Access to justice and the funding gap

In a mature legal system, with a complex body of law, I would suggest that access to justice is to all intents and purposes largely dependent on the ability of a litigant to source and fund appropriate professional advice and representation.

Anyone who has acted as an advocate in court knows that there few more painful things to watch than a litigant in person, struggling to put across their points, or making bad points or missing the point altogether, whilst the judicial temperature starts to rise.

More fundamentally, inequality in arms, with one party represented and the other not, means that justice in the sense of the right result, may not be done and justice, in the sense of a fully argued case which is obviously and fairly seen to be decided on the basis of its merits will almost certainly not be done. Such cases always leave me with a sense of unease.

Unease however, turns to alarm in those cases where the state of our law on funding, means that litigants are unrepresented when issues such as the welfare and safety of a child are at stake or where a parent due to disability is effectively precluded from advancing a coherent argument against a case, advanced by the professionally represented state seeking to have the parent’s child removed.

In such circumstances lawyers may step in to act pro bono but if they do not the risks of a miscarriage of justice would seem very grave.

In the case In the matter of D (A child) [2014] EWFC 39 a decision of the President of the Family Division, just that situation seems to have arisen. The case is interesting for a number of reasons.

First it illustrates a plain and obvious gap in the current scheme of public funding in cases where parents might conceivably lose their children.

Secondly it contains a number of fascinating dicta, on the obligations of the state to properly fund such representation.

Thirdly, it is worth noting for the generosity and sheer professionalism of the lawyers, acting in the case, who without prospect of reward did not turn away but acted in the finest tradition of St Ivo, to ensure their clients were not left without a voice.

The issues in the case are summarised in the first three paragraphs of the judgment:

The underlying issue in this case can be stated in a single sentence. Should a little boy, D, live with his parents, or, if they cannot adequately look after him, with other members of his wider family, or should he, as the local authority, Swindon Borough Council, argues, be adopted outside the family.

The issue could hardly be of more profound significance for both D and his parents. For the child, an adoption order, as I recently had occasion to remark (Re X (A Child) (Surrogacy: Time Limit) [2014] EWHC 3135 (Fam), para 54) “has an effect extending far beyond the merely legal. It has the most profound personal, emotional, psychological, social and, it may be in some cases, cultural and religious, consequences.” For the parents it means the permanent loss of their child. Whatever the ultimate decision, D and his parents will have to live with the consequences for the remainder of their lives, in D’s case, given his age, potentially into the 22nd century.

That, however, is not the issue currently before me. What I have to grapple with is the profoundly disturbing fact that the parents do not qualify for legal aid but lack the financial resources to pay for legal representation in circumstances where, to speak plainly, it is unthinkable that they should have to face the local authority’s application without proper representation.

The underlying facts were as follows in the President’s summation:

For the background I can do no better than to quote from Baker J’s judgment (paras 2-6):

“2 D was born on 11th December 2011 and is therefore now aged 2½. His mother was assessed in 2012 as being on the borderline of a mild learning disability. His father was found to have a more significant cognitive impairment, with an IQ of around 50. In the earlier proceedings described below, a psychological assessment concluded that he lacked capacity to conduct litigation. He has, however, managed to function successfully in his adult life, with some assistance from local authority adult social services. He has worked in the same job for over 12 years and has been contributed towards the financial support of the family.

3 When D was born, the local authority started care proceedings under s.31 of the Children Act 1989. After he was discharged from hospital, D and his parents underwent a 16- week residential placement in a local authority foster placement which was completed successfully. Afterwards, the family moved into a new home with a package of support from the local authority and other agencies. They have extended family on both sides to whom they are close, and a network of friends. They attend a local church. In the summer of 2012, the parents were married.

4 At the final hearing of the care proceedings, the local authority’s care plan, dated [28 September 2012] recorded that D had been in his parents’ care since birth and was settled, happy and developing. It recommended that D remain in their care under a full care order. That order would be subject to review after a year when it was thought it might be appropriate to move to a supervision order. The plan specified the level of professional support to be provided for the family. It further provided that, if the placement broke down, D would move initially to a foster placement. The local authority would then carry out a viability assessment of his maternal grandparents to see if they were able to look after him, although an assessment carried during the care proceedings had concluded that they were not.

5 The care plan was endorsed by the children’s guardian. In her final report, she indicated that, while she supported whatshe described as the local authority’s “courageous attempts” to try to enable D to be looked after his parents, she was “not yet entirely confident that they will be able to provide D with the safe, emotionally attentive care that he will need on a long term basis.” She identified “a number of risk factors in D’s care circumstances which can be monitored but not removed or effectively counteracted by the considerable support and monitoring resources that have been and are continuing to be provided.” She thought that, as D becomes more mobile, these risk factors would be more difficult to manage.

6 On 7th November 2012, District Judge Cronin made a care order on the basis of the local authority’s care plan. The order included an undertaking by the local authority not toremove D from the care of his parents without giving 7 days notice in advance, unless an emergency situation should arise.”

I should add that the part of the care plan referred to by Baker J in para 4, went on tosay that “if … the outcome of the … assessment is that [the maternal grandparents] arestill not viable carers for D, then the local authority will seek permanence for D through adoption.”

So far as material for present purposes, subsequent events can be stated quite shortly. On 31 March 2014 the local authority gave the parents notice that they intended to remove D on 25 April 2014. The father consulted the solicitor, Rebecca Stevens of Messrs Withy King, who had acted for him in the care proceedings. Having applied unsuccessfully for public funding, Ms Stevens agreed to represent him pro bono. She has done so ever since. On 11 April 2014 Ms Stevens filed an application on behalf of the father seeking the discharge of the care order in accordance with section 39 of the Children Act 1989. On 22 April 2014 the local authority filed an application for a recovery order pursuant to section 50 of the 1989 Act. Both applications came before District Judge Goddard on 24 April 2014. During the hearing an oral application was made for an injunction to restrain the local authority removing D. The District Judge refused the application for an injunction and made the recovery order. D was removed from his parents the following day, 25 April 2014.

On 29 April 2014 Ms Stevens filed a notice of appeal on behalf of the father. It had been settled by Ms Deirdre Fottrell, also acting pro bono, as she has ever since. The appeal came on before Baker J on 16 May 2014. For the reasons set out in his judgment, he remitted the application for an injunction for hearing by Judge Marshall, but declined to direct D’s return to his parents in the interim. The hearing before Judge Marshall took place on 29-30 May 2014. For the reasons subsequently set out in her judgment, she declined to order D’s return to his parents. On 17 July 2014 the Court of Appeal (Black LJ) refused the father’s application for permission to appeal.

A further case management hearing took place before Judge Marshall on 29 July

The order made on that occasion recited that “This is a case where permanent placement outside the family must be considered as a possible outcome.” In addition to making arrangements for interim contact, Judge Marshall directed that the local authority’s application for a placement order in accordance with section 22 of the Adoption and Children Act 2002 was to be issued by 28 October 2014. She fixed the issues resolution hearing for 5 December 2014. She directed that expert evidence be obtained from an independent social worker, Helen Randall, in a report to be provided by 30 September 2014. On 23 September 2014 Judge Marshall directed that the matter was to be listed before me in London on 8 October 2014.

Ms Randall reported on 26 September 2014. Her report is unfavourable to the parents. Ms Randall said that she was unable to recommend that D be cared for by his parents, that there were no suitable family or friends able or willing to care for him and that her recommendation was that D be adopted.

The matter came on for hearing before me in London on 8 October 2014. The father was represented by Ms Deirdre Fottrell and Ms Marlene Cayoun, instructed by Rebecca Stevens of Withy King. As a protected party the father acted by the Official Solicitor as his litigation friend. The mother was represented by Ms Sarah Morgan QC and Ms Lucy Sprinz, instructed by Goodman Ray. Swindon Borough Council was represented by Ms Hayley Griffiths. D was represented by Mr Kambiz Moradifar. Ms Griffiths and Mr Moradifar were, I assume, being appropriately remunerated – D has legal aid. The others, in circumstances I must describe in more detail below, were allacting pro bono. At the end of the hearing I reserved judgment.

On 28 October 2014, the local authority filed a placement order application under section 22 of the 2002 Act.

