Archive for August 2016
Master Leonard held that an assignment of a Conditional Fee Agreement in a personal injury case was valid and its validity did not depend on a continuing relationship of trust and confidence between the client and solicitor as was the case in Jenkins v Young Brothers Transport Ltd  EWHC 151 (QB)
Here Mr Azim had had a Conditional Fee Agreement with one firm of solicitors which was subsequently assigned to another firm of solicitors.
A key issue was whether the first firm had terminated the Conditional Fee Agreement by way of a letter sent to Mr Azim on the same day as it entered into the assignment with the second firm of solicitors. That letter explained that, due to staff reductions, the solicitors were transferring Mr Azim’s case to the new solicitors on the same terms as the existing Conditional Fee Agreement and they enclosed a Form of Consent which Mr Azim subsequently signed.
Here the court distinguished what it described as the “quite different” facts in Budana v The Leeds Teaching Hospitals NHS Trust (unreported) 4 February 2016, Kingston-upon-Hull County Court and Webb v London Borough of Bromley (unreported), Senior Courts Costs Office (18 February 2016) and found that the letter had not terminated the Conditional Fee Agreement. For the assignment to be valid it was essential for Mr Azim to have had notice.
Thus the paying party’s argument could only succeed if, notwithstanding the need for that notice to be given, that notice was deemed to have terminated the Conditional Fee Agreement.
Consequently the Master held that if the assignment was valid there was no sound basis for concluding that there had been a termination of the Conditional Fee Agreement.
As to the validity of the assignment of the Conditional Fee Agreement the Master rejected the paying party’s contention that a burden of a personal contract cannot be assigned except where a solicitor who enjoys the “particular trust and confidence” of the client moves firm as was the case in Jenkins v Young Brothers.
Here the Master followed the approach in Jones v Spire Healthcare Ltd  3 Costs L0487 and saw no obstacle to a genuine arm’s length assignment of Conditional Fee Agreement in this case.
The Master also rejected arguments based on Section 136 of the Law of Property Act 1925 as he saw no reason to add a gloss to the statutory provisions by imposing a requirement for notice of assignment to be given in advance of the assignment.
Here the court said:-
“29. It was accordingly appropriate for TLW to write to the Claimant, as it did on 23 July 2014, first to give notice of the assignment and second to explain that the Claimant had the option of instructing other solicitors should he choose to do so. That seems to me to offer no real basis for concluding that the TLW CFA had been, or was, terminated at the point that TLW entered into its 23 July 2014 transfer arrangement with Russell Worth Limited.
- The Defendant argues that the notice of assignment to the Claimant dated 23 July 2014 should be construed as a termination of the CFA, but even if that is right (and I do not accept that it is) such notice had not been given at the point of executing the assignment. Following assignment it cannot (again assuming, for present purposes, that the assignment was valid) have been open to TLW to terminate it.
- Nor was the Claimant’s consent to assignment sought in advance, so as to support the argument that what actually took place was a novation. The assignment having taken place and notice having duly been given it only remained for the Claimant to choose whether to allow Russell Worth Limited to act for him, as arranged by TLW, or to instruct other solicitors.
- In short the Defendant’s difficulty is that its argument, on the facts of this case, can only succeed if one accepts that although notice to a client is an essential element of any valid assignment of a CFA between solicitors, giving such notice will in any circumstances terminate the CFA and render it ineffective. That (in fairness to the Defendant) is not how the case is put, but its case on termination seems to me to reduce to those propositions.
- My conclusion is, accordingly, that if the assignment arrangement of 23 July 2014 was in itself valid than there is no sound basis for concluding that the TLW CFA was, at any stage, terminated by TLW. I turn to the question of whether the assignment was valid.”
In relation to the Jenkins point there was no suggestion here that the new solicitor enjoyed the particular trust and confidence of the client.
The court quoted with approval the principles set out at paragraphs 31 and 32 of the judgment in Jones v Spire Healthcare Ltd:-
“… the court is concerned with choses in action, that is non-tangible property and future entitlements, or present entitlements realisable in the future. The general principles… can be distilled as follows:
…The benefit of a contract, other than one which involves personal skill and confidence dependent upon a particular individual discharging obligations under it, can be assigned, whereas the burden cannot, subject to certain exceptions. One of those exceptions arises where the benefits and burdens are inextricably linked, for instance where entitlement to the right or benefit is dependent or conditional upon the discharge of certain responsibilities.”
