Dole v ECT Recycling Ltd

The issue in this appeal, from Principal Costs Officer Lambert, is whether the Claimant’s CFA is unenforceable because her solicitors Messrs Bird and Lovibond, were in breach of Regulations 4(2)(c) and 4(2)(d) of the Conditional Fee Agreement Regulations 2000 (“CFAR 2000”).

Principal Costs Officer Lambert held that there was no such breach and proceeded to assess the bill in total sum of £7,827.19, which includes £3,516.96 for the costs of assessment as appears from the final cost certificate dated 3 April 2007.

The Claimant sustained personal injuries on 23 May 2004, when travelling as a passenger on a No. 195 bus near Park Avenue Road in Southall, close to Tesco Stores in Bullsbridge between approximately 1.15 and 1.30 pm.

The Claimant was sitting at the front of the bus opposite the driver, who suddenly slammed on the brakes. As a result of which a very large man who was standing up fell on top of the Claimant’s leg.

The Claimant was taken to Hillingdon Hospital by ambulance where she was diagnosed as having suffered two or three broken bones in her right leg, and had to undergo surgery whereby a pin and plate were inserted into her leg.

She remained in hospital for 17 days, after which she was given a walking frame and then spent several months bedridden at home.

At a further appointment at Hillingdon Hospital on 13 July 2004, the Claimant was advised that her leg had become infected.

A letter of claim was written as early as 26 May 2004, and followed up on 1 June 2004. And on 11 June 2004, Heath Lambert, the Defendant’s brokers wrote to the Claimant’s daughter saying:

“Please note our interest as brokers and claims handlers for the above named client [ECT Recycling Limited Buses] and write to confirm liability is not in dispute.”

On 8 July 2004, the Claimant’s solicitors wrote to the brokers a letter including the following phrase:

“This case is being pursued by virtue of a conditional fee agreement supported by after the event insurance.”

As was submitted during the hearing before me, the Defendant’s brokers might well have assumed from that letter that a CFA had already been entered into by that date. But in fact, this did not occur until a week later, on 15 July, when the Claimant did enter into a CFA and an ATE policy was taken out. A Notice of Funding was served on the brokers on 27 July 2004.

On 26 August 2004, Ensign Motor Policies wrote to the Claimant’s solicitors and the first two paragraphs of that letter reads as follows:

“We can confirm that we have recently been passed a copy of the file of papers from our insured’s brokers. We will take this opportunity to point out that Heath Lambert Group are not our agents in this matter and that the file will be handled from this office from now on.

Following consideration of the content of the file of papers it is noted that we have never received a formal Letter of Claim from you in connection with this incident. We trust you will forward for our attention in early course. Although we would envisage that you will be very familiar with the format we enclose a copy of the sample document from the DCA website.”

During the argument before the Principal Costs Officer, there was apparently a submission made that the first of the two paragraphs quoted above amounted to a repudiation of the admission of liability previously made by the brokers. Apparently, the Principal Costs Officer rejected that submission.

On this appeal this was mentioned to me, but I have not pursued it because both Counsel recognise that it was peripheral to the main question which I have to decide. For what it is worth I do not think that such a paragraph can be properly construed as repudiation of the acceptance of liability.

It was always obvious that the Claimant, an innocent passenger on a bus, could not possibly be in any way to blame. Although, at least in theory, there might be a Part 20 proceedings between the driver of the bus and the person or driver who caused him to slam on his brakes, this would not affect the Claimant’s entitlement to compensation.

Continuing with the narrative, on 26 October 2004, the Claimant’s solicitors wrote the pre-action protocol letter of claim to which Ensign replied on 24 November 2004:

“Further to your letter of 26 October 2004, we write to advise that liability will not be an issue in this case.

We await receipt of a medical report from Mr Gray and will be very grateful for a note of your client’s special damages to date to assist us with reserving.”

