INDUCEMENTS IN PERSONAL INJURY CASES

Sections 58 to 61 of the Criminal Justice and Courts Act 2015 introduce rules against inducements to bring personal injury claims. These are largely uncontroversial and came into effect on 13 April 2015, by virtue of The Criminal Justice and Courts Act 2015 (Commencement No. 1, Saving and Transitional Provisions) Order 2015 (SI 2015 no. 778).

Section 58 applies to regulated persons, which includes solicitors, and makes it unlawful to offer an inducement to make a personal injury claim, but not if the benefit is related to the provision of legal services in connection with a claim.

Thus offering a discount, or a no win no fee agreement, or offering to pay disbursements or cover adverse costs etc. does not amount to an inducement. An inducement is an offer of a benefit that is intended to encourage the person to make a claim or to seek advice about making a claim or which is likely to have that effect (section 58(2)).

A benefit may be an inducement regardless of when or how the offer is made, when it is received, whether it is subject to conditions or whether it is to be received by a third party (section 58(3)).

Section 58(4) provides that if a person other than the regulated person offers a benefit in accordance with arrangements made by or on behalf of the regulated person then the regulated person is to be treated as having offered that benefit.

Section 58(5) gives the Lord Chancellor power to make regulations as to the circumstances in which a benefit is related to the provision of legal services in connection with a claim, including provision about benefits relating to –

(a) fees to be charged in respect of the legal services;

(b) expenses which are or would be necessarily incurred in connection with the claim, or

(c) insurance to cover legal costs and expenses in connection with the claim.

Section 59(4) provides that breach of section 58 does not make a person guilty of a criminal offence and does not give rise to a right of action for breach of statutory duty.

Section 59 also provides that the appropriate regulator, the Solicitors Regulation Authority in the case of solicitors, must ensure that it has in place appropriate arrangements for monitoring and enforcing the restriction in section 58 and empowers the regulator to make rules and allows those rules to provide for any penalty that the regulator could impose for any other breach of another restriction.

The effect of this is that the SRA can make offering an inducement a disciplinary offence resulting in a solicitor being struck off the roll. Sections 59(5) and (6) allow the regulator to make rules which reverse the burden of proof, which means that if the regulator considers that there is an offer of an inducement, then it is for the solicitor to show that it was for some other reason, or that it was a benefit related to the provision of legal services in connection with the claim.

Section 60 is an interpretation section and section 60(1)(c) wrongly refers to the Law Society as the regulator for solicitors. It is in fact the Solicitors Regulation Authority.

Section 60(2) states:-

“benefit” means—

(a) any benefit, whether or not in money or other property and whether temporary or permanent, and

(b) any opportunity to obtain a benefit;

“claim” includes a counter-claim;

“legal services” means services provided by a person which consist of or include legal activities (within the meaning of the Legal Services Act 2007) carried on by or on behalf of that person;

“personal injury” includes any disease and any other impairment of a person’s physical or mental condition.”

Section 61 provides that regulations under section 58 or 60 are to be made by statutory instrument. The only regulations made to date are the ones commencing these provisions with effect from 13 April 2015 and they are the Criminal Justice and Courts Act 2015 (Commencement No. 1, Saving and Transitional Provisions) Order 2015.

Between them the sections are an all embracing prohibition on inducements in personal injury cases.

The issues raised in this blog are dealt with in Kerry’s course Fixed Recoverable Costs and Portals – book here.

Four courts have reached four different conclusions in cases where the wrong defendant has been named in a conditional fee agreement; what all four decisions have in common is that each states that there is never any need to name a defendant and doing so risks all costs being lost.

In Hailey v Assurance Mutuelle Des Motards SCCO: CCD 1405291

the Senior Court Costs Office held that if the wrong defendant was named in a Conditional Fee Agreement then there was no valid retainer and thus the indemnity principle meant that no costs could be recovered.

However the court held that disbursements could be recovered as these were payable by the claimant in any event, win or lose.

I do not pretend to understand the logic of this decision. The claimant won and therefore there must have been an implied term that he would pay his lawyers in the circumstances. Either the retainer is invalid in which case nothing is recoverable, or it is valid, in which case disbursements and costs were both recoverable.

There can be no logic in holding the retainer valid in relation to disbursements but not valid in relation to costs. If there was no retainer because there was no successful action against the driver of the motorcycle then clearly disbursements in relation to a completely different matter, which the court found this was, against the insurer could not be covered by that retainer.

Here the accident had occurred in France and thus the action, under French and apparently European Union Law, was against the insurer and not the driver of the motorcycle; the Conditional Fee Agreement wrongly named the driver rather than the insurance company and that part of the claim had been struck out.

Nevertheless it was the same accident which occurred on the same date.

In Brierley v Prescott [2006] EWHC 90062 (Costs)

the Conditional Fee Agreement covered:-

“Your claim against Hertz UK Limited Car Hire for damages for personal injury suffered on 7 January 2000″

where the true defendant should have been the other driver, a Mr Prescott. There Master Gordon-Saker said:-

“In my view the words “your claim against Hertz UK Limited Car Hire for damages for personal injury suffered on 7 January 2000″ meant “the claim for damages arising out of the accident and which was being handled by Hertz”. “

He also said that the intention of the parties was obvious and that there was only ever one claim and therefore he held that the Conditional Fee Agreement was binding and the claimant was bound to pay his own solicitors under that agreement which meant that he could recover those costs from the defendant.

That decision is far better reasoned and clearly gives intention to the will of Parliament.

Simon Gibbs appeared for the defendant in each case and in Brierley v Prescott Simon Gibbs conceded that if the agreement had been expressed to cover “your claim for damages for personal injury suffered on 7 January 2000” without identifying the opponent, he would have no argument.

The court there said that it is commonly the case that Conditional Fee Agreements do not identify the opponent and that there is no requirement that they should, provided that “the particular proceedings” to which they relate are specified. As the court said “the sin therefore was one of addition: including an unnecessary detail.”

The key lesson to be drawn from these cases is that the defendant should never be mentioned in a Conditional Fee Agreement, but rather simply the date of the accident, and possibly the rough location, so that “the particular proceedings” are specified.

In that case the claimant and his solicitor had sought retrospectively to replace the 2002 agreement with one in 2005 but backdated. The court had this to say about that:-

“Although this is perhaps not the right vehicle to decide the point, I think it likely that a conditional fee agreement can have retrospective effect. However for the reasons suggested by Colman J in Arkin v Borchard Lines Ltd (Costs Judgment) [2001] NLJR 970, an agreement made after the conclusion of the proceedings to vary a conditional fee agreement relating to those proceedings would be unenforceable as contrary to public policy.”

In Law v Liverpool City Council [2005] EWHC 90020 (Costs)

the court also said that there was no requirement to name a defendant. There, Liverpool City Council were named as the defendant but in fact the property concerned, where the injury took place, had been transferred to Berrybridge Housing Association just two months before the accident. They were not named in the Conditional Fee Agreement. There the court held that there was a retainer, allowing the claimant to recover base costs but that there was no valid Conditional Fee Agreement, as the claim was not against Liverpool City Council, and therefore no success fee could be recovered.

The court said:-

“If the CFA as drafted is such that it can include a claim against any potential Defendant, then the present problem would not arise.”

It also said:-

“In my judgment, when it became apparent that the second defendant needed to be added the claimant and the solicitor should have considered the point and if it was the intention of both of them to have a CFA as well as a retainer covering the second defendant then a fresh CFA agreement should have been entered into or the existing one properly varied in writing and signed. This should have been effected.” (Paragraph 22).

In Brookes v DC Leisure Management Ltd and Technogym UK Ltd [2013] EW Misc 17 (CC) Exeter County Court considered a case where the CFA stated that it covered:-

“Your claim against Exeter City Council for damages for personal injury suffered in an accident at work on or about 19 May 2006”.

In fact the true defendants were DC Leisure Management Ltd and Technogym UK Ltd.

Yet again the court pointed out that it was unnecessary to name any defendant at all:-

“The claim could have been defined in relation to the date of the accident only, but the naming of a particular defendant evidences a clear intention to identify a particular legal claim against a particular Defendant.”

“Although the statutory requirement is that the CFA must be in writing, it does not have to identify the Defendant.”

In that case the court upheld the decision of Master Gordon-Saker sitting in the Senior Courts Costs Office that no costs would be recovered.

Thus on virtually identical facts we now have the following conflicting decisions:-

1. All costs can be recovered (Brierley v Prescott).
2. Base costs, but no success fee can be recovered (Law v Liverpool City Council).
3. Disbursements only can be recovered (Hailey v Assurance Mutuelle Des Motards).
4. Nothing can be recovered (Brookes v DC Leisure Management Ltd).

That is four different possibilities on the same facts. The ingenuity of the courts knows no bounds. I wonder how many further variations they can come up with.

For the sake of completion in the case of Scott v Transport for London (2009) Hastings County Court 23 December 2009 unreported the court allowed an appeal against the decision of the District Judge who had refused to allow any costs in relation to a Conditional Fee Agreement referred to “your claim against Lambeth Council” when in fact the defendant was Transport for London. Thus the County Court allowed costs in full as did the court in Brierley v Prescott.

Insofar as anything is clear from these decisions it is that you should never name a defendant in a Conditional Fee Agreement.

None of these problems are avoided by the fact that the Conditional Fee Agreement is a post 31 March 2013 one where the success fee is not recoverable from the other side. The central point in all of the above cases is that the retainer was invalid, in full or in part, and thus the claimant, that is the person entering into the Conditional Fee Agreement, was not liable to pay their own solicitors because of the defective retainer and therefore because of the indemnity principle those costs could not be recovered from the other side.

Exactly the same principle applies where the success fee is not recoverable, that is that if the claimant is not liable to pay it to the solicitor then obviously the solicitor cannot charge the success fee to the client. As we have seen above there is also the risk that the defendant will be off the hook in relation to base costs as the only retainer is the potentially defective Conditional Fee Agreement.