The court then looked at the Jenkins v Young Brothers decision carefully quoting extensively from it, including the sentence:
“Whether, absent that trust and confidence, a CFA could validly be assigned is not a matter upon which it has been necessary for us to reach a conclusion”.
Thus in Jenkins the judge had not ruled out a valid assignment of a CFA where there was no relationship of trust and confidence with the solicitor in the firm to which the CFA was assigned.
In Budana the District Judge, quoted with approval here, said:-
“… Whilst the personal connection in Jenkins was an important factor it was not a necessary condition of the transfer being valid. To make such a finding would introduce an element of subjectivity as to the degree of trust and confidence required to validate the assignment. In my judgment, following the ratio in Jenkins I am bound to find that it is now possible to assign contracts involving personal skill, even where there was previously no personal relationship between the claimant and the new firm.”
The court in Webb took a different view holding that the relationship of trust and confidence between the solicitor and client in Jenkins was crucial to the judge’s finding and that in the absence of that factor Jenkins was to be distinguished and was not binding and therefore the assignment relied upon by the receiving party in Webb, in purporting to assign the burden of the Conditional Fee Agreement, along with its benefit, was invalid.
In Jones v Spire Healthcare Ltd, which I deal with in my post – Assignment of Conditional Fee Agreements: A Decision not to be relied Upon – the court reached a different conclusion and held that a firm of solicitors can validly assign its entitlement and responsibility under a Conditional Fee Agreement with a client to another firm of solicitors.
In the present case the Master adopted that reasoning and said that the imposition of any requirement that there be a relationship of personal trust and confidence between a particular solicitor and a particular client was inappropriate.
Another non-binding decision which should not be relied upon.
The state of the law on this important topic is currently chaotic and the sooner we get a definitive ruling of the Court of Appeal the better.
Please see my related blogs:-
Chief Master Marsh sitting in the Chancery Division of the High Court was dealing with the case management of a matter where the claimant was bringing an action against its former Chief Executive Officer in relation to entitlement to shares and his conduct, as well as other matters, and the defendants brought actions against other parties seeking declaratory relief and financial remedies relating to the second defendant’s departure from her job.
The first Case Management Conference was not reached until a year after proceedings had been issued and at that Case Management Conference there were two major issues, that is whether the matter should be subject to costs budgeting and whether there should be a split trial.
The Master refused to order a split trial stating that:-
- there was unlikely to be any significant saving in time spent at trial;
- there was unlikely to be any significant costs saving compared with the likely increase in costs if both trials went ahead;
- there would be a major increase in stress on the witnesses in attending two trials;
- it was likely that a first trial would lead to a situation where the court needed additional evidence which would only be available in the second trial anyway.
Although the value of the action was now £13 million the claim form had limited it to £10 million and thus the starting point was that the matter was within the costs budgeting regime, £10 million being the maximum that the scheme automatically applies to at present.
The Master ordered that the matter remain within the costs budgeting scheme stating:-
- it was desirable that costs budgeting take place given the nature of the claim and the matter in which it was being conducted;
- combined costs of £4.14 million meant that issues of proportionality had to be considered in any event and that factor made costs budgeting desirable;
- it was not possible to conclude that the litigation could be conducted justly and with proportionality in the absence of costs management;
- although costs budgeting was taking place at a relatively late stage there were significant future costs to be incurred;
- the court should take into account the size in absolute terms of the costs and £4.14 million is an expensive piece of litigation;
- the potential inequality of arms between the parties, although here the Master found that there was no evidence of any such inequality of arms;
- the difference between the budgets, which here was £700,000.00
It should be noted that even in a case where costs budgeting does not apply, proportionality does apply, although obviously then it would only be dealt with at the end of the case as there would be no budgeting stage.
the defendant was ordered to pay all of the claimant’s costs where the claimant discontinued shortly before trial following disclosure by the defendant of documents which it should have disclosed during the portal process.