Approximately two weeks later on 8 December 2004, Ensign again wrote to the Claimant’s solicitors in the following terms:

“Further to our letter on 24 November 2004, we write to advise you that your client, as a passenger on one of our insured’s buses, has the benefit of Before The Event Legal Expenses Insurance. To make a claim under this policy, please either phone DAS Legal Expenses Insurance Company on 0800 783 6066 quoting policy number TS4/3823368 or write to them quoting the same reference at DAS Legal Expenses Insurance Company Limited Motor Claims Centre, DAS Legal Expenses and Insurance Co. Limited, DAS Parc, Greenway Court, Bdwas, Caerphilly, CF83 8DW.”

Following the obtaining of a Schedule of loss in December 2005, and Counsel’s advice on quantum which was to the effect that the claim was worth in the region of £15,000 - £16,000, the Claimant made a Part 36 counter offer of £15,000 for a final settlement. The original Part 36 offer by the Defendant dated 21 December 2005, had been for the sum of £14,000.

On 13 February 2006, the Defendant’s insurers increased their offer from £14,000 to £15,000, which offer the Claimant duly accepted.

Accordingly the Claimant’s solicitors issued a costs only proceedings, which under the then relatively recently changed rules had to be brought in this office. The matter was balloted to Principal Costs Officer Lambert on 29 January 2007, who sent out notices on the same day appointing the assessment to take place before him on 19 March 2007.

It was apparent from the Defendant’s Counsel’s skeleton argument that a major point to be perused by the Defendant, at the detailed assessment hearing, was that by failing to advise the Claimant of the possibility of her taking advantage of the BTE insurance, referred to in the Defendant’s insurers letter of 8 December, the Claimant’s solicitors had failed to comply with their obligation under Paragraph 4(2)(c) CFAR.

Accordingly at a very late stage, in fact on the day before the hearing before Principal Costs Officer Lambert, a witness statement was made by Mr Gary Bennett, a senior partner of the Claimant’s firm and head of their personal injury department. After the formal introduction the following paragraphs appear:

“2.

I have specialised in personal injury cases since approximately 1998. Most cases are funded by way of conditional fee agreements. I am extremely familiar with the regulations and practice relating thereto. I confirm that as at the date when the CFA was signed in this case (15/07/2004) it was not common knowledge that the bus companies would have been covered by Before The Event Legal Expense insurance which would have been available for passengers to sue the bus company for the negligent driving of its own drivers.

3.

The fact that bus companies may have BTE insurance which would extend to passengers, only became well known at some point at 2005 which was after the Defendants had informed the firm in this particular case that BTE cover was available which they only informed the firm in their letter dated 8.12.2004. The firm has never been provided with a copy of the policy in any event.

4.

The first case which highlighted the point that bus companies can have this form of insurance was the case of Robinson v Doselle which was not until December 2005. When my firm became aware of the existence of this kind of policy in “bus accident cases” it of course became a standard enquiry to make of the defendants when being first instructed by a claimant who had been injured as a passenger on a bus.

5.

Back in July 2004 the idea that a bus company would have applied Legal Expense Insurance to the passengers on a bus to sue itself would have seemed unlikely to say the least. Very few would have considered inquiring of the bus company whether such a policy was available.”

Although it does not say so, this witness statement was clearly in answer to one put in on behalf of the Defendant by Mr Richard Jones, senior claims handler. The relevant paragraphs of that witness statement (dated 24 November 2006) read as follows:

“2.

The Claimant was a passenger travelling on board the Defendant’s vehicle at the time of the accident. The Defendant was insured by Ensign Insurance. From my own knowledge, and information I have obtained by reading the Ensign underwriter’s file relating to the policy with the Defendant, the Ensign Motor Insurance policy automatically includes before the event legal expenses insurance cover which provides legal expenses cover to “insured’s” who are defined as any authorised driver or occupant to the motor vehicles insured by Ensign and the person responsible for insuring it. Accordingly the Claimant was covered under the terms of the Ensign insurance before the event legal expense insurance cover at the time of the accident on 23 May 2004.

3.