Why were the parents not represented by lawyers funded by Legal Aid? The problem was stated in these terms after a recital of the various statutory provisions:

So far as material for present purposes, the effect of all this is clear. Non-means-tested legal aid is available to parents for only two classes of case: first, for care proceedings under section 31 of the 1989 Act; secondly, for proceedings which are, within the meaning of Regulation 5(1)(d) of the Civil Legal Aid (Financial Resources and Payment for Services) Regulations 2013, “related to” care proceedings. Given the definition of “related to”, neither the local authority’s application under section 50 of the 1989 Act, nor the parents’ application under section 39, nor the local authority’s application under section 22 of the 2002 Act, is “related to” the previous care proceedings. So in none of them did, or do, the parents qualify for non-means-tested legal aid. Legal aid is, or as the case may be was, available in principle, in accordance with paragraph of Part 1 of Schedule 1 to LASPO, for the applications under sections 39, 50 and 22, but in each case means-tested.

The practical difficulties were summarised as follows:

The parents’ capital amounts in all to a very modest £3,250 or thereabouts, an amount so small that they are not disqualified from legal aid on that ground. The father’s disposable monthly income (his gross income less income tax, national insurance, employment expenses, dependants allowance and net rent) was assessed in May 2014 as amounting to £767.64 and in June 2014 as amounting to £806.94.

The upper limit for disposable monthly income – the amount above which one is ineligible for legal aid – is £733.00. So, the father and the mother are disqualified from receiving legal aid because the father’s disposable monthly income in May 2014 was £34.64 too much and in June 2014 was £73.94 too much.

The father’s modest earnings disqualify him, and therefore the mother, from receiving legal aid. They cannot afford to fund private representation. They are, at present, wholly dependant on the good will of members of the legal profession who, to their enormous credit, and acting in the highest traditions of the profession, are acting pro bono, that is, for no fee and paying their travel and other expenses out of their own pockets.

Indeed, in the case of Ms Stevens she has been prepared to go even further. The father has a learning disability. He is a “protected party” within the meaning of Rule 2.3 ofthe Family Procedure Rules 2010. As a matter of law he is not able, as a protected party, to act without a litigation friend. Quite apart from that, the father’s learning disability in any event requires him to have considerable support and assistance to be able to participate effectively in the proceedings. The Official Solicitor has agreed to act as his litigation friend. The Official Solicitor cannot be compelled to act as anyone’s litigation friend. His practice is to agree to act only if there is funding for the protected party’s litigation costs, because his own budget – the monies voted to him by Parliament – is not sufficient to enable him to fund the costs of litigation of the type the father is involved in. The Official Solicitor was willing to act here only because the father’s solicitor and counsel have agreed to act, thus far, pro bono. But without the protection against an adverse costs order which the father (and derivatively the Official Solicitor) would enjoy if the father had legal aid, the Official Solicitor has a possible exposure to an adverse costs order – for instance, if the local authority was to obtain an order for costs against him – which, understandably, he is unwilling to assume. The consequence is that the Official Solicitor was not willing to act as the father’s litigation friend unless Ms Stevens agreed, as she has, to indemnify him against any adverse costs orders. And as if all this was not enough – indeed, far more than enough – I am told that Ms Stevens has spent in excess of 100 hours, all unremunerated, working to resolve, thus far without success, the issue of the father’s entitlement to legal aid. This is devotion to the client far above and far beyond the call of duty.

The mother, although she has learning disabilities, is not a protected party and therefore does not need a litigation friend. But the considered view of her experienced counsel (I quote from the position statement dated 6 October 2014 prepared on her behalf by Ms Morgan and Ms Sprinz) is that “The personal characteristics, intellectual functioning and limitations arising from learning difficulties which affect each of them [the father and the mother] in different ways … impact profoundly on their ability to represent themselves in proceedings in relation to their son whether at Court hearings or in discussions with professionals associated with or ancillary to those court hearings … It is readily apparent from meeting with [the mother] that she would be wholly unable to represent herself in relation to any aspect of these proceedings.”

The point is elaborated by reference to the difficulties facing the mother at the hearing before Judge Marshall on 29 July 2014, when she was unrepresented (she had been represented pro bono at the previous hearings before Baker J and Judge Marshall). Judge Marshall directed that the mother was to file any evidence she wished to rely on by 19 August 2014. The mother was unable to manage that aspect of the case alone, and has not complied with the order. Because the father is a protected party, he and the mother as a matter of law require separate representation.

I add this. On 8 September 2014 pre-action protocol judicial review letters were sent on behalf of the father to the Legal Aid Agency and to the Lord Chancellor, challenging the decision of the Agency to refuse legal aid and raising issues in relation to the lawfulness of certain aspects of the funding scheme. Similar letters were sent on behalf of the mother on 19 September 2014. The Treasury Solicitor has responded, making clear that any claim will be resisted. The progress of these claims is stymied: the parents are financially ineligible for legal aid to pursue a claim for judicial review, and those who might otherwise be willing to act pro bono for them in judicial review proceedings are unwilling to run the risks of adverse costs orders.

The rest of the judgment is worth setting out largely in full as it raises fundamental points about whether the cuts to Legal Aid have put the United Kingdom in breach of international human rights law:

It is no part of the function of the Family Court or the Family Division to pass judgment on the appropriateness and wisdom of the arrangements that Parliament (or Ministers acting in accordance with powers conferred by Parliament) choose to makein relation to legal aid. The legality, rationality and, where relevant, theproportionality of the scheme, if properly the subject of judicial scrutiny, are primarily the responsibility of the Administrative Court. It is, however, the responsibility –indeed, the duty – of the judges in the Family Court and the Family Division to ensure that proceedings before them are conducted justly and in a manner compliant with the requirements of Articles 6 and 8 of the Convention. That, after all, is what Parliament determined when it enacted section 6 of the Human Rights Act 1998, declaring, subject only to section 6(2), that it is “unlawful” for a court to act in a way which isincompatible with Articles 6 and 8.

In Q v Q [2014] EWFC 7, paras 12, 15-16, I pointed out that Rule 1.1 of the Family Procedure Rules 2010 requires the court to deal with matters such as those with which I am here concerned “justly” and ensuring “so far as is practicable” that the case is dealt with “fairly” and also “that the parties are on an equal footing.” That, as I observed, is the obligation of the court under domestic law, but it is also the obligation of the court under Articles 6 and 8 of the Convention. I went on to make the point that as long ago as 1979, in the well-known case of Airey v Ireland (Application No 6289/73) (1979) 2 EHRR 305, the European Court of Human Rights had held that there could be circumstances in which, without the assistance of a legally qualified representative, a litigant might be denied her Article 6 right to be able to present her case properly and satisfactorily. I referred to Mantovanelli v France (Application No 21497/93) (1997) 24 EHRR 370 as indicating the significance of the right to an adversarial hearing guaranteed by Article 6 specifically in the context of an expert’s report which (as here with Ms Randall’s report) is “likely to have a preponderant influence on the assessment of the facts by [the] court.” See further Q v Q, Re B (A Child), Re C (A Child) [2014] EWFC 31, paras 45-49.

Given the parents’ difficulties in the present case, I need to refer to the more recent decision of the Strasbourg court in RP and others v United Kingdom (Application No 38245/08) [2013] 1 FLR 744, the aftermath of proceedings in the Court of Appeal, reported as RP v Nottingham City Council and the Official Solicitor (Mental Capacity of Parent) [2008] EWCA Civ 462, [2008] 2 FLR 1516, in which a mother with learning difficulties, who lacked capacity to litigate, failed in her endeavour to have a placement order in relation to her child set aside.

I draw attention to what the Strasbourg court said in paras 65-67 (citations omitted):

“65 In cases involving those with disabilities the court has permitted the domestic courts a certain margin of appreciation to enable them to make the relevant procedural arrangements to secure the good administration of justice and protect the health of the person concerned. This is in keeping with the United Nations Convention on the Rights of Persons with Disabilities, which requires States to provide appropriate accommodation to facilitate the role of disabled persons in legal proceedings. However, the court has held that such measures should not affect the very essence of an applicant’s right to a fair trial as guaranteed by Art 6(1) of the European Convention. In assessing whether or not a particular measure was necessary, the court will take into account all relevant factors, including the nature and complexity of the issue before the domestic courts and what was at stake for the applicant.

66 It is clear that in the present case the proceedings were of the utmost importance to RP, who stood to lose both custody of and access to her only child. Moreover, while the issue at stake was relatively straightforward – whether or not RP had the skills necessary to enable her successfully to parent KP – the evidence which would have to be considered before the issue could be addressed was not. In particular, the court notes the significant quantity of expert reports, including expert medical and psychiatric reports, parenting assessment reports, and reports from contact sessions and observes the obvious difficulty an applicant with a learning disability would have in understanding both the content of these reports and the implications of the experts’ findings.

