Nizami v Butt
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Simon,Mr Justice Simon |
| Judgment Date | 09 February 2006 |
| Neutral Citation | [2006] EWHC 159 (QB) |
| Court | Queen's Bench Division |
| Docket Number | SCCO Nos 05/380 and 383 |
| Date | 09 February 2006 |
[2006] EWHC 159 (QB)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon Mr Justice Simon
(Sitting With Master Hurst and Mr Jason Rowley, as Assessors)
SCCO Nos 05/380 and 383
Mr Roger Mallalieu (instructed by McCullagh & Co) for the Appellants
Mr Nicholas Bacon (instructed by Colman Coyle) for the Respondents
Hearing date: 31 January 2006
Approved Judgment
I direct that pursuant to CPR PD 39A §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 the Defendant's appeal from the order of Master O' Hare dated 30 June 2005.
The Background
On 30 December 2003 the Claimants, Mr Kamaluden and Mr Nizami, were the driver and passenger respectively of a car which had stopped at traffic lights in Salford, Manchester. The car was struck from behind by a vehicle driven by the Defendant, Mr Butt; and as a result of the accident, both the Claimants suffered whiplash injury.
The Claimants instructed Messrs Colman Coyle to pursue claims for damages on their behalf; and at some stage, they entered into Conditional Fee Agreements ("the CFAs") in relation to the claims.
In the event, the claims were each settled before proceedings were begun. Mr Nizami's claim was settled on 28 January 2005 for £1,675.05, plus costs on the standard basis to be assessed if not agreed. Mr Kamaluden's claim was settled on 23 February 2005 for £2,430.31, plus costs on the standard basis to be assessed if not agreed.
Costs could not be agreed; and on 19 April 2005, the Claimants issued Part 8 Proceedings in the Supreme Court Costs Office in accordance with CPR 44.12A for the determination of costs.
At the heart of the dispute between the parties is the suspicion of those representing Defendant's insurers that the CFA did not comply with the Conditional Fee Agreement Regulations 2000 ('the Regulations'). The issue was initially articulated by Jaggards, legal costs negotiators appointed by the Defendant's insurers. In a letter dated 10 March 2005, Jaggards wrote:
Please can you confirm in writing that … the fee earner with the conduct of the matter personally saw and checked the motor policy document of the vehicle in which the claimant was travelling for legal expense insurance and there was none available. Please confirm that the fee earner checked the household policy document for legal expense insurance and there was none available.
Please also confirm who gave oral advice to your client and when the same took place.
The Claimants' solicitors sent a copy of the CFAs, but declined to respond further to Jaggards' interrogation. The Defendant is concerned that, before the signing of the CFAs, the Claimants' solicitors failed to make appropriate enquiries about the availability of Before the Event ("BTE") insurance, the existence of which might invalidate the CFAs.
The Indemnity Principle and the change in the law
At its simplest the Indemnity Principle provides that an unsuccessful party cannot be held liable to pay more to a successful party than the successful party is himself legally liable to pay. This principle worked satisfactorily until the introduction of conditional fee agreements. These usually provide that the client does not have to pay the solicitor's costs unless the claim is successful. Although most modern litigation (particularly in the field of personal injuries) is now conducted on the basis of conditional fee agreements, they are difficult to reconcile with the Indemnity Principle. For this reason the law was changed.
In June 2003, s.51(2) of the Supreme Court Act 1981 ('the SCA 1981'):
Without prejudice to any general power to make rules of court, such rules may make provision for regulating matters relating to the costs of those proceedings including, in particular, prescribing scales of costs to be paid to legal and other representatives …
was amended so as to add:
or for securing that the amount awarded to a party in respect of the costs to be paid to such representatives is not limited to what would have been payable by him to them if he had not been awarded costs
The amendment conferred the power to make Rules of Court which provided for the inter-party recovery of costs which would otherwise be precluded by the Indemnity Principle.
CPR 45 Section II
CPR Part 45 , Section II provides, so far as relevant:
Scope and interpretation
45.7.
(1) This section sets out the costs which are to be allowed in –
(a) costs only proceedings under the procedure set out in Rule 44.12A …
in cases to which this section applies.
(2) This section applies where —
(a) the dispute arises from a road traffic accident;
(b) the agreed damages include damages in respect
of personal injury, damage to property, or both;
(c) the total value of the agreed damages does not exceed £10,000; and
(d) if a claim had been issued for the amount of the
agreed damages the small claims track would not
have been the normal track for that claim.
