Flatman v Germany

These appeals (which relate to two entirely unconnected cases) are the consequence of the costs regime that presently operates in relation to personal injury litigation. They are focussed on applications for discovery as to funding arrangements made by unsuccessful claimants in personal injury litigation. Underlying these limited procedural requests, however is an issue as to the extent to which solicitors acting on behalf of claimants can fund or ‘prime pump’ litigation for those of limited means when proceeding pursuant to a conditional fee agreement (‘CFA’) and no ‘after the event’ insurance cover (‘ATE cover’) without thereby exposing themselves to adverse orders for costs should the claims fail.

The facts underline the potential for profit by solicitors against the limited downside risk and although the costs regime will change with the coming into force of Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, for certain types of litigation, the issues with which this appeal grapples will still arise. Indeed, in one sense, they may become more acute if Defendant’s insurers can undermine the principle of qualified one way costs shifting (which will limit recovery of costs by insurers in failed personal injury actions) by pursuing the solicitors acting for the claimant who fails.

It is for that reason that Rix LJ took the unusual step of granting permission to bring second appeals in what, after all, is limited to an issue concerned with costs. The concern has also led to an intervention by the Law Society (whose participation in the actions was approved by Rix LJ) with the result that there has been a wide ranging analysis of the position, which, on the face of it, extends beyond the very limited issue which falls to be resolved and covers the circumstances generally in which it may be appropriate to make a third party costs recovery order against solicitors acting for the losing party.

Notwithstanding the significant issues raised by the Law Society’s intervention, these appeals are, in fact, limited to the disclosure of information in two specific cases. In one case, all the information has now been made available and, in the other, partial information was (unrealised by either of the parties) disclosed at a very early stage. On the basis of what they now know, in the first case, the insurer has instituted a claim for the recovery from the solicitor of the costs incurred in successfully defending the personal injuries claims. This court is not specifically concerned with the question whether such an order should be made in that case or such an application instituted in the other case.

The background litigation can be summarised shortly. As long ago as 8 September 2005, Mr Gavin Flatman suffered injury following an accident on his motorbike which he alleged had been caused by gravel which had been strewn over the road and which was the responsibility of Ms Gill Germany trading as Old Macdonald’s Children’s Centre. He brought an action for damages with the benefit of a conditional fee agreement without having obtained ATE cover, claiming, among other sums, loss of earnings for three years. On 21 January 2010, the action came for trial at the Norwich County Court before His Honour Judge Moloney Q.C. He dismissed the claim on the basis that Mr Flatman had not discharged the burden of proof. On the face of it, therefore, the defendant (or her insurer) was entitled to recover the costs incurred in defending the action.

The defendant insurer’s costs, as claimed, amounted to £14,420.51 but it quickly became apparent that Mr Flatman was impecunious and, without ATE cover, on the face of it, the sums would be irrecoverable. This situation is to be contrasted with the costs that would have been claimed had the action succeeded. Mr Flatman’s solicitors (to whom I shall refer as GMS Law although there has been an issue as to whether this should be Godfrey Morgan Solicitors Ltd trading as GMS Law or a firm going under the name Godfrey Morgan Solicitors prior to incorporation) would have claimed £41,304.78 (that is, £20,652.39 plus an uplift to reflect the conditional fee agreement of 100%) inclusive of VAT. Because counsel was engaged under a CFA, the disbursements (consisting of the court fee, a medical report and a fee for records) were £2,035.82. It is a matter of concern that so much time could apparently have been spent by the solicitors on what is comparatively straightforward litigation.

Because Mr Flatman was unemployed at the time of the accident and claiming substantial loss of earnings, the defendant’s solicitors suspected that the disbursements had been defrayed by GMS Law. On 21 December 2010, therefore, they applied to Judge Moloney for an order that GMS Law be joined as a party, for an order revealing how the claim had been funded, and (on the assumption that their suspicions were justified) an order that the solicitors pay the defendant’s costs. On 20 January 2011, Judge Moloney dismissed the application. On 10 November 2011, Eady J allowed an appeal from that refusal and required the solicitors to disclose how the claim had been funded.

