LEGAL ADVICE/FUNDING


Claims management - conditional fee agreements - legal advice - legal costs insurance - solicitor and client costs

Jones v Wrexham Borough: CA (Civ Div) (Lords Justice Waller (vice-president), Longmore, Hughes): 19 December 2007



The appellant (J), who had funded litigation against the respondent (W) via a conditional fee agreement (CFA), appealed against the ruling of a circuit judge in the county court that the CFA was unenforceable for failure by J's solicitors to inform her of an interest as required by regulation 4(e)(ii) of the Conditional Fee Agreements Regulations 2000.



J had entered into a loan agreement and insurance policy to finance a personal injury claim and her case had been sent to the insurer's panel solicitor. The solicitors sent a client care letter asking J to sign a CFA and recommending insurance with the insurer. By the terms of the CFA, it was stated that the insurer's litigation insurance cover was 'only made available to you by solicitors who have joined the scheme'. However, by the final term of the CFA, the solicitors stated that they 'did not have an interest in recommending this particular insurance agreement'.



The main issue in the present appeal was whether the CFA fell within regulation 3A of the 2000 regulations as amended by the Conditional Fee Agreements (Miscellaneous Amendments) Regulations 2003.



At first instance, the district judge had allowed reliance on the client care letter, and on the recoverability of disbursements under the insurance policy, to conclude that the CFA fell within regulation 3A, but on appeal to the circuit judge, the client care letter was found not to be an admissible resource when construing the CFA contract. The circuit judge had also found that if the fees could be met by insurance, it followed that liability for costs remained with the client, since an insurance company simply indemnified a client against a liability.



The questions for determination were whether J's CFA made her liable only for fees and expenses that she would recover by way of costs 'or otherwise' in accordance with the meaning of those words as used in regulation 3A(i), and whether, in considering whether a CFA fell within regulation 3A, regard should be had to the client care letter or to the CFA agreement alone. It was the first occasion on which the court was required to consider the 2003 regulations.



J submitted that the words 'or otherwise' included a situation where the claimant recovered under an insurance policy what he might otherwise be liable to pay to his solicitor, so that such a CFA was within regulation 3A. W argued that by using the word 'recovery', it was clear that the words 'or otherwise' did not include insurance because 'recovery' denoted recovery (in the costs sense) from the claimant's opponents. In relation to the second issue, J maintained that the terms of the CFA left her with no liability for any costs. W argued that, on the terms of the client care letter, J was liable to pay the client's disbursements and that the language of regulation 3A had, therefore, not been complied with.



Held: (1) In the CPR, 'recovery' and 'recovered' certainly related to recovery of costs from a party, but not much reliance could be placed on the use of the word in regulation 3A, and there were no pointers to a requirement to place some constrained meaning on the words 'or otherwise'. There was no reason why, as a matter of language, 'or otherwise' could not include recovery under an insurance policy.



(2) The correct approach to construing a CFA agreement was to look at the whole package produced by the solicitor: the CFA agreement, the client care letter explaining the effect of the agreement and the insurance policy recommended by the solicitor. It was necessary to ask whether the solicitor had produced an arrangement under which the client would not be liable for any own-side costs or expenses (apart from the circumstances defined by regulation 3A(5)) other than those that were actually recovered from the other side or from insurers. If a client remained liable for own-side costs and expenses in certain circumstances, then unless the position was covered by regulation 3A(5), the CFA would not be a 'CFA Lite' and its enforceability would depend on whether reg 4(e)(ii) of the 2000 regulations had been complied with, Foord v American Airlines Inc [2007] EWHC 90076 (Costs) considered.



The agreement in the present case, correctly construed, was that there would be a waiver (except to the extent that there was recovery) either from a losing defendant or under an insurance policy so that J, unless she withdrew instructions, had no liability for costs. Therefore, the CFA in the present case was a 'CFA Lite'.



(3) If the CFA had not been a 'CFA Lite', the court would have ruled that there had been non-compliance with regulation 4(e)(ii) by the solicitors' failure to disclose their interest, and the CFA would have been unenforceable, Myatt v National Coal Board [2006] EWCA Civ 1017, [2007] 1 WLR 554 applied. J's solicitors had clearly had an interest, and the fact that the CFA disclosed them to be on the insurer's panel of solicitors was insufficient, having regard to the absolute terms in which they had suggested they had no interest.



Appeal allowed.



Nicholas Bacon (instructed by Birchall Blackburn) for the appellant; Jeremy Morgan QC (instructed by Beachcroft) for the respondent.