67 In light of the above, and bearing in mind the requirement in the UN Convention that State parties provide appropriate accommodation to facilitate disabled persons’ effective role in legal proceedings, the court considers that it was not only appropriate but also necessary for the United Kingdom to take measures to ensure that RP’s best interests were represented in the childcare proceedings. Indeed, in view of its existing case-law the court considers that a failure to take measures to protect RP’s interests might in itself have amounted to a violation of Art 6(1) of the European Convention (emphasis added).”

I draw attention in particular to the words I have emphasised.

The parents’ predicament

In the circumstances as I have described them, the parents’ predicament is stark, indeed shocking, a word which I use advisedly but without hesitation. Stripping all this down to essentials, what do the circumstances reveal?

i) The parents are facing, and facing because of a decision taken by an agent of the State, the local authority, the permanent loss of their child. What can be worse for a parent?

ii) The parents, because of their own problems, are quite unable to represent themselves: the mother as a matter of fact, the father both as a matter of fact and as a matter of law.

iii) The parents lack the financial resources to pay for legal representation.

iv) In these circumstances it is unthinkable that the parents should have to face the local authority’s application without proper representation. To require them to do so would be unconscionable; it would be unjust; it would involve a breach of their rights under Articles 6 and 8 of the Convention; it would be a denial of justice.

v) If his parents are not properly represented, D will also be prejudiced. He is entitled to a fair trial; he will not have a fair trial if his parents do not, for any distortion of the process may distort the outcome. Moreover, he is entitled to an appropriately speedy trial, for section 1(2) of the 1989 Act and section 1(3) of the 2002 Act both enjoin the court to bear in mind that in general any delay in coming to a decision is likely to prejudice the child’s welfare. So delay in arranging for the parents’ representation is likely to prejudice the child. Putting the point more generally, the court in a case such as this is faced with an inescapable, and in truth insoluble, tension between having to do justice to both the parents and the child, when at best it can do justice only to one and not the other and, at worst, and more probably, end up doing justice to neither.

vi) Thus far the State has simply washed its hands of the problem, leaving the solution to the problem which the State itself has created – for the State has brought the proceedings but declined all responsibility for ensuring that the parents are able to participate effectively in the proceedings it has brought – to the goodwill, the charity, of the legal profession. This is, it might be thought, both unprincipled and unconscionable. Why should the State leave it to private individuals to ensure that the State is not in breach of the State’s – the United Kingdom’s – obligations under the Convention? As Baker J said in the passage I have already quoted, “It is unfair that legal representation in these vital cases is only available if the lawyers agree to work for nothing.”

In addition to these fundamental problems there are a number of more practical but very important points:

i) I have already noted that those working pro bono for the parents are not merely working for no fee but also having to pay their travel and other expenses out of their own pockets and, in the case of Ms Stevens, agreeing in addition to indemnify the Official Solicitor.

ii) There is also the problem that the parents do not have the money to travel to court unless it is very close to home. The very practical question of how the parents were to pay the cost of coming to court in London for the hearing on 8 October 2014 was resolved only because the local authority agreed, but explicitly without any future commitment, to make an ex gratia payment.

iii) The mother and the father may require the use of an intermediary, not merely in the court setting but also, for example, when meeting professionals out of court. An intermediary at court is paid for by Her Majesty’s Courts and Tribunals Service: see Q v Q, Re B (A Child), Re C (A Child) [2014] EWFC 31, para 52. But who is to pay the costs of any intermediary whose use is necessary for the purposes of meetings with professionals out of court?

The way forward

I am conscious that, in expressing myself as I have, I have not thus far had the benefit of argument from anyone other than the parties. In particular, I have had no argument from any emanation of the State other than the local authority. My conclusions must to that extent be provisional. If the State wishes to challenge my conclusions, especially as I have set them out in paragraph 31 above, then let the State do so. I shall of course be willing to hear further submissions from any interested State party, or indeed any other interested party.

What then is the appropriate way forward?

If legal aid is not available for the parents then I need to explore whether there is some other public pocket to which the court can have resort to avoid the problem. There are, in theory, three other possible sources of public funding. As I said in Q v Q [2014] EWFC 7, para 18:

“In a public law case where the proceedings are brought by a local authority, one can see a possible argument that failing all else the local authority should have to pay. In a case … where one party is publicly funded … it is, I suppose, arguable that, if this is the only way of achieving a just trial, the costs of the proceedings should be thrown on the party which is in receipt of public funds. It is arguable that, failing all else, and bearing in mind that the court is itself a public authority subject to the duty to act in a Convention compliant way, if there is no other way of achieving a just and fair hearing, then the court must itself assume the financial burden, as for example the court does in certain circumstances in funding the cost of interpreters.”

I continued (para 19):

“May I be very clear? I am merely identifying possible arguments. None of these arguments may in the event withstand scrutiny. Each may dissolve as a mirage. But it seems to me that these are matters which required to be investigated”.

The need for such investigation in the present case is, if anything, even more pressing than in Q v Q.

I have accordingly directed that there be a further hearing at which, assuming that the parents still do not have legal aid, I shall decide whether or not their costs are to be funded by one, or some, or all of (listing them in no particular order) the local authority, as the public authority bringing the proceedings, the legal aid fund, on the basis that D’s own interests require an end to the delay and a process which is just and Convention compliant, or Her Majesty’s Courts and Tribunals Service, on the basis that the court is a public authority required to act in a Convention compliant manner.

Copies of this judgment, and of the order I made following the hearing on 8 October 2014, will accordingly be sent to the Lord Chancellor, the Legal Aid Agency, Her Majesty’s Courts and Tribunals Service and the Association of Directors ofChildren’s Services, inviting each of them to intervene in the proceedings to makesuch submissions as they may think appropriate. If they choose not to intervene, I shall proceed on the basis of the conclusions expressed in this judgment, in particular as I have set them out in paragraph 31.

Postscript

The preceding part of this judgment was sent to the parties in draft on 28 October I was subsequently informed that the situation in relation to legal aid has moved on since the last hearing but has not been resolved. The Legal Aid Agency has reassessed the father’s means and has granted an emergency certificate, limited at this stage to the hearings in May and July 2014 and subject to agreement to pay a contribution of £133.77 from capital and £96.38 each month from income. That offer has been accepted and the first instalment has been paid to the Agency. The issue of legal aid in relation to the proceedings with which I am concerned has not yet been resolved. It needs to be, before the next hearing, which is listed before me on 13 November 2014.

Strong stuff: but it puts into stark relief the problems for the administration of justice caused by the retreat of the state from funding lawyers and the curtailment of the Legal Aid scheme. In such cases there is no alternative funding: no LEI, and no “winner” which is why CFAs remain banned in criminal and family proceedings on grounds of public policy.

It also raise interesting questions about the futility or otherwise of Parliament granting rights of action in the civil courts to disabled people under the Equality Act 2010, but through the reforms of LASPO 2012 making such actions impossible to fund, absent a  QUOCS scheme for such cases.

The problem is not going to go away: and the issue is going to come back before the courts sooner rather than later.

 

Admissions and the RTA Protocol

This week  I had cause to look at the Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (2nd edition). What a curious set of provisions it is.

Starting with the most obvious point, claims worth up to £25,000 would not in the natural and ordinary meaning of the words, justify the descriptor “low value”.

The fees payable under the Protocol were apparently set based on Legal Aid rates and a notional number of hours, although government in other contexts has acknowledged the uneconomic nature of Legal Aid work.

Even more surprisingly to a lawyer trying to decipher what it means, though it has been around in two editions for several years now there is no binding authority on any part of the provisions.

The so-called authorities I was asked to look at, are nothing of the kind, being decisions of District Judges and Deputy District Judges, shoddily typed, copied multiple times and passed from hand to hand by lawyers practising in this field, like samizdat literature.

One of the issues that remains up in the air, is the nature of an admission made under the Protocol, through the MOJ Portal.

Many road traffic accident claims will involve both parties suffering both insured and uninsured losses: commonly negotiations between the parties, their respective solicitors and insurers will run in parallel, dealing with the various claims and counterclaims.

If proceedings are necessary, claim and counterclaim can be made, either settled in isolation in whole or in part and those elements which are left outstanding go to trial. Such a case is daily bread for the junior barrister in the first years of practice. However what happens when an insurer and insured fall out?