The second action concerned a claim for personal injuries sustained very differently. On 6 September 2006, Mr Richard Weddall was on duty as a deputy manager of a care home operated by Barchester Healthcare Ltd when, because of the ill-health of another member of staff, he called on other employees looking for a volunteer to act as a replacement. One of those he called (by the name of Marsh) was clearly drunk and, beyond declining to assist (as he was entitled to do) felt that Mr Weddall had been mocking him, so he rode to the care home and violently attacked Mr Weddall, ultimately being sentenced to 15 months imprisonment for the attack. Mr Weddall sought to recover damages on the grounds that his employers were vicariously liable for the assault by Mr Marsh. He was represented by the same solicitors (GMS Law), as were the insurers. On 9 November 2010, Judge Moloney dismissed the claim on the basis that Mr Marsh was “acting personally for his own reasons”: that decision, to the effect that the employers were not vicariously liable for the tort of their employee, was later upheld by the Court of Appeal: see [2012] EWCA Civ 25.

Back in the county court, again the question of costs was raised. The estimate by GMS Law of its profit costs amounted to £23,500 inclusive of VAT and, as Eady J observed, it is reasonable to suppose that had the claim succeeded, the solicitors would have claimed some £47,000 taking account of an uplift of 100%. Again, no ATE insurance was in place. Once again, I repeat that it is a matter of concern that so much time could apparently have been spent by the solicitors on litigation which was likely to turn entirely on a narrow point of law, namely the issue of vicarious liability.

Eady J recorded that GMS Law had said that one set of court fees was paid by Mr Weddall and that the cost of the medical report had been deferred to the end of the trial. No further information was then forthcoming and, again, the defendant’s solicitors were concerned that the most likely source of funding was the solicitors themselves. On 16 November 2010, an application for further information was made; on 25 January 2011, this was similarly dismissed by Judge Moloney. Again, Eady J allowed the appeal from that order.

Since then, in relation to this second case, there have been some comparatively startling developments which have generated further disclosure: this material was admitted for the purposes of these appeals by Rix LJ. It is clear that, following the hearing before Eady J, GMS Law were engaging with Mr Weddall in relation to the costs. On 17 April 2012, Mr Weddall wrote to the solicitor for the insurer in these terms:

The letter to his own solicitor (referring to a Bill of Costs of £50,000) is clear. It is worth setting out in full because it underlines the perils associated with the present funding mechanism for this type of litigation:

The case should have been stopped when the original barrister only gave me a 20-25% chance of winning.

I stressed throughout the case that I only wished to proceed with the relevant insurance in place, a stance which you agreed with. Several of my letters refer to this.”

There then follows reference to four letters (16 March 2010, 22 April 2010, 4 May 2010 and 25 June 2010) recording his requirement that before court action was taken, insurance should be in place and identifying that the solicitors themselves would not expect him to proceed without that insurance. The letter goes on:

That led to orders by Rix LJ and disclosure by GMS Law of a considerable amount of material in excess of that which Eady J had ordered and which may be thought to render the appeal (in this case) academic but, in the light of the wider issues and its possible relevance to Flatman v. Germany, it is worth summarising what has emerged. First, there is a signed CFA dated 4 January 2007 between Godfrey Morgan Solicitors (i.e. the predecessor to Godfrey Morgan Solicitors Ltd trading as GMS Law) and Mr Weddall which makes it clear that “If you lose then you remain liable for the other sides costs (sic)”. The agreement does not deal with disbursements but in a longer document “No Win No Fee Conditional Fee Agreements: what you need to know”, it is asserted that “If you lose, you do not pay our costs nor success fee but you pay our disbursements”. Disbursements are listed as medical notes, court fees, experts’ fees, accident report fees, travelling expenses and insurance premiums.