Conditional fee agreements - solicitors - success fees - costs consultants' fees assessed as base costs

Nicholas Crane v Canons Leisure Centre: CA (Civ Div) (Lords Justice May, Maurice Kay, Lady Justice Hallett, Chief Master Hurst): 19 December 2007


The appellant firm of solicitors (R) appealed against a decision that costs incurred by a firm of costs consultants (L) were to be treated as disbursements and, therefore, not subject to a success fee.



R had been instructed by way of a collective conditional fee agreement (CCFA) to act for a client in a personal injury action. The success fee under the CCFA was a 45% uplift for base costs, which were defined under the terms of the CCFA as charges for work done by or on behalf of R. The underlying dispute was compromised; however, costs-only proceedings were commenced. For that purpose, R had instructed L to conduct detailed assessment proceedings on their behalf.



The master held that L's costs fell to be disbursements under the CCFA rather than profit costs and, accordingly, R had not been entitled to claim a success fee in respect of those costs.



R argued: (1) that the work carried out by L was the type of work that R, as solicitors, had retained to do themselves. R had chosen to delegate the work, but had retained control and supervision. The respondent (C) argued that the issue was one of construction of the CCFA under which L's fees were expenses incurred on behalf of R's client - they were not base costs because they were not for work done by R or by another solicitor on R's behalf; and (2) in response to C's claim that the 45% success fee sought to be applied to the costs proceedings should be disallowed or severely reduced as being unreasonable, the court should not, in effect, require separate percentages for success fees to be applied to the initial claim and the assessment of costs.



Held: (1) (Lord Justice Maurice Kay dissenting on the first issue) The distinction in the definitions of base costs and disbursements in the CCFA was between charges for work done by or on behalf of R, and expenses that R had incurred on the client's behalf. That was a distinction between charges by the solicitors themselves for work that they themselves did or were directly responsible for, and expenses that they incurred for the client, some of which were for other people's work that R was not directly responsible for and which they simply passed on to the client at cost.



The work carried out by L was undoubtedly solicitors' work. It was the type of work that R was retained to do. R may have chosen to delegate the work, but it never relinquished control of it and responsibility for it. The classification of the work carried out could not sensibly depend on whether R did the work themselves, whether they delegated it to another solicitor or whether they delegated it to costs draftsmen who were not solicitors. Accordingly, L's work was properly described as work done 'on behalf of the solicitors' and L's fees were properly described as base costs within the terms of the CCFA.



(2) The fact that a single success fee was normally carried through into costs proceedings highlighted the underlying fact that success fees were mainly to compensate lawyers for other cases that they had lost, and thus encouraged them to take the risk of receiving no fee in cases that they may lose, Halloran v Delaney [2002] EWCA Civ 1258, [2003] 1 WLR 28 considered. Thus, there was a wider interest than the individual case. Further, at the outset, the solicitors have to face a risk that their client's claim would fail, but that they may have to conduct costs assessment proceedings on a costs order in favour of the other party for which they would receive no payment. There was no reason of principle that compelled the court to require parties who had entered into CFAs or CCFAs to address at the outset the risk of costs proceedings separately, and there were no clear reasons of policy for that requirement.



Appeal allowed.



John Foy QC (instructed by Rowley Ashworth) for the appellant; R Drabble QC, Robert Marven (instructed by Mccullagh & Co) for the respondent.



DAMAGES



General damages - harassment - injury to feelings - measure of damages

Hugh Martins v Mohammed Choudhary: CA (Civ Div) (Sir Anthony Clarke (Master of the Rolls), Lady Justice Smith, Lord Justice Toulson): 20 December 2007


The appellant (M) appealed against an award of damages for injury to feelings and psychiatric injury suffered by the respondent (C).



M had allegedly pursued a course of conduct against C, which included making racist remarks about C and deliberately colliding with C's vehicle.



The trial judge found that the conduct amounted to the statutory tort of harassment and that, following the collision incident, C developed a generalised anxiety state.



Judgment was entered for C with damages to be assessed. The judge made an injunction restraining M from harassing C, his family and several witnesses. However, as M allegedly harassed witnesses who were to give evidence at the quantum hearing, committal proceedings took place, which delayed the quantum hearing. M was sentenced for breaching the injunction but was later released.



At the quantum hearing, the judge held that the harassment was the principal cause of C's anxiety state. The judge observed that due to M's conduct of the litigation, in fighting every issue and in harassing witnesses in breach of the injunction since the liability judgment, C's genuine fear for his family's safety had not been allowed to subside.



