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You are here: BAILII >> Databases >> England and Wales High Court (Senior Courts Costs Office) Decisions >> Hughes v George Major Skip Hire Ltd & Anor [2009] EWHC 90147 (Costs) (03 July 2009) URL: https://www.bailii.org/ew/cases/EWHC/Costs/2009/90147.html Cite as: [2009] EWHC 90147 (Costs) |
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SUPREME COURT COSTS OFFICE
London, EC4A 1DQ |
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B e f o r e :
____________________
LEANA HUGHES |
Claimant |
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- and - |
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(1) GEORGE MAJOR SKIP HIRE LIMITED (2) PHILIP HUGHES |
Defendants |
____________________
Mr Alexander Hutton (instructed by Hill Dickinson LLP & Weightmans LLP) for the First and Second Defendants
Hearing date: 9th June 2009
____________________
Crown Copyright ©
Master Gordon-Saker :
The background
The conditional fee agreement
If you win your claim, you pay our basic charges, our disbursements and a success fee. The amount of these is not based on or limited by the damages. You are entitled to seek recovery from your opponent of part or all of our basic charges, our disbursements, a success fee and insurance premium.
This is 50% of our basic charges.
The reasons for calculating the success fee at this level are set out in Schedule 1 to this agreement.
You cannot recover from your opponent the part of the success fee that relates to the cost to us of postponing receipt of our charges and disbursements (as set out in paragraphs (a) and (b) at Schedule 1). This part of the success fee remains payable by you.
The Success Fee
The success fee is set at 50% of basic charges and cannot be more than 100% of the basic charges.
The percentage reflects the following:
(a) the fact that if you win we will not be paid our basic charges until the end of the claim;
(b) our arrangements with you about paying disbursements;
(c) the fact that if you lose, we will not earn anything;
(d) our assessment of the risks of your case. These include the following:
(i) need to obtain police report and speak with investigating officer;
(ii) need to interview all appropriate witnesses;
(iii) need full sketch plan and photographs of accident locus;
(iv) allegation of negligence – public nuisance may be difficult to establish in view of relevant authorities;
(e) any other appropriate matters.
The matters set out at paragraphs (a) and (b) above together make up 50% of the increase on basic charges. The matters at paragraphs (c), (d) [and (e)] make up 50% of the increase on basic charges. So the total success fee is 50% as stated above.
If you and your opponent cannot agree the amount, the court will decide how much you can recover. If the amount agreed or allowed by the court does not cover all our basic charges and our disbursements, then you pay the difference. …
You remain ultimately responsible for paying our success fee.
You agree to pay into a designated account any cheque received by you or by us from your opponent and made payable to you. Out of the money, you agree to let us take the balance of the basic charges; success fee; insurance premium; our remaining disbursements; and VAT. You take the rest.
The evidence
I am pregnant at the present time and this ongoing dispute with the insurance companies is causing me further stress and anxiety at a time when I thought I was now able to put the whole thing behind me.
At no stage was it suggested to me that I would have to pay any success fee for the fact that my solicitors would not be paid until the end of the case. (para 15)
There was never any doubt in my mind that I wouldn't have to pay anything and that the insurance companies would pick up my entire bill. (para 17)
At this time, and it remains the case to this date, it was my firm's policy not to charge to Claimants, and that applies to Mrs Leana Hughes, that element of the success fee on a CFA case which reflects the fact that if the case is won Express Solicitors would not be paid basic charges until the end of the claim and reflects the fact that we do not seek payment from clients on account of disbursements. (para 8)
I explained to Mrs Hughes, in accordance with my firm's policy, that in the event that her personal injury claim was successful she should keep 100% of her compensation. I went on to explain that in the event that her claim failed there would be nothing for her to pay and in the event that the claim succeeded there should be nothing for her to pay beyond those costs and disbursements that were recovered from the Defendants. (para 11)
Unfortunately, in the final paragraph of Schedule 1 there is a typing error in the first sentence, which does not properly reflect the agreement I reached with Mrs Hughes. That sentence should read "The matters set out at paragraphs (a) and (b) above together make up 0% of the increase on basic charges". It was my practice at the time, and remains my practice to this day, to apply 0% of the success fee to factors (a) and (b) as set out in the Conditional Fee Agreement.
