Ahmed v Powell [2003] EWHC 9011 (Costs)

Case No BU01 1986

SCCO Ref: 021 0290

[2003] EWHC 9011 (Costs)

IN THE HIGH COURT OF JUSTICE

SUPREME COURTS COST OFFICE

Supreme Courts Cost Office

Clifford Inn

Venue Fetter Lane

London

EC4A 1DQ

Date 19 February 2003

Before

CHIEF MASTER HURST, SENIOR COSTS JUDGE

Between

SAJIDA AHMEDClaimant

P. POWELLDefendant

Mr Nicholas Bacon (instructed by Amelans) for Claimant

Mr Peter Birts QC (instructed by Beachcroft Wansbroughs) for Defendant

Hearing Hearing date : 28 January 2003

Judgment

TABLE OF CONTENTS

Paragraph number The Background 1 The Facts 3 The Issues 7 The applicable law 11 The agreement between Cornhill and Grants 23 The evidence as to the issues arising in this detailed assessment 26 The right of audience issue 30 The Champerty Issue 39 Conclusions 51

Chief Master Hurst

THE BACKGROUND

[1]This case concerns the status of costs negotiators, N L Grant Legal Costs Management (Grants), instructed by liability insurers, Allianz Cornhill (Cornhill), to act on their behalf in relation to questions of costs. Costs negotiators have come to prominence in recent times and are typically paid by results in that they receive by way of remuneration a percentage of the reduction in the amount of costs which they achieve on behalf of the liability insurer. Such arrangements have given rise to concerns that the question of costs may be being pursued over vigorously and therefore disproportionately. In these proceedings I am dealing with one straightforward case, but I understand that the decision in principle is likely to have much wider implications.

[2]Costs negotiators and costs draftsmen both deal with questions of costs but, as the names imply, costs draftsmen typically become involved in drafting bills on behalf of receiving parties as well as attending on detailed assessments on behalf of both paying and receiving parties, whereas costs negotiators tend to be instructed by paying parties (usually insurance companies). Any person may set themselves up as a costs negotiator or costs draftsman without the need to pass any exam or to join any professional body or association. There is an Association of Law Costs Draftsmen which requires its members to undergo training, to pass exams and to abide by a code of conduct. The Code of Conduct is in some respects similar to the Rules of Professional Conduct which apply to solicitors. The Association has the power to discipline its members and may, if necessary, expel a person from membership of the Association. As I have said there is no requirement that costs draftsmen should be members of the Association and there are a number of costs draftsmen of great ability, experience and high repute who are not members of the Association. It must also be said that there are some who lack those qualities. As a general rule costs negotiators do not appear before this court but there is no reason to suppose, given the nature of the work which they do, that they lack competence in their own field, nor is there any reason, if certain necessary criteria are met, why they should not appear. THE FACTS

[3]Against that background I turn now to look briefly at the facts of this particular case. On 5 November 2000 the Claimant was involved in a road traffic accident and suffered personal injury. Originally liability was denied. Subsequently an offer was made on the basis of 50/50 liability which was rejected. Proceedings were commenced on 11 April 2001. There were at that stage two Defendants and both defences were served by 4 June 2001 on which date a Part 36 payment was made. The case proceeded through the normal stages of allocation and listing until December 2001 when a further Part 36 payment was made bringing the total payment to £2,000, which was accepted. The First Defendant, Mr Powell, accepted responsibility for the accident and agreed to pay both the Claimant’s and the Second Defendant’s costs.

[4]It was not possible to agree the Claimant’s costs and accordingly detailed assessment proceedings were commenced on 29 January 2002. Points of Dispute were served by the First Defendant on 22 February 2002. These points were signed by Messrs Beachcroft Wansbroughs the solicitors for the Defendant. The detailed assessment came before District Judge Stevens at Stoke County Court on 16 May 2002. An independent costs draftsman, Mr Owen Jones, appeared on behalf of the Defendant. The solicitors for the Claimant raised the question of rights of audience and I quote from the attendance note of the hearing which explains what happened:

"I raised Mr Jones’ right of audience as a preliminary issue. We argued Grants had been instructed by the Def insurer and in turn Grants had instructed Owen Jones. Owen brought the instruction letter from Beachcrofts to Grants. However, the Judge did not agree that it formed proper instruction and stated that on the def insurers instructions the file was passed to Grants to deal with the costs. The Judge’s view was that the def’s insurer had instructed Grants. With Grants then instructing Owen the Judge ruled that he was too remote from the solicitors to have rights of audience and therefore ruled he could not be heard."

[5]On 10 July 2002 the restored hearing of the detailed assessment took place before Deputy District Judge McQueen. A Mr Harrington of counsel represented the Defendant. Again the Claimant’s solicitors raised counsel’s right of audience as a preliminary issue. The attendance note reads as follows:

"… Judge held as facts: Beachcrofts were sols for the def throughout. The def’s insurers have a liability to pay the claimant’s costs. The def’s insurers instruct Grants direct. Grants negotiate direct with Cl’s sols although they may pass papers through Beachcrofts. At the last hearing the Judge ruled agent had no right of audience as was instructed by Grants not Beachcrofts. Counsel produced a letter from Rachel Quigly at Beachcrofts stating they instructed Grants to attend hearing as their legal representative, which included them instructing counsel if necessary. Counsel admits he is instructed by and paid by Grants. CPR 47.14.17 applies [this refers to a note in the White Book]. Position is BW appoint Grants to represent them at hearing as agent, who in turn instruct counsel. Judge considered Section 27 [Courts & Legal Services Act 1990] held: No contractual relationship between BW and Grants. The instructions are one step too far removed. There would only be a right of audience if counsel instructed by BW direct. Counsel did not have a right of audience."

[6]Pausing there, the only finding of fact with which the Defendant disagrees in that attendance note is that the Defendant insurers instruct Grants the costs negotiators direct. There has been no appeal against that finding and both sides are content that I should consider the issue afresh. The assessment was again adjourned until 9 September 2002 when it came before District Judge Chapman. On this occasion Mr Jonathan Brennan of counsel appeared, as did Dominic Swallow of Grants. Again I quote from the attendance note:

"Raised both defs rights of audience. Counsel informed court he was only there to argue for Dominic’s rights of audience. Judge heard arguments from both sides. Judge gave a preliminary view. He stated he had no problem with counsel attending. However he was concerned with Grants attendance. Concerned that Grants dictate instructions to Beachcrofts as agents of the defs insurers. Also stated that if Grants have a financial interest in the outcome of the hearing then further enquiry is warranted. Said up to Claimant. Can either drop the point and proceed or if wish to pursue the point regarding champerty then need further direction. Elected to pursue the champerty point against Grants."