Further, on 11 May 2009, Mr Weddall paid £18.46 in respect of the costs of obtaining GP notes and, on 26 May 2009, £50 for hospital notes. In June 2009, Counsel advised that the prospects of success were 20-25% and, as early as July 2009, Mr Weddall said that pursuing the case would be “a huge gamble … losing what money I have got towards my retirement”. The response from the solicitors was to “move to a more favourable barrister at a later point in time”. Proceedings were issued 8 weeks later.

By 5 March 2010, GMS Law were advising that they would have to pay the defendant “a couple of grand approx” if they discontinued. Later that month, it is clear that Mr Weddall did not appreciate that proceedings had been commenced. By then, Mr Morgan the solicitor believed that £3,000 would be required to meet the defendant’s costs. He sought to explain why the barrister had advised that the prospects were low for reasons unconnected to the merits and suggested another barrister’s opinion.

On 31 March, the defendant’s solicitors made a Part 36 offer to allow Mr Weddall to discontinue with no order for costs. This offer was followed by fresh counsel’s advice that his prospects of success were 51% and possibly 60% if there was further evidence. That advice led to the letter from Mr Weddall of 22 April (“I could not risk continuing without the insurance which you fully understood”). As for the offer, on 4 May 2010, he wrote noting that the defendants believed that his claim was backed by ATE insurance and expressed his thoughts that the claim continue “provided we have the insurance at a reasonable cost” but that if there was no insurance, the Part 36 settlement was the next best option. He also spoke of coming to “an amicable agreement” to close the matter with his own solicitors.

On 25 June, Mr Weddall wrote to the solicitors to the effect that “when we last met ... you said that you would not expect me to proceed without insurance, which I am unable to do”. On 8 July, GMS Law replied:

In the event, insurance was not available (with one insurer expressing the view that counsel had over-estimated the prospects of success) and the solicitors wrote that insurers were “becoming more and more contentious” and that Mr Weddall had “nothing to lose – if you don’t own a house with equity”. No suggestion of seeking to negotiate acceptance of the Part 36 offer to discontinue with no order for costs appears to have been made; neither did the solicitors refer back to the terms of the ‘no win no fee’ agreement.

There is no mention in the disclosed correspondence of payment either of the fees payable on commencement of the claim (and its increased value) or the allocation fee. Whether these sums were paid by the solicitors or not is unclear from the correspondence; there is certainly no suggestion that Mr Weddall had paid. Suffice to say that, in the light of this information, there was more than enough to enable the defendant’s insurers in Weddall to decide whether it is appropriate to pursue a third party claim for costs or a wasted costs order against GMS Law or whether, alternatively, in an effort to recover the outlay on costs, to seek to pursue GMS Law through Mr Weddall and any potential claim that he might have by way of breach of contract or other duty to recover whatever sums he is ordered to pay by way of costs. Indeed, proceedings have now been commenced to do so. For the purposes of this appeal, to such extent as Rix LJ did not do so, I would admit this evidence in that case.

The disclosed information does, however, have a wider significance. That is the window that it opens on the very difficult pressures (if not conflicts) that it creates and the need for clarity about the circumstances in which it is appropriate to consider third party costs orders against the instructed solicitor. This remains significant in Flatman and, in the light of the full argument that has been advanced, needs to be addressed: to the extent that it permits of a similar fact argument in relation to the possible conduct of the solicitors in the Flatman action, therefore, I also take the view that it could be of relevance in that action.

Before leaving the facts, it is necessary to add that Mr Brown sought to refer to two further facts regarding the personal position of Mr Godfrey Morgan who was the solicitor with conduct of both these actions. The first concerns his appearance before the Solicitors Disciplinary Tribunal (which concerned the purported provision of ATE insurance with an unregulated insurer) and the decision of a costs judge in Morgan v Spirit Group Ltd striking out an entire bill of costs when an attempt was made to recover a premium in respect of a policy of legal expenses insurance with an insurer who could not be traced and about whom Mr Morgan did not provide adequate information. It is sufficient if I indicate that I do not consider that either of these circumstances affect the issues which are now before the court and I reject the application to rely on them.