…
Application of fixed recoverable costs
45.8. Subject to Rule 45.12 the only costs which are to be allowed are -
(a) fixed recoverable costs calculated in accordance
with Rule 45.9;
(b) disbursements allowed in accordance with Rule 45.10; and
(c) a success fee allowed in accordance with Rule
45.11.
…
Amount of fixed recoverable costs
45.9
(1) Subject to (2) and (3), the amount of fixed recoverable costs is the total of
(a) £800;
(b) 20% of the damages agreed up to £5,000;
and
(c) 15% of the damages agreed between £5,000 and £10,000.
(2) Where the claimant —
(a) lives or works in an area set out in the relevant Practice Direction; and
(b) instructs a solicitor or firm of solicitors who practise in that area,
the fixed recoverable costs shall include, in addition to the costs specified in (1), an amount equal to 12 1/2% of the costs allowable under that paragraph.
(3) Where appropriate value added tax (VAT) may be
recovered in addition to the amount of fixed recoverable costs and any reference in this section to fixed recoverable costs is a reference to those costs net of any such VAT.
Disbursements
45.10
(1) The court —
(a) may allow a claim for a disbursement of the type mentioned in paragraph (2); but
(b) must not allow a claim for any other type of disbursement.
(2) The disbursements referred to in (1) are:
(a) the cost of obtaining —
(i) medical records;
(ii) a medical report;
(iii) a police report;
(iv) an engineer's report; or
(v) a search in the records of the Driver Vehicle Licensing Authority;
…
Success fee
45.11
(1) A claimant may recover a success fee if he has entered into a funding arrangement of a type specified in Rule 43.2(k)(i).
(2) The amount of the success fee shall be 12 1/2% of the fixed recoverable costs calculated in accordance with Rule 45.9(1) disregarding any additional amount which may be included in the fixed recoverable costs by virtue of Rule 45.9(2).
…
These Rules were brought into effect following the amendment to the SCA 1981.
The argument before Master O' Hare
In their Part 8 claim forms the Claimants claimed fixed recoverable costs under CPR 45.9, disbursements under CPR 45.10 and a success fee under CPR 45.11. The costs claimed in Mr Kamaluden's case were £2,168.91, and Mr Nazami's case were £1,962.32.
The matter was listed before Master O' Hare for directions. The Defendant sought a direction that the Claimants' solicitors either answer Jaggards' questions or certify that there had been proper compliance with the Regulations. Mr Mallalieu who appeared then (as now) on behalf of the Defendant argued that the Indemnity Principle required that the costs claimed should be costs properly payable by the Claimants to their solicitors and that this presupposed valid and enforceable CFAs.
Master O' Hare's decision
Master O' Hare took the view that the entitlement to the fixed recoverable costs under CPR 45.9 and the success fee under CPR 45.11 did not depend on the existence of a valid and enforceable CFA. He held that, although disbursements were subject to assessment, fixed recoverable costs and success fees should be recoverable without any intervention by the Courts.
As he put it in §7 of his Judgment:
The purpose of the Rules was to simplify the payment of costs in small cases, not to make it more complex. The fixed recoverable costs are just that; they are fixed. But they are payable by the defendant whether or not the claimant's solicitor's retainer is valid. An extra 12.5% is payable if the claimant and his solicitor entered into a CFA, whether that CFA is valid or not.
So far as the disbursements claimed under CPR 45.10 were concerned, he said:
… I am unable to take the same approach to disbursements. It seems to me that, for them, the standard rules, including the familiar indemnity principle, continues to apply. I accept that it seems inconsistent to allow what might be invalid profit costs whilst at the same time disallowing unpaid disbursements … Nevertheless, I think that the inconsistency arises because Part 45 does not deal with the disbursements in the same way as it deals with profit costs. Disbursements are not fixed by Part 45.
The arguments on the appeal
For the Defendants Mr Mallalieu, submitted as follows:
i) The Indemnity Principle is fundamental to orders for the recovery of costs, see for example Harold v. Smith (1860) 5 H & N 381, Baron Bramwell at p.385, and Hollins v Russell [2003] EWCA Civ 718 at §23
ii) Since the principle is fundamental to the recovery of costs, clear wording is required before the...
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