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England and Wales Court of Appeal (Civil Division) Decisions

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)
Cite as: [2009] WLR 1731, [2008] EWCA Civ 1375, [2009] 1 WLR 1731

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Neutral Citation Number: [2008] EWCA Civ 1375
Case No HQ05X00067

Claim No 7LV50506
Case No HQ05X00067
Claim No 6SO08237

Royal Courts of Justice
Strand, London, WC2A 2LL

B e f o r e :





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and between


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and between


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and with





(1) Mr Nicholas Bacon (instructed by Warner Goodman LLP) for the Appellant
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.


  1. These three linked appeals principally concern the true construction of regulation 4(2)(e)(ii) of the Conditional Fee Agreement Regulations 2000 ('the Regulations'). In each case the claimant claimed damages for personal injuries against the defendants and in each case he or she made a conditional fee agreement ('CFA') with his or her solicitors. The claim against the defendant succeeded in each case on terms that, whether by judgment or agreement, the defendant or defendants was or were liable to the claimant in costs. The defendants say that in each case the solicitors were in breach of the Regulations in that they failed to disclose to their client that they had an 'interest' within the meaning of regulation 4(2)(e)(ii) and that, in consequence, the CFA is unenforceable against the claimant. It is common ground that, if that is correct, the claimant is not entitled to recover some or all of the costs claimed against the defendants.
  2. It can immediately be seen that the issue in each of these appeals is not in reality between the claimant and the defendants but between the claimant's solicitors and the defendants or their insurers. It is yet another round in what have become known as the costs wars between claimants' lawyers and defendants' liability insurers arising out of the introduction of CFAs in the 1990s. The Regulations have been repealed with effect from 1 November 2005 by the Conditional Fee Agreements (Revocation) Regulations 2005. It is common ground that that repeal does not affect these appeals because the Jones CFA was entered into on 26 February 2002, the Hibberd CFA on 2 September 2004 and the Tankard CFA on 7 May 2005. Nevertheless we hope that the possibility of further satellite litigation of this kind will be very much reduced in respect of CFAs entered into from 1 November 2005. However, disappointing though it is, we understand that there are a considerable number of disputes arising out of the Regulations which remain to be resolved. It is for that reason that permission has been granted for these appeals to be heard by this court as a first appeal from decisions of two district judges and a costs judge.
  3. We regret to say that there have been a number of earlier cases in this court in which earlier skirmishes have been resolved. They include Hollins v Russell [2003] EWCA Civ 718, [2003] 1 WLR 2487 ('Hollins'), Garrett v Halton Borough Council [2006] EWCA Civ 1017, [2007] 1 WLR 554 ('Garrett'), Rogers v Merthyr Tydfil CBC [2006] EWCA Civ 1134, [2007] 1 WLR 808 ('Rogers') and Jones v Wrexham Borough Council [2007] EWCA Civ 1356, [2008] 1 WLR 1590. In so far as they are directly relevant to the issues in this appeal, we refer to these cases below. However, we do not repeat the account of the history of the costs wars set out in them because it is unnecessary (and would be dispiriting) to do so.
  4. The Regulations and the statutory framework

  5. The Regulations provide, so far as relevant, as follows:
  6. "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.

  7. It is common ground that the effect of section 58 of the Courts and Legal Services Act 1990, as substituted by the Access to Justice Act 1999, is that every CFA must comply with the Regulations and that failure to do so makes the CFA unenforceable, with the result that in such a case the CFA is unenforceable against the claimant, as the solicitors' client, and the claimant cannot recover the profit costs and success fee as party and party costs from the defendant. We understand that there is scope for dispute as to the recoverability of the ATE premium and disbursements, or some disbursements, but issues of that kind do not fall for determination in this appeal.
  8. The Accident Line Scheme