THE ISSUES

[7]As a result the District Judge gave directions which are contained in his order dated 17 February 2002. So far as relevant those directions are:

"1. The detailed assessment hearing is adjourned pending the determination of the following preliminary issues namely: (a) Did Mr Swallow of Grants Legal Costs Management have a right of audience in relation to the hearing on 9 September 2002? (b) Were the terms of payment pursuant to which Mr Swallow appeared at that hearing champertous?"

[8]District Judge Chapman subsequently ordered that the assessment of costs be transferred to the Supreme Court Costs Office by an order dated 25 September 2002 (sealed on 7 October 2002).

[9]The Claimant submits that Grants, whether through Mr Swallow or any other representative, ought not to be granted rights of audience in the detailed assessment proceedings. Mr Bacon put forward three principal reasons for this: i. Grants are not properly instructed as agents of the solicitors on the record and cannot be said to be in the "temporary employ" of the solicitors on the record. ii. The basis upon which Grants charge for their work (including attending hearings) is based on an illegal contingency fee agreement. iii. Grants like other costs negotiators are not regulated by any professional body or organisation.

[10]Mr Birts for the Defendant submits that Mr Swallow was employed or engaged to assist in the conduct of litigation by appearing at the detailed assessment hearing on behalf of the First Defendant. The Defendant further submits that a letter of 30 January 2002 from Mutual Law (the trading name of Beachcroft Wansbroughs) to Grants, which enclosed the file in relation to the claim, had the effect of giving instructions to Grants in relation to the proceedings. The instructions were to assist in the conduct of the litigation by dealing with the costs and those instructions were passed to a particular employee at Grants, a Mr Swallow, by a letter of 3 September 2002 from Mutual Law. (I will consider the correspondence further in due course). In those circumstances it is submitted that Mutual Law validly authorised Grants to assist in the conduct of the litigation while themselves remaining responsible for the performance of all aspects of Mr Swallow’s duties including the receipt by him of proper detailed instructions from an authorised source. In relation to the second issue the Defendant submits that Grants’ terms of remuneration, whilst amounting to a contingency fee agreement and an agreement in support of litigation, was not champertous and in support of that contention they rely on the decision of the Court of Appeal in R (Factortame Ltd) v Transport Secretary (No.8)

[2002] EWCA Civ 932

;

[2002] 3 WLR 1104

. THE APPLICABLE LAW

[11]Section 27 of the Courts and Legal Services Act 1990 deals with rights of audience, and, so far as relevant, reads:

"27. Rights of Audience (1) The question whether a person has a right of audience before a court or in relation to any proceedings, shall be determined solely in accordance with the provisions of this part. (2) A person shall have a right of audience before a court in relation to any proceedings only in the following cases: (a) where – (i) he has a right of audience before that court in relation to those proceedings granted by the appropriate authorised body; and (ii) that body’s qualification regulations and rules of conduct have been approved for the purposes of this section in relation to the granting of that right; (b) where paragraph (a) does not apply but he has a right of audience before that court in relation to those proceedings granted by or under any enactment; (c) where paragraph (a) does not apply but he has a right of audience granted by that court in relation to those proceedings; (d) where he is a party to those proceedings and would have had a right of audience, in his capacity as such party, if this Act had not been passed; or (e) where – (i) he is employed (whether wholly or in part) or is otherwise engaged to assist in the conduct of litigation and is doing so under instructions given (either generally or in relation to the proceedings) by a qualified litigator; and (ii) the proceedings are being heard in Chambers in the High Court or a County Court and are not reserved family proceedings. . . . (4) Nothing in this section affects the power of any court in any proceedings to refuse to hear a person (for reasons which apply to him as a individual) who would otherwise have a right of audience before the court in relation to those proceedings. (5) Where a court refused to hear a person as mentioned in sub-section (4) it shall give its reasons for refusing … (9) In this section— "advocate", in relation to any proceedings, means any person exercising a right of audience as a representative of, or on behalf of, any party to the proceedings; . . . "qualified litigator" means— i. any practising solicitor ("practising" having the same meaning as in section 19(8)(b) [that is one who has a practising certificate in force or is employed wholly or mainly for the purpose of providing legal services to his employer]); ii. any recognised body; and iii. any person who is exempt from the requirement to hold a practising certificate by virtue of section 88 of the Solicitors Act 1974 (saving for solicitors to public departments and the City of London); . . . (10) Section 20 of the Solicitors Act 1974 (unqualified person not to act as a solicitor), section 22 of that Act (unqualified person not to prepare certain documents etc) and section 25 of that Act (costs where an unqualified person acts as a solicitor), shall not apply in relation to any act done in the exercise of a right of audience."

[12]Section 119 of the 1990 Act deals with interpretation as follows: " "Advocacy services" means any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right of audience in relation to any proceedings, or contemplated proceedings, to provide; … "Litigation services" means any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or contemplated proceedings, to provide; … "Right of audience" means the right to exercise any of the functions of appearing before and addressing a court including the calling and examining of witnesses;"

[13]Note 47.14.7 "Rights of audience on detailed assessment" in the White Book is the note referred to by the District Judge at the hearing on 10 July 2002. That note is as follows:

"In detailed assessment proceedings, rights of audience may be exercised by any counsel properly instructed by solicitors, any solicitor or employee of a solicitor representing one of the parties to the proceedings. If the party is legally represented costs consultants, cost draftsmen and the like can only be heard on the basis that they are temporarily, and for the purpose of those detailed assessment proceedings, employees of the solicitors representing the party. The solicitors are responsible for the conduct of the detailed assessment proceedings and cannot avoid that responsibility merely by instructing a costs draftsman."

