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18.07.06: Deborah Garrett v Halton Borough Council David Myatt & Others v National Coalboard
A summary of the above cases in respect of which, joint judgment was handed down on the 18th July 2006. In both cases, the Court of Appeal decided that no costs should be allowed as there had been material breaches of the CFA Regulations 2000 (Reg 4) (now abolished).
Article written by Guy Platt-Higgins LLB(Hons), Director @ Law Costing Ltd.
GARRETT
In this case, the question to be considered by the Court of Appeal was whether a firm of solicitors had any "interest" in an (after-the-event) insurance product which the Claimant was advised to purchase and if so, was that interest something which needed to be specifically declared by the solicitors to their client.
Ultimately, it was adjudged that because the solicitors were obliged to recommend a particular policy of insurance, they did have an "interest" because if they did not recommend the policy, their position on the Claims Management panel would be adversely affected one way or another.
It was also adjudged that the interest was something which had to be declared to the client.
As the solicitors had not declared their "declarable interest", the costs of the action were disallowed.
OUR ADVICE:
It is not clear whether the Courts (either at first instance or Appellate level) actually had a full understanding of how referral schemes operate. Often there is a contractual obligation to sign a client up to a particular insurance product. It is not merely a moral or commercial obligation. Had the Courts been aware of this, surely this would have been mentioned in the judgment and the question of whether the rules had been breached would have been answered much more definitely.
This case relates to all pre-November 2005 CFA's, however, there are many of those still ongoing.
This article has been written one week after the Court of Appeal judgment, however, insurers for paying parties have already hijacked the Garrett band-wagon and are starting to ask the questions of solicitors which some had feared ! By now, many insurers know how particular referral schemes work and therefore, they also know that some firms will fall foul of this latest judgment.
What can be done about it now?
Not a great deal. The Court of Appeal has illustrated that you can have an interest in an insurance product without even knowing you have such an interest. The likelihood is that if you signed up to one of the infamous schemes in the last few years, you would have an "interest" in the after the event insurance product. And if you did not disclose that interest to the client (and many will not have done), there is a risk that you may lose all of your costs!
Obviously, this is extremely harsh. You have spent hours of time on a case and undertaken it properly and efficiently. You will have paid your referrer for the work and ultimately end up with nothing.
We can keep you updated with opponents stances in respect of this case if you e-mail us your own e-mail address. We shall not inundate you with updates but we will keep you abreast of how things progress (e-mail: guyph@lawcostingltd.co.uk).
At the moment, insurers are deciding how to deal with this important judgment. The writer dealt with the matter of Culshaw v Goodliffe and after the appeal in that case, expected insurers and their representatives to object to paying any costs - however, this did not happen. Presumably, insurers decided to be pragmatic so as to avoid further Appeal costs. Hopefully, they will do the same in Garrett, but we will get to know this very
This case involved four coal miners who were pursuing disease claims. Their solicitors asked of them (per their mandatory obligation under Reg 4 CFAR 2000) whether they had any alternative method of funding the claims - e.g. legal expenses insurance under any other insurance policy. Each of the clients answered in the negative and in fact, they were correct in asserting that they did not have any such alternative financial cover.
Interestingly, in a similar way to the unpopular case of Samonini, the Court was not interested in the fact that there was no suitable alternative method of funding, it was merely interested in whether T's had been crossed and I's dotted.
The Court decided that the solicitors had not asked the correct question of the Claimants. They ought to have asked their clients to have brought in their insurance documents for the solicitors to examine. In the Court's judgment, it was decided that clients such as coal miners were not "sophisticated" enough to understand their own insurance policy documents!
The irony is that coal miners are possibly more likely than Appeal Court judges to understand insurance documents because (a) they actually do want to know what they are buying, and (b) they don't have a clerk to do it for them.
OUR ADVICE:
As with Garrett, this case is potentially devastating for Claimants solicitors. We are on the front line when it comes to seeing how insurers react to this. We have hundreds of cases in the negotiation process and we will be the first to see whether the case is as troublesome as anticipated.
We can keep you informed of developments in this regard - simply e-mail me (guyph@lawcostingltd.co.uk) directly for a progress report at any time. If you require any guidance upon prevention measures or suggestions as to best practice, we would be happy to hear from you.