The issues raised in this blog are dealt with in Kerry’s course Qualified One Way Costs Shifting and Jackson Update – book here.

Type of work

 The current Qualified One Way Costs Shifting scheme covers all personal injury work without exception, but nothing else.  All relevant cases, irrespective of the parties’ financial circumstances, are covered.

CPR 44.13 states:

“(1)        This Section applies to proceedings which include a claim for damages –

(a) for personal injuries;

(b) under the Fatal Accidents Act 1976;

(c) which arise out of death or personal injury and survives for the benefit of an estate by virtue of section 1(1) of the Law Reform (Miscellaneous Provisions) Act 1934,

but does not apply to applications pursuant to section 33 of the Senior Courts Act 1981 or section 52 of the County Courts Act 1984 (applications for pre-action disclosure), or where rule 44.17 applies.

(2)          In this Section, “claimant” means a person bringing a claim to which this section applies or an estate on behalf of which such a claim is brought, and includes a person making a counterclaim or an additional claim”.

Section 57 applies “on a claim for damages in respect of personal injury” and by Section 57(8) “personal injury” includes any disease and any other impairment of a person’s physical or mental condition;”

DISCRIMINATION CASES

 Personal injury is not defined in the Civil Procedure Rules dealing with Qualified One Way Costs Shifting but CPR 2.3(1) provides that “a claim for personal injuries” means proceedings in which there is a claim for damages in respect of personal injuries to the claimant or any other person or in respect of a person’s death, and “personal injuries” includes any disease and any impairment of a person’s physical or mental condition.

Section 57(8) of the Criminal Justice and Courts Act 2015 uses exactly the same definition as CPR 2.3(1):

“”personal injury” includes any disease and any other impairment of a person’s physical or mental condition;”

Actual Injury

 Employment Tribunals have the power to award damages for actual personal injury arising out of discrimination, including physical, but more typically psychological, injuries, see for example Vento v Chief Constable of West Yorkshire Police (No 2) [2002] IRLR 102 Court of Appeal. The ordinary civil courts have the same power in relation to discrimination in non-employment fields, such as the provision of services.  Actual injury cases in the Employment Tribunal and in civil court discrimination cases would appear to be covered both by QOCS and Section 57 insofar as relevant, but in fact is it is not as simple as that.

In the civil courts the matter appears relatively straightforward – actual injury claims will be covered.

However the position in Employment Tribunals is less clear.  There are generally no costs in Employment Tribunals and therefore nothing to shift.  They are governed by entirely different costs rules and the Civil Procedure Rules dealing with QOCS – CPR 44.13 to CPR 44.17 – have no application.

Thus I am satisfied that QOCS does not apply to Employment Tribunal cases involving actual injury, let alone injury to feelings.

However on the face of it Employment Tribunal proceedings are capable of coming within section 57(1)……”proceedings on a claim for damages in respect of personal injury…..”.

As we have seen the duty under section 57(2) to dismiss the claim “includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest”. (Section 57(3)).

So, exaggerate your client’s future loss of earnings claim and the safest case will be dismissed in its entirety if there is a personal injury element.

Is a safe unfair dismissal claim lost because of exaggeration of future loss if there is a personal injury claim for discrimination included, even though there is no exaggeration in relation to the personal injury element? The answer appears to be yes, just as an ordinary personal injury claim is lost in its entirety if, for example, the credit hire claim is exaggerated.

Injury to Feelings

 Is injury to feeling s species of personal injury? Does it involve impairment of a person’s mental condition?

Shorter Oxford English Dictionary

 Impairment

No definition given.

Impair

1. Make less effective or weaker; devalue, damage, injure.
2. Become less effective or weaker; deteriorate, suffer injury or loss.

Impaired

1. One that has been impaired.
2. Of the driver of a vehicle or driving; adversely affected by alcohol or narcotics.

Impairment

The action of impairing, or fact of being impaired; deterioration, injurious lessening or weakening.

Impair

To make worse, less valuable, or weaker; to lessen injuriously; to damage, injury.

Impaired

Rendered worse; injured in amount, quality or value; deteriorated, weakened, damaged.

Roget’s Thesaurus gives the following alternative for “impair”:

 Damage, harm, diminish, reduce, weaken, lessen, decrease, blunt, impede, hinder, spoil, disable, undermine, compromise, threaten.

Roget’s Thesaurus gives the following alternatives for “impaired”:

Disabled, handicapped, incapacitated, debilitated, infirm, weak, weakened, enfeebled, paralysed, immobilised.

Roget’s Thesaurus gives the following alternatives for “impairment”:

Disability, handicap, abnormality, defect, deficiency, flaw, affliction, disadvantage, problem.

Those definitions seem to me to be potentially wide enough to cause injury to feelings to amount to an impairment of a person’s mental condition and thus to bring injury to feelings into the sphere of QOCS protection.

Injury to feelings awards are usually in the Employment Tribunal.  There costs do not follow the event and thus QOCS is of no application, for the reasons set out above.

However injury to feelings awards are also made in the County Court where costs do follow the event; discrimination in relation to the provision of services is a County Court, not an Employment Tribunal matter.

My view is that the court could legitimately decide the issue of whether injury to feelings is a species of personal injury either way, although it is significant that the word “injury” is used.

Employment Tribunals have the power to award damages for actual personal injuries arising out of the discrimination, including physical, but more typically, psychological injuries.  These are generally awarded under the “injury to feelings” ahead of damages.  The appellate courts have frequently said that there is no fine line between actual psychological injuries and injuries to feelings.

For example, in Birmingham City Council v Jaddoo UKEAT/0448/04/LA

the Employment Appeal Tribunal referred to “the inevitable overlap between injury to feelings and psychiatric damages…..” (Paragraph 31).

In Vento v Chief Constable of West Yorkshire Police (No 2) IRLR 102 the Court of Appeal said that tribunals should have “……regard…..to the overall magnitude of the sum total of the award for compensation for non-pecuniary loss made under the various headings of injury to feelings, psychiatric damage and aggravated damages” such that “in particular, double recovery should be avoided by taking appropriate account of the overlap between the individual heads of damage”.

In HM Prison Service v Salmon [2001] IRLR 425 the Employment Appeal Tribunal said that it is “necessary to stand back and consider the non-pecuniary award as a whole”.

On balance my view is that injury to feeling should be classed as a species of personal injury and that cases involving claims for injury to feelings should attract the protection of Qualified One Way Cost Shifting in the civil courts, but not in Employment Tribunals.

In Timothy James Consulting Ltd v Wilton [2015] IRLR 368 EAT

the Employment Appeal Tribunal overturned the decision of the Employment Tribunal that had made an award of £10,000.00 for injury to feelings but had then grossed it up to take into account income tax at the rate of 40% and thus awarded £16,666.00.

There was no dispute that £10,000.00 was the correct figure; the issue was whether it should be grossed up to take into account tax and thus the real issue was whether injury to feelings awards are taxable.

Historically it had always been assumed that such awards were free of income tax and the current legislation is the Income Tax (Earnings and Pensions) Act 2003 and section 406 provides:-

“This Chapter does not apply to a payment or other benefit provided—

(a)          in connection with the termination of employment by the death of an employee, or

(b)          on account of injury to, or disability of, an employee.”

This replaced, and is a similar wording to, section 148 of the Income and Corporation Taxes Act 1988.

Here the Employment Appeal Tribunal carried out an exhaustive analysis of the authorities.

The Employment Appeal Tribunal said that the reasoning of the Employment Appeal Tribunal in the case of Orthet Ltd v Vince-Cain [2004] IRLR 857 EAT was persuasive and was preferable to a decision in the First Tier Tribunal (Tax Chamber) in Moorthy v Commissioners for HM Revenue and Customs [2015] IRLR 4 UKFTT which had held that awards for injury to feelings were taxable.

Consequently the Employment Appeal Tribunal held that injury to feelings awards are not taxable and therefore reduced the award back to £10,000.00.

It was a necessary part of the reasoning here, and in the Orthet case, that “injury” could include the concept of injury to feelings.

This reasoning was necessary because of the wording of section 406 set out above which exempts payments made “on account of injury to, or disability of, an employee”.

There is no reference there to injury to feelings and therefore to come within that definition the Employment Appeal Tribunal here and in Orthet held that “injury” includes injury to feelings, or to put it another way injury to feelings is a species of personal injury itself.

Thus here the Employment Appeal Tribunal, at least equal in standing to the High Court, held that injury to feelings Is an injury.

However the feedback that I am getting from practitioners in discrimination cases in the civil courts is that those courts are not treating injury to feelings as personal injury and thus are not providing QOCS protection.

In Black v Arriva North East Limited [2014] EWCA Civ 1115

the Court of Appeal rejected an application for a costs capping order.

Here, the appellant appealed against a judgment in a disability discrimination case but had not taken out a sufficient level of After-the-Event insurance before such insurance became unrecoverable by virtue of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.  Thus any fresh premium, to cover the increased level of cover required, would not be recoverable.

Consequently the appellant sought to have Arriva’s costs capped at £50,000.00.

The Court of Appeal pointed out that this would now apply to all new cases as a result of Parliament ending recoverability of After-the-Event insurance premiums by means of LASPO 2012.

“So the argument could be raised in any appeal brought in respect of a case under that Act.  Such a result is difficult to square with the indication in the Practice Direction that an order for costs capping should only be made in exceptional circumstances” (paragraph 12).

The Court of Appeal also pointed out that it is not a function of costs capping orders to remedy the problems of access to finance for litigation.  “If for instance, the respondent’s costs were agreed to be proportionate, it would not be possible to exercise any jurisdiction to make a costs capping order simply because without it the appeal would not continue to be financially viable.”

That is because CPR 3.19(5) (b) only allows a costs capping order if “there is a substantial risk that without such an order costs will be disproportionately incurred;”

There were other fact- specific reasons for refusing a costs capping order in this case but they do not establish any new legal principles.