  9. At the request of the court, the parties have agreed a summary of what they call 'the ALP Scheme', which, as we understand it, is short for Accident Line Protect. It is sufficient for the purposes of this judgment to quote the summary agreed by the parties as follows (retaining the references to the bundles for ease of reference by the parties):
  10. "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."
  11. We note in passing that the reference in paragraph 6 of the summary to the case of Puksis is a reference to Puksis v Brumby which was initially the subject of a fourth appeal. It was settled shortly before the hearing of the other three appeals. Although the claimant in that case was a patient, it was agreed between counsel (and we accepted) that there was no need for court approval of the settlement on that ground because the claimant had no interest in either the appeal or settlement of the appeal. For the reasons we gave earlier, the dispute was solely between the claimant's solicitors and the defendants or their insurers.
  12. 'Interest'

  13. As we see it, the critical question in these appeals is whether, in each case, the solicitors had an 'interest' within the meaning of regulation 4(2)(e)(ii). The defendants say that they did, whereas each of the solicitors, say that they did not. (The position in Tankard is somewhat different from that in Hibberd and Jones because it was conceded before the district judge that the solicitors had an interest: see [50] below). We consider first the meaning of 'interest' and, secondly, whether the solicitors had such an interest on the facts of each case.
  14. The meaning of 'interest'

  15. The meaning of 'interest', like the meaning of any other word or expression used in a statute or regulation depends upon the context in which it appears and thus upon the regulatory purpose of the Regulations. The principal case in which this question had been considered is Garrett, which was heard in this court by Brooke, Dyson and Lloyd LJJ and in which Dyson LJ gave the judgment of the court.
  16. In its assessment of whether there was an 'interest' for the purposes of the regulation, the court had regard to the legislative history or travaux préparatoires as an aid to the interpretation of the Regulations. In particular, at [89], it cited the conclusion in paragraph 83 of the Lord Chancellor's paper of February 2000 entitled Conditional Fees: Sharing the Risks of Litigation: The Government's Conclusions Following Consultation as follows:
  17. "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".
  18. At [91] and [92] the court rejected the submission that the word interest in regulation 4(2)(e)((ii) should be construed narrowly so as to mean only a direct financial interest such as commission, ie a direct profit arising from payment of the premium. The defendants rely in particular upon [92]:
  19. "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."
  20. The defendants say that, given that the word 'interest' must be given its normal and natural meaning, any interest must be disclosed unless it can be said to be de minimis. They say that the position is the same as that of a judge, where, in Locabail (UK) Limited v Bayfield Properties Limited [2000] QB 451, in the context of actual bias, the test of interest was stated by this court in this way at [10]:
  21. "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."
  22. We do not think that the position of a solicitor is the same as that of a judge. In the course of the argument Dyson LJ suggested that a test along the following lines would be appropriate. For the purposes of regulation 4, a solicitor has an interest if a reasonable person with knowledge of the relevant facts would think that the existence of the interest might affect the advice given by the solicitor to his client. We have considered the appropriate test in the light of the detailed submissions made to us and have concluded that such a test is appropriate because it is consistent with the language of regulation 4 construed with due regard to the legislative purpose, which is identified in Garrett as being that of protecting the solicitor's client. See also in this regard [90] of Hollins and [101] of Garrett.
  23. As to language, regulation 4 is concerned with giving the client who is considering entering into a CFA sufficient information and advice to enable him to take a properly informed and considered decision. He can only do so if he is given information and advice which are not in any way affected by the solicitor's self-interest. The particular context of paragraph (e) relevant to the question whether or not to enter into a CFA is whether the solicitor considers a CFA is appropriate and, if so, whether he considers that a contract of ATE insurance is appropriate and, if so, whether he or she considers the particular contract which is available under the ALP Scheme is in the client's interest. As we see it, the purpose of the regulation is to ensure that the solicitor acts and gives advice independently of his own interest.
  24. In our judgment, the test identified above satisfies that purpose because it ensures that any interest of the solicitor that might affect his or her advice is notified to his or her client. If a reasonable person with knowledge of the relevant facts would think that there might be such a risk, the client must be informed of the interest. If such a person would think that there was no such risk, we cannot think that the draftsman of the Regulations can have intended that the alleged interest should be communicated. The client would himself have no interest in being told about it. His or her only interest would be in being informed of matters which might affect the solicitor's advice or judgment in a manner adverse or potentially adverse to the client.
  25. That approach is in our opinion consistent with the approach in Garrett. It is also entirely consistent with the natural meaning of the language used in paragraph (e) and has regard to the purpose of the Regulations. Nothing more is needed to protect the client.
  26. 'Interest' – application to the facts