The Ensign before the event legal expense insurance cover is administered independently of Ensign by DAS Legal Expenses. DAS are entirely independent of Ensign. We do not correspond with them in relation to any of the claims being managed by them. The claims are dealt with by DAS and their panel of solicitors in their entirety.

4.

If the Claimant or her solicitors had approached the Defendant or Ensign with a request for indemnity under the terms of the Defendant’s BTE legal expense policy, Ensign would have referred the claim to DAS.

5.

There is attached marked “RJ1” a copy of the relevant parts of the Ensign Motor Insurance Policy wording covering vehicles operated by the Defendant.”

Clearly the Defendants had no time to answer Mr Bennett’s witness statement without obtaining an adjournment of the hearing before the Principal Costs Officer which they did not seek. However, Mr Marven on behalf of the Claimant, in his cogent submissions before me, submitted that they had had plenty of time between the hearing before the Principal Costs Officer in March and the hearing before me at the beginning of July in which to put in rebuttal evidence. But they did not do so, from which he asked me to infer that the Defendants must be taken as accepting at its face value what Mr Bennett said about the Claimants’ solicitors’ state of knowledge at the time the CFA was entered into in this case.

As indicated, the Principal Costs Officer rejected the Defendant’s submissions and proceeded to assess the bill. We do not have a copy of his reasons but this is immaterial since the appeal constitutes a rehearing, and it is for me to come to my own independent decision based on the evidence and submissions made to me.

So far as the latter are concerned, the Defendant’s Counsel put in a revised skeleton, but Mr Marven was content to rely on the skeleton put in by his predecessor who appeared before the Principal Costs Officer, Mr Glassbrook.

Apart from the revised skeleton put in on behalf of the Defendant by Ms Butler-Cole, there was no additional material put before me that was not also before Principal Costs Officer Lambert.

The short but formidable point advanced in that skeleton and amplified by Ms Butler-Cole was that by failing to enquire of the Defendant whether BTE insurance was available to the Claimant as a passenger on the Defendant’s bus the Claimant’s solicitor were guilty of a breach of Regulation 4(2)(c) and (d) thereby rendering the CFA unenforceable.

The relevant parts of Regulation 4 read as follows:

“4(1) Before a conditional fee agreement is made a legal representative must

(a)

inform the client about the following matters, and

(b)

if a client requires any further explanation, advice or other information about any of those matters, provide such further explanation, advice or other information about them as the client may reasonably require.

4(2) Those matters are ….

(c)

whether the legal representative considers that the client’s risk of incurring liability for costs in respect of the proceedings to which agreement relates is insured against under an existing contract of insurance,

(d)

whether other methods of financing those costs are available, and if so, how they apply to the client and proceedings in question,

(e)

whether the legal representative considers that any particular method or methods are financing any or all of those costs is appropriate …”

She further submitted that it is common knowledge and would (or should) have been in 2004, that Motor Insurance policies frequently include legal expenses insurance which extends to passengers.

As authority for this proposition Ms Butler-Cole referred to the case of Sawar v Alam [2002] 1 WLR 125; [2002] 1 Costs LR 37.

Ms Butler-Cole particularly relied on paragraph 41 of the judgment of Lord Philips of Worth Matravers, then the Master of the Rolls, under the cross heading: “The appropriateness of BTE cover for Small Motor Accident Claims”:

“41.

In this case we are concerned only with the relatively small personal injuries claim in a road or traffic accident. We are not concerned with claims which look as if they will exceed £5,000 and we are not concerned with any other type of BTE claims. We have no doubt that if a Claimant possesses pre existing BTE cover which appears to be satisfactory for a claim of that size then in the ordinary course of things the Claimant should be referred to the relevant BTE insurer”.

Later on in the judgment at paragraph 45 under the cross-heading “11 Proper Practice for a Solicitor inquiring about BTE Cover” the learned Master of the Rolls said:

“45.