In order to decide whether the orders to provide information should be upheld (even though, in relation to Weddall, the issue is academic because the information has now been provided), it is necessary to consider, first, the principles whereby an order for costs can be made against a third party (in this case the claimant’s solicitors); secondly, the impact of the CFA regime upon those principles; thirdly, the approach to orders for disclosure; and, finally, the orders of Eady J and whether it was or is appropriate to order disclosure in these particular cases (irrespective of the answer to the different question whether or not there is sufficient to lead to an application to the court to order the solicitors to pay the costs, let alone make such an order).

The starting point is s. 51 of the Senior Courts Act 1981 which provides a power to determine to what extent the costs of litigation should be paid whether by one of the legal representatives or a third party (see Aiden Shipping Ltd v Interbulk Ltd [1986] 1 AC 965). The circumstances in which an order could be made against a solicitor were the subject of some elaboration in Tolstoy-Miloslavsky v Aldington [1996] 1 WLR 736, in these terms (per Rose LJ at 745):

These principles were expanded in Dymocks v Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39, [2004]1 WLR 2807 by Lord Brown of Eaton under Heywood in these terms (at para. 25):

In the Knight case, the High Court of Australia dealt with the issue in this way (per Mason CJ and Deane J at page 192):

Applying these observations to the position of a solicitor, in Myatt v National Coal Board (No 2) [2007] 1 WLR 1559, Dyson LJ explained the current position at [8]-[9]:

Thus, as Eady J put it, if a funder is “a real party” in the sense that he has an interest in the outcome of the litigation it may not matter that it would be inappropriate to describe that funder as “the real party”. Eady J went on:

Mr Brown, for the insurers, points to the observation of Balcombe LJ in Symphony Group v. Hodgson [1994] QB 175 (at 192E), that the categories which cover the situation in which a non-party may be liable for costs are neither ‘rigid nor limited’. He argues that, as a matter of ‘fairness and reasonableness’ those who encourage litigation by committing their funds to it for substantial financial gain should have a corresponding liability for the consequences. He cites Floods of Queensferry Ltd v Shand Construction Ltd [2003] Lloyds Rep 181 and Golding v First Tier Tribunal [2012] EWHC 222 (Admin) but all these cases do is to recognise, in the former, that a solicitor who extends credit to his client and, in the latter, that a tax advisor who acted pro bono but did not fund litigation or pay fees, did not fall within the s. 51 regime.

As to the former, Mr Brown submits that there is a clear distinction between funding and deferring the time for payment; that may be so but, in this case, it seems to me that it is a distinction without a difference. To such extent as the solicitors were deferring payment by their client of disbursements, on the basis of Floods of Queensferry Ltd (per Hale LJ at para 81) they did not come within s. 51; but, in relation to Mr Weddall, in the document ‘What you need to know’, the client’s liability to pay disbursements in the event that the claim does not succeed is clear.

Putting the issue on a wider canvas, the Law Society, on the other hand, submits that a solicitor who funds disbursements on behalf of a client on the basis that the costs will be recovered from the other side in the event of success but will not be recovered from the client if the claim fails (at least in cases, such as these, of moderate complexity in which the disbursements are modest) is not acting in circumstances which are outside the ordinary run of cases. Neither can it be said, it is submitted, that the solicitor is either ‘the real party’ to the litigation, the person ‘with the principal interest’ in its outcome, or is acting ‘primarily for his own sake’. Thus, without more, the solicitor should not be made liable to a third party costs order.

Myatt was also concerned with the need to warn a solicitor acting for an opposing party of the possibility that an order for costs will be sought although such a step requires good grounds for believing that the relevant solicitor has gone outside the normal role (properly described) of a solicitor. Both the submission of the Law Society and the requirement to warn requires a consideration of what, in the context of a CFA, that ‘normal role’ is or should be. It is to that issue that I now turn.

