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Samonini v London General Transport Services Limited, Supreme Court Costs Office, 19 January 2005

28 January 2005
The issues

Costs – Conditional Fee Agreement Regulations 2000 – Indemnity Fees – CFA – Insufficient Enquiries As To Alternative Funding – Sarwar v Alam

The facts

The Claimant appealed against the decision of the Costs Officer who disallowed all the Claimant’s costs on Detailed Assessment on the basis that there was not enough evidence to show that proper enquiries had been made by the Claimant’s legal representatives before the after the event insurance policy was taken out and the Conditional Fee Agreement entered into.

The Costs Officer also believed there had been a breach of the relevant CFA Regulations and that the CFA was therefore unenforceable and that no costs were recoverable.

The Claimant had originally contracted with AAH (Accident Advice Helpline) to deal with this claim. Instructions were first received by AAH on 13th September 2001 and initial documents sent to the client on 17th September 2002. They were explained to the client on 18th September. On the same day the client signed an agreement with AAH which stated amongst other things that an AAH panel solicitor had agreed to act for the Claimant to pursue his claim on a Conditional Fee basis. The identity of the panel solicitor did not appear on the face of the agreement. The agreement went on to explain to the client that AAH had arranged for him to borrow money to pay the premium for the insurance certificate and up to the sum of £1,200.00 towards some of the expenses. It noted that the client asked AAH to arrange for the issue of an insurance certificate for a premium of £760.00 plus IPT and for the premium to be paid from the loan. It further went on to explain that AAH will charge the client a management fee of £199.00 plus VAT also initially to be funded by the loan.

Clause 4 stated the various ways of funding personal injury actions including legal expenses insurance and stated “I may have legal expenses insurance cover which may be included in my household car insurance under which I could claim÷.. I have considered and understood these options. I confirm that I am not aware that I have any suitable legal expenses insurance in place (but should this not be the case, I elect not to use it) and I confirm I wish to proceed with AAH”. The AAH documentation pack was sent to the solicitors on 19th September 2002. The documentation included a signed and completed Statement of Truth, a Conditional Fee Agreement and a Consumer Credit Agreement between the Claimant and the First National Bank Plc. The covering letter required the solicitors to contact the client to explain the CFA within the next 10 days. In a witness statement the Claimant said that he remembered being asked by someone at AAH over the telephone if he had any insurance that would cover him for his claim. As a taxi driver he had previously paid an additional premium for this cover but recently had decided not to have any cover for legal expenses insurance because he had been disappointed in the service he had received.

The solicitor, Mr Jones provided a statement in which he said on receipt of instructions he had noted that an LEI check had been done and that he had telephoned the Claimant on 7th October 2002 when he had complied with the necessary regulations concerning oral advice. Mr Jones said that he did not remember if he asked the Claimant directly if he had legal expenses insurance as he already knew the answer but he told the Claimant the reasons why he had to use a CFA and why insurance was taken out i.e. because there was no other insurance in place. He said he believed he would have said the same to the Claimant. He did not recall if the Claimant had made any relevant comments but said there was nothing to alert him that a Conditional Fee Agreement with additional liability with an additional liability was inappropriate.

The attendance note in respect of that call read simply “ODC client explaining CFA”.

The decision

1. The first issue was whether or not the Court should embark on an enquiry at all and go behind the solicitor’s signature on the bill. In Adair v Cullen the Judge held that where there was no evidence indicating that anything was amiss there would be no valid basis on which the Court could go behind the documentation signed by the Claimant but where somebody did in fact have BTE insurance then the question could properly be raised as to whether there was compliance with the regulations. Here it would have been argued for the Claimant that there was no such inconsistency and that the Defendants were inviting the Court to embark on a fishing exercise. The Defendant had said that there was good reason to go behind the solicitor’s certificate no least because the Claimant as a taxi driver could be expected to have such insurance cover and that by inference a taxi driver without such insurance was unusual and justified investigation. Here in addition the material put before the Costs Officer who first dealt with the bill was remarkable for its paucity. Neither the attendance note nor the follow up letter made reference to LEI and this in itself invited investigation given the presumption that had been advanced that the Lei was not likely to be in place.
2. The Defendants had not challenged the quantum of the insurance premium but the premium sought for the ATE policy was on its face disproportionate and demanded investigation. It was therefore appropriate to go behind the solicitor’s signature on the bill.

3. Was there a breach of the regulations? The Court was not satisfied that the solicitor had made any or any sufficient enquiries of the Claimant as to the existence of LEI. If there had been delegation of this task in fax to AAH then the enquiries made by them were inadequate and insufficient to comply with the regulations. In particular, the Claimant was never asked about any policy other than his motor policy.

4. Was the breach material? The failure to consider whether the client’s risk of incurring a liability for costs in respect of the proceedings to which the CFA related was assured against under an existing contract of insurance had a materially adverse affect upon the protection afforded to the client, in that the client had entered into a CFA and a loan agreement and an ATE insurance policy costing £798.00. This was disproportionate where the Claimant’s damages were never going to exceed £2,000.00. In Sarwar, the Court of Appeal had referred to “the availability of ATE at a modest premium” – this was not such a policy. Moreover if solicitors were permitted to skimp on the proper investigation of LEI the administration of justice would be badly served since there would be no improvement in the way in which solicitors conducted proceedings of this type.

In addition this breach had led to costly satellite litigation.

In these circumstances the Court found that there was a breach of Regulation 4 (2) (c) which had had a materially adverse effect. The CFA was unenforceable and no costs were recoverable under it and the appeal was therefore dismissed.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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