Or simply do not communicate with each other, so that an insurer wishing to make an economic settlement of a claim intimated through the MOJ Portal admits liability. Is such an admission binding on the insurer’s policy holder who may otherwise wish to pursue a claim for uninsured losses, eg personal injuries but who would be precluded from doing so by the admission?

Although this scenario concerns the consideration of the status of an admission made within the context of the RTA Protocol rather than a settlement, the issues raised are not new and have arisen in the past where either an insured or insurer has acted to prejudice the interests of the other through an ill-informed settlement. For a general survey see Foskett on The Law and Practice of Compromise 7th edition per chapter 22.

The scenario of an admission requires consideration of similar issues: namely what has actually been admitted/settled and did the maker of the admission, the insurance company, have actual/ostensible authority to make the admission in question?

The starting point is to note that a motorist is required by law to have third party liability insurance when using a motor vehicle on the road. The Road Traffic Act 1988 establishes the scheme of compulsory insurance. The motorist accordingly by law has to effect a contract of insurance with an insurance company.

Whatever the scope of the indemnity of such insurance as the motorist may carry, which might be third party, third party fire and theft, or comprehensive insurance such insurance will not provide an indemnity for all the losses the motorist might potentially suffer. A motorist might incur uninsured losses most obviously personal injury, special damages consequent on the personal injury, general damages for loss of use of his motor vehicle and if he mitigates his loss by hiring a replacement vehicle, damages for hire.

The  insurance company is thus concerned to have rights of control of the proceedings under the contract of insurance in respect of it’s own liability it indemnify a third party. It has no interest in the  uninsured losses, being neither required to pay for them, nor to pay for legal costs in pursing recovery of them.

The  insurance company is also concerned, as is the insurance industry generally, to deal with those claims it is concerned with as cheaply and as efficiently as possible. It is also well known that insurance companies may settle cases for all sorts of reasons: on the merits, and for economic reasons.

The scheme set up under the MOJ Portal and encapsulated in the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents, is thus primarily for Claimants to pursue their uninsured losses through a cheap and quick procedure, and for insurance companies to be able to settle their liabilities accordingly. The scheme is wholly different to an action in the civil courts, which might involve claim and counterclaim, issues of causation and quantum, evidence and fact finding.

Accordingly, it might be thought to be a surprising result if as a by blow of the Pre-Action Protocol an admission by an insurer concerned to agree and settle its liability could bind it’s insured in respect of his own personal injury claim, which is not insured by the insurer, not indemnified by the insurer, not of interest to the insurer, and which cannot be raised within the Portal by the insurer. Equally it would be surprising if, an insurer wanting to make an economic settlement of a low value claim, to preserve its’ insured position must deny liability and lose the benefits of a resolution within the Portal.

In fact some might argue that consideration of the Protocol indicates that this is not the case. Construction of the provisions of the Protocol, indicate that an admission made within the Portal is intended to bind the insurer’s interest, not the insured’s personal claim and any admission made  must be construed to relate to only to the claim made against the insured and indemnified by his insurance company (a narrow construction) and not in respect of the insured’s own personal claim (a wide construction). It is noted that insurance companies often rely on the case of Ullah.v.Jon decided by a District Judge in the Croydon County Court to argue that an admission of liability made by a Claimant’s insurer binds the Claimant personally: but that decision is not binding and could be argued to be wrong in any event.

The Protocol is made under a Practice Direction. Practice Directions are made under the Civil Procedure Act 1997 and the Constitutional Reform Act 2005. Although not delegated legislation made by statutory instrument, it is likely that the general canons of statutory construction will apply to construction of the Protocol: namely that it must be construed in a purposive way and that the purpose is to be given effect by a literal construction.

The aims and thus the purpose of the Protocol are expressly set out in paragraph 3.1:

3.1   The aim of this Protocol is to ensure that—

(1) the defendant pays damages and costs using the process set out in the Protocol without the need for the claimant to start proceedings;

(2) damages are paid within a reasonable time; and 

(3) the claimant’s legal representative receives the fixed costs at each appropriate stage.

Looking at the Protocol’s definitions:

1.1  In this Protocol—     

(1) ‘admission of liability’ means the defendant admits that—

(a) the accident occurred;

(b) the accident was caused by the defendant’s breach of duty;

(c) the defendant caused some loss to the claimant, the nature and extent of which is not admitted; and

(d) the defendant has no accrued defence to the claim under the Limitation Act 1980;

However this has to be read with:

(10) ‘defendant’ means the insurer of the person who is subject to the claim under this Protocol, unless the context indicates that it means—

(a) the person who is subject to the claim;

(b) the defendant’s legal representative; 

(c) the Motor Insurers’ Bureau (‘MIB’); or

(d) a person falling within the exceptions in section 144 of the Road Traffic Act 1988 (a “self-insurer”);

Thus according to the definition, the Protocol seems directed not at the insured personally, but at the insurance company standing behind him. The admission made by the defendant, is made by the insurance company which has to settle the claim accepted. It could be said that it has nothing to do with uninsured losses or the defendant’s personal claim (if any).

Secondly, this consideration is re-inforced by the forms used. Per paragraph 6.1

6.1  The claimant must complete and send—

(1) the CNF to the defendant’s insurer; and

(2) the ‘Defendant Only CNF’ to the defendant by first class post, except where the defendant is a self-insurer in which case the CNF must be sent to the defendant as insurer and no ‘Defendant Only CNF’ is required.

6.2  The ‘Defendant Only CNF’ must be sent at the same time or as soon as practicable after the CNF is sent.

Perusal of the forms reveal that the Defendant Only CNF  has no box for a response. It is provided for information only. There is no scope for the Defendant to engage personally in the process, which might be thought to be a pointer to the Protocol having nothing to do with the Defendant’s personal claim, and any admission made within it, being limited to the Defendant’s insurer’s liability.

Thirdly, the response made is expressly enjoined to be by the insurer. The insurer has no facility to include within the response any intimation of a claim for its own insured’s personal claim, though for the reasons above it would have no interest in doing so:

6.10  The defendant must send to the claimant an electronic acknowledgment the next day after receipt of the CNF.

6.11  The defendant must complete the ‘Insurer Response’ section of the CNF (“the CNF response”) and send it to the claimant within 15 days.

Accordingly it is arguable that on a proper construction the admission made, is for the purposes of the Protocol only and limited to an admission in respect of the subject matter of the Protocol: the potential liability of the insurance company, which alone is bound by it.

Insurance companies stand behind the veil. They rely on the doctrine of subrogation, an ancient doctrine, being a fusion of legal and equitable concepts to preserve their interests when an insured event happens.

Subrogation is the right of an insurer to sue in an insured’s name when it has provided an indemnity under a policy of insurance, to recover the loss under the policy from a wrongdoer. Subrogation can also encompass the right to claim from an insured, the fruits of any litigation the insured has undertaken to repay to the insurer sums it may have paid out under the policy.

The law of agency, deals with the insurer’s rights to deal with third parties when negotiating settlements, and in particular the scope of their actual or ostensible authority to effect a settlement. Dealing with actual authority first, this has to be considered in a number of respects. First the contract of insurance in this scenario, will have given the insurance company authority to settle. But settle what? On general principles of contractual interpretation, the authority to deal with the subject matter of the contract (the right to an indemnity) must be dependent on what the insurer’s obligations are under the terms of the contract.

If the indemnity had a limit of say, £1 million, an insurer purportedly making a settlement of £2 million, would be acting without actual authority in so doing. Whether the settlement was binding vis a vis a third party would hinge on issues of ostensible authority.

Accordingly,in this scenario, where the claim is for uninsured losses, the insurance company can have full authority to dispose of its interest under the indemnity, but by definition it cannot have any actual authority, grounded in the contract of insurance, to deal with claims or losses it is not indemnifying and which fall outside the scope of the contract.

Secondly, implied within the contract of insurance, will be a contractual term that the insurer will not exercise rights of subrogation to his prejudice: see MacGillivray on Insurance Law 12th edition at paragraph 23-059: in circumstances where the insurers by admitting liability and precluding the insured from bringing a claim for his own losses, are in breach of implied term, they would plainly be acting without actual authority given to them by the contract.

In terms of ostensible authority, the general position is summarised in Chitty on Contracts 31st edition at 31-057. The court must consider all the circumstances to conclude whether ostensible authority can be found or not. This is inevitably a case specific, fact sensitive exercise.