After considering the severity scale for psychiatric injury in the Judicial Studies Board (JSB) guidelines and cases on damages for injury to feelings, the judge awarded £12,500 for personal injury and £10,000 for injury to feelings.



M submitted that: (1) the judge had wrongly awarded damages for symptoms or suffering that had been caused by events that had occurred after the liability hearing; (2) the judge should not have made separate awards for psychiatric injury and injury to feelings; and (3) the awards of £12,500 for psychiatric injury and £10,000 for injury to feelings were manifestly excessive and outside the band of awards open to the court on the facts.



Held: (1) The judge's award of £12,500 for psychiatric harm was designed to compensate C for the anxiety state that had been caused by the harassment that C had suffered. The judge had been entitled to hold that, although C had a vulnerable personality, he had in the past been able to cope fairly well with the ordinary vicissitudes of life, and that it was the harassment and, in particular, the collision incident that had changed all that. The judge's only references to later events were made in the context of the slowness of C's recovery from the anxiety state. C's recovery had been delayed because of the prolonged litigation and M's conduct in breaching the injunction. The judge did not treat those matters as fresh torts giving rise to separate damage. Her approach could not be criticised.



(2) There should be no hard and fast rule about whether separate awards should be made for psychiatric injury and injury to feelings, Richardson v Howie [2004] EWCA Civ 1127, [2005] PIQR Q3 and Vento v Chief Constable of West Yorkshire [2002] EWCA Civ 1871, [2003] ICR 318 considered. It would all depend on the facts of the individual case. If, for example, the psychiatric harm was very modest and merged with the injury to feelings, it would plainly be more convenient to make one award covering both aspects. If, as in the present case, where the psychiatric injury was not insubstantial, it was helpful to the parties if the judge separated the award for psychiatric injury from that for injury to feelings. Accordingly, the judge had been justified in making the separate awards. Moreover, she had warned herself to avoid double recovery by overlap and there was no basis on which to conclude that there was.



(3) The judge was in the best possible position to assess the gravity of the psychiatric harm and racial abuse suffered by C, and the effect they had had on his life. The judge had been correct to consider the JSB guidelines and where on the scale of severity in respect of psychiatric injury the case should placed.



As for the award for injury to C's feelings, the judge had been entitled to take into account, among other things, the trauma of having to relive his experience several times during the very protracted proceedings and the increased distress he had suffered as a result of M threatening witnesses. Although the awards of £12,500 for psychiatric injury and £10,000 for injury to feelings were on the generous side, they were not outside the range of appropriate awards.



Appeal dismissed.



Colm Nugent (instructed by Gavins) for the appellant; Paul McCormick (instructed by Clerey's) for the respondent.



FAMILY LAW



Ancillary relief - case management - overriding objective - effect of pre-nuptial agreements

Susan Mary Crossley v Stuart James Crossley: CA (Civ Div) (Lords Justice Thorpe, Keene, Wall): 19 December 2007


The appellant wife (W) appealed against an order made in ancillary relief proceedings following the breakdown of her marriage to the respondent husband (H).



W was approximately 50 years old and H was 62 years old. Both had substantial independent fortunes. They were engaged approximately three months after meeting. H had been married once before and had been in a long-term relationship, and had four children. W had been married three times and had three children. A pre-nuptial agreement was signed. The trial judge stated that the critical part of the pre-nuptial agreement was the clause that effectively meant that both parties should walk away from the marriage with whatever they brought into it.



Approximately 14 months after their wedding, H and W separated. W petitioned for divorce and issued a Form A. The effect of that was to trigger the date for the exchange of Form Es. H subsequently issued a summons that sought an order that W show why her claim for ancillary relief should not be dealt with in accordance with the agreement. W alleged that H had not made full disclosure of his fortune upon which the agreement had been negotiated.



The judge said that W and H should complete Form Es without the accompanying documents, and that W should write a letter to H setting out her position on disclosure and H could answer that in his Form E.



The matter was adjourned,and it was stated at the next hearing that it could be explained why the agreement was not a 'knock-out blow'.



W submitted that the judge had erred in law in directing that H's summons be heard as a preliminary issue and in failing to apply the Family Proceedings Rules, given that the rules were mandatory. She further contended that the judge had been wrong in finding that the overriding objective permitted him to ignore rule 2.61B and in preventing her from filing a questionnaire, which precluded her from challenging disclosure in circumstances where it was suggested that H was responsible for substantial non-disclosure at the time of signing the agreement.