The note then goes on to quote the decision of the Court of Appeal in Waterson Hicks v Eliopoulous, 14 November 1995 CA; Costs Law Reports (Core Volume) 363. That case involved the ostensible or actual authority for costs draftsmen instructed in detailed assessment proceedings. In the circumstances of the case it was not necessary for the court to reach a final decision on the point but certain views were expressed, first by Neill LJ (at 372):

"On the facts of the present case, however, I do not find it necessary to reach a final decision as to the ostensible authority of an independent costs draftsman, but I am inclined to the view that where a solicitor sends a costs draftsman to a taxation the other parties to the litigation are entitled to assume in the absence of any information to the contrary or unless the sums involved are very large, that the costs draftsman has the same authority as to the solicitor would have had to consent to orders which are not plainly collateral to the matters before the taxation officer." and second by Evans LJ (at 373): "

As regards the authority, actual or apparent, of an independent costs draftsman who attends before the taxing officer, it should be remembered that he can appear on behalf of the party only as a duly authorised representative of the solicitor who has instructed him to be there. The scope of his apparent authority would be the same, in my judgment, as that of any costs draftsman employed by the firm. It is unnecessary to decide in these proceedings where his authority would be co-extensive with that of the firm or of the solicitor himself."

[14]Mr Birts for the Defendant stated that he had no quarrel with the terms of the note in the White Book which I have set out above, but suggested that it did not go far enough, since in his submission it does not cover the situation in this particular case.

[15]It is Section 27(2)(e)(i) of the 1990 Act which is the key to the first issue (concerning rights of audience). Mr Bacon referred also to Section 27(2)(c) which deals with the grant of rights of audience by a court in relation to proceedings before it. That is not this case but it is instructive to look at the approach of Lord Woolf, Lord Chief Justice, in relation to rights of audience in Clarkson v Gilbert & Ors [2000] The Times 4 July CA where he explained:

"10. Traditionally the courts have exercised close control over who has rights of audience before them. They do so in the interests of the public and in the interests of the proper administration of justice. Normally there are available two options to a person wishing to bring litigation. First a lawyer who has rights of audience can be instructed to appear on his behalf. Second, he can bring the litigation himself acting in person. It is an important well established principle of the administration of justice in this jurisdiction (unlike some others) that the ordinary member of the public has the right to come to court to conduct litigation themselves. Whether it is before a Magistrates Court, a County Court, the High Court or the House of Lords that right has been maintained throughout the years. But, if somebody wishing to appear in person , wants somebody who is not an advocate and who has no rights of audience to appear on his or her behalf instead of someone who has the rights of audience, that, in my judgment, has to be justified … …. 24. … It is very important that courts, without going into the matter in a disproportionate way, do satisfy themselves that it is right to extend rights of audience to those who are not properly qualified. The courts are at a disadvantage and the public can be at a disadvantage if rights of audience are too readily given to those who do not have the necessary qualifications."

[16]I include for the sake of completeness a reference to the costs of litigants in person CPR 48.6:

"(1) This rule applies where the court orders (whether by summary assessment or detailed assessment) that the costs of a litigant in person are to be paid by any other person. …. (3) The costs allowed to the litigant in person shall be – (a) such costs which would have been allowed if the work had been done or the disbursements made by a legal representative on the litigant in person’s behalf; (b) the payments reasonably made by him for legal services relating to the conduct of the proceedings; and (c) the costs of obtaining expert assistance in connection with assessing the claim for costs."

[17]Paragraph 52.1 of the Costs Practice Direction deals with who may be an expert for the purpose of paragraph (3)(c):

"52.1 In order to qualify as an expert for the purpose of rule 48.6(3)(c) (expert assistance in connection with assessing the claim for costs), the person in question must be a: (i) barrister, (ii) solicitor, (iii) Fellow of the Institute of Legal Executives, (iv) Fellow of the Association of Law Costs Draftsmen, (v) law costs draftsman who is a member of the Academy of Experts, (vi) law costs draftsman who is a member of the Expert Witness Institute."

[18]It will be seen therefore that the range of experts in respect of whom costs can be recovered under this rule is strictly limited.

[19]In relation to the second issue, the question of champerty, Mr Birts relies on the decision of the Court of Appeal in R (Factortame Ltd) v Transport Secretary (No.8)

[2002] EWCA Civ 932

;

[2002] 3 WLR 1104

. In this case Lord Phillips MR gave the judgment of the court and reviewed the law of champerty. It is useful to set out the general principles as found by the court at this point, I will return to the more specific points raised by Mr Birts in due course. The Court of Appeal said this:

"The Law of Champerty 31. Champerty is a variety of maintenance. Maintenance and champerty used to be both crimes and torts. A champertous agreement was illegal and void, involving as it did criminal conduct. Ss. 13(1) and 14(1) of the Criminal Law Act 1967 abolished both the crimes and the torts of maintenance and champerty. S.14(2) provided, however: "

The abolition of criminal and civil liability under the law of England and Wales for maintenance and champerty shall not affect any rule of that law as to the cases in which a contract is to be treated as contrary to public policy or otherwise illegal." Thus, champerty survives as a rule of public policy capable of rendering a contract unenforceable. 32. ‘A person is guilty of maintenance if he supports litigation in which he has no legitimate concern without just cause or excuse’- (See Chitty on contracts 28th Ed [1999], Vol.1, para 17-050.) Champerty ‘occurs when the person maintaining another stipulates for a share of the proceeds of the action or suit’ (Chitty paragraph 17-054). Because the question of whether maintenance and champerty can be justified is one of public policy, the law must be kept under review as public policy changes. As Danckwerts L.J. observed in Hill v Archbold

[1968] 1 QB 686

at 697:

"…the law of maintenance depends upon the question of public policy, and public policy … is not a fixed and immutable matter. It is a conception which, if it has any sense at all, must be alterable by the passage of time." 33. In Trendtex Trading Corpn v Credit Suisse [1980] 1 QB 629 at p.663 Oliver LJ remarked: "

There is, I think, a clear requirement of public policy that officers of the court should be inhibited from putting themselves in a position where their own interests may conflict with their duties to the court by agreement, for instance, of so called "contingency fees". 34. The introduction of conditional fees shows that even this requirement of public policy is no longer absolute. This case raises the question of whether the requirement extends to expert witnesses or others in a position to influence the conduct of litigation and, if it does, whether on the facts of the present case the agreements concluded by Grant Thornton can be justified. 35. In Trepca Mines Ltd (No.2)

