R (Factortame Ltd and Others) v Secretary of State for Transport, Local Government and the Regions (No 8)

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Phillips MR
Judgment Date03 Jul 2002
Neutral Citation[2002] EWCA Civ 932
Docket NumberCase No: 2001/2536

[2002] EWCA Civ 932

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM HIGH COURT OF JUSTICE

SUPREME COURT COSTS OFFICE

COSTS JUDGE WRIGHT

Royal Courts of Justice

Strand,

London, WC2A 2LL

Before

Lord Phillips Mr

Lord Justice Robert Walker and

Lord Justice Clarke

Case No: 2001/2536

Between
The Queen on the Application of Factortame & Others
Respondent
and
The Secretary of State for Transport
Appellant

Mr David Friedman, QC and Mr Alexander Hutton (instructed by The Treasury Solicitor) for the Appellant

Mr Christopher Hancock, QC and Mr Jeremy Morgan (instructed by Thomas Cooper & Stibbard) for the Respondents

Lord Phillips MR

This is the judgment of the court

1

This is an appeal from the judgment of Master Wright, Costs Judge, delivered on 24 October 2001, on an important preliminary issue that has arisen in the context of the assessment of the costs payable by the Appellant ('the Minister') to the Respondents ('the Claimants'). The Claimants seek to recover as costs fees paid to a firm of accountants, Grant Thornton. Those fees were paid pursuant to an agreement under which the Claimants agreed to pay Grant Thornton 8% 'of the final settlement received'. The Minister contends that this agreement was champertous and, in consequence, unenforceable and that the Claimants are not entitled to recover as costs any sums paid pursuant to it. The Costs Judge held that the agreement was not champertous. We have to decide whether he was correct. If we find that he was not, there are further issues which we shall have to address.

Background facts

2

The Factortame litigation forms a notable chapter in the jurisprudence of this country and the European Court of Justice. It is a lengthy chapter and, as this appeal demonstrates, one that has not quite been completed. The claimants were Anglo-Spanish fishing companies who triumphed by demonstrating both that they had been unlawfully excluded from fishing in British waters and that they were entitled to damages to compensate them for the consequences of this. The Claimants before us are only some of these claimants, being companies for whom Thomas Cooper & Stibbard ('Thomas Cooper') have at all times acted as solicitors. Furthermore, the Claimants before us are only some of those for whom Thomas Cooper has acted, as we shall explain in due course. We shall henceforth refer to the experiences of the Claimants, but in the earlier stages of the story these were shared with the other claimants.

3

The events with which this appeal is concerned begin comparatively late in the story at a stage where the Claimants had crossed almost all the hurdles that stood between them and entitlement to damages. The story started on 1 December 1988, when Part II of the Merchant Shipping Act 1988 and the Merchant Shipping (Registration of Fishing Vessels) Regulations 1988 removed the Claimants' vessels from the British Registry, with the effect that they were no longer entitled to fish in UK waters. The Claimants brought judicial review proceedings in which they challenged the legality of the Act and the Regulations on the grounds that they violated the provisions of the EC Treaty. In March 1989 the Divisional Court referred the issue to the European Court of Justice but granted an interim injunction restraining the Minister from enforcing the provisions under challenge. This victory was short lived, for the Court of Appeal quickly reversed the Divisional Court and the House of Lords upheld this decision, holding that an English Court had no power to suspend the operation of an English Act of Parliament: [1990] 2 AC 85.

4

The scene then shifted to Luxembourg where, in June 1990, the European Court ruled that our national courts had power to suspend the operation of an Act of Parliament by way of interim relief where its validity under European law was in issue. The direct effect of this ruling was that the operation of the provisions in question was suspended, and the Claimants were free again to fish in UK waters.