All the above analysis, however, if rejected by a court, does not detract from a very simple point, that it is hard to see why in this scenario,the court should refuse permission to the Claimant to withdraw his admission. See generally the helpful checklist in the Practice Direction to part 14 set out below:

7.1  An admission made under Part 14 may be withdrawn with the court’s permission.

7.2  In deciding whether to give permission for an admission to be withdrawn, the court will have regard to all the circumstances of the case, including –

(a) the grounds upon which the applicant seeks to withdraw the admission including whether or not new evidence has come to light which was not available at the time the admission was made;

(b) the conduct of the parties, including any conduct which led the party making the admission to do so;

(c) the prejudice that may be caused to any person if the admission is withdrawn;

(d) the prejudice that may be caused to any person if the application is refused;

(e) the stage in the proceedings at which the application to withdraw is made, in particular in relation to the date or period fixed for trial;

(f) the prospects of success (if the admission is withdrawn) of the claim or part of the claim in relation to which the offer was made; and

(g) the interests of the administration of justice

In a case where an admission is sought to be withdrawn at an early stage, and where there is no evidential prejudice, the case for withdrawal of an admission made by an insurer without express assent from a client and in breach of an implied term might be more straightforward to argue than other cases.

Privilege, detailed assessments and private hearings

 

The case of Eurasian Natural Resources Corporation Limited v Dechert LLP [2014] EWHC 3389 (Ch) a decision of Mr Justice Roth is a useful illustration of how costs litigation sometimes throws up issues which have a significance far and beyond questions of time and rate.

Eurasian Natural Resources Corporation Limited (ENRC) was subject to a self reporting process by the Serious Fraud Office and latterly a full blown criminal investigation in respect of alleged fraud at some of its overseas operations. It retained the services initially of DLA Piper UK LLP and then Dechert LLP. In total Dechert billed ENRC over £16.3 million, some £11.7 million of which was invoiced in the period from 23rd July 2012 to 11th April 2013.

On 27th March 2013 ENRC terminated Dechert’s retainer and instructed other lawyers. Dissatisfied with the levels of fees charged, ENRC applied for a detailed assessment on a solicitor-own client basis under section 70 of the Solicitors Act 1974. In opposition to the application, Dechert served 220 pages of witness statements and 13 lever arch files of exhibits. The evidence purported to give a very full amount of the various practices at ENRC being investigated, identifying many individuals involved and describing the way they conducted themselves in response to Dechert’s investigations.

ENRC wanted the detailed assessment heard in private: Dechert in public. ENRC’s concern was that the SFO would attend any public hearing, doubtless with their notebooks, in order to listen with interest to the material being discussed.

At first instance Master Haworth directed that the detailed assessment would be heard in public, a conclusion that might be thought surprising, but, as the High Court judge noted he had not heard extensive argument on the law, including the extent to which by taking detailed assessment proceedings, legal professional privilege had been waived by ENRC.

The appeal was argued by no fewer than seven counsel, four of them in silk, which gives an indication of the importance attached to the appeal and gives rise to vulgar speculation as to what it cost.

The key issues then were whether the interests of justice required that a detailed assessment hearing which would ordinarily be held in public should be held in private, a determination which in turn depended on whether a private hearing was required to protect ENRC’s unwaived rights to legal professional privilege.

The appeal in the High Court accordingly considered to what extent privilege is waived by the detailed assessment process, and whether the fact that documents are discussed in open court means that any privilege which attaches to them is lost. Roth J started by summarising certain authorities of long standing:

38. It is well-established that although an application for detailed assessment of costs inter partes may necessarily entail some waiver of privilege, that waiver is (i) limited; (ii) temporary; and (iii) extends only to the opposing party and the judge. Those principles were clarified by the judgment of a very strong Court of Appeal (Lord Donaldson MR, Taylor and Woolf LJJ) in Goldman v Hesper [1988] 1 WLR 1238. The case concerned a party-and-party taxation pre-CPR, where the assessment proceedings themselves were heard in private. The issue was the extent to which the paying party on an assessment was entitled to see all the documents which the party claiming payment of costs lodged before the registrar conducting the assessment, which would of course include many documents otherwise covered by LPP.

39. In his judgment with which the other members of the court agreed, Taylor LJ referred to the requirements regarding the documents to be lodged with the court, then set out in RSC Ord 62, r 29(7) [of which the equivalent are now at CPR PD 47, para 13.12] and stated as follows, at 1244:

“It is therefore clear that there is now a statutory requirement on a claimant for costs to disclose privileged documents to the court. Normally, where privilege exists it applies to protect disclosure not only to the opposing party, but also to the court. So the rule clearly makes inroads into that general protection. It follows that once a party puts forward privileged documents as part of his case for costs some measure of their privilege is temporarily and pro hac vice relaxed. In most cases, as Hobhouse J. observed in Pamplin’s case [1985] 1 WLR 689, 695, no problem would arise on taxation about privilege. However, when the problem does arise the taxing officer has the duty of being fair to both parties: on the one hand, to maintain privilege so far as possible and not disclose the contents of a privileged document to the paying party unnecessarily; on the other hand, he has to see that that party is treated fairly and given a proper opportunity to raise a bona fide challenge. The contents of documents will almost always be irrelevant to considerations of taxation which are more concerned with time taken, the length of documents, the frequency of correspondence and other aspects reflecting on costs.… There may be instances in which a taxing officer may need to disclose part, if not all, of the contents of a privileged document in striking the appropriate balance. He will no doubt use all his expertise and tact in seeking to avoid that situation wherever he can. I do not envisage it occurring, except very rarely.”

40. Referring to the flexible approach which the taxing officer might take, such as restricting disclosure to the lawyers of the paying party, Taylor LJ continued:

“Any disclosure of privileged documents which does have to be made in the exercise of the taxing officer’s discretion would in my judgment be only for the purposes of the taxation. That it is possible to waive privilege for a specific purpose and in a specific context only is well illustrated by the decision of this court in British Coal Corporation v. Dennis Rye Ltd. (No. 2) [1988] 1 WLR 1113. In that case documents which had been created for the purpose of civil proceedings were disclosed to the police for the purposes of criminal investigation. The question arose as to whether the waiver of privilege in favour of the police amounted to a waiver in favour of the defendant for the purposes of the civil proceedings. Neill L.J., giving the first judgment, said, at p. 1121.”Nevertheless it is clear that the plaintiff made the documents available for a limited purpose only, namely to assist in the conduct first of a criminal investigation and then of a criminal trial. This action of the plaintiff, looked at objectively as it must be, cannot be construed as a waiver of any rights available to them in the present civil action for the purpose of which the privilege exists.”

By the same token voluntary waiver or disclosure by a taxing officer on a taxation would not in my view prevent the owner of the document from reasserting his privilege in any subsequent context.”

41. This principle was approved by the Court of Appeal in Bourns Inc v Raychen Corp [1999] 3 All ER 154, where a submission that the above passage was obiter was rejected. In that case, an American company that received documents by way of voluntary disclosure as part of the taxation of the costs of English patent proceedings argued that it should be free to use them in separate proceedings in the United States. Dismissing that contention, Aldous LJ (with whom Sir Stephen Brown P and Swinton Thomas LJ agreed) stated (at 162):

“It is possible to waive privilege for a specific purpose and in a specific context without waiving it for any other purpose or in any other context. Documents disclosed on taxation in the manner contemplated in Goldman are disclosed for the purposes of that taxation and, perhaps absent special circumstances, the privilege is only waived for the purpose for which the documents are disclosed. If Bourns had disclosed the documents after an order made by the taxing master under RSC, O. 62, r. 20(d), the reasoning of Taylor LJ in Goldman would have been decisive. The privilege attaching to the documents would only have been waived for the purpose of the taxation proceedings. Does the fact that no such order was made result in the privilege being waived generally? In my judgment the answer is ‘No’.”

42. After stating that it should make no difference that the documents had been disclosed voluntarily and not pursuant to an order, Aldous LJ continued:

“There is good reason to encourage voluntary disclosure of relevant documents in taxation proceedings. A party who claims payment may have to elect whether to pursue that claim in the light of knowledge that it might require disclosure of privileged documents. If he decides to pursue such a claim with the result that natural justice requires disclosure, he should not lose his right of confidentiality more than justice requires. Justice only requires that right to be lost for the taxation proceedings.”