In our judgment, proper modern practice dictates that a solicitor should normally invite a client to bring to the first interview any relevant motor insurance policy, any household insurance policy and any stand-alone BTE insurance policy belonging to the client and/or any spouse or partner living in the same household as the client. It would seem desirable for solicitors to develop the practice of sending a standard form of letter requesting a sight of these documents to the client in advance of the first interview. At the interview, the solicitor will also ask the client, as required by Paragraph 4(j)(iv) of the Client Care Code (see paragraph 14 above) whether his/her liability for costs may be paid by another person for example an employer or trade union”.

In answer to a question from me during the course of the argument, Ms Butler-Cole accepted that this case, and indeed all the other cases apart from those to which she refers in her submissions, proceed on the basis of enquiries being made by the solicitor of his client, as to the possession by a client and/or his spouse of the relevant BTE insurance policy and that no previous case refers to the necessity to enquire of the defendant whether he held any relevant BTE insurance. However, she contended that the wording of Paragraph 4(2)(c) did not preclude the construction she advanced.

She submitted that it would not have taken much effort for the solicitors to have written one letter to the Defendants on this point, although she accepted that, depending on the answer, there might have needed to be further follow-up letters. She further submitted that, on the authorities, there was no need to prove prejudice, and that any suspicion that the matter could not be dealt with properly by the Defendant’s BTE insurers was not sustainable in the light of the Defendant’s indication that any such claims would be dealt with totally independently of the Defendant’s own liability.

Apparently there is now a national scheme to that effect, but of course, that was not effective at the relevant time. But nevertheless, Ms Butler-Cole suggested that the DAS Scheme referred to in this case was sufficient.

She also referred to two additional cases, which she said supported her contentions. The first of these is a decision of District Judge Hickman, handed down on 19 December 2005 in Milton Keynes County Court, in the case of Lorna Robinson v Allen Doselle.

In a comprehensive judgment the District Judge deals with the Sawar v Alam point by quoting, as I have done, not only Paragraph 45 of the Judgment of the Master of the Rolls but also the following five paragraphs. He also reviewed other authorities such as Hollins v Russell [2003] 1WLR 2487; [2003] Costs LR 423. He also referred to the case of Culshaw v Goodliffe decided by HHJ Stewart QC in Liverpool County Court, in late November 2003 and concluded:

“I think that is too generous. The Court of Appeal in Sawar v Alam set out clear and straightforward principles, and while those principles do not amount to an inflexible code, they do amount to a guide to sensible good practice. Litigators are plainly put on notice by Sawar v Alam that motor policies commonly contain LEI cover available for the benefit of passengers. In this case Mr Piggott could easily have asked MK Metro. To do so would not have been to “embark on a treasure hunt” it would have involved the writing of one letter.”

The other case from which Ms Butler-Cole relied is the decision of Master Gordon-Saker, sitting as a Deputy Judge of Central London County Court in this office, Cochrane v Chauffeurs of Birmingham in which he handed down judgment on 19 December 2006. She relies particularly on the last sentence of paragraph 11 of his judgment:

“It seems to me it is common knowledge that motor insurance policies often provide legal expense insurance cover and that such cover often extends to claims by passengers of the insured driver.”

Ms Butler-Cole concluded her submissions by saying that there was no obligation on the Defendant voluntarily to disclose the existence of their passenger cover, although in fact they did so, and that the onus was squarely on the Claimant’s advisers to ascertain this information.

In his cogent submissions Mr Marven submitted that there were two major flaws in the Defendant’s argument.

Firstly, he submitted that Ms Butler-Cole’s reliance on the decision in Sarwar sought to convert into an immutable principle, what was effectively only a question of fact decided adversely to the Claimant on the facts of that case.

Secondly, he relied heavily on Mr Bennett’s witness statement, and to the fact that it was not contradicted. He reminded me that this CFA was entered into in March 2004, and whilst Sawar v Alam had then been decided, Mr Bennett’s undisputed evidence was that it was not generally thought that insurers of bus companies, and other public liability vehicles, would necessarily have cover to be operated independently which would be available to passengers injured only on the public service vehicle.

He also made much of the fact that the Defendants, through Ensign motor policies, did not advise the Claimant’s solicitors as to the existence of this separate policy until two weeks or so after they had reconfirmed, as he put it, their admission of liability previously made by the brokers.