[1963] 1 Ch 199

at p.219 Lord Denning MR observed:

"The reason why the common law condemns champerty is because of the abuses to which it may give rise. The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses. These fears may be exaggerated, but, be that so or not, the law for centuries had declared champerty to be unlawful, and we cannot do otherwise than enforce the law; and I may observe that it has received statutory support, in the case of solicitors, in section 65 of the Solicitors Act 1957." [See now Section 59 of the Solicitors Act 1974] 36. Where the law expressly restricts the circumstances in which agreements in support of litigation are lawful, this provides a powerful indication of the limits of public policy in analogous situations. Where this is not the case, then we believe one must today look at the facts of the particular case and consider whether those facts suggest that the agreement in question might tempt the allegedly champertous maintainer for his personal gain, to inflame the damages, to suppress evidence, to suborn witnesses or otherwise to undermine the ends of justice. 37. In reaching this conclusion we have been particularly influenced by the approach of the Court of Appeal and the House of Lords in Giles v Thompson [1993] 3 All ER 321; [1994] 1 AC 142 ... … 42. On these facts Lord Mustill held that it was appropriate to consider whether the mischief was established against which the public policy was directed. As to this, he observed at p.161: "

It is sufficient to adopt the description of the policy underlying the former criminal and civil sanctions expressed by Fletcher Moulton LJ in British Cash and Parcel Conveyors Ltd v. Lamson Store Service Co. Ltd [1908] 1 K.B. 1006, 1014:

"It is directed against wanton and officious intermeddling with the disputes of others in which the [maintainer] has no interest whatever, and where the assistance he renders to the one or the other party is without justification or excuse."

This was a description of maintenance. For champerty there must be added the notion of a division of the spoils." … 44. This decision [Giles v Thompson] abundantly supports the proposition that, in any individual case, it is necessary to look at the agreement under attack in order to see whether it tends to conflict with existing public policy that is directed to protecting the due administration of justice with particular regard to the interests of the defendant. This is a question that we have to address. In so doing we revert to the statement of Lord Mustill, at page 153, that ‘the rule, now in the course of attenuation, which forbids a solicitor from accepting payment for professional services calculated as a proportion of the sum recovered from the defendant …survives nowadays, so far as it survives at all, largely as a rule of professional conduct’. With respect, this statement is not correct. The basis of the rule is statutory. …"

[20]The Court of Appeal then went on to consider Rule 8 of the Solicitors Practice Rules 1990 which forbids the use of contingency fees. The court also considered Section 58 of the 1990 Act which deals with conditional fee agreements and the relevant Conditional Fee Agreement Regulations, as well as the definitions in Section 119 of the 1990 Act which I have already set out.

[21]The Master of the Rolls first considered s.58 in its original form:

"50. … There is an issue, however, as to whether the ‘conditional fee agreements’ explicitly permitted, and those that are implicitly unenforceable, by reason of the provisions of s.58, are restricted to agreements concluded by solicitors and others authorised to ‘conduct litigation’, or whether they extend to agreements by any person or body providing services ancillary to the conduct of litigation. Mr Hancock QC for the Claimants argued that the former was the position and that s.58 was not relevant to the issues arising on this appeal. Mr Friedman submitted that the 1998 contracts were in respect of ‘litigation services’ and constituted ‘conditional fee agreements’ within the meaning of that phrase in s.58. In that they were not expressly permitted by s.58 they were implicitly forbidden. 51. This issue arises more acutely in relation to the provisions of s.58 after their amendment by the Access to Justice Act 1999 …"

[22]The court then went on to consider Section 58 of the 1990 Act as substituted by Section 27(1) of the 1999 Act. The judgment continues:

"54. We have concluded that Mr Hancock’s submissions on this issue are correct. ‘Conditional fee agreements’ under s.58 embrace only agreements for the provision of litigation or advocacy services concluded by those with rights to conduct litigation (s.28) or those with rights of audience (s.27). Our reasons for this conclusion are as follows: 55. Ss.27, 28 and 58 are all located in Part II of the 1990 Act. The objective of Part II, referred to as ‘the statutory objective’ is stated in its first subsection: "17 The statutory objective and the general principle (1) The general objective of this Part is the development of legal services in England and Wales (and in particular the development of advocacy, litigation, conveyancing and probate services) by making provision for new or better ways of providing such services and a wider choice of persons providing them, while maintaining the proper and efficient administration of justice." 56. Part II deals exclusively with the authorisation of persons to provide different types of legal services, with their regulation and with Ombudsmen schemes relating to the provision of legal services. In its context it is natural to read s.58 as applying to the provision of advocacy and litigation services by those authorised in accordance with the earlier sections to exercise rights of audience or conduct litigation. There is nothing in the section which suggests that it is intended to apply to the provision of services ancillary to the conduct of litigation by the many different categories of person who have, in the past, been accustomed to assist with the conduct of litigation. 57. This conclusion is supported by the Regulations that were passed pursuant to s.58. … The term "legal representative" is appropriate to describe a person conducting the litigation, or exercising rights of audience on behalf of the litigant. It is not appropriate to describe persons … who are providing services ancillary to those provided by those conducting the litigation. While provisions in a Statutory Instrument cannot alter the meaning of the primary legislation under which they are made, it seems to us legitimate to refer to them as confirming what appears to be the legislative intention of the provisions of the primary legislation. … 59. These passages confirm our view that the legislative intent was that the provisions of s.58 of the 1990 Act were intended to apply only to those who could be described as ‘litigators’, that is advocates and those conducting the litigation. 60. There is good reason why principles of maintenance and champerty should apply with particular rigour to those conducting litigation or appearing as advocates. To demonstrate this we can do no better than cite a passage in the judgment of Buckley LJ in Wallersteiner v Moir (No 2) [1975] QB 373 at p.401-402: "