  27. The defendants submit that the solicitors here had an interest in giving the advice that their clients should enter into the ATE insurance contract that they did, just as the solicitors had such an interest in Garrett. They note that they were on the ALP panel here, just as the solicitors, Websters, were on Ainsworth's panel in Garrett and they point to [92] in the judgment in Garrett which is quoted above. However, we do not think that Garrett assists the defendants on the facts of this case. In [92] the court was careful to say that Websters' interest "includes membership of a panel such as the Ainsworth panel". It did not say that membership of a panel would in all circumstances amount to an interest. Nor, as we read it, did this court do so in [29] of Hollins, quoting paragraph 83 of the Lord Chancellor's paper (quoted above), even though [29] of Hollins is quoted in [89] of Garrett. Although the decision in one case may point the way in another, this is not always the case, as the differences between the facts here and those in Garrett show.
  28. The facts of these cases are very different from those in Garrett because the nature of the ALP Scheme and the nature of the panel here is very different from the Ainsworth panel. The reasons why the court held that Websters had an interest were that (i) there was a close relationship between the solicitors and Ainsworth; (ii) the solicitors were dependent on Ainsworth for the referrals of cases, although it was acknowledged that it was unclear to what extent; (iii) the profit generated by cases was likely to be of greater significance to solicitors than commissions paid on insurance premiums; and (iv) failure to comply with recommending the policy would lead to termination of panel membership, which would result in the loss of "a not insubstantial amount of work fed through … because of [membership] of that panel".
  29. See in this regard [97] to [100] in Garrett and, in particular, the finding of fact made by the deputy district judge in that case, which (as restated at the first appeal by His Honour Judge Stewart QC) was quoted at [97] and which was not challenged on appeal:
  30. "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.

  31. By contrast, on the facts of the ALP Scheme here, as set out in the summary quoted above, the position was significantly different. Although it was (and remains) a membership scheme, the nature of the relationship between Accident Line and the solicitors was quite different from that between Ainsworth and Websters and, in any event, these are not cases where referrals played anything like the same part in the solicitors' business as they did in Garrett: see [97] immediately before the above quotation. In our view, it is clear in all three cases now under appeal that the overriding consideration was the quality of the Accident Line ATE policy. That was why the solicitors subscribed to the scheme and recommended the policy to their clients. They kept the scheme under review and only renewed their membership of it if they regarded it as in their clients' interests to do so.
  32. No-one has suggested that there are any defects in the scheme, including its element of ATE insurance. The scheme has throughout been approved by the Law Society. We refer to particular aspects of the scheme below, notably in connection with referrals and rebates, but viewed as a whole, we have reached the conclusion that, in the absence of particular facts, such as, say, very significant dependence on the scheme for a firm's revenue (which would have to be examined on the facts of the particular case), there is no conflict of interest between the client and his or her solicitors if the test set out above is applied.
  33. In our judgment the position is correctly summarised by Master Wright, who was the judge at first instance in the case of Hibberd, at [63] and [64] of his judgment. In [63] he referred to Garrett and concluded that it was a case in which the solicitor had an advantage or profit in recommending the policy. As he put it, "self-interest would be a description which would apply in those circumstances". He added at [64], after saying that the cases show that the purpose of the Regulations is client protection:
  34. "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)."
  35. This last point is, in our judgment, of some importance. As we read Master Wright's judgment, he was there accepting a submission made by Mr Williams on behalf of the solicitors that in ALP cases the obligation in the scheme to recommend the policy arose, not as a hidden quid pro quo for the referral of a case, but as the ordinary consequence of a conventional ATE arrangement, where the concern of the underwriter was to avoid adverse selection. Mr Williams had relied upon [113] and [114] of the judgment of this court (comprising Brooke, Laws and Smith LJJ), which was given by Brooke LJ, in Rogers as follows:
  36. "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.