43. Finally, B v Auckland District Law Society [2003] UKPC 38, [2003] 2 AC 736, concerned the question whether the applicable New Zealand statute entitled the respondent law society to require a law firm to produce privileged documents for the purpose of an inquiry into allegations of professional misconduct. The Judicial Committee of the Privy Council held that the statute did not override LPP. However, the firm had already provided some documents to the independent counsel appointed by the law society to conduct the investigation, and the question therefore arose whether LPP in those documents had thereby been lost. Under the heading, “Limited waiver”, Lord Millett, delivering the opinion of the Board, stated, at [68]:

“The society’s argument, put colloquially, is that privilege entitles one to refuse to let the cat out of the bag; once it is out of the bag, however, privilege cannot help to put it back. Their Lordships observe that this arises from the nature of the privilege; it has nothing to do with waiver. It does not follow that privilege is waived generally because a privileged document has been disclosed for a limited purpose only: see British Coal Corpn v Dennis Rye Ltd (No 2) [1988] 1 WLR 1113 and Bourns Inc v Raychem Corpn [1999] 3 All ER 154. The question is not whether privilege has been waived, but whether it has been lost. It would be unfortunate if it were. It must often be in the interests of the administration of justice that a partial or limited waiver of privilege should be made by a party who would not contemplate anything which might cause privilege to be lost, and it would be most undesirable if the law could not accommodate it.” After explaining that production of the documents did not deprive them of their privileged character, Lord Millett continued, at [71]:”A lawyer must be able to give his client an unqualified assurance that, not only that what passes between them shall never be revealed without his consent in any circumstances, but that should he consent to disclosure for a limited purpose those limits will be respected….”

Roth J then noted the following:

44. Mr Hollander submitted that all the cases dealing with limited waiver concerned the provision of privileged documents to a third party, where that provision was expressed to be for a limited purpose or, if it were not expressed – as in the case of inter partes taxation – that was recognised as a special circumstance. None of those cases concerned privileged documents that were already in the possession of the party prior to the waiver. In the latter circumstances, he argued, where a waiver of privilege was to be implied, it could not be limited but was complete.

However that was rejected by the court:

45. However, in my judgment there is no reason as a matter of principle, practicality or authority why the circumstances giving rise to a limited waiver should be restricted in the manner which Mr Hollander suggested. Although the leading cases concerning professional negligence actions against a solicitor speak of an implied waiver of privilege in general terms, in my view, that simply reflects the fact that in none of those cases was this question raised for consideration. In none of them was there any issue about holding the hearing in public. More significantly, the authorities which have directly considered limited waiver do not suggest that the concept has an inherently restricted application. The words of Lord Millett, speaking for the Privy Council in B v Auckland District Law Society, set out above, are of general scope (“It must often be in the interests of the administration of justice….”). Since it is established that a waiver of privilege may be express or implied, I consider that in appropriate circumstances an implied waiver can be limited in the same way as an express waiver.

He went onto conclude:

48. In the present case, it is common ground that there is an implied waiver of privilege so as to enable Dechert to resist the argument of special circumstances under sect 70(3) SA 1974, and then contest the challenge to its charges on a detailed assessment. However, I consider that there is no ground for finding that privilege was thereby waived completely and for any use of the documents that is wholly irrelevant to that assessment. For example, the affairs of ENRC, as a former public company, have attracted some media interest and I think that the implied waiver to which the sect 70 application gave rise could not possibly entitle Dechert to hand over all the documents concerning their former client to an inquiring journalist. Once the potential of an implied waiver being limited is recognised, this seems to me a classic case for its application.

The effect of finding there had been (at best) only a limited waiver of privilege for the purposes of the detailed assessment proceedings led inevitably to the appeal being allowed:

59. I have no doubt that the present case is one where the interests of justice require that the reading by the costs judge of the papers should not have the effect of putting them into the public domain. It is notable that Master Haworth made an order pursuant to CPR 5.4C(4) that a non-party may not obtain a copy of any of the documents on the court file: see para 1 of his judgment. That order would have been futile if by reason of his stating that he had read the papers they had thereby entered into the public domain. So also would Master Haworth’s grant of permission to appeal against his refusal to direct that the costs application be heard in private. The purpose of seeking a hearing in private was of course to prevent public access to the documents but, if Dechert’s submission were correct, the pass had been sold on that issue once Master Haworth heard in public the application to decide whether the subsequent hearing should be in private. ENRC’s right of appeal, which the costs judge granted, would be rendered nugatory.

As an interesting issue on the effect of a judge noting he had read the evidence:

60. Even if I were wrong in that conclusion, I consider that this court can still issue an order preventing further dissemination of the documents. Mr Hollander resisted that position, arguing that since the documents had “entered the public domain” they were effectively out in the open and could no longer be subject to restriction. I regard that submission as misconceived. When I put it to Mr Hollander that in that case once a judge entered court and said to the parties at the start of the hearing that he had read the papers, the documents were thereby in the public domain and could no longer be subject to restriction, he submitted that the court would retain power until the conclusion of the hearing to restrain dissemination. But I do not see any logical reason why a cut-off should come at that point, so as to deprive an appellate court from imposing a restriction if, for example, it considered that the judge below had wrongly decided this very point.

61. The power of the High Court with respect to injunctions is set out in sect 37(1) of the Senior Courts Act 1981. It may grant an injunction  “in all cases in which it appears to the court just and convenient to do so.”

62. If the court clearly did not intend by virtue of its statement that it had read the papers to place them in the public domain, or even if it did so and an appellate court held that it had been mistaken in its approach, I see no reason in principle why the court then lacks jurisdiction to make an order against disclosure or dissemination of the material in question, provided always that it is ‘just and convenient to do so’. Clearly, if there had already been widespread dissemination of the material, such an order would be inappropriate. But in a case like the present where no third party attended the hearing and there is no suggestion that any third party has yet obtained access to this material, if the interests of justice required that no disclosure or dissemination should be made, I consider that the court retains the power to make an order accordingly.

The result of the appeal was no longer in doubt:

66. Here, ENRC has a very real concern that a public hearing will expose much of the material to the SFO and thereby prejudice its position. Part of the retainer of Dechert in this case was to assist ENRC in the fraud investigation and its dealings with the SFO, and so some of the privileged documents were created for that very purpose. I consider that there is the potential for very real prejudice to ENRC if the matter were heard in public. That is illustrated by the declared position of ENRC that if the order below stands, it will not proceed with its application. The effective protection of ENRC’s rights therefore requires that the matter be heard in private.

67. By contrast, what legitimate interest has Dechert that the application should be heard in public? This is addressed in a brief witness statement from Mr Richard Harrison, who is not himself a solicitor at Dechert but at its external solicitors instructed for the purpose of this action. Mr Harrison exhibits a bundle of press articles which he says include reports that ENRC is “suing Dechert for overcharging millions of pounds”. Mr Harrison continues:

“These proceedings, and the complaints being made by the Claimant about Dechert in relation to its fees, are accordingly so well documented in the press that it is vital that Dechert has the ability to clear its name of the allegations of gross and deliberate overcharging in a public court and that it is not dealt with by evidence and a judgment which are kept in private. Therefore, it is important to Dechert that these proceedings be heard in public.”

68. I have read the exhibited articles, which mostly concern allegations about ENRC in a letter from Dechert to ENRC that was mysteriously leaked to the press. They do also report complaints by ENRC about Dechert’s “improper billing”, although I note that only one of the 11 articles exhibited includes the specific allegations to which Mr Harrison refers. Nonetheless, I recognise Dechert’s understandable concern to vindicate its reputation. But I consider that this concern will be entirely met by a public judgment determining the costs application. There is no question of this court directing that the costs judgment itself should be kept private, as Mr Harrison infers. I can see no need for the hearing itself to be in public, which is the issue on this appeal, in order adequately to protect Dechert’s interests. Indeed, I would have thought that a public hearing might have a contrary effect since all the allegations advanced by ENRC regarding its overcharging would then be rehearsed before a public audience.

69. Finally, it is not suggested that there is some particular public interest on the facts of this case for holding the hearing in public. I also consider it of some relevance that this is not adversarial litigation but the exercise of a supervisory jurisdiction by the court over its officers.

This judgment is perhaps unsurprising in its result: it will be of use to all who have to consider and deal with material disclosed on detailed assessments and who must consider carefully, what is to be regarded as in the public domain, and what is to be  regarded as falling back into the locked box marked legal privilege after the detailed assessment is over.

