Khans Solicitors v Chifuntwe & Anor

These are proceedings issued under CPR Part 8 by Khans Solicitors (“Khans”) against the First Defendant (“Mr Chifuntwe”), their one time client, on whose behalf the firm acted in proceedings for Judicial Review against the Second Defendant (“SSHD”). Khans seek the following relief:

I heard the application on 16 January 2012. Earlier, Mr Chifuntwe had requested an adjournment until August 2012 on the grounds that he was out of the jurisdiction (in Zambia) and was unwell; he lodged a letter from a Dr Chisala of Buchi Small Clinic, Zambia in confirmation. At the hearing, Khans were represented by Mr Biggs and Mr Radley-Gardner appeared for SSHD. Having considered Mr Chifuntwe’s application, I decided that the Overriding Objective in CPR 1 would not be furthered by granting an adjournment. Counsel did not dissent from this view. The hearing went ahead and I reserved judgment.

It is necessary to set out the chronology in detail. For the most part this is taken from the Claim Form, as supplemented by Mr Radley-Gardner’s skeleton argument and Counsels’ oral submissions:

Mr Biggs submitted that Khans was an interested party in the resolution of the costs of the Judicial Review proceedings. The SSHD had been aware of that fact through the August/September correspondence which had been written by Khans to prevent the £6,000 being released to Mr Chifuntwe. Nonetheless, the SSHD had purported to settle the costs direct with him for a sum below that which would have been recovered on detailed assessment, in circumstances where Mr Chifuntwe had then pocketed the £6,000 for his own benefit and absconded. Mr Biggs relied on Re Margetson & Jones [1897] Ch 314, in which Kekewich J at page 319 had said this:

“… and therefore whether there is a litigation pending or not, if the solicitor for the Defendant meets the Plaintiff and effects a compromise with him, that compromise is binding upon the Plaintiff or the Defendant, as the case may be, notwithstanding that up to that time he had been represented by a solicitor. That is consonant with common sense as the rule itself; but what the Court has also said is that it must be done honestly and in a straightforward way to get rid of the litigation for the sake of peace, and not with a view to depriving the solicitor of his costs. If the one solicitor meeting the party on the other side, or the two parties compromise knowing of the lien of the solicitor and intending to defeat it, that shall not be allowed; and the only question, therefore, is whether that was the intention. That runs through all these cases as, in The Hope (1), where Lindley LJ says:

“There is no rule that the parties may not compromise an action without the intervention of their solicitors. They must, however, do so honestly and not intend to cheat the solicitors of their proper charges.”

The word “cheat” is not a bit too strong: the Master of the Rolls also uses it.”

In the present case, SSHD had been aware of Khans’ strong objection to the costs being paid to Mr Chifuntwe direct, since his purpose in telling SSHD to do so was in order to undermine Khans’ interest in the costs of the Judicial Review proceedings and to keep the costs for his own benefit. In these circumstances, Mr Biggs contended that the Court should go behind the putative settlement and find that there had been no valid compromise, alternatively, to hold that the settlement should not be binding. As regards the application for the charging order, Mr Biggs submitted that an order could be made over the costs pursuant to Section 73 (see Re Ford (No.4) [1967] 2 AER 646 at page 655).

Mr Biggs also drew the Court’s attention to CPR 47.6. This provides that where (as here) detailed assessment proceedings are commenced by the receiving party, a copy of the notice of commencement and the bill must be served “on any other relevant persons, specified in the Costs Practice Direction”. Section 32.10 of the Practice Direction provides that for the purposes of rule 46.6(2) a “relevant person” means:

“(b)

any person who has given to the receiving party notice in writing that he has a financial interest in the outcome of the assessment and wishes to be a party accordingly”

In Mr Biggs’ submission it was the clear intention that that part of the Practice Direction meant that any interested party should be treated as a party to the assessment: here, for there to have been a valid settlement, the Solicitors would have needed to be a party to a compromise with SSHD. On the facts, they were not.

Mr Radley-Gardner submitted that at the time of the settlement on 2 August 2011 there had been no solicitor/client relationship because by then Mr Chifuntwe had terminated the retainer. From that point, Mr Chifuntwe had been a free agent, able to conclude the compromise that had been reached. Had Mr Chifuntwe been in breach of the retainer with Khans, that was a matter as between Khans and their client in respect of which the firm had a contractual remedy. In any event, the £6,000 had not been paid over straightaway. The SSHD had been very careful to check the status of Mr Chifuntwe so far as the court records had been concerned. Had Khans still been on the Court record, it would have been unprofessional for SSHD to have communicated with Mr Chifuntwe. However, a check had been made concerning the Court record before the money had been handed over, which revealed that Mr Chifuntwe was acting in person. In these circumstances it was clear that at the date of the compromise, he had been acting in person and that Khans were no longer his Solicitors.

As to Margetson & Jones, that case applied only in strong circumstances. There was no suggestion that Mr Chifuntwe had tried to cheat by compromising the costs aspect of the claim in order to defeat any interest which Khans might have had in the costs of the Judicial Review proceedings. Outside a special case such as that which occurred in Margetson & Jones, a principal (here Mr Chifuntwe) was free to compromise without reference to his solicitor. In these circumstances, there was no cause of action which could be brought against SSHD and the claim should be struck out.