The matter was an Occupiers’ Liability slipping case. The defendant denied liability and stated that it had no documents to disclose.
Proceedings were issued. The defendant then disclosed documents showing that it had a reasonable cleaning and inspection system.
The claimant discontinued.
The claimant was awarded fixed costs up to the post-listing, pre-trial stage less the fixed recoverable costs sum applicable had the matter settled pre-issue.
The court described the defendant’s conduct as “entirely unacceptable” and was critical of the National Health Service Litigation Authority.
The Pre-Action Protocol for Personal Injury Claims provides that:-
“The Defendant should also enclose with the response, documents in their possession which are material to the issues between the parties, and which would be likely to be ordered to be disclosed by the court, either on an application for pre-action disclosure, or on disclosure during proceedings.”
CPR 44.2(1) provides:-
“(1) The court has a discretion as to –
- whether costs are payable by one party to another;
- the amount of those costs; and
- when they are to be paid.”
CPR 44.2(4) states:-
“(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –
- the conduct of all the parties;”
CPR 44.2(5) says:-
“(5) The conduct of the parties includes –
- conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;
- whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
- the manner in which a party has pursued or defended its case or a particular allegation or issue; and
- whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.
The court awarded costs on the basis of the stage costs of £3,790.00 without the added 20% of damages as no damages were recovered.
It then set-off the stage costs of £950.00 which the claimant would have incurred anyway, representing the point where the matter would have been stopped had the NHSLA disclosed its evidence when it should have done so.
Consequently the defendant was ordered to pay the claimant £2,840.00 plus VAT and disbursements.
Of course in a Conditional Fee Agreement case, as this was, a claimant would normally be prevented from recovering costs due to the indemnity principle. However that principle does not apply in fixed costs cases – see Nizami v Butt  EWHC 159 (QB).
The court also recognized the extra danger involved of defendants behaving badly in fixed costs cases:-
“15. The Defendant’s behaviour in the conduct of this litigation was entirely unacceptable. It’s exactly the type of conduct which Part 44.2 is designed to address. Under the modern costs provisions, of course, the costs sanctions become increasingly important. The Claimant’s solicitors are pursuing these matters, PI claims, and at the end of the claim are recovering costs which are fixed and which are not by any stretch of the imagination, generous. There is a danger of — I am not saying it has happened in this case — this is a pure inadequacy of approach by the Litigation Authority and the Trust, but there is a danger that defendants and their representatives will cause difficulties in the course of litigation, so as to run up the work which claimant’s solicitors are having to do in the knowledge that those solicitors cannot recover costs reflecting that work. And of course, it always has to be borne in mind the provisions of CPR 1.3, that the parties to litigation have an obligation to assist the Court to further the overriding objective. The overriding objective firstly being to try and avoid costs and the issue of proceedings if at all possible, which is the whole purpose of the pre-action protocol, of course and secondly, when such claims are brought that they be dealt with in an efficient manner, in a proper manner so as to avoid excessive costs, involving public resources, delay and so on.”
The court rejected any suggestion that CPR 44.2 did not apply to fixed costs cases:-
“18. I am satisfied that the provisions of Rule 44.2 can be applied. It would be a nonsensical situation if the rules which are provided by Rule 44.2 to give the Court the power to impose sanctions to penalise those who abuse the system, and clearly there has been abuse here by the Trust and possibly by the Litigation Authority initially representing them. I am certainly not suggesting that Weightmans have been dealing with it improperly, they are obviously having to deal with what information they are supplied. But it would be a nonsensical situation if the rules, in an appropriate case where the fixed costs regime did apply, precluded the Court from imposing the sanctions provided under Rule 44.2 and 44.2, of course, gives the Court an unqualified discretion. I do not accept that I am bound by the Part 45 scales, but I clearly have to bear them in mind. It would be nonsensical if the Claimant’s solicitors could achieve a windfall and recover more costs than they would have done had the matter gone to trial or settled in favour of the Claimant at the stage that it was discontinued. That would be absolutely nonsensical.”