Regulation 4 compliance
The Defendants' argument
A conditional fee agreement which provides for a success fee-
(a) Must briefly specify the reasons for setting the percentage increase at the level stated in the agreement; and
(b) Must specify how much of the percentage increase, if any, relates to the cost to the legal representative of the postponement of the payment of his fees and expenses.
16. However, the CFA, having informed the client that she would not be able to recover the "postponement element" in two separate places, specifies in Schedule 1 that the success fee is a total of 50%, that the factors in (a) and (b) – the irrecoverable postponement element – make up 50% of the increase on basic charges and the elements at (c), (d) and (e), "the risk elements", also make up 50% of the increase, so the increase is 50%.
17. At paragraph 6 of the Points of Dispute, it is pointed out that the position is not clear and it could be:
(a) The 50% is attributable to postponement and therefore paid personally by the Claimant; or
(b) The 50% is attributable to all of the matters other than postponement and the Claimant does not have to pay any part of the success fee; or
(c) A success fee of 25% relates to the postponement and the other 25% relates to matters other than postponement.
18. The position is entirely unclear on its face: it could be any of those possibilities. The Claimant is thus left in the position of being unaware what element, if any, of the success fee is attributable to the postponement element. There is a plain and obvious breach of Regulation 3(1)(b) which requires the postponement element to be specified in the CFA.
In my judgment Regulation 3(1) of the 2000 Regulations is perfectly clear. The CFA must specify how much of the percentage increase relates to the cost of postponement. In my view the words "if any" do not mean that if the deferral element is nil there is no need to mention it. Those words are there to ensure that the client is left in no doubt as to the position, even if the deferral element is nil. In those circumstances I find that there has been a breach of the Regulation.
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact", but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meaning of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749.
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.
The Claimant's argument
131. In Tichband v Hurdman the motorist's insurers also relied on a point under regulation 3(1)(b). Under this regulation the CFA was required to specify how much of the percentage increase (by way of success fee), if any, related to the cost to the legal representative of the postponement of the payment of his fees and expenses. This has to be specified because under the Costs Rules this part of a success fee cannot be recovered from the paying party (see CPR 44.3B(1)(a)).
132. The point the defendants' insurers sought to take (and on which they succeeded before Judge Holman) is as unattractive as it is unmeritorious. Clauses 32 and 33 of this CFA are headed "Success Fee" and read:
"32. The reasons we have set the success fee at the level stated are explained on the Risk Assessment form attached to this agreement. We will not seek to recover from you any of the success fee which we are unable to recover from your opponent.
33. None of the success fee is attributable to the postponement in paying our fees."
133. The amount of the percentage uplift on the solicitor's basic charges was omitted from the first page of the CFA. The Risk Assessment form, however, makes it clear that there is to be a total success fee of 45%, made up of one component of 15% and six components of 5% each. One of the latter represents the cost of postponing payment of the solicitor's costs until the end of the case.
134. Mr McLaren was compelled to admit that as between solicitor and client no court would dream of allowing the solicitor to recover this 5% from his client when he was necessarily unable to recover it from the paying party due to the operation of CPR 44.3B(1)(a). The language of Clause 32 makes this clear. The reality therefore is that, despite what is said in the risk assessment calculation, none of the recoverable success fee is attributable to the postponement in payment of the solicitor's fees. Taken together, Clauses 32 and 33 prevail over the risk assessment schedule, and thus on its true construction the CFA in this case complies with the Regulations.
135. For these reasons we also allow the claimant's appeal in Tichband v Hurdman. The order of Judge Holman must therefore be set aside.
on its true construction the CFA in this case complies with the Regulations.