In line with the approach of Eady J, it is worthwhile setting the scene for CFAs with the explanation provided by Lord Bingham in Callery v Gray (Nos 1 and 2) [2002] UKHL 28, [2002] 1 WLR 2000 in these terms (at page 2002D):

Mr Brown argues that one of the most important policy imperatives concerned the inability of successful defendants to recover costs if, as is visualised, solicitors act for those who neither take out after the event insurance nor have the means to meet an adverse order for costs but who have been supported financially by their own solicitors.

With that policy in mind, it is necessary to turn to the legislation. Section 58 of the Courts and Legal Services Act 1990 (as amended) makes CFAs lawful. A conditional fee agreement is defined by s. 58 (2)(a) as “an agreement with a person providing advocacy or litigation services which provides for his fees and expenses or any part of them to be payable only in specified circumstances”. The term ‘expenses’ is not defined by the Act and at the core of this appeal has been its true meaning. Mr Carpenter for the solicitors, supported by Mr Holland Q.C. for the Law Society, argues that as a matter of ordinary language and on authority the word “expenses” includes own side’s disbursements; Mr Brown for the insurers argues that, as a matter of principle and established use, a disbursement is to be distinguished from a solicitor’s expense, which has important and practical implications in areas such as VAT.

The line between the practical effect of these different approaches is fine. Mr Brown argues that because disbursements are not included within the permissible category of costs, they cannot be made the subject of payment by the client conditional on success. That is not to say that the solicitor must insist on prepayment of disbursements by the client; the agreement, however, must require the client to remain responsible for them (whether or not the solicitor goes to the trouble and expense of pursuing repayment if the client, having lost his action, is impecunious). Mr Carpenter and Mr Holland argue that as a matter of ordinary language, once the solicitor has paid the cost of a disbursement (such as a court fee or a medical report) it becomes an expense and can be subject to a prior agreement that it will not have to be reimbursed (as opposed to a subsequent decision that it is not worth pursuing). This distinction can be remarkably fine: if photocopying of the court bundle is done in house, it is a cost to the solicitor; if it is sent out to a copying firm, it is a disbursement.

The significance of this narrow question of statutory construction goes back to the test identified in Tolstoy-Miloslavsky because it is argued that the solicitors could not be acting ‘outside the role of a solicitor’ (so as to bring themselves within the third category identified by Rose LJ) if they were doing no more than the legislation which set up CFAs rendered lawful and not caught by the laws of maintenance or champerty.

Mr Brown took the court to different examples of the use of the terms ‘expenses’ and ‘disbursements’ but it seems to me that the phrase “fees and expenses” must be construed in the context of the legislation in which it appears. On the face of it, once it is conceded (as seems to me is inevitable) that the solicitor does not have to be in funds before incurring costs (such as the obtaining of a medical report), that cost has been borne by the solicitor (at least for the time being) and becomes an expense of providing advocacy or litigation services. To put it another way (which may be more relevant to the precise question which has to be answered), the cost may have to be the subject of an account to the client as a disbursement but the credit afforded to the client in respect of that cost is part of the service provided by the solicitor to his client.

The same conclusion can be reached following a consideration of Jones v Wrexham Borough Council [2008] 1 WLR 1590. The issue in that case was whether or not a CFA, properly construed, was a ‘CFA Lite’ as defined in Reg. 3A Conditional Fee Agreements Regulations 2000 (“under which ... the client is liable to pay his legal representative’s fees and expenses only to the extent that the sums are recovered in respect of the relevant proceedings, whether by way of costs or otherwise”). Regulation 3A(2) made it clear that “no account is to be taken of any obligation to pay costs in respect of the premium of a policy taken out to insure against the risk of incurring a liability in the relevant proceedings”.