He submitted that if they had indicated to the Claimant’s solicitors at the outset of their involvement that there was this separate policy (which must of course have been known to them), then it might have been possible for the Claimant and his advisers to “unpick” the CFA arrangements, and to rely instead on the independent policy offered by the Defendants.

Turning to the authorities, and dealing first with the case of Sawar v Alam, Mr Marven placed great emphasis on what he called the proviso, which is to be found in paragraph 41 of the judgment in that case:

“We are not concerned with claims which look as if they will exceed £5,000 and we are not concerned with any other type of BTE claim.”

He reminded me that this claim could certainly not be classified as “a small motor claim”, as the Claimant sustained quite serious injuries, and her claim was ultimately settled for £15,000.

Turning to the District Judge’s decision in the case of Robinson v Doselle, he submitted that it was a decision which was in no sense binding on me, and that it was open to me to distinguish that case, and to come to the opposite conclusion.

So far as the case of Cochrane v Chauffeurs of Birmingham was concerned, there was a complication at the oral hearing before me. Mr Marven was able to confirm that Master Gordon-Saker’s decision had been appealed, and that a Circuit Judge at Central London had dismissed the appeal. However, he could not say more than that, in the absence of a transcript of the Circuit Judge’s judgment.

Accordingly, he made submissions based on Master Gordon-Saker’s judgment at first instance in Cochrane, and, since I was going to reserve judgment in any event, I decided to see if a transcript of the Circuit Judge’s decision would become available before it was necessary for me to complete this judgment.

Obviously, when this did occur, early in August, I sent a copy to both Counsel, and asked them to submit any further written submissions they might have in the light of that judgment before I completed this draft judgment.

As I have indicted above, the submissions before me by Ms Butler-Cole relied heavily on what Master Gordon-Saker had said at first instance, in paragraph 11 of his judgment in Cochrane.

After quoting paragraphs 55 and 62 of the judgment of Lord Justice Dyson in Garrett v Halton Borough Council; Myatt v National Coal Board [2006] Costs LR 798, Master Gordon-Saker said this:

“11.

I take that to mean that to comply with the regulation a solicitor must take reasonable steps to ascertain the true insurance position so as to enable him to inform the client of the matters set out in Regulations 4.2(c) and 4.2(d). It seems to me it is common knowledge that motor insurance policies often contain legal expenses insurance cover and that such cover often extends to claims by passengers of the insured driver.”

Mr Marven in his submissions, which obviously were also based, and could only be based, on what Master Gordon-Saker had said, submitted that the Cochrane case was not binding on me, but only of persuasive authority, and I could ignore it, if I felt that the proper course to follow.

The transcript of the judgment of His Honour Judge Lindsay QC is obviously important, because of the way the Judge deals with this particular point. Ms Butler-Cole particularly relies on what the Judge says in paragraph 20 of his judgment, which reads as follows:

“20.

I am grateful to both Mr Holland and to Mr Mallalieu for the extremely detailed and careful submissions they have presented. I have, however, no hesitation in deciding that this appeal should be dismissed. The Master applied, in my judgment, the proper test in paragraphs 11 and 16 of his judgment. In my view, he was fully entitled to make the observations that he did at paragraph 11 about the common knowledge point in the light of the decision in Sarwar and the evidence of Mr Jones. Those observations apply with equal force to a reasonable solicitor acting on behalf of the client in November 2004. Dyson LJ said that the solicitor must take steps to ascertain what the insurance position is in order to be in a position to say whether he considers that the client’s risk of costs is already insured.”

Ms Butler-Cole also said that I should follow the approach of His Honour Judge Lindsay set out in the following paragraph from his judgment:

“21.

I agree with the Master that one is not concerned in this case in considering whether or not Mrs Cochrane would have availed herself of the advantage of the DAS policy. The obligation was upon the solicitor to take reasonable steps to ascertain the true position so they could inform her about the matters contained in the regulations. I consider that the Master was right in stating that by failing to enquire of the defendant as to whether the policy provided legal expenses insurance for passengers, the solicitors failed to comply with either regulation 4(2)(c) or (d).”