  37. There is, in our judgment, nothing in the ALP Scheme of a general nature which requires disclosure to the claimant on the ground that the solicitors have an interest of a kind which must be disclosed under regulation 4(2)(e)(ii). That is because there is nothing which would lead a reasonable person with knowledge of the facts to think that the solicitor had an interest in the scheme that might affect the advice given to his or her client. Put another way, since there is nothing in the arrangement which might affect the solicitor's advice or judgment in a manner adverse or potentially adverse to the client, disclosure was not required. We turn to the particular matters relied upon.
  38. Exclusivity

  39. As set out in paragraph 5 of the summary quoted above, it is a condition of membership of the ALP Scheme that an ALP policy must be effected in all qualifying cases which the solicitor conducts on a CFA, save where those cases are referred by a third party which specifies use of a different insurance. Moreover, as stated in paragraph 8, AL is entitled to suspend or terminate membership of the scheme if a solicitor is in breach of that condition. In these circumstances it is submitted that the solicitor has an interest in his or her client entering into an ALP policy which should have been disclosed to the client.
  40. We are not able to accept that submission. This is the very point discussed in [113] and [114] of Rogers to which we have just referred. Given that the purpose of the obligation was to protect the proper operation of the ATE market, we do not think that the reasonable observer with knowledge of the relevant facts would conclude that the existence of the obligation might affect the advice given by the solicitor to his or her client.
  41. Referrals

  42. As set out in paragraphs 2 and 3(b) of the summary quoted above, one feature of the ALP Scheme is that subscribing solicitors from time to time receive referrals of cases. The question under this head is therefore whether this aspect of the scheme gave the solicitor an 'interest' within the meaning of regulation 4(2)(e)(ii).
  43. In Tankard the solicitors, Warner Goodman LLP, opened 1,618 new civil litigation cases in the year 2005-6 (the year when Tankard commenced). Of those 1,618 cases, only 15 were referred by Accident Line. That represents just under 1% of the total. The great majority of potential claims referred by Accident Line to Warner Goodman turned out, upon investigation, to be not worth pursuing. It can be seen from the figures put in evidence that the referrals from Accident Line generated approximately 0.15% of Warner Goodman's total fee income.
  44. In Jones the solicitors, Walton Mills & Co, did an analysis of the seven year period, 2000 to 2007. They received 90 referrals from Accident Line during that period, out of which only 29 cases were pursued. The investigation of each referral involved on average £150 of irrecoverable costs. In respect of the 29 cases pursued, these generated 4.57% of the firm's turnover. It was the quality of the insurance policy, not the prospect of referrals, which caused the solicitors to subscribe to the Accident Line scheme.
  45. In Hibberd the solicitors, Leigh Day & Co, also did an analysis of the seven year period, 2000 to 2007. During that period Accident Line referred 134 cases to them, of which only 10 were pursued. Out of those 10 cases, 5 were successfully concluded, 4 were abandoned and 1 was ongoing at the time of the hearing before Master Wright. Profit costs from cases referred by Accident Line amounted to a minute fraction of the solicitors' turnover, substantially less than 1% in any year. As already indicated, we accept Master Wright's conclusion, which was based on Ms Moore's evidence, that the interest which Leigh Day & Co had in recommending the policy was, as Master Wright put it, simply that it was a good policy.
  46. We have already expressed our view that the present appeals are far removed from Garrett, where cases were referred by claims farmers, and where the flow of referred cases appears to have been on a considerable scale: see [97] in Garrett. In our view, as already stated, it is clear in all three cases now under appeal that the overriding consideration was the quality of the Accident Line ATE policy. That was why the solicitors subscribed to the scheme and recommended the policy to their clients. The prospect of referrals (most of which simply involved the solicitors in irrecoverable costs of investigation) was an incidental matter. In our view, no reasonable person with knowledge of the relevant facts would think that the prospect of referrals might influence the solicitors' judgment in recommending the Accident Line policy.
  47. Rebates