The case turned on the meaning of the Regulations and, as Richards LJ observed during the course of argument, it is not appropriate to seek to construe the statute by reference to the construction of the delegated legislation made under it but Waller LJ (with whom Longmore LJ agreed) made it clear:

Mr Brown argues that the decision in Tolstoy-Miloslavsky was not cited nor were the consequences being considered; the comments should be regarded as “wrong and/or per incuriam”. He also refers to the observations of Hughes LJ, as indicating a contrary view, when he said (at para. 73):

In fact, Hughes LJ was merely reciting the history of CFAs, going on to explain that “the CFA and the ATE policy have moved towards making the client less and less exposed to the payment of costs, not only of his own side, but also of the other side” (para 76). Although he did not specifically discuss s. 58(2)(a), he did deal with the same language in the Regulation and said (at para 81):

Mr Brown uses these last words to submit that the matter was not given sufficient attention but I wholly reject that submission. Neither do I consider that anything that Hughes LJ said could be taken to differ from the approach of the majority as to the meaning of s. 58(2)(a) of the Act.

There was a rather sterile argument as to whether the interpretation of Regulation 3A (and, by inference, s. 58(2)(a) of the Act) was part of the ratio of the case or obiter. It is unnecessary to resolve that issue: in my judgment, the construction of s. 58(2)(a) as discussed by Waller LJ – and thus the primary point of contention in this appeal – was clearly correct. Tolstoy-Miloslavsky was simply not relevant to Jones and the proper approach to the jurisdiction to make non party costs orders cannot impact on the construction of the law relating to CFAs: if anything, the reverse is true.

In my judgment, therefore, the legislation does visualise the possibility that a solicitor might fund disbursements and, in that event, it would not be right to conclude that such a solicitor was ‘the real party’ or even ‘a real party’ to the litigation. As for the policy imperative argued by Mr Brown, after the event insurance is not a pre-requisite of bringing a claim on a CFA (see King v Telegraph Group [2005] 1 WLR 2282 at paragraph 100 and Floods of Queensferry Ltd v Shand Construction Ltd (supra) at paragraph 37). The fact that a litigant can (or cannot) afford an expert report or the court fee says nothing about his or her ability to fund the costs incurred by opponents in an unsuccessful claim and, indeed, Eady J (at paragraph 25 of his judgment) recognised that the solicitor could advance disbursements with a technical (albeit improbable) obligation for repayment.

That much is also clear from the fact that solicitors are entitled to act on a normal fee or conditional fee for an impecunious client whom they know or suspect will not be able to pay own (or other side’s costs) if unsuccessful (see Sibthorpe v Southwark BL [2011] 1 WLR 2111 at paragraph 50; Awwad v Geraghty [2001] QB 570 at 588; Dophin Quays Developments Ltd v Mills [2008] 1 WLR 1829 at paragraph 75.

In those circumstances, contrary to the submissions of Mr Brown, I agree with the issue of principle advanced by the Law Society (and Mr Carpenter) that payment of disbursements, without more, does not incur any potential liability to an adverse costs order. That, however, is not an end of this appeal because the issue in fact decided by Judge Maloney and Eady J was not to order costs but, rather, to order disclosure of information prior to the insurers considering whether to apply for an order of costs. That is a different question and requires separate consideration.

The starting point is the test set out by Blake J in Thomson v Berkhamsted Collegiate School [2009] EWHC 2374 QB based on the observations of Lord Brown Dymocks Francise Systems (NSW) PTY Ltd v Todd (above). Having observed (at paragraph 17) that if the case was inherently weak, it was inherently improbable that an order would be made and that if overwhelming, it was unlikely that ancillary orders for disclosure, inspection or cross examination would be necessary, he summarised in the following principles (at paragraph 18):

Blake J then (at paragraph 19) commendably summarised the factors to be considered when considering whether disclosure was necessary for the fair determination of the application in these terms:

The rationale of Eady J (contrary to the view of Judge Moloney and the subject of express disagreement by Judge Stephen Davies in Tinseltime Ltd v Roberts [2012] EWHC 2628 TCC) was only that, by funding disbursements, the solicitors might have stepped “outside the ‘normal role’ of a solicitor”: for the reasons that I have set out above, I do not consider that funding disbursements alone is sufficient to justify that conclusion.