Interestingly one of the submissions made in favour of a costs capping order, but rejected, was that there was a lacuna in the law in that Qualified One-Way Costs Shifting applied in personal injury cases but not Equality Act cases.  As this is a disability discrimination claim in relation to the provision of services one would expect damages for injuries to feelings to be available.  The issue as to whether such damages are in fact damages for personal injuries, and thus covered by QOCS, does not appear to have been considered in this case.

“Another factor was that the potential subject of the Costs Capping Order – Arriva – had already incurred vastly more costs than £50,000.00 prior to the application being made and therefore the Costs Capping Order would have been retrospective:-

“The effect of what I have described is that by the time of the application, the major part of the solicitor’s costs of the appeal had been incurred. The effect of the order sought would, therefore, be that the Respondents will have already spent what is, if the costs capping order is made, in substance a budget laid down by the court without knowing that it had to stick to that insofar as it sought to recover its costs. In principle, the person who is the subject of the costs capping order ought, so far as possible, to know the budget to which he must work in advance.” (Paragraph 25).

QOCS

 QOCS protection is of no relevance in Employment Tribunals, neither in relation to actual injury or injury to feelings.

Section 57

  Applies to actual injury cases in civil courts arising out of discrimination.

May apply to injury to feelings cases in civil courts arising out of discrimination. – see the discussion of what is “injury” in Timothy James Consulting Ltd v Wilton [2015] IRLR 368 EAT.

Appears to apply to actual injury cases in Employment Tribunals arising out of discrimination.

May apply to injury to feelings cases in Employment Tribunals – see the discussion what is injury in Timothy James Consulting Ltd v Wilton [2015] IRLR 368 EAT.

Logically, in relation to injury to feelings awards, either both section 57 and QOCS apply in the civil courts or neither do.  The Simmons v Castle [2012] EWCA Civ 1039 10% uplift is subject to different reasoning, which I now consider.

Simmons v Castle 10% uplift

 Actual injury awards in the civil courts attract the Simmons v Castle [2012] EWCA Civ 1039 10% uplift.

The situation in relation to injury to feelings awards in the civil courts is unclear,  “general damages” awards attract the uplift and that is obviously a wider definition than “personal injury”.  My view is that injury to feelings awards being “general damages” do attract the 10% uplift in the civil courts.  That does not throw any light on the issue of whether injury to feelings is a species of personal injury.

In Employment Tribunals the position is even more complicated.

There remains the issue of whether injury to feelings awards in Employment Tribunals attract the 10% uplift.  Let us assume, as must be the case, that such awards are general damages and thus, on the face of it, attract the uplift.  Why is there any doubt?

In Chawla v Hewlett Packard Ltd [2015] IRLR 356 EAT

the Employment Appeal Tribunal held that the 10% uplift under Simmons v Castle [2012] EWCA Civ 1039 did not apply to injury to feelings awards nor actual personal injury awards in Employment Tribunal cases as the rationale does not apply as successful claimants do not generally recover their costs in Employment Tribunal cases.

The case was unusual in that an award for actual injury, as well as injury to feelings, was made. The EAT quoted from paragraph 15 of that judgment where Lord Judge, the Lord Chief Justice said:-

“15. Thirdly the increase we are laying down… is attributable to the forthcoming change in the civil costs regime initiated by Sir Rupert as an integral part of his proposed reforms which were unconditionally endorsed and supported as such by the judiciary publicly, and it was plainly on the basis that the 10% increase would be formally adopted by the judiciary that the 2012 Act was introduced and enacted.”

Here the EAT points out that Employment Tribunal claims are not included on the list of specific types of litigation dealt with in the report.

At paragraph 91 of the judgment the EAT says:-

“The rationale for the uplift… does not apply to litigation in the ET.  Accordingly the 10% uplift decided upon in that case does not apply to increase guidelines in cases on injury to feelings in discrimination cases in ET’s.”

This is in conflict with two previous decisions of the Employment Appeal Tribunal:-

Ozog v Cadogan Hotel Partners Ltd [2014] EqLR 691 EAT and

The Sash Window Workshop Ltd v King [2015] IRLR 348 EAT

In Ozog the point was conceded but the EAT said that the concession was rightly made.  In The Sash Window neither of the advocates nor the judge appeared to have a clue as to what the Simmons v Castle uplift was about, with references to inflation, the inflation uprating in Da’ Bell v NSPCC [2010] IRLR 19 EAT and that Simmons v Castle was decided because the level of general damages was generally low.  The Judge herself refers to the Da’ Bell v NSPCC inflation uplift as being 4 years old at the time of the hearing here.

The discussion and judgment on this point in The Sash Window are woeful.

Chawla is a much better reasoned decision and in my view is correct.

It is also in conflict with the Presidential Guidance 2014 which makes specific reference to the Vento guidelines on injury to feelings as having been updated by Simmons v Castle at paragraphs 13 and 14 which state:-

“13…tribunals may award a sum of money to compensate for injury to feelings…

14. They follow guidelines first given in Vento v Chief Constable of West Yorkshire Police, which have since been updated by Da’ Bell v NSPCC and Simmons v Castle, but are still referred to as the “Vento” Guidelines.”

A previous decision of the Employment Appeal Tribunal took the same line as the EAT here –

Pereira de Souza v Vinci Construction UK Ltd UK EAT/0328/14, unreported

Leave to appeal to the Court of Appeal has been given in Pereira.

If you can answer most of these questions then there is no need to book for Kerry on Tour; if you can’t then click here.

WHIPLASH AND MEDCO

Q1          Is the scheme confined to neck and associated injuries?

Q2          If the claim exits, or falls outside the portal do these whiplash/MedCo rules still apply?

Q3          Is use of MedCo compulsory?

Q4          Have pre-medical offers been banned?

Q5          What is the timescale for expert accreditation?

Q6          Can the report be prepared by someone who has treated the claimant?

Q7          When did fixed costs soft tissue medical reports come in?

Q8          When did the requirement to use MedCo in such cases come in?

Q9          What happens if I instructed an expert before 6 April 2015 but the CNF until on or after 6 April 2015?

Q10        Do the fixed costs medical report rules apply throughout the Fixed Recoverable Costs Scheme as well as the portal?

Q11        Does the Accreditation Scheme apply to FRC as well as the portals?

Q12        Does MedCo apply to EL (Employers Liability) and PL (Public Liability) matters?

Q13        Do the fixed medical report costs provisions apply to EL and PL claims?

Q14        Is a motorcyclist “an occupant of a motor vehicle” for the purposes of the definition of a soft tissue injury claim under the RTA Protocol?

Q15        What about a person in a side-car?

MEDICAL REPORTS

Q16        In EL/PL portal claims do you need to nominate a medical expert?

Q17        Is there any guidance as to appropriate fees for medical reports in cases where medical report fees are not fixed?

PREVIOUS CLAIMS HISTORY

Q18        When does the requirement to provide previous claims history apply?

Q19        Do the claimants’ previous claims history provisions apply to EL and PL claims?

GENERAL

Q20        Is it compulsory to use the portals?

Q21        Can a claim which exits the portal re-enter it?

Q22        Does the portal cover protected parties?

Q23        Does it cover cases where personal representatives are involved?

Q24        Does it cover children?

Q25        Does it cover bankrupts?

Q26        Is £25,000 the true upper limit of the portal?

Q27        What are vehicle related damages?

Q28        Does it cover MIB untraced driver claims?

Q29        Does it cover MIB uninsured drivers claims?

Q30        What happens if the claim becomes worth more than the limit?

Q31        What happens if the CNF is sent to the wrong defendant?

Q32        What happens if the claimant reasonably believes the claim is worth at least £1,000, and thus is above the small claims limit, but it then becomes clear that it is worth less than £1,000?

Q33        If an insurer does not respond to the CNF and the matter exits the portal can you issue proceedings without the need for a letter of claim?

Q34        Is there any case law on what constitutes complexity for the purposes of justifying taking the matter out of the portals?

Q35        Where personal injury damages are under £25,000 but the claim far exceeds that level because of the vehicle related damages which do not come into play for the upper limit the matter will be commenced in the portal.  If it falls out for any reason what costs regime applies?

EL AND PL

Q36        What happens if the claimants are considering applying for a Group Litigation Order?

Q37        What if there are complex issues of fact or law?

Q38        In a dog bite case against individual defendants what protocol and what costs regime applies?

FIXED RECOVERABLE COSTS

Q39        Can a claim that never entered a portal go to Fixed Recoverable Costs?

INFANT APPROVAL SETTLEMENTS

Q40        What fees do I get in relation to advice on an Infant Approval Settlement?

EXITING THE PORTAL

Q41        If the settlement monies and costs are not paid by the insurance company within 10 days can I exit the portal and issue proceedings?

Q42        If the defendant insurers fail to pay the medical fee with the Stage 1 costs on a soft tissue matter can I drop the claim out of the portal?

FEES

Q43        I recently completed an NI claim form for an RTA cases and in years gone by I would simply put “to be assessed” in the box where it asks for solicitors costs.  It no longer lets you type that in so I just put a fairly conservative figure down based on fixed recoverable costs.  The form was returned back to me saying they can’t issue the claim because my costs are too high.  I don’t understand this at all.  Even under Fixed Recoverable Costs there is a table and the costs recoverable depend on what stage you get to and is also linked to the settlement account.  The figure I put down was comfortably below the maximum costs recoverable, so in summary what figure am I supposed to put in that box?

COSTS

Q44        I want to settle a claim that has fallen out of the portal without proceedings being issued.  The level of costs is thus fixed by CPR 45.29C.  The insurers have offered to pay agreed damages but there is no reference to costs.

                Do I still need agreement to pay costs?

Q45        If a case drops out of the portal after Stage 1 costs have been paid and Part 7 proceedings are issued does credit have to be given for those Stage 1 costs against FRC?

Q46        Is a Pre-Action Disclosure Application in a claim that has exited the portal as interim application for costs purposes?

Q47        What fee do I get?