A contingency fee, that is, an arrangement under which the legal advisers of a litigant shall be remunerated only in the event of the litigant succeeding in recovering money or other property in the action, has hitherto always been regarded as illegal under English law on the ground that it involves maintenance of the action by the legal adviser. Moreover where, as is usual in such a case, the remuneration which the adviser is to receive is to be, or to be measured by, a proportion of the fund or of the value of the property recovered, the arrangement may fall within that particular class of maintenance called champerty….. It may, however, be worthwhile to indicate briefly the nature of the public policy question. It can, I think, be summarised in two statements. First, in litigation a professional lawyer’s role is to advise his client with a clear eye and an unbiased judgment. Secondly, a solicitor retained to conduct litigation is not merely the agent and adviser to his client, but also an officer of the court with a duty to the court to ensure that his client’s case, which he must, of course, present and conduct with the utmost care of his client’s interests, is also presented and conducted with scrupulous fairness and integrity. A barrister owes similar obligations. A legal adviser who acquires a personal financial interest in the outcome of the litigation may obviously find himself in a situation in which that interest conflicts with those obligations." 61. These, then, are the reasons that have led us to conclude that s.58 of the 1990 Act, both as originally enacted and as amended by the 1999 Act, applies only to agreements concluded by those conducting litigation or providing advocacy services. The effect of the section extends more widely, however, for it reflects Parliament’s assessment of the present state of public policy in this area. Thus, in Awwad v Geraghty

[2001] QB 570

at 600 the Court of Appeal held that there was no scope for the Court to hold that the common law permitted conditional fee agreements that did not conform to the requirements imposed by s.58 and, in Bevan Ashford v Geoff Yeandle (Contractors) Limited (in Liquidation)

[1999] Ch 239

Sir Richard Scott V-C held that the provisions of s.58, which applied only to litigation, should be applied by analogy to solicitors who were conducting arbitration. 62. More generally, however, s.58 evidences a radical shift in the attitude of public policy to the practice of conducting litigation on terms that the obligation to pay fees will be contingent upon success. Whereas before this practice was outlawed, it is now permissible – subject to the requirements imposed by the section. These requirements do not appear designed to mitigate the mischief that had led to the banning of contingency fees - the undesirability of the interests of officers of the court conflicting with their duties to the court. Rather the requirements appear designed to protect the litigants concluding conditional fee agreements who, when the section was first enacted, were required to pay any ‘uplift’ out of their recoveries. Conditional fees are now permitted in order to give effect to another facet of public policy – the desirability of access to justice. Conditional fees are designed to ensure that those who do not have the resources to fund advocacy or litigation services should none the less be able to obtain these in support of claims which appear to have merit. THE AGREEMENT BETWEEN CORNHILL AND GRANTS

[23]The insurance company Cornhill stands in the shoes of the Defendant in accordance with normal subrogation rights. Mr R W Rabbitts, the technical claims manager of Cornhill, in his witness statement of 1 October 2002 explained (paragraph 2) that Grants had been providing a costs handling service to Cornhill for over six years, both directly and through panel solicitors. They are regularly instructed by Cornhill’s branches in court actions where Cornhill’s insured is a party and required to pay the opponent’s costs.

[24]In about 1994 it seems that Cornhill’s Birmingham office agreed an arrangement with Neil Grant whereby his company would be paid on the basis of a percentage of savings on costs achieved. Although Mr Rabbitts had made enquiries about this he was satisfied that the arrangement was never recorded in writing, nor were any variations in the agreement recorded in writing until he became involved in January 2001 when he took over as manager. In January 2001 he had a meeting with Neil Grant and new terms were agreed to come into effect on 1 February 2001. Those terms were set out in a letter to Neil Grant dated 18 January 2001. Grants were to be remunerated on the basis of a commission payable at a set rate provided that they, Grants, achieved a monthly average gross saving of a given percentage on claimants’ costs over a 12 month period for a guaranteed number of cases. In the event that the target was not met Grants’ commission would be reduced to a lower percentage figure. Mr Rabbitts explains in his witness statement (paragraph 9) that the reason a percentage mark-up was chosen over an hourly rate charge was because it was a simple way to achieve quality control and went some way to relating the fees paid to the level of costs claimed. It was intended to act as an incentive to Grants to maximise the discount they were able to achieve. Mr Rabbitts goes on to explain:

"11. There is a standing instruction with Cornhill panel solicitors including Beachcroft Wansbroughs that once a matter is settled costs will be referred to Grants. 12. Although the panel solicitor sends the file to Grants, it is handled by Grants under the terms of Grants retainer with Cornhill. Any bill from Grants for further services is sent to Cornhill and is calculated in accordance with their retainer with Cornhill. 13. The panel solicitor remains on the court record as acting for Cornhill’s insured. If an attendance is required at an assessment hearing, the solicitor will normally agree (as in this case) to a member of Grant’s staff attending the hearing as their agent. 14. The panel solicitor’s fees are dealt with separately between Cornhill and the panel solicitor without including Grants. For the avoidance of doubt no bill will be rendered by Grants to the panel solicitor."

[25]Mr Peter Steadman, managing director of Grants Legal Costs Management, by his witness statement of 4 October 2002 essentially confirmed what Mr Rabbitts had said, and concluded by showing that in the period 1 January 1999 to 4 October 2002 his company had dealt with some 27,700 cases on behalf of Cornhill and had achieved a saving in costs of £20.8 million. THE EVIDENCE AS TO THE ISSUES ARISING IN THIS DETAILED ASSESSMENT

[26]On 29 January 2002 the Claimant’s solicitors served notice of commencement of assessment. On 30 January 2002 Messrs Beachcroft Wansbroughs, the Defendant’s solicitors, writing under their trading name Mutual Law, wrote to Grants as follows:

"We enclose our file in relation to the above claim in accordance with the Cornhill International protocol for the determination of third party costs. We have told the Claimant’s solicitors that you will be dealing with costs but would ask that you contact them direct within the next 7 days, ie on or before 6 February 2002, to confirm your involvement. At the conclusion of the matter we would be grateful if you would return the complete file, so that we may archive the matter, together with a short note stating the amount of costs agreed/assessed and confirmation that the cost payment has been discharged. Please acknowledge receipt of this letter and our file. If you have any queries regarding this matter please telephone the writer …"

[27]It is this letter which was produced to the District Judge at the first hearing on 16 May 2002. The only other relevant letter which I have seen is dated 3 September 2002 from Mutual Law to Dominic Swallow of Grants. This reads:

"We refer to the detailed assessment hearing fixed for 9 September in the Stoke County Court. Pursuant to Section 27(2)(e)(i) of the Courts & Legal Services Act 1990, we hereby appoint you to act as our agent at the forthcoming hearing in the above matter. We confirm that we have briefed counsel, Mr John Brennan … to represent the Defendants interests."

