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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Kitchen v Burwell Reed & Kinghorn Ltd. [2005] EWHC 1771 (QB) (03 August 2005) URL: https://www.bailii.org/ew/cases/EWHC/QB/2005/1771.html Cite as: [2005] EWHC 1771 (QB), [2006] 1 Costs LR 82 |
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
Sitting with Assessors
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JOHN KITCHEN |
Claimant |
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- and - |
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BURWELL REED & KINGHORN LIMITED |
Defendant |
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Ian McLaren QC (instructed by Langleys) for the Defendant
Hearing dates: 19 July 2005
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Crown Copyright ©
Mr Justice Gray: Introduction
The facts
"2. From about 1997 the Claimant was employed by the Defendants as a polisher at their factory premises in Gildersome. Throughout his employment the Claimant used vibrating tools which exposed him to harmful vibration by which he allegedly suffered loss and damage.
3. On 24 April 2001 Mr Kitchen applied to his union, the AEEU, for legal assistance with a view to seeking compensation from the Defendants.
4. On 17 May 2001 Thompsons wrote to Mr Kitchen informing him that the AEEU had asked them to contact him concerning his claim and invited Mr Kitchen to attend at their offices on 26 June 2001 in order to discuss the claim. The sixth paragraph of the letter read as follows:
'Technically, like all solicitors' clients you are liable for your legal costs, however the union will indemnify you i.e. pay all legal costs for you – provided you continue to satisfy the conditions of the legal assistance scheme as set out in the Union Rule Book.'
5. The letter went on to deal with other issues, namely identifying the person dealing with the case and advising Mr Kitchen as to the firm's complaints procedure.
6. On 1 June 2001 Thompsons signed a Collective Conditional Fee Agreement ("the CCFA") with the AEEU.
7. After having obtained a medical report relating to Mr Kitchen's injuries, Thompsons sent a letter of claim to the Defendants on 14 December 2001. The penultimate paragraph of the letter stated:
'This claim is funded by a collective conditional fee agreement. This funding arrangement includes additional liabilities as provided by CPR rule 43.2 which will be recoverable from you on the successful conclusion of this claim.'
8. Between 17 May 2001 and 8 July 2002, Thompsons did not send any letters to Mr Kitchen either advising him of the existence of the CCFA or relating to any change of funding arrangements. On 8 July 2002 Thompsons wrote to Mr Kitchen as follows:
'As a result of changes in the law, I now need to review the position further with regard to the funding of your claim.
I previously explained that, technically, like all solicitors clients you are liable for your legal costs, however the union will indemnify you i.e. pay all legal costs for you provided you continue to satisfy the conditions of the union's legal assistance scheme.
I also confirmed that the law allows the union to cover your costs and any costs payable by you to the other side by way of a collective conditional fee agreement so long as membership of the union continues and we are instructed. I have accepted their instructions to act for you accordingly. The service which we provide is governed by the terms of our collective conditional fee agreement with the union which provides that we are entitled to stop acting for you under the union's legal assistance scheme if membership of the union ceases. Further if you choose to instruct other lawyers you will become responsible for your own costs and the other side's costs from that time onwards.
Up until now the collective conditional fee agreement has applied to your case but it has not been possible to provide insurance for the costs not covered directly by that agreement e.g. your opponent's costs and expenses incurred on your behalf such as medical fees, etc. Your liability for these costs has been covered by direct indemnity from the union as outlined above.
As insurance approved by the union is now available for these costs, this direct indemnity will shortly be replaced with a personal policy of insurance to cover you in respect of such costs. To ensure complete protection for you the union will still indemnify you in respect of your liability for this insurance premium.'
9. The letter continued with a request to Mr Kitchen to complete a questionnaire relating to any pre-existing legal expense insurance. The final paragraph of the letter read:
'If you would like any further explanation, advice or other information about legal costs, the funding arrangements for your case or any other matter please do not hesitate to ask.'
10. The letter contains no reference to any other enclosures with the letter apart from the insurance questionnaire.
11. On 20 July 2002 proceedings were issued in Leeds County Court. The claim form had been settled by counsel.
12. On 20 January 2003 there was a directions hearing at the Leeds County Court.
13. On 11 March 2003 the Defendants applied for the issue and service of the proceedings to be set aside and that application was heard on 17 April 2003 when the application was dismissed with costs assessed at £900 to be paid by the Defendant.