  48. We turn now to rebates. As stated in paragraph 9 of the summary quoted above, solicitors could receive a rebate of part of their membership subscriptions if they issued a sufficient number of policies in any year. Accident Line charged membership subscriptions in two instalments. Under the ALP Scheme the second instalment might be reduced or extinguished, depending upon the number of ATE policies that a firm of solicitors had issued during the first part of the year. The precise figures changed from year to year. In the year 2001 to 2002 the second instalment of the membership subscription amounted to £550 + VAT (see the evidence in Jones and Hibberd). In the year 2002 to 2003 a rebate of £1,000 + VAT might be achieved if 30 policies or more were issued (see the evidence in Jones). In Tankard the question of rebates was neither explored in evidence nor dealt with in the judgment of District Judge Sykes. In Jones the solicitors, Walton Mills & Co, paid membership fees of some £15,000 to Accident Line in the period 2000 to 2007. The rebate which they received from Accident Line amounted to £250. In Hibberd the evidence concerning rebates was not at all clear. Ms Moore, the solicitor who gave evidence, was not aware that this might be an issue when preparing her witness statement. In cross-examination she said that the fact of rebates came as a surprise to her. However, in the period 2000 to 2007 Leigh Day & Co had issued 375 Accident Line policies, and so they would have qualified for a rebate in most years.
  49. In these circumstances, in any given year the rebate which solicitors might receive in respect of the second instalment of membership subscription would be a minute fraction of turnover. Once the solicitors had decided that the Accident Line policy was the best form of ATE insurance for their clients, the possibility of securing a partial rebate on membership subscriptions could not realistically affect their judgment in recommending the policy to individual clients. No reasonable person with knowledge of the relevant facts would think otherwise. We therefore conclude that neither the anticipation of future referred cases nor the prospect of partial rebate on membership subscriptions constituted an 'interest' within regulation 4(2)(e)(ii) of the Regulations in the cases under appeal.
  50. Other

  51. It was not seriously contended that the other benefits identified in paragraph 3 of the summary quoted above amounted to a relevant 'interest'. It was not suggested that the delegated authority or the optional access for clients to funding through the BoI did so. As to access to ancillary services, these were described in the course of the argument as odds and ends and could not, in our judgment amount, to an 'interest' which had to be disclosed.
  52. Conclusions on 'Interest'

  53. It follows from the above that, in our opinion, none of the solicitors in the three cases under appeal had an 'interest' which ought to have been disclosed because none of them had an interest such that a reasonable person with knowledge of the facts would have thought that the advice given to the claimant might have been affected by any of matters relied upon. We are conscious that, in reaching this conclusion, we have not analysed the evidence in each case in great detail. However, that is because in the part of the summary which we have not quoted above it was stated that the main factual differences between the cases concerned what was or was not disclosed to clients. It did not concern the facts relevant to the nature of the interest. In these circumstances, we have sufficiently set out those facts above, in reaching our conclusion that the solicitors were not bound to disclose any of the facts relied upon as amounting to an interest.
  54. Disclosure of interest