Costs and the administration of estates

Some years ago, The Guardian estimated that as at 2009 the high street banks and solicitors profession charged collectively £1.25 billion a year in fees for dealing with the administration of estates through the grant of probate or letters of administration.

Probate is the term applied to the process of dealing with someone’s property after their death. It involves proving a will, gathering in property, and perhaps having it valued, paying the estate’s debts including taxes and then distributing the value of the estate either according to the terms of the will or in accordance with the laws of intestacy, if someone died without a will.

The naming of solicitors or banks in wills as executors will often mean that as a matter of course they undertake the administration and distribution of the estate of the deceased.

Although one can see at a difficult time for the family that for a professional to move seamlessly into position and deal with the necessary work might be a welcome option, the charges of the solicitor may not have been discussed, agreed or negotiated on a competitive basis.

Accordingly the purpose of this post is to consider the basis on which solicitors charge and the way in which such charges can be limited at the start of the engagement or challenged after its conclusion.

The starting point is to consider what agreement has been reached in relation to the solicitors fees by the executors or administrators of the deceased’s estate. There will always be a contract of retainer, between a solicitor and client as even if there is no express agreement the law will imply a contract: but the terms of the contract may be very different and in particular may provide for an opaque charging structure based on time spent and the value of the estate or in fact make no provision for an express agreement on fees. In such circumstances the term implied by law is that the solicitor will be paid a reasonable fee: but how does one ascertain what is reasonable?

Such situations should be increasingly uncommon: as the weight of regulation grows on the legal profession, year by year, in most cases one would expect to see a written retainer either made in writing or at least evidenced in writing and the absence of such a document can itself be a cause for complaint.

The starting point in this respect will be the Solicitors Code of Conduct and the requirement as an outcome in any matter to give the client “best possible information” about the costs they will incur as well as the mechanism for complaint about the solicitor’s bill.

The Code of Conduct dictates the outcomes that a solicitor must achieve:

O(1.13)

clients receive the best possible information, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter;

O(1.14)

clients are informed of their right to challenge or complain about your bill and the circumstances in which they may be liable to pay interest on an unpaid bill;

The outcomes are achievable by what are termed the range of indicative behaviours, so those steps a solicitor might take in order to achieve the outcomes.

IB(1.13)

discussing whether the potential outcomes of the client’s matter are likely to justify the expense or risk involved, including any risk of having to pay someone else’s legal fees;

IB(1.14)

clearly explaining your fees and if and when they are likely to change;

IB(1.15)

warning about any other payments for which the client may be responsible;

IB(1.16)

discussing how the client will pay, including whether public funding may be available, whether the client has insurance that might cover the fees, and whether the fees may be paid by someone else such as a trade union;

IB(1.17)

where you are acting for a client under a fee arrangement governed by statute, such as a conditional fee agreement, giving the client all relevant information relating to that arrangement;

IB(1.18)

where you are acting for a publicly funded client, explaining how their publicly funded status affects the costs;

IB(1.19)

providing the information in a clear and accessible form which is appropriate to the needs and circumstances of the client;

IB(1.20)

where you receive a financial benefit as a result of acting for a client, either:

(a) paying it to the client;

(b) offsetting it against your fees; or

(c)keeping it only where you can justify keeping it, you have told the client the amount of the benefit (or an approximation if you do not know the exact amount) and the client has agreed that you can keep it;

IB(1.21)

ensuring that disbursements included in your bill reflect the actual amount spent or to be spent on behalf of the client;

So much for the form: but what will be the terms of trade? How can (or should) a solicitor structure their charges in a probate matter?

Solicitors undertake both contentious and non-contentious work: a theme of the last 20 years with the move to ever increasing specialisation within the solicitors’ profession, is that many solicitors will never have undertaken contentious work and vice versa.

The difference matters, because there are separate legal rules governing how solicitors can charge depending on whether work is classed on contentious and non-contentious work. Section 87 of the Solicitors Act 1974 defines the two areas of work in these terms:

“contentious business” means business done, whether as a solicitor or advocate, in or for the purposes of proceedings begun before a court or before an arbitrator, not being business which falls within the definition of non-contentious or common form probate business contained in section 128 of the Senior Courts Act 1981…”non contentious business” means any business done as a solicitor which is not contentious business as defined by this subsection.

Probate work (for the most part) will be non-contentious work.

A contract of retainer for non-contentious business to be carried out may be a simple retainer or it may be a non-contentious business agreement. Satisfaction of the requirements of section 57 of the Solicitors Act 1974 will serve to create a non-contentious business agreement:

(1) Whether or not any order is in force under section 56, a solicitor and his client may, before or after or in the course of the transaction of any non-contentious business by the solicitor, make an agreement as to his remuneration in respect of that business.

(2) The agreement may provide for the remuneration of the solicitor by a gross sum or by reference to an hourly rate , or by a commission or percentage, or by a salary, or otherwise, and it may be made on the terms that the amount of the remuneration stipulated for shall or shall not include all or any disbursements made by the solicitor in respect of searches, plans, travelling, fees or other matters.

(3) The agreement shall be in writing and signed by the person to be bound by it or his agent in that behalf.

(4) Subject to subsections (5) and (7) , the agreement may be sued and recovered on or set aside in the like manner and on the like grounds as an agreement not relating to the remuneration of a solicitor.

(5) If on any assessment of costs the agreement is relied on by the solicitor and objected to by the client as unfair or unreasonable, the costs officer may enquire into the facts and certify them to the court, and if from that certificate it appears just to the court that the agreement should be set aside, or the amount payable under it reduced, the court may so order and may give such consequential directions as it thinks fit.

(6) Subsection (7) applies where the agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

(7) If, on the assessment of any costs, the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into—

(a) the number of hours worked by the solicitor; and

(b) whether the number of hours worked by him was excessive.

It should be noted that sometimes a non-contentious business agreement is created accidentally: a client care letter signed by the client may suffice. Where a simple retainer has been made, or indeed is implied which does not specify the amount or basis of the solicitors remuneration, the Solicitors (Non Contentious Business) Remuneration Order 2009 implies a set of criteria for establishing the reasonable charges of a solicitor.

Article 3 expressly allows a solicitor’s charges to be related to the amount of any money or value of any property involved.

A solicitor’s costs must be fair and reasonable having regard to all the circumstances of the case and in particular to—

(a) the complexity of the matter or the difficulty or novelty of the questions raised;

(b) the skill, labour, specialised knowledge and responsibility involved;

(c) the time spent on the business;

(d) the number and importance of the documents prepared or considered, without regard to length;

(e) the place where and the circumstances in which the business or any part of the business is transacted;

(f) the amount or value of any money or property involved;

(g) whether any land involved is registered land within the meaning of the Land Registration Act 2002;

(h) the importance of the matter to the client; and

(i) the approval (express or implied) of the entitled person or the express approval of the

testator to—

(i) the solicitor undertaking all or any part of the work giving rise to the costs; or

(ii) the amount of the costs.

More than ten years ago the Court of Appeal in the case of Jemma Trust Co Ltd.v.Liptrott and others [200]4 1 WLR 646 established a set of principles for the basis of solicitors charges in probate matters going forward and indeed which may be of more general application for devising fair and reasonable charging structures for non-contentious work undertaken by solicitors. In this case the solicitors had sent to their client bills claiming time spent and also a separate bill seeking costs calculated by reference to the value of the estate on a percentage basis.

The principles set out at paragraph 33 of the judgment of Longmore LJ were as follows:

(1) Much the best practice is for a solicitor to obtain prior agreement as to the basis of his charges not only from the executors but also, where appropriate, from any residuary beneficiary who is an entitled third party under the 1994 Order. This is encouraged in the 1995 booklet and letter 8 of appendix 2 to the 1999 booklet provides a good working draft of such agreement. We support that encouragement.

(2)In any complicated administration, it will be prudent for solicitors to provide in their terms of retainer for interim bills to be rendered for payment on account; this is of course, subject to the solicitor’s obligation to review the matter as a whole at the end of the business so as to ensure that he has claimed no more than is fair and reasonable, taking into account the factors set out in the 1994 Order.

(3)There should be no hard and fast rule that charges cannot be made separately by reference to the value of the estate; value can, by contrast, be taken into account as part of the hourly rate; value can also be taken into account partly in one way and partly in the other. What is important is that (a) it should be transparent on the face of the bill how value is being taken into account; and (b) in no case should it be taken into account more than once.

