Flatman v Germany (Law Society intervening)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Leveson,Lord Justice Richards,Lord Justice Mummery |
| Judgment Date | 10 April 2013 |
| Neutral Citation | [2013] EWCA Civ 278 |
| Docket Number | A2/2011/1168+3115(B) + 3118(A) |
| Court | Court of Appeal (Civil Division) |
| Date | 10 April 2013 |
[2013] EWCA Civ 278
Lord Justice Mummery
Lord Justice Richards
and
Lord Justice Leveson
A2/2011/1168+3115(B) + 3118(A)
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (Mr Justice Eady)
ON APPEAL FROM THE NORWICH COUNTY COURT
9CL07336
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr James Carpenter (instructed by Godfrey Morgan Solicitors Ltd trading as GMS Law) for the Appellants in both cases, and for GMS Law
Mr Simon J Brown and Mr Richard Sage (instructed by Plexus Law) for the Respondents
Mr David Holland Q.C. (instructed by the Law Society) appeared on behalf of the Law Society as Interveners.
Hearing dates: 6, 7 March 2013
These appeals (which relate to two entirely unconnected cases) are the consequence of the costs regime that presently operates in relation to personal injury litigation. They are focussed on applications for discovery as to funding arrangements made by unsuccessful claimants in personal injury litigation. Underlying these limited procedural requests, however is an issue as to the extent to which solicitors acting on behalf of claimants can fund or 'prime pump' litigation for those of limited means when proceeding pursuant to a conditional fee agreement ('CFA') and no 'after the event' insurance cover ('ATE cover') without thereby exposing themselves to adverse orders for costs should the claims fail.
The facts underline the potential for profit by solicitors against the limited downside risk and although the costs regime will change with the coming into force of Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, for certain types of litigation, the issues with which this appeal grapples will still arise. Indeed, in one sense, they may become more acute if Defendant's insurers can undermine the principle of qualified one way costs shifting (which will limit recovery of costs by insurers in failed personal injury actions) by pursuing the solicitors acting for the claimant who fails.
It is for that reason that Rix LJ took the unusual step of granting permission to bring second appeals in what, after all, is limited to an issue concerned with costs. The concern has also led to an intervention by the Law Society (whose participation in the actions was approved by Rix LJ) with the result that there has been a wide ranging analysis of the position, which, on the face of it, extends beyond the very limited issue which falls to be resolved and covers the circumstances generally in which it may be appropriate to make a third party costs recovery order against solicitors acting for the losing party.
Notwithstanding the significant issues raised by the Law Society's intervention, these appeals are, in fact, limited to the disclosure of information in two specific cases. In one case, all the information has now been made available and, in the other, partial information was (unrealised by either of the parties) disclosed at a very early stage. On the basis of what they now know, in the first case, the insurer has instituted a claim for the recovery from the solicitor of the costs incurred in successfully defending the personal injuries claims. This court is not specifically concerned with the question whether such an order should be made in that case or such an application instituted in the other case.
Facts
The background litigation can be summarised shortly. As long ago as 8 September 2005, Mr Gavin Flatman suffered injury following an accident on his motorbike which he alleged had been caused by gravel which had been strewn over the road and which was the responsibility of Ms Gill Germany trading as Old Macdonald's Children's Centre. He brought an action for damages with the benefit of a conditional fee agreement without having obtained ATE cover, claiming, among other sums, loss of earnings for three years. On 21 January 2010, the action came for trial at the Norwich County Court before His Honour Judge Moloney Q.C. He dismissed the claim on the basis that Mr Flatman had not discharged the burden of proof. On the face of it, therefore, the defendant (or her insurer) was entitled to recover the costs incurred in defending the action.