[28]Mr Bacon relies on a number of attendance notes exhibited to the witness statements of Paul Kimber, a trainee solicitor with the Claimant’s solicitors, and Thomas Walsh, a costs draftsman employed by those solicitors, both dated 3 October 2002 which he says demonstrate the fact that it was in fact Grants who were instructing Beachcroft Wansbroughs rather than the other way round.

[29]The relevant parts of the attendance notes are as follows: i. 4 April 2002 - Paul Kimber spoke to Liz Simmons at Beachcroft Wansbroughs:

"Liz says she has been in touch with Grants – they have asked her to ask us if we can make them our best offer they will then speak to the insurers to see if they will come up from their offer. I said it is up to them to make an offer that puts us at risk. We have made an offer which I am happy is close. They have made an offer £3,000 less than this." ii. 13 May 2002 - Thomas Walsh spoke to Liz Simmons "

Liz has been asked by Grants to ring us to see if the assessment can be stayed pending Callery. I said I could agree to the additional liabilities being stayed but there is no reason not to deal with the base costs. I asked her to take instructions on agreeing base costs, she will speak to Grants and revert." iii. 13 May 2002 - Paul Kimber spoke to Liz Simmons "Spoke to Liz to see if she had taken instructions from Grants. She said she has and they say hearing is to proceed." iv. 16 May 2002 - The hearing took place before District Judge Stevens to which I have already referred. v. 9 July 2002 - Paul Kimber spoke to Rachel Quigly at Beachcroft Wansbroughs "Asked Rachel who will be attending tomorrow’s hearing in Stoke County Court. She said that Grants were dealing and that they had instructed an agent to attend on behalf of the Defendants. She said a Graham Barber was dealing at Grants and I should speak to him to see who he had instructed." vi. 10 July 2002 - Hearing before Deputy District Judge McQueen vii. 11 July 2002 – The Claimant’s solicitors wrote to Beachcroft Wansbroughs requesting further information to establish whether or not there was a proper retainer between the Defendant and/or his insurers and the solicitors representing the Defendant and between the Defendant and the Defendant’s appointed costs negotiator. The requested information was never supplied. viii. 2 August 2002 - Paul Kimber spoke to Naomi Marshall at Beachcroft Wansboughs:

"… I said that it appears from correspondence that they are taking instructions from Grants. She said she is instructed by the insurer and she has instructed Grants. I said that the Judge has already ruled at the first two hearings that Grants are instructed by the insurers. I said we are concerned that Grants are paid on a percentage basis and they instruct Beachcrofts with regard to costs." ix. 22 August 2002 - Paul Kimber spoke to Rachel Quigly at Beachcroft Wansbroughs "

I said we have made an offer back in May and we still have not had a response, despite my chasing. She said they are struggling to take instructions from Grants. She said the file had been transferred from Christine Phoenix to Dominic Swallow. She called Dominic everyday but has been unable to speak to him, as he is never in the office. I suggested she speaks to his team leader, as I know that Dominic is doing their hearings and is rarely in the office. She will try him again today and if not will try to speak to someone else there. I asked if counsel was still attending the next hearing and whether it was still Tim Harrington. She said that Grants had instructed a different barrister, a Jonathan Brennan from Citadel Chambers to attend. She will come back to me re the offers if she can speak to someone from Grants." x. There then followed a number of telephone conversations which were inconclusive, including 2 September 2002 when Paul Kimber spoke to Naomi Marshall:

"Chased Naomi – she still has not managed to obtain any instructions from Grants – she will chase them and revert." xi. 3 September 2002 Paul Kimber spoke again to Naomi Marshall "

Naomi has spoken to Grants. Grants have rejected my offers and the matter is to proceed to the detailed assessment on Monday. Beachcrofts will not respond to our Part 18 request for information regarding their retainer." xii. 9 September 2002 – Hearing before District Judge Chapman THE RIGHT OF AUDIENCE ISSUE

[30]Mr Birts argues that this question is simply resolved as a matter of construction of Section 27(2)(e). He submits that the words "by a qualified litigator" govern only the giving of instructions and not the employing or engaging to assist. Thus, he says, it does not matter who employs or engages the person who is to have a right of audience provided he or she is authorised to do so: in particular he need not be a qualified litigator; he could be (and often is) the client. Furthermore he suggests that since instructions may be given by a qualified litigator "either generally or in relation to the proceedings" the instructions referred to are basic instructions to act rather than the factual detail of instructions themselves which may well come from another source. He argues that "instructions" simply means instructions given by the qualified litigator to the employee or agent under which the litigator, while delegating aspects of his litigation duties to the employee or agent nevertheless remains responsible for their proper performance in the litigation of which he has conduct. He suggests that all that is required is for the qualified litigator to give the employee or agent instructions under which the qualified litigator maintains control of the employees’ or agents’ performance of his duties whether generally or in relation to specific proceedings; and from whatever source the factual detail of the latter’s instructions may come.

[31]Mr Birts then goes on to argue that by their letter of 30 January 2002 Mutual Law "employed or engaged Grants to assist in the conduct of the litigation in that they asked Grants to deal with the costs aspect of the claim on behalf of the First Defendant".

[32]I reject that submission. In my judgment Section 27(2)(e) does not give Grants a right of audience in this case. The letter of 30 January 2002 enclosed the Defendant’s file "in accordance with the Cornhill International Protocol for the determination of third party costs". It is clear from the witness statements, to which I have referred, and from the letter of 18 January 2002 that Grants were employed or otherwise engaged by Cornhill who in turn agreed to supply Grants with a guaranteed minimum number of cases in a 12 month period.

[33]The Cornhill International Protocol for the determination of third party costs has not been disclosed but it may be inferred that it is a term of the agreement between Cornhill and its panel solicitors that when the question of costs comes to be decided the file must be sent to Grants (or possibly other nominated costs negotiators) as described by Mr Rabbitts in paragraph 12 of his statement. The question then is: are Grants assisting in the conduct of litigation and doing so under instructions given (either generally or in relation to the proceedings) by a qualified litigator? The answer to that question is no.