Q48        What is the position with multi-claimant matters?  Do you get just one fee or one for each claimant?

ADVOCACY

Q49        How is the advocacy fee calculated if you are representing more than one claimant?

COUNSEL

Q50        Is counsel’s fee for drafting pleadings every recoverable in an FRC case?

Q51        Is counsel’s fee for a conference every recoverable in an FRC case?

Q52        If I instruct counsel to conduct the advocacy in an FRC case and it settles is any fee recoverable in respect of counsel?

Q53        Is counsel’s fee recoverable from an interim application?

Q54        Does the advocacy fee vary depending on who undertakes the advocacy?

Q55        Can I ever recover an extra fee for counsel in the portal?

Q56        Is there any definition of “reasonably required”?

Q57        Can I recover the costs of counsel advising in liability in the portal?

Q58        How much is that fee?

SPECIALIST SOLICITORS

Q59        Can I instruct another firm of solicitors instead?

Q60        Can I instruct a specialist solicitor in my own firm and get the entire fee?

CFAs

Q61        I signed my client up to a CFA before 1 April 2013 but have only just issued the CNF.  Can I recover the success fee?

Q62        I have a child’s RTA claim from 2007.  Does this go into the portal?

Q63        Does the 12.5% London uplift apply in the portals?

Q64        I have a claim where there are two claimants and one claim is valued at £4,000 and one is valued at £9,000.  How do I calculate the court issue fee?

QOCS

Q65        Does QOCS apply to portal claims?

Q66        Does QOCS apply to FRC claims?

Q67        Does QOCs apply to Pre-Action Disclosure applications?

Q68        Does QOCS apply to other interim applications?

SECTION 57

Q69        Does section 57 Criminal Justice and Courts Act 2015 apply to portal claims?

Q70        Does section 57 apply to FRC claims?

MISCELLANEOUS

Q71        I have a small claims track case that has ended up in the Court of Appeal.  Are costs payable/recoverable?

Q72        Is a Noise Induced Hearing Loss claim covered by the EL/PL portal?

Q73        If it exits the portal does it go to FRC?

Q74        What is your authority for stating that NIHL claims are disease claims?

Q75        Are members of the Armed Forces employees for the purposes of the EL/PL portal?

Q76        What happens to such claims?

Kerry is the author of the After The Event Insurance chapter of Insurance Disputes.

In Impact Funding Solutions Ltd v Barrington Support Services Ltd (formerly Lawyers at Work Ltd) and AIG Europe Insurance UK Ltd [2015] EWCA Civ 31

the Court of Appeal considered the interplay between After-the-Event insurance and professional indemnity insurance and disbursements used or necessary to fund cases.

Here Impact Funding Solutions Ltd had made funds available to Barrington Support Services Ltd to fund disbursements in relation to noise induced hearing loss claims.

The funding was made available by way of loans to the claimants and if the claim was successful the costs would be recoverable from the defendants but if the claims failed, or settled on unfavourable terms, the loans made by Impact, together with interest, would have to be recovered in some other way.

If the claimants had Before-the-Event legal expenses insurance or After-the-Event insurance then the loans may be recoverable from the insurers. However if those insurers, for any reason, did not pay then Impact Funding Solutions Ltd would look to the solicitors, rather than their clients, to pay.

Solicitors must have professional indemnity insurance and the issue in this case was whether those professional indemnity insurers were obliged to indemnify solicitors who are liable to reimburse the loans made to their clients in order to defray the disbursements made by those clients.

Here the After-the-Event insurers succeeded in avoiding liability to Barrington on the ground that they had failed properly to assess the merits of the claims and also that they drew monies down from Impact apparently to pay for disbursements but in fact to pay referral fees to claims management companies and also to pay fees to a company called LCS Sprint for work that could and should have been done by Barrington.

In those circumstances Impact successfully sued Barrington and obtained judgment in the sum of £581,353.80 but Barrington had gone into liquidation.

Consequently Impact brought proceedings against Barrington’s insurers, AIG Europe Ltd, pursuant to the Third Parties (Rights Against Insurers) Act 1930 and AIG is entitled in those proceedings to rely on any defence which it would have had if it had been sued by its insured, that is Barrington.

AIG argued that they were not liable to indemnify Barrington in respect of liabilities to repay what the insurers referred to as “commercial loans” since professional indemnity insurers are not in the business of helping Impact or anyone else to obtain repayment of loans to solicitors which were made or drawn down for the purpose of carrying on their practices. The judge at first instance accepted that argument and thus gave judgment in favour of AIG and thus refused to allow Impact to claim against the solicitor’s professional indemnity insurance.

On appeal the Court of Appeal overturned that decision and entered judgment against AIG.

It held that obligations arising out of loans made to cover disbursements in intended litigation are essentially part and parcel of the obligations assumed by a solicitor in respect of his or her professional duties to the client, rather than obligations personal to the solicitor such as, for example, paying for a photocopier.

They are inherently part of the professional practice and are assumed as an essential part of the duty to advise the client as to the likelihood of success in the intended litigation. Disbursements should not be incurred in litigation which is unlikely to succeed. A solicitor who negligently advises the client that a claim is likely to succeed and causes a client to incur disbursements which should not have been incurred, will be liable to the client for disbursements needlessly incurred.

It makes no difference from the point of view of a professional indemnity insurer that the disbursement had been incurred before such advice is given or without such advice having been given at all.

Thus Barrington’s liability to Impact fell within clause 1 of the insurance cover as being “civil liability” arising “from private legal practice in connection with the insured firm’s practice” which is part of the Minimum Terms required by the Solicitors’ Indemnity Insurance Rules.

The fact that the loan was nominally made to the solicitor’s client but was in fact an inherent part of a set of interlocking agreements all intended to enable the solicitor to earn a professional livelihood did not alter that position.

The Civil Procedure Rules Committee, unelected, unrepresentative, unaccountable and undemocratic, has decided to remove judges from a whole series of judicial functions including deciding applications in relation to the following matters:-

• amending Particulars of Claim;
• stays;
• rectifying procedural errors;
• extending time for service of Claim Form;
• adding or substituting a party;
• making a counterclaim;
• setting aside or varying a default judgment;
• interim payments.

A pilot scheme comes into force on 1 October 2015 and covers claims issued at Northampton Bulk Centre, Money Claims Online and the County Court Money Claims Centre in Salford. This is achieved by Practice Direction 51K – The County Court Legal Advisers Pilot Scheme.

Extraordinarily CPR 51.2 gives the Civil Procedure Rules Committee entirely unlimited powers to modify or disapply any provision of any rule for the purposes of a pilot.

The rule reads:- “51.2 Practice directions may modify or disapply any provision of these rules –

(a) for specified periods; and

(b) in relation to proceedings in specified courts,

during the operation of pilot schemes for assessing the use of new practices and procedures in connection with proceedings.

I suspect no-one ever anticipated that this Rule would be used to abolish judges hearing a whole raft of applications.

Taken to its logical conclusions the Civil Procedure Rules Committee could abolish trials, appeals and indeed the whole civil justice system in England and Wales.

The Nazis in Germany or the apartheid regime in South Africa would have been delighted with such powers.

I trust that the Administrative Court will strike this provision down at the earliest opportunity and that every court will refuse to enforce it on the ground that it is a very obvious breach of Article 6 of the European Convention on Human Rights, that is the right to a fair trial. As this is secondary legislation courts can simply refuse to take any notice of it if it breaches the Human Rights Act; there is no need to refer it back to Parliament.

The Law Society Civil Justice Committee at its meeting on 25 February 2015, under Any Other Business, recorded this in the minutes:-

“Keith Etherington said that there was to be a pilot scheme run at the County Court Money Claims Centre in Salford, from around October 2015, under which cases would be dealt with by legal advisors rather than judges until they were allocated to a court. There was concern at the level of training the advisors would have and that judicial decisions would be taken by unqualified people; and that the service standard was being reduced when fees were rising. The Civil Procedure Rules Committee had been under pressure to introduce the system and had not consulted on it. The new rule and practice direction had not been written and the Society might wish to consider whether to contest the arrangement. Any decision made by a non-judge was likely to be challengeable. Martin Heskins would be asked to obtain, if possible, the report that the Rules Committee had considered.”

Legal advisers, who must be solicitors or barristers, will now make these decisions which have always been the responsibility of the judges. There will be no hearing.

There has been no consultation about this radical change, which overturns nearly 900 years of judicial matters being determined by judges. No details have been provided as to the training, or more likely lack of training, that these parajudges will receive. There is no minimum period of qualification or call.

The parties can within 14 days request a District Judge reconsider the decision. That reconsideration will take place without a hearing.

Now you know what the 622% court fee increase was for.

Remember it is this unbelievably incompetent Civil Procedure Rules Committee which brought you the Relief from Sanctions fiasco, along with unintelligible rules in relation to a whole host of matters including Part 36 and Qualified One-Way Costs Shifting and a complete lack of guidance on matters such as proportionality.

It is time for this bunch of incompetents to be banished and their committee and all its works abolished. Making Civil Procedure Rules should now become a matter for a Parliamentary Committee drawing on the use of experts, that is people who know what they are doing, when needed.

As to the removal of judges from any process whatsoever that should require an Act of Parliament.

NEXT WEEK: CIVIL PROCEDURE RULES COMMITTEE ABOLISHES PARLIAMENT AND DECLARES MARTIAL LAW

PERSONAL INJURY AND FUNDAMENTAL DISHONESTY – CLIENT CARE WORDING

I set out below suggested wording for the client care letter and statements by the client to assist lawyers in dealing with Section 57 of the Criminal Justice and Courts Act 2015 and also the disqualification of Qualified One-Way Costs Shifting caused by fundamental dishonesty.

These statements have been tested using the Flesch-Kincaid readability test which indicates how difficult a reading passage in English is to understand and all the statements are easily understood by 13 to 15 year olds.

Obviously having this wording does not prevent the court from overturning a claimant win and dismissing the successful claim under Section 57 and nor does it prevent a court from awarding costs in a lost claimant claim that would otherwise have been covered by QOCS.