Although this is a first instance decision it is of considerable importance as this type of scenario is not uncommon. The whole issue will become of much greater importance as and when fixed costs spread to much higher value claims and also to non-personal injury claims.
I am grateful to Emma Ireland of Scott Rees and Co both for bringing this matter to my attention and supplying me with the judgment and for pursuing the matter on behalf of the claimant in the first place.
the High Court held that the reference, to legal services in CPR 46.5(3)(b) (which sets out a litigant in person’s right to recover costs), does not allow recovery in respect of services provided by a lawyer qualified in a different jurisdiction.
Here the claimant, a litigant in person, instructed lawyers in a Jersey law firm (who were acting for him in related litigation in Jersey but were not practising as English solicitors) to assist in the English proceedings.
The court referred to Agassi v Robinson (HM Inspector of Taxes) (No 2)  EWCA Civ 1507 (a case decided under the forerunner of CPR 46.5(3)), where the applicant was assisted by specialist tax advisers.
There the court held that the costs of those advisers could not be recovered as disbursements, and also approved Tuckey LJ’s interpretation of “legal services” (in United Building and Plumbing Contractors v Kajla  EWCA Civ 628) as “those provided by or under the supervision of a legal representative”.
It was not just a question of the nature of the services, but also the identity of the provider.
In reaching his decision, the judge noted that:
- There was no material difference between the position of a lawyer qualified in a different jurisdiction and the specialist tax advisers considered in Agassi. Although the providers of the services, in each case, no doubt had valuable knowledge and expertise, they were not authorised to conduct litigation, and nor were they subject to the wasted costs jurisdiction of the court.
- In the English proceedings, the Jersey lawyers were in the position of lay advisers so (as with a McKenzie Friend) their fees would not ordinarily be recoverable from the opposing party.
- The use of lawyers qualified in a different jurisdiction to provide “legal services” in respect of English proceedings seemed far from the “unbundling of legal services” that Lord Woolf had in mind in his Access to Justice report.
District Judge Brett held that where a claim is properly brought in the fast track and the defendant then admits part of the claim, causing the amount still in dispute to bring the claim within the small claims track limit, the court may award fast track costs up to the date of entry of judgment on the admission.
Practice Direction 46.7.1(3) reads:-
“(3) Where a claim, issued for a sum in excess of the normal financial scope of the small claims track, is allocated to that track only because an admission of part of the claim by the defendant reduces the amount in dispute to a sum within the normal scope of that track; on entering judgment for the admitted part before allocation of the balance of the claim the court may allow costs in respect of the proceedings down to that date.”
The defendant argued that the claimant should only be allowed fast track costs up to the date of the admission and not the date of judgment.
That submission was rejected.
Here the claim was for just over £10,000.00 and included credit hire and vehicle damage. In the defence the defendant admitted £4,787.47, meaning that the balance in dispute would be allocated to the small claims track.
Thus a defendant who pays off or admits part of the sum claimed and thus reduces the balance to a small claim is still potentially liable for costs up to the date that judgment is entered.
How the courts exercise what is clearly a discretion under this Practice Direction may become of considerable significance as and when the personal injury small claims limit is raised from £1,000.00 to £5,000.00.
the Chancery Division of the High Court stated that figures for additional liabilities in cases where they are still recoverable should not appear in cost budgets.
Additional liabilities remain recoverable in defamation and privacy proceedings, mesothelioma proceedings and, to a limited extent, in clinical negligence proceedings.
Here the defendant had submitted that the court should consider the extent of additional liabilities when looking at proportionality during the costs management exercise.
However the judge agreed with the claimants that Precedent H, the form for the costs budget, stated clearly that it related only to base costs and the summary page contained wording stating that the budget excluded success fees and After-the-Event insurance premiums.
This form is compulsory by virtue of Practice Direction 3E and therefore the form itself had the force of a Practice Direction.
Furthermore the claimants were under no obligation to disclose the terms of the Conditional Fee Agreement or After-the-Event insurance before the end of the trial and that itself meant that it could not be proper for that information to be given during the costs budgeting stage.
It has always been the case that details of the level of success fee do not have to be disclosed until the end of the case as that would indicate the solicitor’s assessment of risk and would prejudice the party being represented under that Conditional Fee Agreement.