(4)In many cases, if a charge is separately made by reference to the value of the estate, it should usually be on a regressive scale. The bands and percentages will be for the costs judge in each case; the suggestion to the costs judge set out in para 31 may be thought by him to be appropriate for this case but different bands and percentages will be appropriate for other cases and the figures set out in para 31 cannot be more than a guideline.

(5)It may be helpful at the end of the business for the solicitor or, if there is an assessment, for the costs judge, when a separate element of the bill is based on the value of the estate, to calculate the number of hours that would notionally be taken to achieve the amount of the separate charge. That may help to determine whether overall the remuneration claimed or assessed is fair and reasonable within the terms of the 1994 Order.

(6)It may also be helpful to consider that the Law Society’s guidance in cases where there is no relevant and ascertainable value factor which is given in the 1995 booklet at para 13.4 If the time spent on the matter is costed out at the solicitors expense rate (which should be readily ascertainable from the solicitors expense of time calculations) the difference between that sum (the cost to the solicitor of the time spent on the matter) and the final figure claimed will represent the markup. The markup (which should take into account the factors specified in the 1994 Order including value) when added to the cost of the time spent must then be judged by reference to the requirement that this total figure must represent “such sum as may be fair and reasonable to both solicitor and entitled person”.

It should be noted that some commentators might take the view that the Court of Appeal decision shows a degree of benevolence to solicitors when rendering bills where their fees have not been expressly agreed, which sits uneasily with the obligations in the Solicitors Code of Conduct.

In this respect the case of Bilkus.v.Stockler Brunton (a firm) [2010] 1 WLR 2526 is an interesting illustration of a stricter approach being taken to charging clients value elements. A solicitor having done an excellent job for his client, in recovering £6.6 million, decided to add a value element of £50,000 to his charges.

The decision hinged upon the question of whether work done in giving effect to a final court order in concluded litigation was contentious or non contentious work: if contentious then no “value” element of the type contemplated by article 3 of the 2009 Order could be added to the bill. Of perhaps wider importance, was the fact that the client had never agreed to pay a value element, and this was sought to be raised at the end of the case. The Court of Appeal in the leading judgment of Stanley Burnton LJ noted the following:

50 It is common ground that sections 57 and 59 of the 1974 Act do not require separate agreements relating to contentious and non-contentious business. A single written agreement, signed by both parties, may cover both kinds of business. Whether the agreement does so will depend on its true construction in the circumstances prevailing when the business in question is carried out.

51 I accept that the terms of the letter, when it was written and agreed, applied to the contentious business then anticipated. But when the solicitors continued to act after judgment had been given by Lawrence Collins J without seeking Mr Bilkus’s agreement to any other basis of charging, or even informing him that any other basis of charging would be applicable, he was entitled to assume that nothing had changed: that the same basis of charge continued. Mr Bilkus was not a solicitor; it can safely be assumed that he had no knowledge of the statutory de[1]nitions in the 1974 Act or of their relevance. The reasonable client, in the circumstances of this case, would consider that the solicitors were continuing to work under the terms of the letter agreement.

52 Indeed, it may be significant that although the solicitors own invoice dated 3 September 2004 stated that the proceedings had been concluded by the order of Lawrence Collins J dated 29 October 2003, it does not distinguish between the basis of charge for work done by them before and after that date.

53 In my judgment, it is incumbent on a solicitor who seeks to charge a client on a di›erent basis from that previously agreed to make his intention clear to his client, who must be given an informed opportunity to agree or to reject the new basis of charge, and if he so chooses to cease to instruct the solicitor. Mr Bilkus was not given that opportunity.

54 It follows that I would uphold the finding of the judge that the solicitors are not entitled to any remuneration beyond that agreed in the letter of 25 January 2001. Thus for this reason too they are not entitled to any value element or uplift.

Ward LJ expressed in a concurring judgment:

71 The answer to the appeal may, however, lie in the answer to the second point identified by and given by Stanley Burnton LJ. There was only one retainer by the client of his solicitor in this case. The terms of business for that retainer were set out in the letter dated 25 January 2001. The terms prevailed until the retainer was discharged or varied. It was not. Mr Stockler was not entitled to charge more than he had agreed to charge in that letter. He was not entitled to charge an uplift.

In cases where there is a dispute about the amount of a solicitors costs, whether in terms of the time spent on the case or the value element, an application to court can be made for a solicitor/own client assessment under the Solicitors Act 1974.

Alternatively a complaint can be made to the Legal Ombudsman. The question of which route a client should pursue will of course depend on the nature of the complaint about the solicitors work and the amount of the costs in dispute.

Costs and NIHL

Recent pronouncements by the ABI have challenged the amount of costs that insurers are paying to solicitors firms who represent claimants suffering from NIHL/tinnitus. The view expressed by the ABI is that insurers on average are paying £3 in legal costs for every £1 that they pay in compensation to the afflicted person.

These statements should be seen as part of the ongoing programme of the insurance industry to reduce legal costs across the board readily observable in recent years, with the creation of the Portal, the reduction in Portal costs, the introduction of fixed costs in some species of Fast Track claims and the continuing pressure on guideline hourly rates.

In turn it has been observable that despite the decline of many heavy industries the number of deafness claims coming forward do not seem to have slowed, with numerous claims coming from industries very far removed from mining, boiler making or shipbuilding which featured so heavily in the cases of 30 years ago.

A further point of significance is that many of the claims presented these days seem to be at the sub 10 DBA level of hearing loss and some just above the level of impairment that might be contended to be de minimis.

No doubt there is a thesis begging to be written on the correlation between the number of claims being presented and the rise of the claims management industry now respectably clothed and regulated by the provisions of the Compensation Act 2006.

The combination of a desire to cut costs and the rise in claims is pointing towards a clash or more accurately series of clashes as the respective sides lock horns on what are reasonable and proportionate costs to recover for a standard NIHL/deafness claim.

The starting point for all NIHL/tinnitus claims these days is potentially the Pre-action Protocol for Low Value Personal Injury (Employers Liability and Public Liability) Claims. I say potentially, because although this Protocol includes within its scope disease claims, such claims fall outside the scope of the Protocol where there is more than one defendant, and in NIHL/tinnitus cases it is very common to have more than one potential defendant.

Assuming that the case proceeds within the Protocol, costs are fixed for a claim litigated outside London and worth less than £10,000 at £300 for stage 1, £600 for stage 2 and a further £500 for stage 3, plus VAT plus reasonable disbursements falling within 45.19. More valuable claims worth more than £10,000 attract higher fees but these are still a fraction of the value of the claim, adding a further £700 plus VAT at stage 2.

If a case within the Protocol, falls outside it for whatever reason, and there is no argument to a paying party within rule 45.24 to point to unreasonable behaviour on the part of a claimant, costs will be at large. This is because of the exclusion of disease claims from Fast Track fixed costs in rule 45.29A. There is no indication that this side of the election in May 2015 there is any appetite to extend the matrix of fixed costs to disease claims, and probably little point so long as the Protocol excludes multiple defendant claims.

So with costs at large, it can safely be predicted that the battleground will focus on a number of key issues which are regularly raised in points of dispute.

The first is proportionality. Given the new test of proportionality and the requirement that there be a reasonable relationship between the sum recovered and costs, if compensation is paid in the sum of £3000, paying parties will surely argue that costs should not exceed or greatly exceed £3000 pointing no doubt to the levels of costs prescribed for other types of personal injury claim by the fixed costs regime.

The second relates to the issue of common costs in deafness claims. Where a claimant brings a claim against 6 defendants and loses/discontinues against 5, why he should be able to recover all his common costs as well as his individual costs against the unlucky sixth defendant? The law on division and apportionment and the discretion of the court to make a “special order” might be scrutinised.

The third relates to the grade of fee earner used and in turn the hourly rates charged. The results of the Foskett review have been discussed elsewhere on this blog: but a move to explain or emphasise how these cases are conducted by grade E fee earners with a faithful computerised companion telling them what to do and which buttons to press can be anticipated. This will in turn bode ill for the use of counsel to settle statements of case or other paperwork, at least in the run of the mill case.

NIHL and success fees

Submissions concluded today before Mr Justice Phillips in Birmingham, on the point as to whether NIHL/tinnitus is a disease or injury for the purposes of fixed success fees under the former part 45 of the Civil Procedure Rules.

Judgment was reserved and will be handed down at a later date.

The judgment will be reported on in full when it has been handed down.