What effect might the Court of Appeal judgment in Gavin Edmondson v Haven Insurance have on intervention strategies
Gavin Edmondson Solicitors v Haven Insurance Co. Ltd
Court of Appeal
The Court of Appeal has concluded that an insurer who settled claims submitted to the MoJ Portal directly with the claimants, interfered with the rights of the solicitors they instructed to recover their Portal costs; and the equitable remedy would be to order the insurer to pay those costs to the solicitors concerned.
Gavin Edmondson Solicitors acted for a number of claimants, all of whom had been involved in various road traffic accidents. The solicitors had submitted the claimants’ claims to the insurer via the MoJ Portal and had also sent out CFAs in the post for those claimants to sign. Having received notification of the claims in the Portal, the insurer then engaged directly with the claimants and settled their claims, without reference to the solicitors and without agreeing to pay the solicitors’ portal costs. The solicitors brought a claim against the insurer on the basis that their conduct was unlawful.
DWF Motor and Fraud Head and Partner, Nigel Teasdale looks at the judgment, which will be of interest to all those dealing with claims in the Portal and considers what impact it may have on claims handling strategies.
All of the claims fell to be dealt with within the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (the “protocol”) and were presented to the Portal between April and August 2012. The protocol describes the behaviour that the court will usually expect of those acting under the protocol, the aims of the protocol being set out under paragraph 3.1:
“3.1 The aim of this Protocol is to ensure that
(1) the defendant pays damages and costs using the process set out in the Protocol without the need for the claimant to start proceedings;
(2) damages are paid within a reasonable time; and
(3) the claimant’s legal representative receives the fixed costs at the end of each stage in this Protocol.”
Having started the process by the completion and submission of the CNF to the insurer, the insurer was then obliged to acknowledge the CNF electronically and then to choose whether the claim continued in the Portal or whether it should be dropped out. For claims that remain in the Portal, the protocol provides for fixed costs are to be paid at Stages 1 and 2.
As well as submitting the claims to the Portal, the solicitors sent out CFAs for the claimants to sign. The Court drew attention to three features of the retainers between the claimants and the solicitors
The conditional fee agreement (“CFA”) that each of the claimants had entered into was in a standard form, but also incorporated the Law Society document “What you need to know about a CFA”, which had the effect of incorporating that document into the contract. That document contemplated that, where the claimants were successful, they would pay their solicitors their charges and would then reclaim them from the insurer. The solicitors also sent a client care letter which stated that “For the avoidance of any doubt if you win your case I will be able to recover our disbursements, basic costs and the success fee from your opponent. You are responsible for our fees and expenses only to the extent that these are recovered from the losing side. This means that if you win, you pay nothing”.
The Law Society document that was incorporated into the retainer made provision for a recovery action for the costs against the insurer in the eventuality of the insurer failing to pay.
The CFAs were subject to the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008, which provided the claimants each with a right to cancel the contract within 7 days of receipt of notice of the right to cancel. Whilst the claimants had signed a waiver of those rights, the Court proceeded on the basis that that waiver had been ineffective and each of the claimants would still have been entitled to cancel the contract within 7 days.
After the claims had been submitted to the Portal, the insurer engaged directly with the claimants to conclude their claims and did so without reference to the solicitors and without paying the protocol costs. The solicitors brought the claim against the insurer arguing that, by acting in the way that they did, they interfered with their equitable interest to recover costs.
The Court considered the solicitors’ appeal on the basis of equitable intervention after His Honour Judge Jarman QC, originally dismissed their claim on 13 August 2014.
Held, with Lord Justice Lloyd-Jones giving the lead judgment:
As there was a tension between the CFA and the client care letter, the client care letter would take precedence as it included the words “For the avoidance of doubt”;
By submitting the claims to the Portal, the insurers were given express notice from the CNF that the solicitors had entered into a CFA with the claimants;
Whilst the claimants did not have a liability to the solicitors for their charges, the insurers had sought to act with the intention of defeating the claimants’ entitlement to recover costs under the protocol;
The insurer’s knowledge of and participation in the scheme established by the protocol and the Portal meant that it was well aware of the interest of the solicitors;
The insurer had not negotiated settlement with the claimants on reliance that the claimants were still within the cancellation period (which they wrongly believed to be 14 and not 7 days); and
Even if they had done so, the insurer would not have been relieved of liability on the basis that:
they knew of the existence of the CFA;
the offers that they made were not time limited and could have been accepted outside the expiry of the cancellation period;
the offers could have been made conditional upon the claimants cancelling their retainer with the solicitors, but were not advanced on that basis.
During the course of the appeal, the Court considered the Court of Appeal’s decision in Khans Solicitors (a firm) v Chifuntwe  EWCA Civ 481;  1WLR 1185, where a defendant had sought to collude with a claimant to deprive the solicitors of their costs, by paying those costs over to the claimant directly, who then promptly disappeared. The Court concluded in that case:
In our judgment, the law is today (and, in our view, has been for fully two centuries) that the court will intervene to protect a solicitor’s claim on funds recovered or due to be recovered by a client or former client if (a) the paying party is colluding with the client to cheat the solicitor of his fees, or (b) the paying party is on notice that the other party’s solicitor has a claim on the funds for outstanding fees. The form of protection ought to be preventive but may in a proper case take the form of dual payment.”
The Court effectively concluded that implied notice of a retainer through the information submitted on the Portal was sufficient for the operation of that principle.
On the basis that the principle of equitable intervention applied, the Court of Appeal ordered the insurer to pay the fixed costs that the solicitors would have been entitled to under the MoJ protocol.
For further information about this case, its impact upon Portal strategies and strategies generally, please contact Nigel Teasdale on 01772 554264, or by email at firstname.lastname@example.org
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.