Brown-Quinn v Equity Syndicate Management Ltd

Hearing dates: 21 st & 22 nd November 2012

Introduction

This appeal, about the freedom to choose one's own lawyer, concerns legal expenses insurance, an area of law which since 1987 has had a European dimension Council Directive 87/344 EEC ("the Directive") made provision for the co-ordination of laws, regulations and administrative provisions relating to legal expenses insurance. Article 4 of the Directive provides:-

"1. Any contract of legal expenses insurance shall expressly recognize that:

a) where recourse is had to a lawyer or other person appropriately qualified according to national law in order to defend, represent or serve the interests of the insured person in any inquiry or proceedings, that insured person shall be free to choose such lawyer or other person;

b) the insured person shall be free to choose a lawyer or, if he so prefers to the extent that national law so permits, any other appropriately qualified person, to serve his interests whenever a conflict of interests arises.

2. Lawyer means any person entitled to pursue his professional activities under one of the denominations laid down in Council Directive 77/249/EEC of 22 March 1977 to facilitate the effective exercise by lawyers of freedom to provide services."

This Directive has been superseded by the newer general Insurance Directive 2009/108/EC, in which Articles 198 –205 provide for legal expenses insurance in the same terms. The 1987 Directive was transposed into English law by the Insurance Companies (Legal Expenses Insurance) Regulations 1990 ("the Regulations"). The equivalent of Article 4 is Regulation 6 which provides:-

" Freedom to choose lawyer

6

(1) Where under a legal expenses insurance contract recourse is had to a lawyer (or other person having such qualification as may be necessary) to defend, represent or serve the interests of the insured in any inquiry or proceedings, the insured shall be free to choose that lawyer (or other person).

(2) The insured shall also be free to choose a lawyer (or other person having such qualifications as may be necessary) to serve his interests whenever a conflict of interests arises.

(3) The above rights shall be expressly recognised in the policy."

The three respondents to this appeal had the benefit of legal expenses insurance ("LEI") with the appellant insurance company Equity Syndicate Management Ltd ("the insurers") and wished to bring employment and discrimination claims. The relevant terms of that insurance included the following:-

" Declaration

This is to certify that Equity Red Star at Lloyds, the underwriters, hereby agree to the extent and in the manner herein provided to indemnify the insured person against legal costs and expenses subject to the terms, limits of indemnity, exclusions and conditions herein in respect of an insured event which occurs within the territorial limits and during the period of insurance.

Definitions

COSTS and EXPENSES

Legal and professional fees for which you are responsible, including reasonable fees, costs and expenses incurred by the Appointed Representative acting for you in connection with the pursuit or defence of legal proceedings.

[There was a limitation to such costs and expenses of a maximum of £50,000, provided for by the Terms and Conditions.]

APPOINTED REPRESENTATIVE

A solicitor, firm of solicitors, barrister or any other suitably qualified person appointed to act on your behalf.

General Conditions

1. You [defined in the Definitions section as "You the insured" (plus certain dependants)] must:

1.1 Keep to the terms and conditions of this policy.

1.2 Take reasonable steps to keep any amount we have to pay as low as possible.

…

2.3 If we agree to start legal proceedings and it becomes mandatory for you to be represented by a lawyer, or there is a conflict of interest, you can choose an appointed representative by sending us the suitably qualified person's name and address. We may choose not to accept the choice of representative, but only in exceptional circumstances. If there is a disagreement over the choice of appointed representative, another suitably qualified person can be appointed to decide the matter. Before you choose a lawyer, we can appoint an appointed representative.

2.4 An appointed representative will be appointed by us and represent you according to our standard terms of appointment. The appointed representative must co-operate fully with us at all times.

…

5. If an appointed representative refuses to continue acting for you or if you dismiss an appointed representative, the cover we provide will end at once, unless we agree to appoint another appointed representative.

…

7. If we and you disagree about the choice [of] appointed representative … we and you can choose another suitably qualified person to decide the matter. We and you must both agree to the choice of this person in writing. Failing this we will ask the President of a relevant national Law Society to choose a suitably qualified person. …"

The insurers operated a system of panel solicitors whereby (so we were informed) solicitors to whom the insurers promised to give work agreed to charge either a fixed hourly rate or a total all-in fee irrespective of the importance or complexity of the work or of the experience or qualifications of the person carrying out the work. The insurers also had a system of standard terms of appointment for non-panel solicitors and it is these terms that are referred to in General Condition 2.4 cited above and were available to anyone who asked to see them. They provided for a fixed hourly rate of £125 per hour, later, following an ad hoc increase, rising to £139 per hour in relation to Ms Brown-Quinn and Ms Baxter, but not in relation to Ms Jones. If an insured wanted to appoint a solicitor to conduct her litigation who was not on the panel, the insurer would only agree to that appointment and be responsible for fees if the solicitor concerned agreed to these standard terms of appointment.

Ms Jones decided to instruct Webster Dixon, a London firm of solicitors specialising in employment and discrimination law. This firm of solicitors was not on the insurers' panel of solicitors and did not agree to limit their charges to the fixed hourly rate in the standard terms of appointment (which I shall call the "non-panel rate"). They have sought a declaration that the insurers are bound to pay their fees up to the limit of the insurance.

Ms Brown-Quinn and Ms Baxter were originally happy enough to use the services of McKeowns, one of the solicitors on the insurers' panel, but the individuals looking after their cases then moved to Webster Dixon. These respondents wanted the relevant individuals to continue to conduct their cases but the insurers have declined to be responsible for Webster Dixon's fees. Ms Brown-Quinn and Ms Baxter have therefore sought declarations that the insurers were bound to continue to support their cases.

Before Burton J the insured claimed they were entitled to recover the reasonable fees of Webster Dixon and the insurers expressly disclaimed any case that the insured were not covered if they instructed solicitors who did not accept the non-panel rate and also any case that the recoverable costs were only the non-panel rate. Their submission was that any assessment of Webster Dixon's fees and expenses should take the non-panel rate as the starting point of any assessment. The judge adopted a middle course saying that the non-panel rate was relevant on assessment as a comparator but not as a starting point. He said further that any assessment should take into account the availability of other suitable firms of solicitors who would charge less than Webster Dixon but that the following matters should also be taken into account:-

a) the location of the chosen solicitors compared to the panel solicitors;

b) their specialisation and qualification for taking on the claims;

c) the complexity of the claims;

d) the importance of the claim to the client;

e) the substance and strength of the proposed defendant to the claims; and

f) the nature of the work to be carried out e.g. whether it was appropriate to be conducted by a senior solicitor or partner of the firm.

Such an assessment would be neither an ordinary assessment taking account of those matters relevant to costs under the CPR nor an assessment adopting the non-panel rate as a starting point. He granted declarations accordingly. He also held that the position was no different for a claimant who reasonably instructed a non-panel solicitor in the middle of the case from that of a claimant who instructed such a solicitor from the outset. His decision is reported at [2012] 1 All E.R. 778. The insurers now appeal with the permission of this court.

The Insurers' position

The facts of this case have revealed that the insurers exhibit an insouciance to their obligations...