Garrett v Halton BC; Myatt v National Coal Board
[2006] EWCA Civ 1017; [2007] 1 All ER 147; [2007] 1 WLR 554
Citation: [2006] EWCA Civ 1017; [2007] 1 All ER 147; [2007] 1 WLR 554
Facts:
Myatt concerned Reg. 4(2)(c) of the CFA Regulations 2000 which requires the solicitor to inform the client whether he considers that the client's costs risk is insured under an existing contract of insurance. Solicitors had agreed to act for four ex-miners with potential claims for damages for noise-induced hearing loss against their former employer. They had made certain inquiries of their clients over the telephone designed to elicit whether BTE cover was available, but in each case they had been told that it was not. They had not asked to see any policy documents, and there was an issue as to the effect of the questions which they had asked. The Costs Judge had held that the inquiries were inadequate, particularly as they had required unsophisticated clients to form a judgment as to whether their household etc policies covered a claim for industrial disease against their former employer.
Garrett turned on Reg. 4(2)(e)(ii), which requires the solicitor who recommends a particular policy of insurance to declare any interest he may have in doing so. In this case the case had been referred to the solicitor by a claims management company and it was found to have been a term of the solicitor’s panel membership that he should recommend the policy of insurance promoted by the claims management company, with exclusion from the panel as a sanction for failure to comply. The solicitors had declared that they had no interest in recommending the policy on the basis that they got no commission for doing so, though they informed the client orally that they were on the panel. The judge held that panel membership in those circumstances was disclosable and had not been disclosed, and that accordingly there was a materially adverse effect on the protection afforded to the client.
The claimants in both cases appealed, and in Myatt permission was given for a leap-frog to the Court of Appeal.
Held:
(1) Hollins v Russell [2003] 1 WLR 2487 had not decided that a failure to comply with the statutory scheme only rendered a CFA unenforceable if (i) there had been actual detriment to the client or the administration of justice (ii) viewed retrospectively from the date of the assessment of costs.
(2) The enforceability of a CFA must be determined (or determinable) at its commencement.
(3) The materiality of a breach of the statutory regime was not judged by its consequences.
(4) The language of s.58 Courts and Legal Services Act 1990 was clear and uncompromising. Parliament considered that the need to safeguard clients was so important that it should be secured by providing that, if any of the conditions were not satisfied, the CFA would not be enforceable and the solicitor would not be paid.
(5) Hollins was properly understood as a case deciding that "literal but trivial and immaterial departures from the statutory requirements did not amount to a failure to satisfy the statutory conditions."
(6) In Myatt the Costs Judge had been correct to find that the questions asked of the clients required them to form a judgment as to whether they had BTE which would cover their particular industrial disease claims. As it was conceded that such questions were insufficient, the appeal would be dismissed. The fact that, on the basis of evidence admitted on the appeal, it emerged that the clients did not have any BTE cover for industrial disease claims was irrelevant.
(7) Looking at Reg. 4(2)(c) generally, there was no logical necessity to apply the approach in Sarwar v Alam [2002] 1 WLR 125. There was an implied obligation under 4(2)(c) to take reasonable steps to ascertain what BTE insurance cover the client has, and what is reasonable will depend on all the circumstances of the case. Relevant factors would be the nature of the client, the circumstances in which the solicitor is instructed, the nature of the claim, the cost of the ATE premium if one had to be purchased, and whether a referring body had already investigated the availability of BTE. The client did not in every case have to send the solicitor the relevant policy document merely because he said that he had a home, credit card or motor insurance or was a trade union member.
(8) In Garrett the judge had been correct to find that membership of a referrer's panel requiring the recommendation of a particular policy of insurance was a disclosable interest. Disclosable interests were not confined to commission arrangements.
(9) He had also been right to find that merely disclosing the fact of panel membership, without disclosing its implications, was insufficient. Many laypersons would see panel membership as an indication of quality control.
(10) The Court rejected the Law Society's argument that there was compliance with Reg. 4(2)(e) where the solicitor gave the client information as to his interest, even if that information was wrong.
(11) The appeal in Garrett would therefore also be dismissed.
Comment:
This is obviously an extremely important decision for all cases conducted on CFAs made before 1.11.05, when the 2000 Regulations were revoked. Many solicitors had assumed, based on the rather loose language of para. 107 of Hollins, that a CFA would be enforceable unless it could be shown that their client had suffered actual detriment and they will now have to review the enforceability of their CFAs in order to decide whether they can properly sign the certificate on their bills. In particular, the Court was told that a large number of solicitors have not shared its view of what is a disclosable interest for Reg. 4(2)(e). The guidance given by the Court in relation to Reg. 4(2)(c) has the advantage of flexibility but, as the Court frankly recognised, the disadvantage that it might tend to promote arguments on assessment. The difficulty for paying parties remains, as ever, that of establishing whether the Regulations have in fact been complied with given the limited information to which they have access.
Permission to appeal was refused by the Court of Appeal in both cases. Leave to appeal has been refused by the House of Lords in both cases.
Jeremy Morgan QC acted for Halton BC and the National Coal Board. Benjamin Williams was for Halton BC and Judith Ayling was for the National Coal Board.