However it should assist in dealing with any negligence action or complaint by clients and should also sharpen up a solicitor’s risk assessment in what is a new area of risk, that is that an otherwise safe claim is now lost under Section 57.

Client Care Letter

Add to “Your Responsibilities”:-

“You will not exaggerate any part of your claim.”

Below that I advise the following in bold:-

“Please note that in a personal injury claim any inaccuracy or exaggeration by you or on your behalf in relation to any part of the claim will lead to the whole claim being thrown out with you being ordered to pay the other side’s costs. This will happen even if you have already won your claim. For example if the court finds that the accident was the other party’s fault but you exaggerate your injuries or the amount that you have spent then your claim would be lost. You will then be responsible for my firm’s costs as well as the other side’s costs. Such conduct on your behalf will invalidate any insurance policy.”

This statement has a readability score of 61.7 on the Flesch-Kincaid readability scale meaning that it is easily understood by 13 to 15 year olds.

I advise that all clients be seen by a Senior Lawyer at least for the purposes of explaining the effect and meaning of fundamental dishonesty and also for discussing funding. Obviously a careful attendance note should be made.

Although the client has to sign a Statement of Truth in relation to their statement I suggest a following separate statement to be signed by the client in the following terms:-

“I have read and understood the statement that I have made. I have had any parts that I was unsure about explained to me and I confirm that the statement is true and correct in every respect. I understand that anything wrong in my statement may lead to my whole claim being thrown out and me being ordered to pay the other side’s costs as well as my own solicitor’s costs and expenses.”

This statement has a readability score of 63 on the Flesch-Kincaid readability scale meaning that it is easily understood by 13 to 15 year olds.

In relation to the Schedule of Special Damages I suggest the following be signed separately by the client:-

“I have read and understood my Schedule of Special Damages. I understand that these are expenses that I have actually paid or am liable for. I have had any parts that I was unsure about explained to me. I confirm that the Schedule of Special Damages is true and accurate in every respect. I understand that any inaccuracy in my Schedule of Special Damages may lead to my whole claim being thrown out and me being ordered to pay the other side’s costs as well as my own solicitor’s costs and expenses.”

This statement has a readability score of 64.5 on the Flesch-Kincaid readability scale meaning that it is easily understood by 13 to 15 year olds.

The above statement can be adapted for a Schedule of Future Loss.

In relation to medical evidence I advise the following:-

“I have read and understood my Medical Report. I have had any parts that I was unsure about explained to me. I confirm that the report is true and accurate in every respect. In particular I have been supplied with an explanation of the medical terms and I understand all of them. I understand that any inaccuracy in the Medical Report may lead to my whole claim being thrown out and me being ordered to pay the other side’s costs as well as my own solicitor’s costs and expenses.”

This statement has a readability score of 61 on the Flesch-Kincaid readability scale meaning that it is easily understood by 13 to 15 year olds.

The above wording can be adapted for any other reports obtained.

Solicitors may wish to have the client care statements in any Conditional Fee Agreement.

These are merely suggestions to try and assist lawyers in what is a new and very difficult area with a section of an Act of Parliament which goes against the grain for any lawyer anywhere.

Comments and suggestions as to how to improve the wording, or details of further issues that need to be addressed would be most welcome.

Related blogs:-

Qualified One Way Costs Shifting (“QOCS”)

Personal Injury Revolutionized: Criminal Justice and Courts Act 2015

Exaggeration = Fraud – Key Court of Appeal Case

Don’t dumb down

• Senior lawyer intervention at start;
• A stitch in time saves nine;
• Is it in the right portal – employees, Crown servants and all that;

Part 36

• Immediate offer on liability where appropriate;
• Specials to date;
• Settle early – settle low;

• Consider “one good offer or go to trial” policy;
• Anything and everything.
• Claimant lawyers’ 25% more valuable the earlier the case settles

Portals

• Never let it out!
• Is contributory negligence ever worth it?
• Court fees: unintentional tax on defendants?

Fixed Recoverable Costs

• Extend by agreement;
• Has the Claimant got ATE;
• The Claimant’s solicitors 25% damages charge – making it work for defendants;
• Agreeing to waive the indemnity principle;
• Agreeing DBAs plus costs;
• Don’t make the claimant’s solicitor do unnecessary work;
• Less work, lower costs but more profit makes both parties happy;
• No more fattening up a file up like a pig for market.

Qualified One Way Costs Shifting

• Part 36;
• Special Damages;
• Fundamental dishonesty, QOCS and Section 57 Criminal Justice and Courts Act 2015;
• Strike out;
• Summary judgment;
• Discontinuance.

ADR

• Private mediation/arbitration;
• Settlement agreements;
• Waiving indemnity principle;
• Waiving small claims limit.

Settlement Agreements

• Based on employment cases;
• Fee paid by defendant;
• Dealt with only by qualified lawyer;
• No deduction from client’s damages;
• Agree never to engage in Third Party Capture – unacceptable

Voluntary extension of Fixed Recoverable Costs

• Seek to agree FRC on anything;
• Use Tables with % applying to higher sums;
• Agree to waive indemnity principles;
• Saving costs of dealing with costs;
• Certainty suits everyone.

Unnecessary Costs

• Issue fee;
• ATE insurance;
• Costs lawyers;
• Costs negotiators;
• Most expert’s fees.

Good firms

• Work collaboratively with good firms;
• Agree structure workable for us both;
• Settlement agreements;
• No technical challenges on costs/retainer;
• Fixed Recoverable Costs extension;
• No small claims limit.

Bad firms and Claims Management Companies, Claim Farms etc.

• Fight;
• Claim fundamental dishonesty to defeat QOCS;
• Defeat QOCS – apply to strike out;
• Use Section 57 – fundamental dishonesty;
• “Financial benefit of another” QOCS exception.

Relevant Blogs

• FIXED COSTS, ALL THE PORTALS AND FIXED RECOVERABLE COSTS

• QUALIFIED ONE WAY COSTS SHIFTING (“QOCS”)

• CONDITIONAL FEE AGREEMENTS, DAMAGES-BASED AGREEMENTS AND CONTINGENCY FEES

• INSURANCE – INTERPLAY BETWEEN ATE INSURANCE AND PROFESSIONAL INDEMNITY INSURANCE

• PORTALS AND FIXED RECOVERABLE COST: 76 FAQ’S

• PERSONAL INJURY: QOCS, S.57 and 10% UPLIFT

• CFAS: NEVER NAME THE DEFENDANT!

• EXAGGERATION = FRAUD – KEY COURT OF APPEAL CASE

• COSTS AGAINST LAWYERS

• DOES QOCS APPLY WHERE THERE IS A NIL SUCCESS FEE?

• JACKSON: 2 YEARS ON

• INDEMNITY COSTS

• PROVISIONAL ASSESSMENT

• NEW PART 36: APRIL IS AGAIN THE CRUELLEST MONTH

• WASTED COSTS AND NON-PARTY COSTS ORDERS

• WHIPLASH: ALL YOU NEED TO KNOW ABOUT COSTS

• PERSONAL INJURY REVOLUTIONIZED: CRIMINAL JUSTICE AND COURTS ACT 2015

• FIXED RECOVERABLE COSTS IN ALL CIVIL CASES UP TO £250,000

• PART 36: CLAIMANTS’ OFFERS AND COURT BIAS – ELSEVIER CONSIDERED

QOCS, COSTS AND DISCONTINUANCE

In Dar Al Arkan Real Estate Company v Al Refai [2015] EWHC 1793 (Comm)

the Commercial Court of the High Court held that discontinuance of an action has no effect on any interlocutory costs orders.

Here the claimant discontinued the action but the defendant was still liable for interlocutory costs orders made in the life of the case. As the court pointed out, any other decision would leave a losing claimant who went to trial better off than a discontinuing claimant.

“As a matter of policy it would be surprising if the CPR provides for harsher consequences on a litigant who discontinues a claim or part of a claim than are typically visited on one who pursues an invalid claim or arid litigation to the bitter end. Surely a litigant who comes to appreciate that there is no point in pursuing a claim or part of one is to be encouraged to discontinue it promptly.” (Paragraph 37).

QOCS and Discontinuance

That must be right and presumably is the rationale for a discontinuing personal injury claimant still having the benefit of Qualified One-Way Costs Shifting, that is that it would be absurd to force a potential discontinuer to proceed and lose at trial in order to gain QOCS protection.

However life is not that simple and the unbelievably badly drafted CPR in relation to QOCS are already throwing up problems.

In a recent case in Newcastle County Court the claimant had issued against two defendants in a road traffic matter that exited the portal.

The claimants accepted agreed damages of £3,500.00 from the second defendant and discontinued against the first defendant who had never applied to have the action struck out. The first defendant obtained full costs against the claimant with an order that they be enforced in full even though the total exceeded £3,500.00.

CPR 44.13 to 44.17, dealing with Qualified One-Way Costs Shifting, does not anywhere or in any way change the basic law that a losing party is ordered to pay costs.

Throughout the rule the restriction is on enforcement without the permission of the court. Thus a costs order is always made in the usual way and CPR 44.14 is the rule that limits enforcement of the costs order to the aggregate amount of damages and interest made in favour of the claimant.

CPR 44.15 dis-applies that restriction and allows full enforcement in the usual way where the proceedings have been struck out on any of the grounds stated in that rule.

CPR 44.16 allows for enforcement to the full extent of the order, but only with the permission of the court, in the circumstances set out in CPR 44.16, essentially where there has been fundamental dishonesty or the claim is made for the financial benefit of another.

Thus the structure of what must be one of the worst drafted rules in history is that CPR 44.15 lists exceptions to Qualified One-Way Costs Shifting where permission is not required and CPR 44.16 lists exceptions to Qualified One-Way Costs Shifting where permission is required and the subheadings indeed indicate that.