It is common ground (at least Khans do not assert to the contrary) that the one-time client of a solicitor can personally compromise the costs of an action with his opponent, where he does so having served Notice of Acting in Person and without a cheat. An example would be where a client has paid his former solicitor in full, so that there can be no question of that solicitor being able to exercise a lien to obtain a charging order over the inter partes costs. Where, however, the client cheats in the sense that he intends to deprive his former solicitor of costs by serving Notice of Acting in Person and diverting payment to himself, the decision in ReMargetson & Jones will provide the solicitor with a remedy. It follows that the issue which I have to decide is whether Mr Chifuntwe’s purpose in simultaneously dismissing Khans, accepting the offer of £6,000 and requesting that payment be made to himself, is a cheat. That leads to a further point: did SSHD collude with Mr Chifuntwe by settling the costs for less than they were worth, thereby resolving the Secretary of State’s liability for costs under the Order of 29 April 2011 in an amount lower than Khans could have achieved on a detailed assessment?

In my judgment, there is no evidence to support the proposition asserted in paragraph 3 of the Claim Form that Mr Chifuntwe intended to undermine Khans’ interest in the costs of the Judicial Review Proceedings and to keep the costs for his own benefit. In the first place, Mr Chifuntwe made no secret of what he was doing. His letter of 2 August 2011 was copied not only to Khans and the Court but also to the Chambers of Mr Kadri QC. Secondly, SSHD did not keep quiet about the proposed settlement, still less was the £6,000 paid over straightaway and without reference to Khans. On the contrary, as I understand Mr Radley-Gardner’s submission, steps were first taken to check with the Court that Mr Chifuntwe and not Khans were on the Court record and thereafter, that the payment itself was not made until after the proceedings before Thirwell J had been dismissed. In these circumstances I am not prepared to find that Mr Chifuntwe was acting in a manner that was underhand, nor am I willing to reach such a conclusion so far as SSHD is concerned.

The facts are, in any event, different from those in ReMargetson & Jones. In that case, Mr Jones had reduced his bill to his former clients, Mr and Mrs Pugh, by £25 without reference to the Pughs’ new solicitor, Mr Margetson. He then paid over the agreed sum without notifying Mr Margetson on the basis, according to Mr Jones, that Mr Margetson’s retainer had long since been determined. Mr Margetson complained that this had been done without any application or communication being made to him as to whether any costs were owed to him by the Pughs, who were known by Mr Jones to have financial difficulties and that the £25 would not find its way to Mr Margetson.

Kekewich J found “a distinct case of a cheat” on the part of Mr Jones, in that what Mr Jones had done had been with the intention of cheating Mr Margetson of his costs -(Judgment page 320.) That is not the case here. There was no collusion between Mr Chifuntwe and SSHD to deprive Khans of their costs. The settlement was not done “on the quiet”: Khans were well aware of it: indeed they had threatened proceedings for an injunction to prevent payment direct to Mr Chifuntwe and had issued the application which Thirwell J struck out. It follows that I agree with Mr Radley-Gardner that this is not a strong case to which the rule in Margetson & Jones would apply and I decline to find that compromise was invalid, in which case the question of a charging order over the £6,000 under Section 73 cannot arise.

As to CPR 47.6 and CPD 32.10, this does not assist Khans. The rule involves a direction of the Court that the request be served on the person with an interest in the assessment. Since Khans served the Notice of Commencement themselves, the firm was on notice and the complaint itself is not one of ignorance about the existence of the detailed assessment proceedings, but rather, that as solicitors, the firm has been cheated out of £6,000. However, for the reasons I have given, I find that there was no cheat on the facts of this case.

As to the submission that Mr Chifuntwe may have settled the costs for less than would have been recovered on detailed assessment, the answer to that, as it seems to me, is that it is trite law that absent an agreement to the contrary, costs recoverable from an opponent in litigation belong to the client and not to the solicitor. However, the tenor of Khan’s letter to Mr Chifuntwe dated 4 August 2011 suggests that the firm believed to the contrary, not only that the costs belonged to them, but also that the issue of the costs had nothing to do with him. That was said despite the fact, I am told, that Mr Chifuntwe had paid £1,500 on account of costs and that Khans could have safeguarded their position by taking additional funds “up front” thereby avoiding the situation in which the firm now finds the need to assert a cheat on its erstwhile client’s part. In any case, if, which I do not accept, Mr Chifuntwe did settle “on the cheap”, it would be he and not Khans who would be the loser, since by accepting just £6,000, he will have thereby increased the potential shortfall between the amount Khans have, or may in the future, charge him for doing the work, and the sum that he has received from SSHD.

Finally, although it did not appear to be at the forefront of Mr Biggs’ submissions, because it is mentioned in the Claim Form, I need to deal with the increased “offer” made by Kain Knight. The argument, as I understand it, is that the offer of £6,000 was varied or withdrawn by the offer of £7,125. I disagree. If there was a concluded agreement between Mr Chifuntwe and SSHD for £6,000, the fact that £7,125 was later put on the table cannot have undone what had been crystallised on 2 August 2011 unless Mr Chifuntwe agreed, which he did not. Moreover, even if the £7,125 was a valid offer, it was never accepted and was, in any case, overtaken by the performance of an agreement to settle for £6,000 when that sum was tendered and paid. For all these reasons, the application must be dismissed.

The application for declarations in the terms set out in paragraphs (1) and (2) of the claim form dated 23 December 2011 are refused. The request for an order for payment of £6,000 is also refused. To save costs, there is no need for the parties to attend when this judgment is handed down. Subject to any argument to the contrary, I would propose ordering Khans to pay SSHD’s costs, that these should be resolved by agreement, but that if that is not possible, a schedule be lodged so that I can deal with the amount on paper. Likewise in relation to permission to appeal: any application is to be made in writing within 14 days of the date of handing down.