Sidhu v Sandhu
The percentage takes into account:
(a) the risks inherent in litigation;
(b) the risks in your particular case;
(c) that we have given you a significant discount on our standard hourly rates:
(d) that we have agreed to accept that we may not recover the success fee;
(e) the additional risk factors we have identified.
The matters set out in paragraphs (a) and (b) above together make up 60% of the increase on the basic charges. The matters at paragraphs (c), [(and (d)] make up 40% of the increase on the basic charges. So the total success fee is 14.5% as stated above.
On detailed assessment, the paying party (D) contended that the CFA was unenforceable for failure to comply with Regulation 3(1)(b) having omitted to specify how much of the percentage increase (if any) related to the cost to the legal representative of the postponement of the payment of his fees and expenses. Below, the Master had held that the words "if any" related to the words "how much" and if, as was the case, that figure was nil, it should have been stated within the body of the CFA. Accordingly the CFA was unenforceable.
Burton J held that if the postponement element was nil, there was no need for this to be specified unless doubt existed as to the construction of the agreement, in which case it would be necessary for the court to consider the full construction of the CFA. On the facts before him, the Judge was satisfied that there was doubt as to the construction of the CFA and, in these circumstances, it was necessary for him to decide whether the CFA had contained a sufficiently explicit statement that there was to be no charge to the client for postponement.
Burton J was satisfied that Schedule 1 excluded any allowance for the deferment of fees by expressly providing that the matters mentioned under paragraphs (a) to (d) amounted to 100% of the success fee. He expressed himself to be much influenced by the decision of the Court of Appeal in Tichband v Hurdman (see Hollins v Russell [2003] 1 WLR 2487 at paragraphs 131 – 134). On the facts, he was also satisfied that the position about postponement had been made sufficiently clear and that clause 3 of the CFA, schedule 1 and paragraph 3(m) of schedule 2 prevailed over all the countervailing clauses. CFA enforceable. Appeal allowed.
Interpretation before compliance
What evidence can the Court consider when interpreting the agreement?
Interpretation of the agreement
It is clear on the authorities that a mistake in a written instrument can, in limited circumstances, be corrected as a matter of construction without obtaining a decree in an action for rectification. Two conditions must be satisfied: first, there must be a clear mistake on the face of the instrument: secondly, it must be clear what correction ought to be made in order to cure the mistake. If those conditions are satisfied, then the correction is made as a matter of construction. If they are not satisfied, then either the Claimant must pursue an action for rectification or he must leave it to a court of construction to reach what answer it can on the basis that the uncorrected wording represents the manner in which the parties decided to express their intention.
So the total success fee is 50% as stated above.
To my mind the word "so" suggests some aggregation of what goes before it.
Does the agreement comply with regulation 3(1)?
The matters set out at paragraphs (a) and (b) above together make up 50% of the increase on basic charges.
In approaching this issue, we bear in mind that the purpose of the Regulations is consumer protection. This means that in general terms they must be construed in a way which will promote, rather than detract from, such protection. It means in particular that regulation 4(1)(a) and 4(2)(e)(ii) must be construed in a way which will ensure that the solicitor discloses to the client the true nature of his interest in recommending the insurance so that the client can make the necessary informed decision. This entails explaining to the client the nature of the benefits to the solicitor in remaining on the ALP panel with sufficient clarity for the client to understand what they are and to be able to assess their significance.
The matters set out at paragraphs (a) and (b) above together make up 50% of the increase on basic charges
when read with the rest of the paragraph did not provide the Claimant with that information "with sufficient clarity". By reference only to the agreement the Claimant would not know what part of the success fee related to the postponement of payment. Was it 50% of 50% of the basic charges? Was it 50%? Was it nothing?
Is the breach material?
Costs Judges should … 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 upon the protection afforded to the client or upon the proper administration of justice?"
If the answer is "yes" 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.
… in most cases the court should focus its attention principally on the terms of the CFA and the advice and information given by the solicitor and other relevant circumstances which existed at the date of the CFA and make a judgment as to whether, in the light of that material, the departure from the requirement in question had a material adverse effect on the protection afforded to the client.
Regulation 4 compliance revisited