When pressed to justify why an order for disclosure might be justifiable on grounds other than speculation, Mr Brown pointed to the obvious weakness of the cases as giving rise to the inference that the clients were not risking their own money and, in those circumstances, might be being indemnified by the solicitors. The difficulty with that argument is that the inherent weakness of a case might be thought to be a reason why a solicitor would not risk his own money funding it in the hope of recovery with a suitable uplift. In the event, however, howsoever the information has come to light (there being some issue as to whether it is a consequence of these proceedings or as a result of an attempt to assess and then potentially enforce the order for costs), the information now available in Wedall reveals what might be a state of affairs very different from mere funding of disbursements.

If what is alleged by Mr Weddall is made good, the solicitors have pressed on with this litigation without ATE insurance, contrary to his express instructions and in circumstances where what they might have recovered by way of costs is by no means insubstantial: to use the words in Hamilton v Al Fayed (No 2) [2003] QB 1175, 1194, it is arguable that the solicitors were taking a lead in the litigation and effectively seeking “to control its course”. This latter possibility more than justified full disclosure and, given the circumstances, is sufficient (on the basis of a ‘similar fact’ argument) equally to justify disclosure in cases being conducted at the same time by the same solicitor on a CFA without ATE insurance: that would include Flatman v Germany.

In the circumstances, in the light of what is now known, I would dismiss the appeal both in Weddall and in Flatman (albeit for reasons different to those advanced by Eady J). In the former case, discovery has now been provided and a costs application is underway. In the latter case, some information has been made available (albeit that both parties have overlooked that fact until a late stage in the appeal) but I see no reason why, in the unusual circumstances that have arisen, disclosure should not also be provided. Unless waived by Mr Flatman, legal professional privilege may impact on documents the disclosure of which is now sought and any order must permit an argument about privilege to be taken.

I appreciate that what has emerged in Weddall would not normally become known to a successful opponent in the absence of some sort of disclosure. I equally recognise that insurers will not wish to go to the expense of a costs assessment and enforcement exercise against an impecunious litigant simply in the hope that some detail will emerge which might alert them to the prospect that costs might be recovered against the solicitor. It is, however, a comparatively straightforward matter to deal with. The Law Society makes it clear that if solicitors have agreed to indemnify their client (as is entirely lawful: see Sibthorpe), the solicitors could not then seek to deny the existence of that indemnity or prevent their client from relying upon it. For my part, without seeking disclosure of documents, I see no reason why a successful insurer should not obtain an order for costs in principle against the claimant, together with an interim payment on account and invite the claimant to reveal the extent to which the litigation had been supported by any third party and to provide any reason why the costs order should not be enforced. I appreciate that it will not assist in many cases: examples such as Weddall, however, stand a prospect of being exposed thereby permitting the insurer to decide what, if any, further steps need to be taken.

Although I agree that the basis on which Eady J ordered disclosure of information and documents was not justified in law (and, thus, I endorse the principled objection to his order which is what caused the Law Society to intervene in the appeals), that which has emerged from Mr Weddall clearly justified the order that Eady J made and it has, in fact, been complied with: in those circumstances, I would dismiss the appeal in his case. Further, because the argument that the approach of the solicitor in that case (that is to say, prima facie, to press on regardless of specific instructions not to do so without ATE insurance) could – I do not say will – justify an order for costs against the solicitor, I consider it equally sufficient to require disclosure in a similar case undertaken by the same solicitor at the same time. I would therefore dismiss the appeal in Mr Flatman’s case as well.

It is abundantly clear from the written arguments in this case that substantial issues as to costs of the appeal will arise. In my view, the parties should exchange and lodge skeleton arguments on costs issues within 14 days, with 7 days thereafter to respond to the skeleton argument of the other side; this does not apply to the Law Society. In the absence of good reason to do otherwise, a decision on costs could then be reached on paper.

I agree.

I also agree.