The defendant insurer's costs, as claimed, amounted to £14,420.51 but it quickly became apparent that Mr Flatman was impecunious and, without ATE cover, on the face of it, the sums would be irrecoverable. This situation is to be contrasted with the costs that would have been claimed had the action succeeded. Mr Flatman's solicitors (to whom I shall refer as GMS Law although there has been an issue as to whether this should be Godfrey Morgan Solicitors Ltd trading as GMS Law or a firm going under the name Godfrey Morgan Solicitors prior to incorporation) would have claimed £41,304.78 (that is, £20,652.39 plus an uplift to reflect the conditional fee agreement of 100%) inclusive of VAT. Because counsel was engaged under a CFA, the disbursements (consisting of the court fee, a medical report and a fee for records) were £2,035.82. It is a matter of concern that so much time could apparently have been spent by the solicitors on what is comparatively straightforward litigation.
Because Mr Flatman was unemployed at the time of the accident and claiming substantial loss of earnings, the defendant's solicitors suspected that the disbursements had been defrayed by GMS Law. On 21 December 2010, therefore, they applied to Judge Moloney for an order that GMS Law be joined as a party, for an order revealing how the claim had been funded, and (on the assumption that their suspicions were justified) an order that the solicitors pay the defendant's costs. On 20 January 2011, Judge Moloney dismissed the application. On 10 November 2011, Eady J allowed an appeal from that refusal and required the solicitors to disclose how the claim had been funded.
The second action concerned a claim for personal injuries sustained very differently. On 6 September 2006, Mr Richard Weddall was on duty as a deputy manager of a care home operated by Barchester Healthcare Ltd when, because of the ill-health of another member of staff, he called on other employees looking for a volunteer to act as a replacement. One of those he called (by the name of Marsh) was clearly drunk and, beyond declining to assist (as he was entitled to do) felt that Mr Weddall had been mocking him, so he rode to the care home and violently attacked Mr Weddall, ultimately being sentenced to 15 months imprisonment for the attack. Mr Weddall sought to recover damages on the grounds that his employers were vicariously liable for the assault by Mr Marsh. He was represented by the same solicitors (GMS Law), as were the insurers. On 9 November 2010, Judge Moloney dismissed the claim on the basis that Mr Marsh was "acting personally for his own reasons": that decision, to the effect that the employers were not vicariously liable for the tort of their employee, was later upheld by the Court of Appeal: see [2012] EWCA Civ 25.
Back in the county court, again the question of costs was raised. The estimate by GMS Law of its profit costs amounted to £23,500 inclusive of VAT and, as Eady J observed, it is reasonable to suppose that had the claim succeeded, the solicitors would have claimed some £47,000 taking account of an uplift of 100%. Again, no ATE insurance was in place. Once again, I repeat that it is a matter of concern that so much time could apparently have been spent by the solicitors on litigation which was likely to turn entirely on a narrow point of law, namely the issue of vicarious liability.
Eady J recorded that GMS Law had said that one set of court fees was paid by Mr Weddall and that the cost of the medical report had been deferred to the end of the trial. No further information was then forthcoming and, again, the defendant's solicitors were concerned that the most likely source of funding was the solicitors themselves. On 16 November 2010, an application for further information was made; on 25 January 2011, this was similarly dismissed by Judge Moloney. Again, Eady J allowed the appeal from that order.
Since then, in relation to this second case, there have been some comparatively startling developments which have generated further disclosure: this material was admitted for the purposes of these appeals by Rix LJ. It is clear that, following the hearing before Eady J, GMS Law were engaging with Mr Weddall in relation to the costs. On 17 April 2012, Mr Weddall wrote to the solicitor for the insurer in these terms:
"My solicitor, GMS law have sent me a Bill of Costs … As I have very little savings, no assets and in a low paid job, I am unable to pay these horrendous costs.
I was unhappy that the case proceeded without insurance in place etc and have advised GMS law accordingly. See the attached copy letter. …
I have never been in debt and feel due to bad advice have become a victim of the no win no fee syndrome."
The letter to his own solicitor (referring to a Bill of Costs of £50,000) is clear. It is worth setting out in full because it underlines the perils associated with the present funding mechanism for this type of litigation:
"The objection I have to this Bill is it would never have come to this had my views been listened to and respected by GMS law during the case.
(1) The case should have been stopped when the original barrister only gave me a 20-25% chance of winning.
(2) I stressed throughout the case that I...
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