[34]Mr Birts argues further that by their letter of 3 September 2002 Mutual Law appointed Mr Swallow, an employee of Grants, to act as their agent at the hearing on 9 September. Mr Birts submits that Mr Swallow was therefore employed or engaged to assist in the conduct of the litigation by appearing at the detailed assessment on behalf of the First Defendant. He argues that in delegating the conduct of the detailed costs hearing to Mr Swallow Mutual Law did not relinquish responsibility for the conduct of the litigation but retained it throughout.

[35]I also reject that submission. The reality of the situation, as evidenced by the attendance notes which I have set out is that the whole issue of costs was passed to Grants to deal with by Mutual Law on the instructions of Cornhill. The normal process of lawyers advising the client and taking the client’s instructions and then delegating their function to a costs specialist is entirely absent. It is clear that the letter of 3 September 2002 was merely the result of difficulties encountered at earlier hearings. Although the letter of 3 September appears to be a valid letter of appointment, Mutual Law were purporting to appoint Mr Swallow to be their agent in respect of matters which they themselves had no authority to pursue, namely the assessment of costs. Grants themselves had previously purported to appoint an agent (see paragraph 28(v) above).

[36]The whole tenor of the legislation and the authorities is to provide protection not only for those using the courts but also for the court itself, as Buckley LJ said in Wallersteiner v Moir, when explaining the public policy:

"It can, I think, be summarised in two statements. First, in litigation a professional lawyer’s role is to advise his client with a clear eye and an unbiased judgment. Secondly, a solicitor retained to conduct litigation is not merely the agent and adviser to his client, but also an officer of the court with a duty to the court to ensure that his client’s case, which he must, of course, present and conduct with the utmost care of his client’s interests, is also presented and conducted with scrupulous fairness and integrity. A barrister owes similar obligations."

The court must be able to rely implicitly on those appearing before it. Both barristers and solicitors have, as part of their Rules of Professional Conduct, the requirement that the court must not be misled. In certain limited circumstances a litigant in person may be entitled to rely on the advice of experts or the help of a MacKenzie Friend. That is not the case here. The Defendant was properly represented by solicitors throughout and it was their responsibility to arrange for appropriate representation at the detailed assessment proceedings and to supervise that representation. There is nothing in my view inherently wrong in a requirement by an insurance company that, when costs come to be determined, a particular firm of costs draftsmen should be instructed. Those instructions must come from the instructing solicitors who have themselves been properly instructed and who are required to consider the claim for costs and advise the client. It is abundantly clear in this case that Grants were attempting to run the detailed assessment proceedings without reference to the Defendant’s solicitors under the umbrella of the correspondence to which I have referred, which does not, for the reasons I have given, achieve its objective.

[37]An example of the difficulties which arise when costs negotiators are instructed direct by insurance companies and in turn instruct solicitors, may be seen in my decision in Salmons v Perch 30 April 2002 (unreported) which was relied on by Mr Bacon. In that case the defendant’s solicitors conceded that they had no proper retainer from the defendant with the result that a wasted costs order was made against them in respect of the assessment proceedings they had pursued on the defendant’s behalf.

[38]Even if it is subsequently decided that I am wrong in stating that Grants were not employed or engaged by Mutual Law this does not overcome the problem that they appear to have been dealing with the question of costs without reference to the solicitors at all. The solicitors in their letter of 13 January 2002 clearly do not expect to hear further from Grants until the conclusion of the matter and merely request "a short note stating the amount of costs agreed/assessed". That cannot in my view amount to assisting in the conduct of litigation under instructions given (either generally or in relation to the proceedings) by a qualified litigator. I am not told of any other instructions Mutual Law may have given Grants, whether generally or in relation to this case. I infer that there are none. I am driven to the regrettable conclusion that Beachcroft Wansbroughs/Mutual Law were not supplying any services to the Defendant they were merely allowing the use of their name in the detailed assessment proceedings. THE CHAMPERTY ISSUE

[39]Mr Birts accepts that Grants terms of remuneration, set out in the witness statement of Mr Peter Steadman, amount to a contingency fee agreement and an agreement in support of litigation, but he says that the fact that they have a direct financial interest in the outcome of costs assessments does not mean their terms of payment are champertous and unlawful. In support of this submission he relies on the Court of Appeal decision in Factortame.

[40]Mr Bacon asserts that the arrangement between Grants and Cornhill is an illegal, champertous agreement which is unenforceable, both according to statute and the common law, with the consequence that the court, when exercising a discretion to grant rights of audience, should not grant such rights to those acting under illegal champertous agreements; and that Grants’ fees, were the Defendant to be awarded costs, would not be recoverable between the parties. Mr Bacon argues that the agreement between Grants and the Company is caught by Section 58 of the 1990 Act because Grants provide litigation services and advocacy services.

[41]It is not disputed that the agreement does not comply with the Conditional Fee Agreement Regulations 2000. Mr Bacon goes on to point out that in Factortame the disputed agreement was not caught by Section 58 as the accountants were providing services which fell outside "litigation services" or "advocacy services". They were in fact providing expert witness services. He submits however that Grants provide both litigation and advocacy services and as such are caught by Section 58.

[42]Mr Bacon goes on to say that, even if the agreement does not fall foul of Section 58, it should be struck down as a contingency fee agreement at common law. He relies on what the Master of the Rolls said in Factortame:

"84. A contingency fee agreement which entitles those providing litigation services to a percentage of anything recovered may give rise to particular objection on the ground that it poses a temptation to act in an unethical manner in order to achieve the maximum recovery. … Nonetheless, it is pertinent to consider the role played by Grant Thornton in order to see whether the nature of their interest in the outcome of the litigation carried with it any tendency to sully the purity of justice on the facts of this case."

[43]In Mr Bacon’s submission the agreement with Grants falls squarely within the points raised by the Master of the Rolls. He suggests correctly, that the position of costs negotiators such as Grants is quite different from that of the accountants in Factortame. Costs negotiators are unregulated, often not legally qualified in any respect, and, in the present case, not members of the Association of Law Costs Draftsmen. He also points out that the Court of Appeal had very much in mind the fact that the conducting solicitor, a Mr Swabey, had "very properly insisted on remaining in control of the conduct of the litigation". As I have already pointed out the Defendant’s solicitors in this case did not remain in control of the assessment proceedings in any way.