This did mean that there might be some inconsistency between the budgeting process and the assessment process.
In BNM v MGN Ltd  EWHC B13 (Costs)
the Senior Costs Judge had said that the court need not consider the amount of any additional liability separately from the base costs when looking at the whole test of proportionality, that is the new test post-1 April 2013.
Here the judge commented that on actual assessment the judge would know what the additional liabilities were and would be dealing with actual figures and the inconsistency was an inevitable effect of the different things required of the parties at different stages of litigation.
There is an inherent logical problem here. Suppose a court sets a budget taking into account proportionality and limits the total to say £100,000.00 base costs and disbursements as the maximum proportionate figure.
If that is then applied on assessment it is obvious that nothing further can be allowed for the success fee or ATE premium as any additional costs would tip the bill over into disproportionality.
To not allow any such additional liabilities defeats the will of Parliament in retaining recoverability in these limited fields and indeed in relation to mesothelioma the Administrative Court quashed Government attempts to remove recoverability.
Under the pre-1 April 2013 law proportionality did not come into play in relation to additional liabilities.
In my view the new Civil Procedure Rules, insofar as they allow proportionality to be considered in relation to additional liabilities, are ultra vires, or to put it more bluntly, illegal.
Solicitor and own client bills are very heavily regulated in a way unparalleled in any other profession, business or trade.
One little known provision is that in County Court matters a solicitor cannot charge her or his own client anything beyond that recovered from the other side in the event of a win, or, in the event of a defeat, a sum which could have been allowed on a party and party basis, unless there is a written agreement to the contrary.
Section 74(3) of the Solicitors Act 1974 reads:-
“(3) The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in a county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.”
The rules of court do provide otherwise, but only to a limited extent. CPR 46.9(2) and (3) read:-
“(2) Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.
(3) Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed –
- to have been reasonably incurred if they were incurred with the express or implied approval of the client;
- to be reasonable in amount if their amount was expressly or impliedly approved by the client;
- to have been unreasonably incurred if –
- they are of an unusual nature or amount; and
- the solicitor did not tell the client that as a result the costs might not be recovered from the other party.”
Thus unless there is a written agreement to the contrary a solicitor in a County Court matter cannot charge the client any more than could have been recovered from the other side and must tell the client that the costs may not be recovered.
The requirement to tell the client that any particular item of costs may not be recovered only applies if the costs are of an unusual nature or amount, but applies to all matters, not just County Court matters.
The written agreement provision applies to County Court matters only.
The requirement to tell the client applies to any individual item, not just the overall bill. Thus if, say, £10,000.00 could have been recovered and the total bill is £9,000.00, the solicitor still cannot charge for, say, an unrecovered medical report fee unless these provisions are satisfied.
This can become a circular argument which applies to between the parties’ assessments.
Thus a phase in the costs budget is exceeded. Arguably the excess is something of “an unusual nature or amount” relieving the client from any obligation to pay it unless told in advance.
Under the Indemnity Principle if there is no liability on the client to pay, then there can be no recoverability from the other side.
Note that the mere fact that the costs might not be recovered from the other party does not bring the requirement to inform the client in to play. The costs need to be of an unusual nature or amount as well, as the link between CPR 46.9(3)(c) (i) and (ii) is and, not or.
Conditional Fee Agreements
There is an obvious issue here. Success fees and After-the-Event insurance premiums, with very limited exceptions, are no longer recoverable from the other side, so in County Court proceedings cannot be charged to the client without written agreement.
As a Conditional Fee Agreement must be in writing that should not be a problem but it is most important that details of any After-the-Event insurance premium, as well as the success fee, are dealt with in writing and that the client’s written agreement is obtained to charging such premium.
If any costs are “of an unusual nature or amount” then additionally the solicitor must tell the client that as a result the costs might not be recovered from the other side.
As a success fee and ATE generally cannot be recovered from the other party it is best to always include the appropriate wording, whether or not the expenditure may be considered of an unusual nature or amount.
