Conditional fee agreements – Legal costs insurance – Solicitors’ powers

Kier Tankard (appellant) v John Fredricks Plastics Ltd (respondent); (1) Fawcett Old Ltd (2) Michael Jane Hair & Beauty (appellants) v Yvonne Hibberd (respondent); Mark Jones (appellant) v Karl Joseph Attrill (respondent) & Law Society (intervener) (2008): CA (Civ Div) (Sir Anthony Clarke, Master of the Rolls, Lords Justice Dyson, Jackson): 11 December 2008

In conjoined appeals brought by the appellants (T, F and J), the court was required to consider the true construction of regulation 4(2)(e)(ii) of the Conditional Fee Agreements Regulations 2000. F had been the defendant and T and J the claimants in three separate personal injury claims.

In each case, the claimant had entered into a conditional fee agreement (CFA) with his solicitor before November 2005, and in each case the claim had succeeded on terms that the defendant was liable to the claimant in costs.

The solicitors were each members of a membership scheme known as Accident Line Protect (ALP) and had recommended its after-the-event (ATE) insurance to their clients. The defendants asserted that the solicitors were in breach of the regulations, in that they had failed to disclose to their clients that they had an interest within the meaning of regulation 4(2)(e)(ii), and that consequently the CFAs were unenforceable against the claimants. If that was correct, the claimants were not entitled to recover some or all of the costs claimed against the defendants. In T’s case, it had been conceded before the district judge that the solicitors had an interest. In each case, the issue was whether the solicitors had an interest within the meaning of regulation 4(2)(e)(ii), and whether T’s solicitor had been right to make the concession.

Held: (1) For the purposes of regulation 4, a solicitor had an interest if a reasonable person with knowledge of the relevant facts would think that the existence of the interest might affect the advice given by the solicitor to his client. Such a test ensured that any interest of the solicitor that might affect his advice was notified to his client, and was consistent with the language of regulation 4 construed with due regard to its legislative purpose, namely protecting the client.

(2) While membership of the panel of a claims management company could amount to an interest, it would not do so in all circumstances. In the present case, the overriding consideration was the quality of the policy. That was why the solicitors subscribed to the scheme and recommended the policy. The obligation in the scheme to recommend the policy arose not as a quid pro quo for the referral of a case, but as the ordinary consequence of a conventional ATE arrangement, where the concern of the underwriter was to avoid adverse selection, Myatt v National Coal Board [2006] EWCA Civ 1017, [2007] 1 WLR 554 distinguished. There was nothing in the ALP scheme of a general nature that required disclosure to the claimant on the ground that his solicitor had an interest within the meaning of regulation 4(2)(e)(ii). That conclusion was not affected by the requirement that an ALP policy be effected in all qualifying cases, the fact that subscribing solicitors had cases referred to them from time to time, and the fact that subscribing solicitors could receive a rebate of part of their membership fees if they issued a sufficient number of policies in any year. There was nothing that would lead a reasonable person with knowledge of the facts to think that the solicitors had an interest in the scheme that might affect their advice.

(3) (Obiter) Under regulation 4(1)(a), a solicitor had to inform his client about any interest within the meaning of regulation 4(2)(e)(ii). To meet that requirement, it was not sufficient for him simply to say that he had an interest, rather, he had to identify the nature of that interest. Although regulation 4(2)(e)(ii) did not spell out such a requirement, it had to be interpreted purposively so as to enable the client to make an informed decision. The solicitor had to explain to the client the nature of the benefits to him in remaining on the ALP panel with sufficient clarity for the client to understand what those benefits were and to assess their significance. What was said at paragraph 103 of the judgment in Myatt, to the effect that a solicitor had simply to tell his client that he was contractually obliged to recommend a certain policy, was not to be followed. (4) None of the solicitors had an interest that ought to have been disclosed. F’s appeal was therefore dismissed and J’s allowed. In T’s case, the solicitor was permitted to resile from his concession that he had an interest.

Judgment accordingly.

Nicholas Bacon (instructed by Warner Goodman) for Kier Tankard; Robert Marven (instructed by QM) for John Fredricks Plastics Ltd, Fawcett Old Ltd and Michael Jane Hair & Beauty; Benjamin Williams (instructed by Leigh Day & Co) for Yvonne Hibberd; Michael Pooles QC, Roger Mallalieu (instructed by Walton Mills & Co) for Mark Jones; Jeremy Morgan QC, Alexander Hutton (instructed by Beachcroft) for Karl Joseph Attrill; Richard Drabble QC, David Holland (instructed by the in-house solicitor) for the Law Society.