5

In July 1991 the European Court ruled on the substantive issue. It held that the Act was incompatible with European law: [1992] QB 680. The issue then arose as to whether the Claimants were entitled to damages in respect of the Government's breach of Community law. That question the Divisional Court referred to Luxembourg. The European Court replied that the Claimants would be entitled to damages provided that certain criteria were satisfied, one of which was whether the breach was "sufficiently serious". That question was, however, an issue for the domestic court: [1996] QB 404. In July 1997 the Divisional Court answered the question, holding that the Government's breach was sufficiently serious to give rise to a right to compensatory damages, but not to a right to exemplary damages: [1997] Eu.L.R. 475. The Minster appealed to the Court of Appeal. On 8 April 1998 the Court of Appeal dismissed the appeal: [1998] Eu.L.R. 456. In July 1998 the Court of Appeal referred the assessment of damages to the Official Referee's Court, later to be renamed the Technology and Construction Court ('TCC'). At the same time the Minister decided to appeal to the House of Lords.

6

By this stage the Claimants were in a parlous financial state. Mr Swabey of Thomas Cooper described the position as follows in his witness statement.

"…. the financial position of the Anglo-Spanish fleet in 1997 was parlous in the extreme. Of 100 or so Claimants, a large number had given up fishing, sold their vessels and licences and were holding their creditors at bay pending the outcome of the litigation. Many had gone into liquidation, others had been dissolved and a significant number languished in a sort of insolvent dormancy while the Inland Revenue, the VAT authorities, banks, trade creditors and others anxiously awaited the outcome of the litigation."

7

Among the anxious creditors were Grant Thornton, who had provided accountancy services to a number of the Claimants and who were owed fees of approximately £200,000 plus substantial interest in respect of these. They appreciated that the only prospect that they had of recovering these fees was if their clients succeeded in recovering substantial damages from the Government.

The engagement of Grant Thornton

8

Evidence of the circumstances in which Grant Thornton were engaged has been provided principally in witness statements of Mr Swabey and of Mr John Davies, a partner in Grant Thornton. The task of establishing damage that confronted the Claimants was unusual and complex. Mr Swabey described it as follows:

"(i) The effect of the MSA had been to lay up a virtually complete section of the British fishing industry. That section was the group of vessels which fished in ICES Area VII (i.e., off the south west and west coasts of the Republic of Ireland) and, to a lesser extent in British waters in the south west approaches) against UK quotas of, principally, three species of fish –Hake, Monk and Megrim. The vessels were fresh fish catchers (i.e., although they carried ice they did not freeze the catch so it had to be brought to market quickly). As to gear, the vessels were either longliners, trawlers or gill netters. The market for the fish was Spain which was reached either by landing in the UK and transporting the catch in refrigerated trucks or landing direct into Spain. The vessels had been laid up for between 18 months and 3 years. As general rule, the poorer the company the longer it took to get back to sea following the House of Lords interim measures judgment.

(ii) The problem facing the experts was to assess how much the vessels would have caught and what they would have sold the catch for at a time when both the amount available to be caught and the price was – or at any rate could have been – severely affected by the very absence of the vessels in question. To assess the loss of profit of a ball bearing factory caused by a two year shut down is a relatively straightforward matter. It should be possible to assess how many ball bearings the factory could have produced and what the market price for them would have been – neither of these variables will be affected by the closure of the factory. The fishing boats on the other hand fished against artificially set and administered quotas and were the principal suppliers to a very volatile fish market. Prices soared in 1990- 1992 but who knows whether this was because of the absence of the Anglo-Spaniards or would have happened anyway. Moreover, there is no market price for fish. The price of fish depends principally on quality and quality depends principally on freshness. Some vessels (particularly the Basques) cut short their trips to get a fresher catch to the market. Some vessels prefer to get a lower price for a larger quantity. Each major Spanish fish market publishes daily prices for the important species but the range of prices on a particular day is so enormous both from port to port and within individual ports that published prices are a useless guide to what an individual vessel could have achieved throughout the year.

(iii) In addition all manner of variables have to be taken into account:

(a) weather conditions during actual years of lay-up in particular the high price months;

(b) when in the year the quota might have been exhausted;

(c) would the vessels have missed trips because of mechanical breakdown?

(d) how would MAFF have managed the quota during the year? Fish are migratory and are more abundant at some times during the year than others. Furthermore demand is not even throughout the year fish being especially in demand in Spain at Christmas.

(iv) Variables at a deeper level were:

(a) the...

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