Emw Law LLP (Respondent/Claimant) v Mr Scott Halborg
| Jurisdiction | England & Wales |
| Judge | Mr Justice Newey |
| Judgment Date | 04 May 2017 |
| Neutral Citation | [2017] EWHC 1014 (Ch) |
| Docket Number | Case No: CH-2016-00280 |
| Court | Chancery Division |
| Date | 04 May 2017 |
[2017] EWHC 1014 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM MASTER CLARK
HC-2014-001191
Rolls Building, Royal Courts of Justice
7 Rolls Buildings, Fetter Lane
London, EC4A 1NL
Mr Justice Newey
Case No: CH-2016-00280
Mr Vikram Sachdeva QC (instructed by EMW Law LLP) for the Claimant
Mr Robert Marven (instructed by Deals & Disputes Solicitors LLP) for the Defendant
Hearing dates: 27 February & 3 March 2017
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is an appeal by the defendant, Mr Scott Halborg, against an order for disclosure that Master Clark made in favour of the claimant, EMW Law LLP ("EMW"), on 28 October 2016. Among other things, the appeal raises issues as to the applicability of the without prejudice rule.
Basic facts
Mr Halborg is a solicitor. Until 14 March 2013, he was a sole practitioner practising under the name "Halborg & Co". Since then, he has practised through a limited liability partnership now known as "Deals & Disputes Solicitors LLP".
During the period he was practising on his own account, Mr Halborg was instructed to act for his parents and a family company, Halborg Limited, in a claim against some architects referred to as "Savage Hayward". On 19 December 2008, Mr Halborg and his clients ("the Halborg Claimants") entered into a conditional fee agreement ("the Client CFA") in respect of the claim. By March of the following year, Mr Halborg had decided to engage EMW to assist him with it.
On 24 March 2009, EMW sent Mr Halborg a letter "to formally set out the terms of [their] engagement". The letter referred both to a document headed "The Small Print" containing terms of engagement and to a conditional fee agreement ("the Agency CFA") which was described as a binding legal contract between Mr Halborg and EMW and was signed by or on behalf of those parties. The Agency CFA said the following under the heading "Paying us":
"If the clients [i.e. the Halborg Claimants] win their claim, the Solicitors' agents [i.e. EMW] will be entitled to be paid by the Solicitors [i.e. Mr Halborg] our basic charges, our disbursements and a success fee provided the same have first been recovered in full from the Opponents [i.e. Savage Hayward] by the clients and/or the Solicitors; and without limitation it is a condition precedent to our receiving any payment to this Agreement that the clients and/or the Solicitors have first received payment in full from the Opponents in respect of any specific fees and/or disbursements of the Solicitors' agents (the 'pre-eminent condition precedent to this agreement'). The clients are entitled to seek recovery from the Opponents of part or all of the Solicitors' agents basic charges, disbursements, and success fee and insurance premium as set out in the document 'What the Solicitors need to know about a CFA'.
…
If the Solicitors end this agreement before the case is won or lost other than where it is reasonable to do so and/or they are entitled to do so due to our breach, subject to pre-eminent condition precedent to this agreement, we shall also claim the success fee.
We may end this agreement before the case is won or lost, provided that we shall not do so unreasonably and we shall forfeit all our entitlement to fees and/or disbursements should we do so without the clients' and the Solicitors' agreement."
Although named in the Agency CFA, the Halborg Claimants were not, it seems clear, true parties to it. On the other hand, they were evidently aware of Mr Halborg's use of EMW. In witness statements of 10 August 2016, Mr Halborg's parents each explained that they "agreed to 'Halborg & Co. Solicitors' using the subcontracting services of a third party, [EMW], on a purely conditional basis, as set out in a Conditional Fee Agreement to which we were not parties …."
On 15 September 2009, the Halborg Claimants issued proceedings against Savage Hayward. On 19 July 2010, Savage Hayward made a Part 36 offer of £350,000, and the offer was accepted by the Halborg Claimants on 6 August 2010. As a result, Savage Hayward became liable to pay the Halborg Claimants' costs of the claim they had brought.
EMW had worked on the case between 7 April 2009 and 6 August 2010. According to EMW, it spent a total of 179.8 hours on the matter, as a result of which it stood to become entitled to £53,940 plus a success fee of 95% and VAT.