Held: As H contended, the judge did not direct that his evidence was to be heard as a preliminary issue. H accepted that the court had to adopt the exercise under section 25(2) of the Matrimonial Causes Act 1973, and the existence of the agreement could not oust the court's obligation to apply section 25. He accepted that the agreement was part of the matter, but emphasised the facts. Upon the facts, he correctly added that the combination of the factors gave rise to a very strong argument that the possible result of the section 25 exercise was that W would receive no financial award.



If ever there was to be a paradigm case in which the court would look at a pre-nuptial agreement as not simply one of the peripheral factors but a factor of magnetic importance, the present case was such. The court was unpersuaded that the rules were intended to be a straightjacket precluding case management. It was easy to attach to the case a number of objectives under the overriding objective. As H pointed out, the inhibition in relation to the questionnaire did not have the effect of preventing W from raising the issue of non-disclosure, but simply allowed her to state her position in a letter that would then be answered in his Form E. The judge's management of the case seemed admirable. The approach of the judge was in accordance with a developing view that pre-nuptial contracts were growing in importance. The matter demonstrated the discretionary power of a judge to require a party to show a court why a contractual agreement should not rule the outcome of an ancillary relief claim.



Appeal dismissed.



Charles Howard QC, Susan Wilkins for the appellant; James Turner QC, Deepak Nagpal for the respondent.



HUMAN RIGHTS



Mental health - NHS foundation trusts - patients - right to life - suicide

Anna Savage (appellant) v South Essex Partnership NHS Foundation Trust (respondent) & Mind (intervener): CA (Civ Div) (Sir Anthony Clarke (Master of the Rolls), Lords Justice Waller, Sedley): 20 December 2007


The appellant (S) appealed against a decision that, in order to establish a breach of article 2 of the European Convention on Human Rights, she had to show that the respondent trust (E) had been guilty of at least gross negligence.



S's mother (C) had committed suicide after absconding from a hospital run by E. C had been detained at the hospital pursuant to section 3 of the Mental Health Act 1983. She had a long history of mental illness and had been an inpatient on previous occasions.



S commenced proceedings, seeking damages under the Human Rights Act 1998, on the basis that E was a public authority and liable for an alleged breach of C's right to life under article 2. The allegations of negligence centered on whether there had been a failure to take reasonable measures to prevent the risk of suicide and, in particular, whether there had been a failure properly to assess the risk of C absconding from the hospital.



E sought to be determined as a preliminary issue what, on the facts alleged, was the proper test in law in order to establish a breach of article 2. The judge accepted E's argument that it was necessary to at least establish gross negligence, rejecting S's argument that it was merely sufficient to establish negligence, or perhaps something less. S argued that the judge was wrong in law to hold that the applicable test was one of gross negligence and that the test in a case where the deceased was compulsorily detained in a mental hospital under section 3 of the 1983 Act was the same as the test where the deceased was detained in prison. In each case, the deceased was not only in the care of the state but detained under compulsion and, at any rate in theory, unable to leave the hospital or prison. The test should be determined by the nature of the relationship between the deceased and the state, and there was no relevant distinction between the two classes of case.



E argued that the relevant comparator in a case such as the present should not be a person detained in prison but should be other patients, whether in an NHS hospital or otherwise, and in particular that the treatment given to mental patients under section 2 of the 1983 Act would in many cases be the same as that given to mental patients detained under section 3.



Held: It was not necessary for S to establish either gross negligence or something more serious, Osman v United Kingdom(23452/94) [1999] 1 FLR 193 applied. The position of a mental patient detained by the state under section 3 of the 1983 Act was more akin to the position of a person detained in a prison than to that of an ordinary patient in a hospital, whether the patient was receiving treatment for problems with his or her mental health or otherwise. There was no reason to afford those detained under the 1983 Act any less rights under article 2 than those detained in a prison or prison hospital, whether closed or open. In the circumstances, therefore, the relevant test in a case such as the present was the Osman test. In order to establish a breach of article 2, on the assumed facts, S had to show that, at the material time, E knew or ought to have known of the existence of a real and immediate risk to life of C from self-harm, and that it had failed to take measures within the scope of its powers which, judged reasonably, might have been expected to avoid that risk.



Appeal allowed.



J Richards (instructed by Bindman & Partners) for the appellant; E Faulks QC, A McCullough (instructed by Bevan Brittan) for the respondent; P Bowen, Alison Gerry (instructed by the in-house solicitor) for the intervener.