Absent CPR 44.15 or CPR 44.16 applying, and clearly they did not in this case, then CPR 44.14 applies. That rule is ambiguous. CPR 44.14(1) allows a costs order made against a claimant to be enforced without the permission of the court up to the extent of damages and interest awarded.

My view is that the Deputy District Judge was wrong in law in allowing enforceability beyond the aggregate of damages and interest.

True it is that CPR 44.14(1) refers to enforcement without the permission of the court, which suggests that there can be enforcement beyond the total of damages and interest with the permission of the court. However if that were the case what is the point of CPR 44.16? It would be otiose as a court would always be able to give permission for the order to be enforced to its full extent by virtue of CPR 44.14(1).

There is a second question as to whether the court, properly exercising its discretion, should have made any award at all. On the face of it CPR 44.14(1) does allow an order to be made and as we have established allows that to be enforced up to the aggregate amount of damages and interest. Thus it could be argued that as an award has been made of £3,500.00, albeit against a different party, that sum can be used to discharge a costs order. Practice Direction 44 at 12.4(c) provides:-

“(c) Where the claimant has served a notice of discontinuance, the court may direct that issues arising out of an allegation that the claim was fundamentally dishonest be determined notwithstanding that the notice has not been set aside pursuant to rule 38.4;”.

That clearly envisages that in the absence of an allegation of a claim of fundamental dishonesty notice of discontinuance will not of itself trigger a costs liability; otherwise what is the point of that Practice Direction giving the court that power in the case of alleged fundamental dishonesty if the power is there in any event?

It also raises the policy point which is that if discontinuance of itself triggers costs, as it obviously does in the absence of Qualified One-Way Costs Shifting, then one is better going to trial and losing and wasting everyone’s time and money as generally following a lost trial no costs can be enforced against a claimant in the absence of fundamental dishonesty. Clearly if the claimant loses the trial then the aggregate amount in money terms of any orders for damages and interest is nil.There is a third argument. If one reads CPR 44.14(1) it does not actually say that orders for costs can be made for any amount but only enforced without permission of the court up to the aggregate amount in money terms of any orders for damages and interest. What it in fact says is:-

“…but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.” (My Italics and bold)

Thus it appears to say that insofar as any order exceeds the amount of damages and interest it cannot be enforced even to the extent of the amount of the damages and interest.

Thus damages are £3,500.00. An order is made for £5,000.00. That order thus exceeds the aggregate amount in money terms etc. and therefore cannot be enforced without the permission of the court.

That is subject to CPR 44.15 and 44.16 which we have already considered. They have no application here.

Thus in my view if a court makes an order for £5,000.00 where the damages etc. are only £3,500.00 then none of it can be enforced without the permission of the court because that is what CPR 44.14(1) literally says.

The problem here is that presumably the court can give permission to enforce the whole sum and that appears to take it out of CPR 44.14, but does not affect the points raised above.

The final non-technical, but probably most important, point is this. The claimant would have been better simply throwing in the towel and losing against both parties, or indeed going to trial and losing as then the client would have received nothing but paid nothing. To win £3,500.00 but then be ordered to pay a greater sum very obviously leaves the client worse off than simply losing completely.

In the absence of fundamental dishonesty that cannot possibly have been the intention of those drafting the rules.

NEXT: QOCS, COSTS AND STRIKE-OUT

FUNDAMENTAL DISHONESTY, STRIKING OUT AND HUMAN RIGHTS ACT

In Fairclough Homes Ltd v Summers [2012] UKSC 26

the Supreme Court held that a court had the power to strike out a claim in its entirety in the event of fraud, but that that power should only be exercised in very exceptional circumstances. It has rarely been used.

Under the principles of this case a claimant would generally receive the genuine element of a claim even if a court found that s/he had dishonestly claimed other losses. This case is in a sense a forerunner of Section 57 of the Criminal Justice and Courts Act 2015. Here the Supreme Court said, at paragraph 1:-

“The principal issues in this appeal are whether a civil court (“the court”) has power to strike out a statement of case as an abuse of process after a trial at which the court has held that the defendant is liable in damages to the claimant in an ascertained sum and, if so, in what circumstances such a power should be exercised.”
There was no doubt that the claimant had had an accident which was the defendant’s fault but the trial judge found that he had exaggerated his symptoms to the extent of being fraudulent and had deliberately lied to those preparing medical reports.

At paragraph 33 of its judgment the Supreme Court said:-

“33. We have reached the conclusion that, notwithstanding the decision and clear reasoning of the Court of Appeal in Ul-Haq, the court does have jurisdiction to strike out a statement of case under CPR 3.4(2) for abuse of process even after the trial of an action in circumstances where the court has been able to make a proper assessment of both liability and quantum. However, we further conclude, for many of the reasons given by the Court of Appeal, that, as a matter of principle, it should only do so in very exceptional circumstances.”

Interestingly at paragraph 45 the Supreme Court said:-

“It was submitted that an ascertained claim for damages could only be removed by Parliament and not by the courts. We are unable to accept that submission. It is for the court, not for Parliament, to protect the court’s process. The power to strike out is not a power to punish but to protect the court’s process.”

Parliament has clearly taken a different view from the Supreme Court in passing Section 57.

Most interestingly of all the Supreme Court considered the role of the European Convention on Human Rights in the context. Specifically the Supreme Court accepted that a judgment is a possession within the meaning of Article 1 Protocol 1 of the European Convention on Human Rights and that the effect of striking out a claim for damages would be to deprive someone of that possession, which would only be permissible if “in the public interest and subject to the conditions provided for by law…”

The Supreme Court said that the State has a wide margin of appreciation in deciding what is in the public interest but that is subject to the principle of proportionality – Pressos Compania Naviera SA v Belgium (1995) 21 EHRR 301 Paras 31 to 39.

“48. It is in the public interest that there should be a power to strike out a statement of case for abuse of process, both under the inherent jurisdiction of the court and under the CPR, but the Court accepts the submission that in deciding whether or not to exercise the power the court must examine the circumstances of the case scrupulously in order to ensure that to strike out the claim is a proportionate means of achieving the aim of controlling the process of the court and deciding cases justly.”

The court then went on to say, at paragraph 49:-

“The draconian step of striking a claim out is always a last resort, a fortiori where to do so would deprive the claimant of a substantive right to which the court had held that he was entitled after a fair trial. It is very difficult indeed to think of circumstances in which such a conclusion would be proportionate. Such circumstances might, however, include a case where there had been a massive attempt to deceive the court but the award of damages would be very small.” (My italics)

Section 57 very obviously raises a major Human Rights Act issue. This case may give some indication as to how the Supreme Court will treat that issue.

PART 36 ANTI-CLAIMANT BIAS CONTINUES

In Gulati and Others v MGN Ltd [2015] EWHC 1805 (Ch)

the Chancery Division of the High Court held that where a claimant’s Part 36 offer had been withdrawn and then beaten at trial it was not appropriate to award the claimant indemnity costs in the absence of otherwise unreasonable conduct which would attract an indemnity costs award in any event.

The court’s general costs discretion under CPR 44.3 did not justify an award of indemnity costs absent such unreasonable conduct.

The court distinguished the decision in The Trustees of Stokes Pension Fund v Western Power Distribution (South West) plc [2005] EWCA 854

where the Court of Appeal allowed an inoperative Part 36 offer – no money had been paid into court as then required – to have Part 36 effects.

It also refused to apply CPR 44.2(4)(c) which allows a court to take non Part 36 offers into account and give them the same effect as Part 36 offers.

Comment

This is another fundamentally flawed decision reflecting the courts’ anti-claimant bias when it comes to Part 36.

Here, as before, the court is equating indemnity costs orders with misconduct. That is not the case when a claimant matches or beats its own Part 36 offer; it is merely a device to give claimants an incentive to make such offers and defendants to accept such offers.

It is no more punitive and requiring of misconduct than the fact that a successful claimant has to pay the unsuccessful defendant’s costs if it fails to beat a defendant’s Part 36 offer.

COURT OF APPEAL DELAYS

The Master of the Rolls has issued a new Practice Guidance effective 1 August 2015, which extends the time by which the Court of Appeal should hear appeals (Judiciary: Practice Guidance: Court of Appeal Hear-by-Dates)

All of the details are set out in a table annexed to the Practice Guidance.

The covering note states that the extensions are “necessary for the efficient management of the work of the court”, given the 67% increase in permission to appeal applications and the 3% increase in appeals since the last Practice note was issued in 2003. The guidance replaces that note.

The number of Court of Appeal judges has increased by 1 in those 12 years.

Comment

Another Jackson Reforms triumph.

VULNERABLE CLIENTS

On 2 July 2015 the Law Society published a practice note entitled Law Society: Meeting the Needs of Vulnerable Clients

The notes provides guidance on identifying vulnerable clients and their needs. It covers assessing capacity under the Mental Capacity Act 2005 and providing accessible services in accordance with the Equality Act 2010.

It also discusses the role of carers and other third parties such as attorneys, deputies and litigation friends. It includes examples of working with clients who have physical or learning disabilities, lack mental capacity or are vulnerable to undue influence.

The guidance is addressed to solicitors in all areas of practice, particularly if they do not act for vulnerable clients on a regular basis.

In Cox v Woodlands Manor Care Home [2015] EWCA Civ 415

the Court of Appeal held that solicitors fail to give a client notice of the right to cancel the agreement, which happened to be a Conditional Fee Agreement, then it would be unenforceable and no costs could be recovered from the paying party, this being as a result of the indemnity principle.

The decision was made under the 2008 Regulations which have now been replaced by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134) which although has been described in court as “somewhat less inflexible” imposed the same obligation and in my view the same result would arise in the event of failure to give proper notice.

The court also held that it made no difference that the Conditional Fee Agreement was subject to a condition which meant that the obligations under it might not come into immediate effect. The client was still legally committed at the time of signing and, therefore, the agreement was made at that time.

Following an accident at work the claimant wished to instruct a particular firm of solicitors but it transpired that the claimant had BTE insurance and the solicitors were not on the insurer’s panel. The claimant agreed with those solicitors that if the insurers will not authorise them being instructed then the matter would proceed under a CFA.