I suggest the following wording for all retainers, whether or not they are County Court or otherwise and whether or not they are Conditional Fee Agreements or otherwise:-
Section 74 Solicitors Act 1974 agreement
“This agreement expressly permits the solicitors to charge an amount of costs greater than that which you will recover or could have recovered from the other party to the proceedings and expressly permits payment of such sum.
This part of this agreement is made under section 74(3) of the Solicitors Act 1974 and Civil Procedure Rules 46.9 (2) and (3).
In so far as any costs or disbursements are of an unusual nature or amount these costs might not be recovered from the other party.”
the Senior Courts Costs Office was considering a Part 8 application by the claimants seeking an order under Section 68 of the Solicitors Act 1974 that the defendant firm of solicitors deliver a final statute bill or bills in relation to proceedings brought against the claimants by Ottercroft Ltd.
Section 68 reads:-
“(1) The jurisdiction of the High Court to make orders for the delivery by a solicitor of a bill of costs, and for the delivery up of, or otherwise in relation to, any documents in his possession, custody or power, is hereby declared to extend to cases in which no business has been done by him in the High Court.”
The defendant solicitors gave a costs estimate of “between £15,000 and £25,000 plus VAT and disbursements” and stated that an application by their opponent for an interim injunction might add “costs of between £5,000.00 and £10,000.00 plus VAT”.
Between September 2011 and July 2014, 22 invoices totalling £76,153.14 were delivered. All except the last were termed Interim Accounts; the last was described as a Final Account.
Only the last three bills contained any narrative explaining the work done.
For reasons relating to late service any application for a Solicitors Act assessment was out of time, and therefore the claimants had to show that the invoices delivered were not “bills” for the purposes of the Act in order to get fresh bills which they would then be in time to have assessed.
A solicitor’s retainer is an entire contract and solicitors are not entitled to be paid other than for disbursements until the case is finished unless there is a natural break in protracted litigation or the parties have agreed that the solicitor may submit interim and statute bills.
Neither occurred here. The solicitors contended that the invoices were chapters culminating in a final bill as in the Court of Appeal decision in Chamberlain v Boodle & King  1 WLR 1443 and Bari v Rosen  5 Costs LR 851.
The court here rejected that submission as the bills did not contain sufficient information about the work done so as to comply with the Act.
However in Ralph Hume Garry v Gwillim  1WLR 510
the Court of Appeal approved the principle set out in
Cook v Gillard 1 E & B 26 , 36–37
that a person cannot object to a bill on the ground of lack of information if it appears that that person is already in possession of that information, even if it does not appear on the bill.
In Cook the court said:-
“64. Thus I would accept the proper principle to be that there must be something in the written bill to indicate the ambit of the work but that inadequacies of description of the work done may be redressed by accompanying documents (as in Eversheds v Osman where it was doubtful whether the bill on the face of it would have been sufficient) or by other information already in the possession of the client. That, it seems to me, would serve the purpose of the Act to give the client the knowledge he reasonably needs in order to decide whether to insist on taxation. If the solicitor satisfies that then the bill is one bone fide complying with the Act.
- This review of the legislation and the case law leads me to conclude that the burden on the client under section 69(2) of the Solicitors Act 1974 to establish that a bill for a gross sum in contentious business will not be a bill “bona fide complying with this Act” is satisfied if the client shows: (i) that there is no sufficient narrative in the bill to identify what it is he is being charged for, and (ii) that he does not have sufficient knowledge from other documents in his possession or from what he has been told reasonably to take advice whether or not to apply for that bill to be taxed. The sufficiency of the narrative and the sufficiency of his knowledge will vary from case to case, and the more he knows, the less the bill may need to spell it out for him. The interests of justice require that the balance be struck between protection of the client’s right to seek taxation and of the solicitor’s right to recover not being defeated by opportunistic resort to technicality.”
Here the court held that the claimants did not have sufficient information at the time that they received the final invoice.
It is irrelevant that the claimants subsequently gained that knowledge when they received the files from the solicitors and the court said that that development cannot “convert the final invoice into something that it was not as at the date that it was received by the Claimants.”
Accordingly the court found that the defendants had not yet rendered a final bill to the claimants and therefore the application succeeded to the extent that the claimants were entitled to an order that the defendants now render a final bill.