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English v Clipson, Peterborough County Court, 3 September 2002

3 September 2002
The issues

Costs after the event insurance – Conditional Fee Agreement Regulations – indemnity principle.

The facts

The District Judge heard a preliminary issue relating to the enforceability of a Conditional Fee Agreement. The Claimant went to The Accident Group (TAG) and thereafter entered into a CFA with Solicitors. The CFA did not provide for a success fee, but an ATE premium was paid. The claim settled 18 months after the accident.

The TAG Scheme provided that once a Solicitor took a referral, TAG arranged for AIL, an Associated Company, to visit the Claimant at home. During the visit, the CFA was explained. The Defendant argued that the Claimant’s Solicitors had failed to comply with Regulation 4 of the Conditional Fee Agreement Regulations 2000. Regulation 4 states that before a CFA is entered into, “the legal representative” must inform the client about certain matters, namely the circumstances in which the client may be liable to pay costs; the circumstances in which the client can seek assessment of his fees and expenses and the way of going about doing so; whether the legal representative consider the client’s risk of incurring liability for costs is insured against under an existing contract of insurance; whether there are other methods of financing those costs available; whether the legal representative considers any particular method of financing any or all of those costs is appropriate, and if he recommends a particular contract of insurance, why he does so and whether he has an interest in doing so. The Defendant further argued that if the District Judge agreed that the Claimant’s Solicitors had not complied with Regulation 4, that therefore there was no liability between Solicitor and client and therefore no right to an indemnity from the Defendant. Regulation 1(3) defines a “legal representative” as “the person providing the advocacy or litigation services to which the Conditional Fee Agreement relates”.

The decision

1. Regulation 4 was mandatory.

2. Under the TAG Scheme, the Claimant had no direct contact with his Solicitor prior to signing the CFA and it was not the Solicitor who provided the explanation and advice that was required.

3. On the facts, AIL could not be considered the legal representative by means of an agency. The statutory duties under Regulation 4 were non-delegable beyond a member of the firm of Solicitors which conducted the litigation.

4. The Regulation had been breached, as had the indemnity principle. The Claimant had no right to costs from the Defendant.


The Transcript is now available. Having looked at it, it is hard to say if the Judgment represents the last gasp of the old system or the first breath of the new. District Judge Wharton takes pains to emphasise the philosophy behind the Conditional Fee Regulations 2000 and his Judgment. “Parliament was concerned, amongst other things, to safeguard the rights of the Claimant/client and to ensure that he retained the right, in an informed manner, to choose who and by what financial means his claim should be conducted”. Indeed, he quotes the Blackwell report and its recommendation that given the increasing importance of claims management companies, and their ability to impose conditions on “whether and how the claim is pursued”, that they themselves should come under regulation. Although he specifically disassociated himself from the description of TAG and its scheme as “ingenious, iniquitous and commercially ruthless” which appeared in the Defendant’s Skeleton Argument, he nonetheless came to the view “that Parliament had good reason to include the safeguards in the CFAR” which have featured as a constant thread throughout this Judgment. There are also threads in the Judgment which have a scent of both locality and perhaps a distaste for the concept of imposed panel firms.

How in any event could Solicitors advise when they themselves were tied in to the TAG Scheme. “If they were to recommend an alternative which the Claimant were to buy, the Scheme with TAG/The Accident Advice Bureau would flounder and as likely as not, the Solicitors would lose the case and their costs”.

The District Judge also came to the conclusion that the AIL employer could not be the Agent of the Panel Solicitor. TAG argued that the Client Care Letter sent to the Claimant established that the AIL representative was the Solicitor’s Agent and that “the fact-find and oral advice sheet” was headed by the phrase “We, Mills Kemp and Brown with Hinchcliffe-Baker (Claimant’s Solicitors), authorise Accident Advice Bureau Limited to orally advise the Claimant, George English as detailed below in conjunction with his accident on 13th June 2000″, but in fact the duties “as detailed below” appeared limited to investigating, collating and assessing information. That District Judge reasonably took as the limit of AIL’s responsibilities under the Agreement and therefore the limit of its actual authority if they were to be under any purported agency.

TAG relied on an exchange of letters between themselves and The Lord Chancellor’s Department in 2000. The District Judge expressed some surprise that TAG should have taken this step rather than to obtain Counsel’s Advice. To be honest, one sympathises with TAG at this point. Ms Williams of The Lord Chancellor’s Department told TAG “although the CFA Regulations require the legal representative to provide certain oral information to the client, there is nothing to prevent the legal representative interpreting the requirements in the light of their professional rules of conduct with regard to the use of Agents, Interpreters, or any other intermediary”. The District Judge commented “I do not know what is Ms Williams’ status in the LCD. I simply do not know what she had in mind when making the italicised statement above; it seems to me to be thoroughly vague, perhaps deliberately so. In my Judgment no authoritative status at all can be conferred on the letter”.

In any event, the District Judge appears to have taken the view that the statutory duties imposed by paragraph 4 were non-delegable. The Regulations obliged the advice to be given by the person providing advocacy or litigation services. He noted that in Section 119 of The Access to Justice Act 1999, “litigation services” means any services which would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or contemplated proceedings, to provide. Relying on that definition and on
Bowstead -v- Reynolds on agency 16th Edition at paragraph 2-016 which states “an agent may be appointed for [any] purpose%u2026 except for the purpose of executing a right, privilege or power conferred, or of performing a duty imposed, the exercise or performance of which requires discretion or special personal skill, or for the purpose of doing an Act which the Principal is required by or pursuant to any statute, to do in person”, he concluded that this provided support for the proposition that the duties of the legal representative were non-delegable beyond the Panel Solicitor and members of his firm. This of course interestingly failed to answer his other objection, namely the conflict of interest point.

It will be interesting to see what the Court of Appeal make of this case. They may or may not find certain of the District Judge’s legal arguments persuasive. More interesting, will be the way in which they deal with practical problems – namely the financial difficulties that will be caused to a large number of firms if the decision is upheld; and on the other hand, the risk of undermining what surely must be an important part of the Regulations, namely the provision of clear, detailed financially independent advice on funding and the commencement of litigation. We will have to do so in the context of a commercial revolution in the world of litigation funding and, possibly, the long term disappearance of “private client” personal injury litigation in favour of commercially and panel managed work.

TAG have said forthrightly, “once the flawed nature of the Judgment is fully understood and it is realised that this is a decision at District Judge level creating no precedent, and that a number of other District Judges have come to the opposite conclusion on the same issue, we do not expect there to be any effect on our business”. If this is intended to warm the shivers currently going through the spines of many Claimant firms of Solicitors, it may not be sufficiently warming. It will be interesting to see what the Court of Appeal do and if they believe it is appropriate for them to side-step what was surely always intended by the Chancellor to be an important safeguard under the new Rules of the interests of Claimants. It will also be interesting to see to what extent the Court of Appeal’s awareness or otherwise of the recent furore about “door-stepping” will have any influence upon their decision.

Oh, one might say, for universal legal expenses insurance.

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