  55. In view of our decision that in the three cases with which we are concerned the claimants' solicitors did not have an 'interest' within the meaning of regulation 4(2)(e)(ii), the question whether the solicitors gave information as required by regulation 4(1)(a) about whether they had an interest in recommending the contract of insurance does not arise. We do not, therefore, propose to decide that question. But since we heard full argument on the issue of what information is required by regulation 4(1)(a) to be given to satisfy regulation 4(2)(e)(ii), we will make some observations about it.
  56. The first question is whether it is sufficient for the solicitor simply to say that he has an interest in recommending the insurance which he recommends, or whether he is required at least to identify the nature of the interest. Mr Bacon (supported by the Law Society in their written submissions) submits that it is sufficient for the solicitor to say that he has an interest without identifying its nature: if the client wishes to know what the interest is, he can require information about it pursuant to regulation 4(1)(b). Mr Bacon points out that regulation 4(2)(d) provides that one of the matters about which the solicitor must inform the client is "whether other methods of financing those costs are available, and, if so, how they apply to the client and the proceedings in question" (emphasis added). He argues that the absence of words such as "and, if so, what it is" from regulation 4(2)(e)(ii) is striking and supports his submission that, in the first instance, the solicitor is not required to provide any information beyond the bare fact that he has an interest in recommending the insurance.
  57. We cannot accept this submission. As Mr Morgan points out, the purpose of regulation 4 is consumer protection: see Hollins at [25] ff. It must be construed in a way which gives adequate protection to the client. If all that the client is told is that the solicitor has an interest in the recommendation, then he is not much the wiser. The client needs to know more about the nature of the interest before being able to judge whether the solicitor has a motive for making his recommendation. The fact that the client can always ask more questions does not provide adequate consumer protection, because clients often do not ask questions. The purpose of the sub-paragraph is to put the client in a position where he can make an informed decision. Mr Morgan gives the example of a judge who at the outset of a trial announces that he wishes to declare an interest in one of the parties. If he says no more than this, the parties do not know whether to request that the judge should recuse himself or not.
  58. We see the force of Mr Bacon's linguistic analysis, but in our view it must yield to the purposive interpretation of affording the consumer protection to which we have referred. Although the words "and if so what it is" could have been added at the end of regulation 4(2)(e)(ii), we do not consider we are precluded from adopting a purposive interpretation by their omission.
  59. The next part of this judgment is predicated on an acceptance of the argument that a solicitor who recommends the ALP insurance has an interest in doing so in one or more of the respects discussed (and rejected) earlier in this judgment. The question is: on the hypothesis that the solicitor has such an interest, what must he do to declare it so as to satisfy the requirements of regulation 4(1)(a) and 4(2)(e)(ii)?
  60. On behalf of the claimants (supported by the Law Society) it is submitted that it is sufficient for a solicitor to disclose the fact that he is recommending the insurance because he is obliged to recommend the insurance in all eligible CFA cases and if he does not do so he cannot remain a member of the ALP Scheme. Reliance is placed on the obiter dicta of this court at [103] in Garrett:
  61. "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."
  62. Mr Morgan (supported by Mr Marven) submits that we should not follow these obiter dicta. He argues that the correct analysis is that, where a solicitor recommends a policy and informs the client that he has not conducted a fair analysis of the market and is contractually bound to recommend the policy which he recommends, he is doing no more than disclosing to the client one of the reasons for the recommendation, namely that he is only allowed to recommend a certain policy. He is not telling the client anything about his interest in making the recommendation, namely whether anything, and if so what, will or may happen to his firm if he recommends a different policy.
  63. 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.
  64. In our judgment, the dicta at [103] of Garrett should not be followed. A solicitor who informs his client that he is recommending a policy because that is the only policy which he can recommend consistently with his membership of the panel tells the client nothing about the nature of the benefit that accrues to the solicitor through continuing membership of the panel. The matter can be tested in this way. Suppose that a large number of referrals accrue to the solicitor by reason of his membership of the panel. Merely to inform the client that the solicitor is recommending the insurance because, if he does not, he will be unable to take the case on under a CFA and remain on the panel tells the client nothing about the real benefit derived by the solicitor from his membership of the panel. Take the facts of Garrett itself: as we have seen, Websters were "dependent on Ainsworth for referrals of cases" (see [97]). The extent of the dependency was unclear on the evidence, but (as stated above) it is implicit in the decision that the dependency was substantial. It is difficult to see how the interest in such a benefit would be disclosed to the client by the mere statement that the policy was recommended because it was the only policy which, consistently with the solicitor's membership of the panel, he was allowed to recommend.
  65. The present appeals reveal a further possible complication. Let us suppose that, before the CFA is concluded, a statement that the policy is recommended because it is the only policy which, consistently with the solicitor's membership of the panel, he is allowed to recommend, is sufficient disclosure of his interest in recommending it. We shall refer to such a statement as a "disclosure statement". What is the position where the solicitor confirms in the CFA itself that he does not have an interest in recommending the insurance that he recommends? It is submitted on behalf of the claimants that such a confirmation must be interpreted as meaning that the solicitor does not have any interest in recommending the insurance other than the interest previously declared in the disclosure statement. Approaching the matter as if it involved a question of construction, we can see that there may be much to be said for this interpretation. An alternative answer, however, might be to say that the apparent conflict between the confirmation and the disclosure statement should be resolved in favour of the former, since it appears in the CFA itself. At the very least, a client who tries to reconcile the two statements might well be puzzled. On the assumption that the client studies the documentation with care, the interpretation of the confirmation in the CFA that is proposed on behalf of the claimants might well not occur to him. On any view, the inclusion in the CFA of the confirmation that the solicitor has no interest in recommending the insurance means that there is no clear disclosure of the interest. In our view, the Regulations require clear disclosure of the interest. Anything less would mean that they fail in their objective of providing consumer protection.
  66. Although we recognise that what we have said in this section of the judgment are obiter dicta, we have included them because they were fully argued and in the hope that what we have said may assist those who have to apply the regulations in the future. It is not, however, necessary or helpful for us further to lengthen this judgment by considering the facts relevant to disclosure in each of the appeals, especially since the facts of each case would have to be considered separately and in some detail.
  67. Material breach and de minimis