The solicitors visited the claimant at her home and she signed the CFA and the BTE insurer refused to allow the solicitors to act and so they continued under the CFA.

The Court of Appeal held that the parties had entered into a legally binding agreement at the claimant’s home and there was an intention to create legal relations and the claimant was legally committed at that time and had no control over the suspensory condition, which depended upon the attitude of the BTE insurer.

The aim of the regulations is to protect consumers in their homes as they might feel pressured into making a decision and that pressure operated at the time of the decision.

Medical Reporting Organisations about to be banned?

Tier 1 Medical Reporting Organisations must be able to handle 40,000 claims a year.

MedCo users who choose to select an MRO are provided with a list of seven providers one of which is Tier 1 and six of which are Tier 2. An unexpectedly large number of companies – around 20 – have registered at Tier 1 and the market share of the biggest providers has fallen sharply.

This has led to providers such as Speed Medical, Doctors’ Chambers and Premex registering 10 Tier 2 agencies so as to maximise the chance of receiving instructions.

On 10 June 2015 the Ministry of Justice said that:

“such actions have the potential to put at the risk the chances of existing MROs to compete for selection, and also runs contrary to the policy objective of providing users with a range of seven “different – i.e. unconnected – MROs to choose from”.

“In addition the issue of MROs overstating their capabilities in order to be in Tier 1 will shortly be addressed by MedCo through a programme of detailed audits.”

On 16 July 2015 the MOJ announced an immediate review of MedCo., just three months and 10 days after it came in, with Justice Minister Lord Faulks stating:

“ Since the portal went live on 6 April 2015, issues relating to a number of new business practices within this sector have emerged which have the potential to undermine the government’s policy objectives and public confidence in the MedCo portal.”

A report with recommendations for action,if required, will be published this autumn.

Comment

What is the point of medical reporting organisations ? They are parasitic on the system and introduce unnecessary costs. If Mr Gove wishes to continue the positive start that he has made in his new job then he should ban completely the use of MROs and while he is at it he should ban Claims Management Companies and repeal the Legal Services Act 2007 and thus ban ABS’s.

As a general rule anything connected with the law that has three initials is bad news – MRO, CMC, ABS, MOJ etc. etc.

Courts Grant Themselves Relief from Sanctions

The Judicial Office has agreed to Lord Justice Jackson’s request that there be a temporary break in costs budgeting in clinical negligence cases.

Its statement in July 2015 read:-

“As a temporary measure, to clear a backlog of cases, the Queen’s Bench Masters responsible for the case management of clinical negligence cases are exercising this discretion in relation to cases listed before them between October 2015 and January 2016. This approach will be kept under review.”

The discretion referred to was described by the Judicial Office in the same statement in these terms:-

“The court has a standing discretion to dis-apply the costs budgeting/management provisions in individual cases”.

Quite how a blanket ban on costs budgeting in all cases for three months comes under a discretion “to disapply the costs budgeting/management provisions in individual cases” is beyond me.

Lord Justice Jackson himself had said that the nine month waiting time for a first Case Management Conference was “unacceptable” and risked undermining his reforms.

This decision has not met with universal approval. Unkind commentators have pointed out that this was precisely the type of issue – heavy workload, ups and downs of litigation – which was rejected by the Court of Appeal as an excuse in the Mitchell case.

It is also apparent to all that costs budgeting has increased, not decreased, costs.

One is tempted to agree with a person who said that Jackson’s reforms cannot cope with reality and so reality must be altered to fit the reforms.

A Dick Chilblain Special!

Our intrepid reporter catches up with legal entrepreneur Chris Innovator  who tells of his life in the law in his own words:

” I started with the protection rackets of the Kray Twins – lovely boys – much maligned- but they got banged up so I moved in to Financial Services – same thing really but less violence.

That got regulated so I became a will-writer flogging dodgy funeral packages. Good one that as the client is always dead when the complaints roll in.

Then Claims Direct and The Accident Group – same thing as the protection rackets but with a bit more violence – but all good things must come to an end. As one door shuts another opens – Claims Management Companies and referral fees and ATE insurance! Those were the days!

Apart from a bit of PPI that is all over. Saw that coming so set up a few Medical Reporting Organisations – MROs – MOR’s more like – Money for Old Rope. This Gove chap seems to have sussed that one though, so I’ve got a few ABS’s on the go – they can get away with anything – and do.

Yes, the law has been good to me.”

NEW MIB UNINSURED DRIVERS’ AGREEMENT

The new MIB Uninsured Drivers’ Agreement came into force on 1 August 2015 and applies to accidents occurring on or after that date; the 1999 agreement continues to apply to accidents occurring between 1 October 1999 and 31 July 2015.

The Untraced Drivers’ Agreement has not been changed. It is currently the subject of consultation and a new scheme is expected by 2017.

The new agreement is much simpler and the key requirements are to submit an application to the MIB in the proper form and to join the MIB in the action at the beginning.

There is a requirement for the claimant to give the MIB such information as it may reasonably require. Consequently the MIB should receive court notices etc. in the same way that a defendant does.

Arbitration

Independent arbitrators have now been appointed replacing the rarely used provision that any dispute be arbitrated by the Secretary of State.

Notifying police

The requirement that a claimant pursue insurance details of the driver and lodge a complaint with the police has been scrapped.

Knowing vehicle not insured

The new agreement still does not cover those who enter a vehicle knowing that it is not insured. However the evidential presumption that the claimant knew that the vehicle was uninsured has been removed.

Crime

The crime exclusion has been removed following the Court of Appeal’s decision in: –

Delaney v Secretary of State for Transport [2015] EWCA Civ 172.

Exclusions

The main existing exclusions continue: –

• Crown vehicles;

• vehicles exempt from insurance;

• where someone else, apart from the Criminal Injuries Compensation Authority, is liable;

• passengers who knew or had reason to believe that the vehicle had been stolen or unlawfully taken or is being used without insurance;
• terrorism.

Limit on compensation

Compensation in relation to property damage is limited to one million pounds.

ADR REGULATIONS FOR SOLICITORS: 1 OCTOBER 2015

On 1 October 2015 the Alternative Dispute Resolution for Consumer Disputes (Amendment) Regulations 2015 are in force implementing the EU Directive on Consumer Alternative Dispute Resolution. These require solicitors to provide information about an ADR approved body but solicitors are not required to submit complaints to that body. The obligation in the ADR Directive and the Regulations is to give information, not to agree the use of ADR.

The requirements in relation to the Legal Ombudsman remain unchanged whether or not solicitors agree to submit the claims to an ADR approved body. Solicitors remain obliged not only to give information about the Legal Ombudsman but to cooperate actively with that body.

Given the internal complaints procedure which solicitors are obliged to have and given the compulsory use by solicitors of the Legal Ombudsman and given the heavy and unique restrictions on solicitors enforcing bills and given the rights of clients to apply to the court for assessment of costs under the Solicitors Act 1974 solicitors may feel that yet another tier, that would be the fourth apart from resort to the ordinary courts, is wholly unnecessary and pointless.

That is the view that my firm has taken.

From 1 October 2015 solicitors must, at the end of the first tier complaints process, that is the internal complaint procedure:-

• provide information on the Legal Ombudsman as the Statutory Complaints Scheme for Solicitors, and

• inform the client, on a durable medium:

– that they cannot settle the complaint with the client;

– of the name and web address of an ADR approved body which would be competent to deal with                 the complaint, should both parties which to use the scheme;

– whether they intend to use that ADR approved body.

The Legal Ombudsman had applied to the Legal Services Board to become certified as an ADR approved body for the purposes of the ADR Directive and it was assumed that virtually all solicitors would name the Legal Ombudsman.

However the Legal Ombudsman has unexpectedly withdrawn its application.
The Chartered Trading Standards Institute (CTSI) has approved a number of ADR entities who will be able to provide ADR services and these can be checked by solicitors and indeed their clients on the list of approved providers on their website, that is the CTSI website.

The Law Society has published an updated guidance on 10 September 2015 on how to comply with the Directive.

It suggests the following text once the first tier complaints process has been concluded:-

“We have been unable to settle your complaint using our internal complaints process. You have a right to complain to the Legal Ombudsman, an independent complaints body, established under the Legal Services Act 2007, that deals with legal services complaints.

You have six months from the date of this (our final) letter in which to complain to the Legal Ombudsman.

Legal Ombudsman

PO Box 6806

Wolverhampton

WV1 9WJ

Telephone: 0300 555 0333

Email address: enquiries@legalombudsman.org.uk

Website: www.legalombudsman.org.uk

Alternative complaints bodies (such as [include one of them and their website]) exist which are competent to deal with complaints about legal services should both you and our firm wish to use such a scheme.

We [state whether you do or do not] agree to use [include name of scheme].”

At present the following three alternative complaints bodies are approved:-

Ombudsman Services

ProMediate

Small Claims Mediation

Clearly this or similar wording has to be used once the internal complaints procedure at the firm has been exhausted.

I advise that you also include the following in your Client Care Letter, which anticipates that wording, should there be a complaint and should the complaints procedure be exhausted:-

“At the conclusion of any internal complaints handling procedure you also have the right to complain to the Legal Ombudsman, full details of this, their address and our complaints procedure is set out below.”

I advise against having this information in a Conditional Fee Agreement or Damages-Based Agreement. It is perfectly proper and lawful, and indeed in my view advisable, for solicitors not to agree to utilise the scheme but I think that is better contained in the Client Care Letter rather than a Conditional Fee Agreement or DBA which is much more likely to be seen by the other side and the court who could take the point, albeit a dud point.

From January 2016 additional requirements will apply to online traders and online marketplaces, including, if appropriate, solicitors.

More information can be obtained from the Trading Standards website the January 2016 requirements stem from the EU Regulation on Consumer Online Disputes Resolution (ODR).