[44]Mr Birts position is that Grants were not providing advocacy or litigation services but were merely "assisting in the conduct of litigation" (in the same way as the accountants in Factortame), and their agreement is therefore not caught by Section 58 of the 1990 Act.

[45]Mr Birts typified the relationship between Cornhill, the solicitors and Grants as triangular, with the insurance company at the apex, instructing both the solicitors and Grants; with the solicitors referring to Grants, on the instructions of the insurers, those cases which have led to litigation; and with the retainer by Grants of Beachcrofts for litigation services, where Beachcrofts have not previously been on the record. Mr Birts argues that "instructions" can and do pass in both directions. Grants are he says acting under the instructions of Beachcrofts as the qualified litigators and the solicitors are receiving instructions from Cornhill through the agency of Grants.

[46]Mr Birts argues that Grants’ contingency fee agreement with Cornhill is in accordance with public policy today. It is in the public interest because of the saving of costs which are achieved. It is therefore a beneficial agreement.

[47]He argues that Grants are not providing litigation or advocacy services, they are merely supplying ancillary services, for example: clerical assistance; and even though Mr Swallow appeared at the detailed assessment hearing with the intention of addressing the court he was, in Mr Birts’ submission, assisting in the conduct of litigation. In my judgment that submission, which appears to cut directly across Mr Birts’ submission in respect of rights of audience, cannot possibly be right. Section 27 of the 1990 Act states that the question whether a person has a right of audience before a court must be determined solely in accordance with the provisions of that Part of the Act. The only circumstances in which a person may have a right of audience before the court (if he does not have a right granted by an authorised body) is, if the court grants a right in relation to the particular proceedings (Section 27(2)(c)), or he is employed or otherwise engaged to assist in the conduct of litigation and is doing so under instructions given by a qualified litigator (Section 27(2)(e)(i)). Section 119 of the 1990 Act defines "right of audience" as meaning "the right to exercise any of the functions of appearing before and addressing a court …" That is exactly what Mr Swallow was proposing to do. His purpose in attending was, in my judgment, to provide "advocacy services" because he was contemplating exercising a right of audience in relation to the proceedings. As I have already found, he did not have a right of audience because he was not employed or otherwise engaged to assist in the conduct of litigation under the instructions given by a qualified litigator.

[48]If the court were to consider granting Mr Swallow a right of audience in relation to these proceedings under Section 27(2)(c) of the 1990 Act it would not in my judgment be right to do so because of the admitted contingency fee agreement under which Grants operate.

[49]As to Mr Bacon’s argument that Grants’ agreement with Cornhill is caught by Section 58 of the 1990 Act; this argument fails for the reasons given by the Master of the Rolls in Factortame (paragraph 59): the section is intended to apply only to "litigators" ie advocates and those conducting litigation. Neither Grants nor Mr Swallow are "litigators".

[50]Mr Birts argues that Grants’ agreement is not champertous for the following main reasons: i. Grants cannot be held to be inter-meddling in the litigation because it is litigation in which they have a proper business interest having been formally instructed to act for a party. If Grant’s business interest in this case could be described as a proper business interest I agree. As to this see (iii) below. ii. Grants do not enjoy a share of the proceeds. The fact that they are paid by results by the paying party who benefits from costs savings achieved by Grants means that they do not share in the proceeds whether directly or indirectly. Mr Birts suggests that the "proceeds of the litigation" in this context are the costs obtained by the receiving party. In my view that submission is flawed because the "proceeds of litigation" or "spoils" as they are sometimes called will only ever take tangible form in the hands of a successful party, either as damages or costs. It is necessary to take into account, not only amounts received but also amounts preserved. It seems to me that savings achieved on behalf of a losing insurance company (to the tune of £20 million per year) is in fact a very significant element of the proceeds of litigation and Grants’ remuneration is a share of that element. iii. Public policy no longer holds that an agreement under which a representative of a party to litigation is paid by results offends the integrity of justice. The introduction of conditional fees demonstrates that such agreements are now in accordance with public policy subject to the statutory safeguards. The relevant words here are "subject to the statutory safeguards" which the agreement with Grants clearly is not. iv. Public policy favours containment of litigation costs and an agreement which rewards a representative according to savings of such costs achieved by him is manifestly in accordance with public policy. The benefits of costs negotiators’ services are self evident in an area of specialist expertise. I disagree for the reasons given under (ii) above. This submission is tantamount to stating that the ends (costs savings) justify the means (payment by results). Plainly they do not. v. There can be no threat to justice because the performance of costs negotiators’ duties is subject to the supervision of a qualified litigator and the discipline of court rules of procedure enforced by a Costs Judge, an expert in the field. I reject that submission because, as I have found, Grants purported to perform their duties under supervision which was wholly illusory. In any event even if Grants themselves were a firm of solicitors their agreement would be champertous. (This point also applies to points vi) and vii) below.) vi. This is not a type of litigation where evidence can be contaminated or the process of justice corrupted. There are no witnesses (or very rarely) the material is limited to documents produced by claimants and the exercise is one of evaluation and submission on (usually) agreed facts. There is no opportunity for costs negotiators to manipulate the proceedings or the parties to them. This may be so on the facts of this case but this may not always be the case. vii. There is nothing to suggest that Grants agreement might tempt Mr Swallow to undermine the ends of justice or unfairly prejudice the interests of the opposing party for his personal gain or otherwise. As I indicated at the outset, arrangements of this type give rise to concerns that the question of costs may be pursued over vigorously and therefore disproportionately and in breach of the overriding objective. This is in my judgment a very real concern and is one of the reasons why the control of those appearing before the courts is so rigorously controlled by Section 27 of the 1990 Act, and the authorities which I have quoted. CONCLUSIONS

[51]It follows from the above that the answers to the two preliminary issues are: i. Mr Swallow of Grants did not have a right of audience in relation to the hearing on 9 September 2002. ii. The terms of payment pursuant to which Mr Swallow appeared at that hearing were (as between Grants and Cornhill) champertous. DRAFT CONSEQUENTIAL ORDER IT IS ORDERED that pursuant to CPR 31.22(2) the Claimant is prohibited from using the letters from Cornhill to Grants dated 18 January 2001 and 24 January 2001 in subsequent proceedings or from making those documents available to the public. PTH\42\Ahmed v Powell