14. On 8 May 2003, after hearing counsel for both parties, His Honour Judge Barry ordered a judgment be entered for the Claimant in the sum of £11,524.21 (inclusive of interest) and that the Defendant do pay the Claimant's costs to be assessed by detailed assessment if not agreed.
15. A short while thereafter, Thompsons served Notice of Commencement of Detailed Assessment Proceedings with the Claimant's bill of costs. The bill was divided into two parts. Part 1 was headed pre CCFA and Part 2 was headed post CCFA. A success fee of 100% was claimed in respect of the base costs in Part 2 totalling £4,972.50. The Defendant lodged Points of Dispute on 16 September 2003. Thompsons subsequently served and filed Replies to the Points of Dispute.
16. On 20 April 2004 there appears to have been a preliminary detailed assessment hearing before District Judge Jordan at the Leeds County Court when the District Judge adjourned the detailed assessment and ordered the filing of skeleton arguments.
17. On 5 July 2004 District Judge Jordan ordered that the matter be transferred to the Supreme Court Costs Office."
The issues for decision
i) whether the letter sent by Thompsons to the Claimant on 8 July 2002 was effective to vary the initial retainer, contained in Thompsons earlier letter of 17 May 2001, so as to incorporate the Collective Conditional Fee Agreement ("the CCFA") entered into between the Amalgamated Engineering and Electrical Union ("the AEEU") and Thompsons on 1 June 2001 and
ii) whether the effect of clause 5.8 of the CCFA, whereby Thompsons agreed not to seek to recover their charges direct from the Claimant, should be construed as an agreement on the part of Thompsons that the Claimant should have no liability to pay their costs with the result that the Defendant is not entitled to recover any costs from the Claimant since that would involve a breach of the indemnity principle. I propose to take the two issues in the order set out above.
The material provisions of the CCFA
"1.1.6 'win': a member wins an action if when it is finally determined (whether by the court or by agreement) who shall pay the costs relating to that action s/he becomes entitled to be paid by another party to those proceedings all or part of those costs.
1.1.8 'legal assistance' means the indemnity against legal costs in respect of advocacy and litigation services granted by the union to a member.
1.2.3 'disbursements' means expenses which the solicitors incur on the member's behalf in the course of an action, such as court fees, fees for experts, barrister's fees (including success fees for barristers where appropriate), copying charges made by others, travelling and hotel expenses (this is not an exhaustive list).
…
3.1 When accepting instructions under this agreement in relation to a claim the Solicitors must inform the member as to the circumstances in which the member may be liable to pay the Solicitors charges and, if the member requires any further explanation, advice or other information about that subject, the Solicitors must provide such further explanation, advice or other information as the member may reasonably require.
3.2 When accepting instructions under this agreement in relation to a claim the Solicitors must prepare and retain a written statement ("the written statement of the success fee") containing:
3.2.1 Their assessment of the probability of the circumstances arising in which the success fee will become payable in relation to that claim ("the risk assessment");
3.2.2 Their assessment of the amount of the success fee in relation to that claim, which in no case should be more than 100%, having regard to the risk assessment; and
3.2.3 The reasons by reference to the risk assessment for setting the success fee at that level.
3.3 The Solicitors shall comply with their obligations under clauses 3.1 and 3.2 by sending to the member a copy of the "Conditions of the AEEU Legal Aid" worded as set out in the document annexed to this agreement or as may be subsequently agreed by the parties to this agreement.
3.4 After accepting instructions under this agreement in relation to a claim the Solicitors must confirm their acceptance of instructions in writing to the member.
4. Liability to pay the costs of other parties
4.1 If while covered by the Union's legal assistance the member is ordered to pay the costs of any other party to the claim the Union shall pay those costs on behalf of the member provided that the member has complied with the Conditions of the AEEU Legal Aid.