An online trader is defined as “a trader who intends to enter into online sales contracts or online service contracts with consumers” (Regulation 19A(7) of the Alternative Dispute Resolution for Consumer Disputes (Amendment) Regulations 2015).
This definition is likely to capture many solicitors who would not necessarily consider themselves to be online traders. The Department for Business, Innovation Skills, states that it will include solicitors who send and receive contracts, customer care information, etc. to clients via email and thus virtually every firm will be court by these new requirements.

The information to be given will depend on whether or not the Legal Ombudsman resubmits its application to the LSB and become certified as an ADR approved body.

If it does then solicitors will be required to:-

• provide a link to the ODR platform in any offer made to a client by email, and

• inform clients of;

– the existence of the ODR platform;

– the possibility of using the ODR platform for resolving complaints

The information in the second bullet point above must also be included in the general Terms and Conditions of online sales contracts and online service contracts, where such general Terms and Conditions exist. Thus that information will need to be in the Conditional Fee Agreement or Damages-Based Agreement as well as the Client Care Letter but there is no such requirement in relation to the information required from 1 October 2015 and indeed strictly that does not need to be in any document at the beginning but only included once the internal complaints process has been exhausted.

If the Legal Ombudsman does not become an ADR approved body by 1 January 2016 solicitors will be required to provide on their websites:-

• a link to the ODR platform

• the email address of the online trader

No decision as to whether the Legal Ombudsman will reapply for approval is expected until December 2015.

The Department for Business, Innovation Skills has issued detailed guidance for business.

This blog should be read in conjunction with my blog Consumer Contracts Regulations.

Please note these regulations have been subject of a very hard line by the courts – see Cox v Woodlands and the recent case of Allpropertyclaims Ltd v Mr Tang Pang and ITC Compliance Ltd [2015] EWHC 2198 (QB).

CONTENTIOUS BUSINESS AGREEMENTS (CBA)

In Addleshaw Goddard LLP v Wood and Hellard [2015] EWHC B12 (Costs)

the Senior Courts Costs Office, Master Campbell, had a rare opportunity to consider Contentious Business Agreements.

A Contentious Business Agreement (CBA) and a Conditional Fee Agreement (CFA) are mutually exclusive. The judgment is 45 pages long.

The terms of the agreement were that if the action failed Mr Berezovsky, who had entered into the agreement with Addleshaw Goddard, would pay a reduced fee of 50% of normal charges; if the action was successful he would pay the normal rates (level one success fee) and if he recovered a set minimum trigger amount there would be a 100% success fee on top of the normal charges (level two success fee).

The case was settled after Mr Berezovsky had died and the appropriate fee was the highest one, that is the level two success fee. Mr Berezovsky’s solicitors sought recovery of costs from the defendants, who were the Administrators for the now deceased Mr Berezovsky.

There was a dispute as to the actual level of recovery but the court held that, subject to the validity of the CBA, the level two success fee, that is the highest one, had been triggered.

The relevant provisions of the Solicitors Act 1974 in relation to Contentious Business Agreements are sections 59 to 61. Section 70 deals with the application procedure.

Those sections read:-

“”59. Contentious business agreements.

(1) Subject to subsection (2), a solicitor may make an agreement in writing with his client as to his remuneration in respect of any contentious business done, or to be done, by him (in this Act referred to as a “contentious business agreement”) providing that he shall be remunerated by a gross sum or by reference to an hourly rate, or by a salary, or otherwise, and whether at a higher or lower rate than that at which he would otherwise have been entitled to be remunerated.

(2) Nothing in this section or in sections 60 to 63 shall give validity to —

(a) any purchase by a solicitor of the interest, or any part of the interest, of his client in any action, suit or other contentious proceeding; or

(b) any agreement by which a solicitor retained or employed to prosecute any action, suit or other contentious proceeding, stipulates for payment only in the event of success in that action, suit or proceeding; or

(c) any disposition, contract, settlement, conveyance, delivery, dealing or transfer which under the law relating to bankruptcy is invalid against a trustee or creditor in any bankruptcy or composition.

60. Effect of contentious business agreements.

(1) Subject to the provisions of this section and to sections 61 to 63, the costs of a solicitor in any case where a contentious business agreement has been made shall not be subject to taxation or (except in the case of an agreement which provides for the solicitor to be remunerated by reference to an hourly rate) to the provisions of section 69.

(2) Subject to subsection (3), a contentious business agreement shall not affect the amount of, or any rights or remedies for the recovery of, any costs payable by the client to, or to the client by, any person other than the solicitor, and that person may, unless he has otherwise agreed, require any such costs to be taxed according to the rules for their taxation for the time being in force.

(3) A client shall not be entitled to recover from any other person under an order for the payment of any costs to which a contentious business agreement relates more than the amount payable by him to his solicitor in respect of those costs under the agreement.

(4) A contentious business agreement shall be deemed to exclude any claim by the solicitor in respect of the business to which it relates other than —

(a) a claim for the agreed costs; or

(b) a claim for such costs as are expressly excepted from the agreement …

61. Enforcement of contentious business agreements.

(1) No action shall be brought on any contentious business agreement, but on the application of any person who —

(a) is a party to the agreement or the representative of such a party; or

(b) is or is alleged to be liable to pay, or is or claims to be entitled to be paid, the costs due or alleged to be due in respect of the business to which the agreement relates,

the court may enforce or set aside the agreement and determine every question as to its validity or effect.

(2) On any application under subsection (1), the court —

(a) if it is of the opinion that the agreement is in all respects fair and reasonable, may enforce it;

(b) if it is of the opinion that the agreement is in any respect unfair or unreasonable, may set it aside and order the costs covered by it to be assessed as if it had never been made;

(c) in any case, may make such order as to the costs of the application as it thinks fit.

(3) If the business covered by a contentious business agreement (not being an agreement to which section 62 applies) is business done, or to be done, in any action, a client who is a party to the agreement may make application to a costs officer of the court for the agreement to be examined.

(4) A costs officer before whom an agreement is laid under subsection (3) shall examine it and may either allow it, or, if he is of the opinion that the agreement is unfair or unreasonable, require the opinion of the court to be taken on it, and the court may allow the agreement or reduce the amount payable under it, or set it aside and order the costs covered by it to be assessed as if it had never been made.

(4A) Subsection (4B) applies where a contentious business agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

(4B) If on the assessment of any costs the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into —

(a) the number of hours worked by the solicitor; and

(b) whether the number of hours worked by him was excessive.

(5) Where the amount agreed under any contentious business agreement is paid by or on behalf of the client or by any person entitled to do so, the person making the payment may at any time within twelve months from the date of payment, or within such further time as appears to the court to be reasonable, apply to the court, and, if it appears to the court that the special circumstances of the case require it to be re–opened, the court may, on such terms as may be just, re–open it and order the costs covered by the agreement to be assessed and the whole or any part of the amount received by the solicitor to be repaid by him…

70. Assessment on application of party chargeable or solicitor.

(1) Where before the expiration of one month from the delivery of a solicitor’s bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.

(2) Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment), order —

(a) that the bill be assessed ; and

(b) that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.

(3) Where an application under subsection (2) is made by the party chargeable with the bill —

(a) after the expiration of 12 months from the delivery of the bill, or

(b) after a judgment has been obtained for the recovery of the costs covered by the bill, or

(c) after the bill has been paid, but before the expiration of 12 months from the payment of the bill;

no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the assessment as the court may think fit.

(4) The power to order assessment conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill…”

The defendants argued that this was in fact a CFA and not a CBA and that sections 59 to 61 of the Solicitors Act 1974 therefore had no application.

The document looked like a CFA and was structured like a CFA and the letter referring to it was headed “Discounted Conditional Fee Agreement”. Nevertheless the court found that it was in fact a Contentious Business Agreement.

The court held that the CBA entered into between a firm of solicitors and an experienced businessman was valid, and, in the circumstances reasonable. There was no reasonable basis for the defendants to be allowed to assess these charges.

The case also dealt in detail with a solicitor’s right to a lien and the law in relation to solicitors’ charging orders for costs.

The court also held that the fact that a solicitor gets paid something in any event in a No Win Lower Fee Agreement as compared with a No Win No Fee Agreement, is of less relevance in relation to the success fee where the success fee is not recoverable from the other side. Thus the court distinguished the case of Gloucestershire County Council v Evans [2008] 2 Costs LR 308.

The court said this at paragraph 76 of the judgment:-

“Both sides relied on Gloucestershire CC. I agree with Mr Atherton that “costs at risk” and the fact that win or lose, AG would recover the Reduced Fee, are relevant factors to take into account when considering the reasonableness of the success fee, but that is tempered by the fact that that was a case about costs between the parties. The position here is once removed, in the sense that, contrast Gloucestershire CC where it was the paying party saying that the success fee was too high, here we are addressing charges as between solicitor-and-own client under a contractual agreement which has provided for its level. It follows that in accepting Mr Bacon’s submission, I am not doing so simply because agreements embodying such terms, in particular that the success fee can be 100%, have been permitted since 1999 under Section 58 Access to Justice Act 1998. On the contrary, in the circumstances as they have been explained to me, I do not consider that the success fee is either unreasonable or unfair, having been commercially negotiated by both sides in the way I have described, so the point fails.”

In fact the court is wrong in that such arrangements were sanctioned by the Courts and Legal Services Act 1990 and had been permitted since 1995.

Contentious Business Agreements essentially deprive the client of the right to challenge the agreed rate of remuneration although the court can still inquire into the number of hours worked. Thus they have attractions for solicitors.

However given that restriction, which does not apply to Conditional Fee Agreements, the courts are likely to look more carefully at the validity of such agreements.

Few lawyers or judges realise that the Solicitors Act 1974 allowed a form of Conditional Fee Agreement long before the Courts and Legal Services Act 1990 and the 1995 Regulations. The Act also specifically sanctions Pre-Action Contingency Fee Agreements and the Damages-Based Agreements Regulations 2013 specifically state that nothing in those regulations affects those provisions.