Mr Halborg entered into negotiations about costs with Savage Hayward's solicitors, Berrymans Lace Mawer ("BLM"). A bill of costs was prepared and served on BLM. This sought a total of £1,357,714.39, £123,590 of which was accounted for by a claim for EMW's "agency charges".
BLM served points of dispute on 16 September 2011. These included the following:
i) Under the heading "Proportionality, conduct/ liability costs & costs estimate":
"It is evident that the principal lawyer in this matter, SH, and his firm, Halborg & Co, are not experienced in this kind of litigation. The inexperience of the solicitors increased the costs substantially and disproportionally in that assistance was required from a solicitor agent and five different counsel. The fact is that the only reason that the solicitors were instructed was because SH is son of the first and second claimants and sole shareholder of the third claimant";
ii) Under the heading "Hourly Rate":
"The inexperience of the solicitors in these kind of matters and the heavy reliance on others (counsel and solicitor agent) does not justify hourly rates in excess of the guidelines for Leicester.
The only reason that a grade A had conduct of this matter was that the solicitor involved was the son of the first and second claimants and had an interest in the third defendant company. The principal lawyer had no specialist experience …"; and
iii) Under the heading "Solicitor Agent":
"The work of the solicitor agent appears to be no more than 'handholding' no doubt due to the inexperience of the solicitors in these kinds of matters. The agent, also a grade A lawyer, has claimed 179.8 hours @ £300 per hour which is no more than duplication of effort by the principal solicitor. In any event, the principal solicitor has also claimed all his time for liaising with the agent which is also clear duplication between the two lawyers.
The agents' fees, inclusive of success fee, amount to £105,183 plus VAT which was a highly disproportionate step to take by a grade A lawyer charging rates up to £295 per hour who had already had the assistance of various counsel, including a senior junior ….
The defendants offer nothing for time spent by the solicitor agent and the subsequent time of principal solicitor on the same issues."
Not having been paid anything for their work, EMW said the following in a letter to BLM of 21 November 2011:
"We hereby give you notice that under CPR Part 47, particularly by reference to paragraph 32.10, that we, EMW Solicitors, consider ourselves to be a relevant person under CPR 47.5(2) as we have a financial interest in the outcome of the assessment in this matter.
Our fees are those with the Claimants, not Halborg and Co, see Pomeroy & Tanner [1897] 1 Ch 287 and so this firm will be dealing with its own negotiations in relation to the part of the Bill of Costs that relates to this firm's fees. Please be clear that only this firm has authority to negotiate in relation to our fees and so should you enter any agreement with anyone else it will not affect our fees."
On the next day, EMW sent Mr Halborg an email that read:
"Take this as written notice under CPR Part 47, Para 32.10, that EMW is a relevant person under 47.5(2) and has a financial interest in the outcome of the assessment and wishes to be a party to the assessment process and retains all its rights to negotiate its own fees with the Defendants."
On 22 October 2013, having still not recovered any payment from anybody, EMW issued proceedings in the Senior Courts Costs Office to which the defendants came to be the Halborg Claimants and Mr Halborg. The proceedings were brought under CPR Part 67 and sought an assessment of costs under section 70 of the Solicitors Act 1974. On 24 October 2014, Master Campbell struck the proceedings out as against the Halborg Claimants, taking the view that there was no solicitor/client relationship between them and EMW. In contrast, Master Campbell declined to grant summary judgment in favour of Mr Halborg and, on appeal, Judge Purle QC, sitting as a Judge of the High Court, concluded that Master Campbell had been "right (or at least entitled) not to" strike out the claim as against Mr Halborg (see EMW Law LLP v Halborg [2015] EWHC 2005 (Ch), [2015] 4 Costs LO 427, at paragraph 10). Mr Halborg has appealed to the Court of Appeal against a finding by Master Campbell, on 24 November 2014, that EMW is not a litigant in person for the purposes of CPR 46.5.
The present proceedings were issued on 16 September 2014. They seek damages for breach of contract. More specifically, EMW alleges that Mr Halborg has breached various terms which, it says, were implied in the Agency CFA and that it has failed to recover its fees in consequence. In his defence, Mr Halborg states, among other things, as follows:
"It is admitted and averred that since 21 November 2011 [Mr Halborg] has declined to provide to [EMW] particulars in respect of the costs position between the Halborg Claimants and the defendants to their claim, and has refused to give [EMW] authority to negotiate with the defendants to the substantive claim. [EMW] has no entitlement to the said particulars and/or to demand the said authority."
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