4.4 The additional amount in respect of the claim for which instructions from the Union were first received by the Solicitors before the date of this agreement shall be specified both by reference to the categories specified in clause 4.3 and in addition by whether in the Solicitors' opinion the probability of the circumstances arising in which the member will become liable to pay some or all of the costs of any other party to the claim (including any counterclaim or interim dispute) has substantially increased or decreased since instructions in respect of that claim were first received by the Solicitors.
4.7 As soon as practicable after the date of this agreement the Solicitors shall notify the Union in respect of each claim for which instructions from the Union were first received by the Solicitors before the date of this agreement of which the categories specified in clause 4.3 the claim falls within, the Solicitors' opinion of the probability specified in clause 4.4 and the additional amount in respect of that claim in accordance with the then current notice given by the Union pursuant to clause 4.2.
…
5.8 The Solicitors shall not seek to recover direct from the member their charges in respect of any period during which the member was covered by the Union's legal assistance unless that legal assistance has been annulled.
6. Success
6.1 If a member wins an action the Union shall pay on behalf of the member the Solicitors' charges for the work done on that action.
7. Success fees
7.1 Subject to the following provisions of this clause the success fee shall be as specified in the written statement of the success fee and shall only apply to the work done by or on behalf of the Solicitors on or after the date of this agreement. 7.2 A member is entitled on request to a copy of the written statement of the success fee in relation to his/her claim.
8. Losing
8.1 If the member loses an action neither the Union nor the member is liable to pay any of the Solicitors charges for work done on that action save that the Union shall pay on behalf of the member such disbursements (inclusive of any VAT thereon) as were reasonably incurred prior to the date of this agreement."
The submissions for the Defendant on the first issue
The submissions for the Claimant on the first issue
Decision on the first issue
"… the agreement under which the union agreed with their solicitors that they should represent the Claimant was a CCFA. For the purposes of these proceedings it is presumed to have been a valid CCFA that complied with the CCFA Regulations. The union so agreed with the authority of the Claimant. An alternative view is that the Claimant ratified the agreement reached by the union on his behalf by availing himself of the services of the solicitors. On either footing, the contract pursuant to which he came under a liability to pay the solicitors for their services was a CCFA."
The second issue: its importance
The submissions for the Defendant on the second issue
Submissions for the Claimant
Decision on the second issue
"It is clear that Mr Averay was in law the party to the appeal. He was the person responsible for the costs. If the appeal had failed he would be the person ordered to pay the costs. If the costs had not been paid, execution would have been levied against him and not against the Automobile Association. The truth is that the costs were incurred by Mr Averay but the Automobile Association indemnify him against the costs. This is borne out by a letter of 11 April 1972 from Messrs Amery- Parkes & Co, the AA's solicitors, to the Area Secretary of the Law Society. They say:
'…We… made it clear that Mr Averay was indemnified in all respects by the Automobile Association so that no part of the costs of the appeal has or would have fallen on him' ". The Court of Appeal felt able to conclude that the indemnity principle was not breached notwithstanding the letter from the solicitors indicating that no part of the costs of the appeal had or would have fallen on the Claimant.
"In Lewis v Averay… the successful Defendant had enjoyed the benefit of legal services funded by the Automobile Association, of which he was a member. Lord Denning MR, with whom the other members of the Court agreed, considered it just and equitable that the Defendant should recover his costs from the Legal Aid Fund in order to be in a position to reimburse the Automobile Association. It is not satisfactory that the right to recover costs in such circumstances should turn on the question whether the litigant has a legal liability to pay such costs, albeit that such liability is little more than notional".
As in Lewis v Averay, the court in Thornley v Lang found itself able to spell out the existence of a binding obligation on the Claimant to pay his solicitors.
"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 seen".
This appears to me to be another example of the courts seeking, if they properly can, to avoid a construction of an agreement which will involve a breach of the indemnity principle because of the unfairness consequent upon such a conclusion.
"The background was famously described 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".
"You are responsible for all the legal costs incurred in connection with your claim. While you are covered by the AEEU's legal aid the AEEU will pay those legal costs on your behalf provided that legal aid is not annulled and that you comply with your obligation to pay to the AEEU any costs recovered from any other party to the proceedings".
I accept that the Claimant did not see those Conditions but their terms nonetheless appear to me to be relevant as a matter of construction.
Conclusion