  68. In the light of our conclusions on 'interest', the issues argued under these heads do not arise. We would only say that, if the solicitors have an interest of the kind we have identified, there will be a risk that, if it is not disclosed, the solicitor might give advice which is adverse or potentially adverse to the client's interests. In these circumstances it is difficult to think that a failure to disclose the interest would not be a material breach or that such a failure would be de minimis.

  70. In Hibberd, as a result of a settlement, judgment was given against the defendant for £40,000 together with costs to be assessed if not agreed. Costs were agreed in the sum of £40,000 subject to the question whether the CFA was unenforceable. Master Wright gave judgment on that issue on 17 March 2008. As indicated above, he held that the solicitors did not have an interest within regulation 4(2)(e)(ii). For the reasons we have given, we have concluded that he was correct so to hold and dismiss the defendants' appeal.
  71. In Jones liability was admitted by the defendants on 17 March 2004 and on 21 July 2006 the claimant's claim was settled for £100,000 plus costs. The issue of enforceability of the CFA was decided by District Judge Dancey on 25 February 2008. He held that it was not enforceable. On the question whether there was a relevant interest he concluded that there was no distinction between the ALP Scheme and that in Garrett. For the reasons we have given, we do not agree. Moreover, the judge did not approach the meaning of 'interest' as we have done. In our judgment, the correct conclusion here is the same as in Hibberd. For these reasons we allow the solicitors' appeal.
  72. In Tankard the claimant's claim was settled for £2,500 without the need for proceedings. The only remaining issue was costs and costs only proceedings were issued under CPR 44.12A. A number of preliminary issues came before District Judge Sykes which she determined on 6 February 2008. Before the district judge the solicitors conceded that they had a relevant interest and they did not initially seek to resile from that concession. However, in the course of the argument in this appeal, they sought to do so if the interest point were decided in favour of the solicitors in the other appeals. The question arises whether, now that we have decided the issue in the solicitors' favour in Hibberd and Jones, the solicitors in Tankard should be permitted to do so. We have concluded that they should, since if at all possible cases should be determined on their merits. Subject to questions of costs, which can be considered hereafter, we see no injustice to the defendants in our reaching this conclusion.
  73. Postscript

  74. We are pleased to have been able to reach these conclusions. We have in mind the trenchant views of this court expressed by Brooke LJ thus in Hollins at [224] to [226]:
  75. "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.

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