agreement was signed, but incorporated a twenty-five per cent success fee. Mr Dench says in paragraph 23 of his witness statement, that "I then changed my mind ". Mr Dench has to give a better explanation than simply that he changed his mind. What happened between his file review on the 22 August 2000, when he had already been dealing with the case for two months and the 25 August 2000, to make him change his mind? Whatever that reason was, surely, it has to be recorded and an explanation given to the client. His attendance note simply states that he discussed the Conditional Fee Agreement in detail with the client and explained each clause. He failed to record any explanation as to why the Agreement was dated 15 July 2000, nor did he record any explanation as to why the success fee had suddenly leapt from nil to twenty-five per cent, or the reasons why he had changed his mind. No evidence has been submitted by Mr Holmes as to the circumstances and consequently I do have serious doubts as to whether there has been compliance with Regulation 4(2) (a) and Regulation 4(3).
31. I am satisfied that in this case the breaches of Regulations 4(2) (a) and 4(3) are material and have had a materially adverse effect upon the protection afforded to the client. The success fee in this case was claimed at £33,052. The Claimant does have a primary liability to his solicitors for payment of this sum. There are circumstances, however technical, where the Claimant could be liable for this sum. The Conditional Fee Agreement provides, in condition 4(2) that:
"You remain ultimately responsible for paying our Success Fee."
32. There is also a liability for payment of the success fee if Mr Holmes were to die and his personal representatives wished to continue the claim for damages or, if Mr Holmes decided to change his solicitors. Mr Holmes was informed in writing on two occasions that there would be a nil success fee, in which case he would have had no additional liability. There is no evidence of any explanation being given to the client, in breach of the Regulations, of the circumstances whereby Mr Holmes could have a substantial personal liability. Mr Dench has been quite honest in stating that he cannot clearly remember what actually happened, but where, in the circumstances of this case, there has been such deviation from what the client was informed in writing, to what was actually stated in the document, I must treat the limited information provided by the evidence of Mr Dench with considerable caution.
33. All the facts lead me to believe that just as the date of 15 July 2000 was inserted in error, and that such error was not noticed by Mr Dench when he gave his explanation of the Conditional Fee Agreement to the client on 25 August 2000, it seems highly likely that the success fee of 25% was also included in the agreement in error. Mr Dench attempts to explain the backdating by suggesting that his assistant copied the agreement from a previous draft. If that was the case then it is possible, if not probable, that the same previous draft contained a 25% success fee and that error also became embodied into the Agreement signed by Mr Holmes. As the Conditional Fee Agreement signed on behalf of Mr Holmes contained two basic, obvious and fundamental errors, I cannot be satisfied that the explanation of the terms of the Agreement was given to the client in accordance with the Regulations. I conclude that the absence of sufficient explanation has had a materially adverse effect on the protection afforded to the client. Accordingly, the Conditional Fee Agreement dated the 15 July 2000, is unenforceable.
The parties' submissions before me (a) the procedure on this appeal
The parties' submissions before me: (b) on the substance of the appeal
In all the circumstances, on the information currently available to us, we believe that a contract of insurance with [ ] is appropriate. Detailed reasons for this are set out in Schedule II.
Paragraph (e) (ii) stated: "In any event, we believe it is desirable for you to insure your opponent's charges and disbursements in case you lose." I would have expected both of these subparagraphs to have been deleted: both were inappropriate in view of the protection afforded by UCATT.