In his supplementary submissions, having received the judgment, Mr Marven points out that the facts of Cochrane were markedly different from the facts in the present claim, and he reminds me that Mr Gary Bennett’s evidence quoted above was based on his experience that it was not common knowledge at the time this CFA was executed, on 15 July 2004, that buses had BTE insurance. He further submitted, in the absence of any contradictory evidence from the Defendant’s insurers, that is a complete answer to the Defendant’s reliance on the case of Cochrane. He reminded me that there was ample time, between the hearing before Principal Costs Officer Lambert and the hearing before me, for the Defendant to put in contradictory evidence from Mr Jones to that put in by Mr Bennett, but no such evidence was adduced.

Mr Marven then contrasts the factual position in this case, with that which occurred before Master Gordon-Saker in the Cochrane case, pointing out that the uncontradicted evidence in that case was that it was common knowledge in November 2004 that such insurance was available through the Defendants. He reminded me that in that case the Defendants put in evidence to that effect, which was not contradicted on behalf of the Claimant.

Next, Mr Marven reminded me that although in Cochrane there was reference made to the case of Sarwar v Alam, that case did not concern buses’ insurance, as opposed to a private motorist’s insurance, and therefore it cannot constitute a proper basis for doubting Mr Bennett’s evidence.

Mr Marven also submits that there is a further distinction between Cochrane and this claim, in that in this claim there had been between the parties correspondence, intimating a claim prior to the CFA being executed. Thus, the Defendant, although acting on its behalf, had the opportunity to say at that stage if it was prepared to provide insurance to the Claimant. Conspicuously the Defendant did not do that. It was only five months after the CFA was executed that the Defendant for the first time mentioned the existence of this BTE policy. He submitted that the tenor of the judgment of Master Gordon-Saker in Cochrane suggests that there was no such inter parties correspondence before the CFA that was executed in that case.

Finally, Mr Marven submitted that the decision in Cochrane may have been influenced by the particularly unattractive features of the CFA arrangement in that case, as referred to by Master Gordon-Saker in paragraph 16 of his judgment: it was not accompanied by ATE insurance and there was an irrecoverable success fee. He speculated that those feature might have “elevated” the Regulation 4(2)(c) duty in that case, to investigate other methods before executing a CFA, but reminded me that these features were not present in this case.

I accept the clear conclusion from Mr Bennett’s uncontradicted evidence that the state of knowledge of solicitors specialising in this field in the summer of 2004 was not that the defendants to a claim of this nature might have passenger cover, and in particular that such cover would be dealt with independently of any claim made against them by the passenger.

In her oral submissions Ms Butler-Cole suggested that it would have been difficult to contradict such evidence, but, in my judgment, that is not so. However, she also submitted that even if such evidence was adduced, the Court faced with a conflict of witness statements would still have to make a decision as to reasonableness.

The Defendants, presumably, act for insurers of public service vehicles, notably buses, which would necessarily involve a substantial number of claims, and certainly more claims than any individual claimant’s solicitor would be likely to encounter.

If, therefore, there was evidence that it was general knowledge in July 2004 that that such cover existed, one would have expected the Defendants to have put in evidence to that effect.

I consider that this is the vital distinction between this case and the case of Cochrane, but, even if I am wrong about that, I would not follow the decision of Master Gordon-Saker, notwithstanding what is said about it on the appeal by His Honour Judge Lindsay.

Accordingly, I find that there has been no breach of either Regulation 4(2)(c) or 4(2)(d) of CFAR 2000, and that this CFA is accordingly valid and enforceable.

It follows from the above that this appeal fails, and must be dismissed. When this judgment is formally handed down, I will hear submissions on costs, and any other relevant matters the parties may wish to raise, but as Principal Costs Officer Lambert has already assessed the bill, it would seem there would be little more to do, other than summarily to assess the costs of the appeal.