Connaughton v Imperial College Healthcare NHS Trust [2010] EWHC 90173 (Costs)

Case No 1000511[2010] EWHC 90173 (Costs)
IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE
Venue Clifford’s Inn, Fetter LaneDate 30/07/2010
London, EC4A 1DQ
Before
MASTER HAWORTH, COSTS JUDGE
Between
MARY CONNAUGHTONClaimantIMPERIAL COLLEGE HEALTHCARE NHS TRUSTDefendant
Mr Philip de Berry (instructed by Pannone LLP) for ClaimantMr Vinsen (instructed by Barlow Lyde & Gilbert) for DefendantHearing Hearing date: 28 June 2010
Judgment

Master Haworth:

[1]The Claimant was injured in an accident on 2 September 2008, when she was visiting her husband who was a patient at Charing Cross Hospital in London. At the time of the accident the Claimant was 75 years of age. She was walking through the Intensive Care Unit when she slipped on a patch of wet floor which had just been mopped, fell over and fractured her ankle. Shortly after the accident the Claimant instructed solicitors who entered into a Conditional Fee Agreement (CFA) with her on 24 October 2008. The CFA agreement replicates The Law Society model CFA. Accompanying the agreement is a Law Society document entitled “Conditional Fee Agreements: What You Need to Know”, setting out the terms and conditions of the CFA.[2]On 27 May 2009, the Claimant issued an application for Pre-Action Disclosure (PAD) against the Defendant seeking disclosure of certain documents which were disc losable under the pre-action protocol. In particular, the Claimant was anxious to establish what system of cleaning the Defendant employed.[3]The PAD was listed for hearing at Salford County Court on 14 August 2009. On 12 August 2009 the application was compromised, save in respect of costs issues. On 23 December 2009, District Judge Hovington, inter alia, awarded the Claimant her costs in the sum of £2,206.41. He ordered that the matter be transferred to the Senior Courts Costs Office for determination of issues relating to the nature and extent of the Claimant’s retainer, and entitlement to recover costs from the Defendant in respect of the application for PAD.

THE ISSUES

[4]The issues before the Court are: i) Does the CFA agreement cover the Claimants application for pre-action disclosure? ii) Can costs be recovered in the absence of a “win” as defined in the CFA agreement? iii) Can costs be recovered where, as in this case, the Claimant is not proceeding against the Defendant in her claim for damages, but is proceeding against another party?

FACTS

[5]The CFA agreement is dated 24 October 2008, and is made between Pannone LLP and the Claimant. The important terms of the agreement are as follows:
“What is covered by this Agreement: • Your claim against your opponent for damages for personal injury suffered on 2 September 2008. • Any appeal by your opponent. • Any appeal you make against an interim order. • Any proceedings you take to enforce a judgment order or agreement. • Negotiations about and/or a Court assessment of the costs of this claim. What is not covered by this Agreement: • Any counter-claim against you. • Any appeal you make against the final judgment order. Paying us: If you win your claim, you pay our basic charges, our disbursements and a success fee. You are entitled to seek recovery from your opponent of part or all of our basic charges, our disbursements, a success fee and insurance premium, as set out in the document “What You Need to Know about a CFA”
. Provided that you comply with your obligations under this agreement, we agree to limit our basic charges, disbursements and success fee to the amounts recovered in respect of those items of costs from your opponent.” • Your claim against your opponent for damages for personal injury suffered on 2 September 2008. • Any appeal by your opponent. • Any appeal you make against an interim order. • Any proceedings you take to enforce a judgment order or agreement. • Negotiations about and/or a Court assessment of the costs of this claim. • Any counter-claim against you. • Any appeal you make against the final judgment order.[6]Attached to the CFA is a separate document headed “Conditional Fee Agreements: What You Need to Know”. This document contains standard Law Society terms and conditions. It bears the date “The Law Society 2005”. The relevant parts of this document are:
“What do I pay if I win? If on the way to winning or losing you are awarded any costs, by agreement or Court order, than we are entitled to payment of those costs, together with a success fee on those charges if you win overall. Basic charges These are for work done from now until this agreement ends. They are subject to review. Explanation of words used (c) Claim Your demand for damages for personal injury, whether or not Court proceedings are issued. (j) Lose The Court has dismissed your claim or you have stopped it on our advice. (o) Win Your claim for damages is finally decided in your favour, whether by a Court decision or an agreement to pay you damages, or in any way that you derive benefit from pursuing a claim.”
Basic charges

Explanation of words used

[7]On 27 May 2009, the Claimant issued an application in the Salford County Court for an order that the Defendant herein disclose those documents requested in the Applicant’s protocol letter of claim dated 30 October 2008, and listed in a schedule of documents annexed to the application.[8]The application was supported by a witness statement from Madeleine Holdsworth dated 26 May 2009, setting out the reasons for the application. On 30 October 2008 a letter of claim was sent to the Defendant. Information was given, including allegations of negligence and certain documents were requested in the absence of an admission of liability. Despite chasing letters, the documents were never received and the Claimant’s solicitor wrote a final letter on 19 May 2009 requesting a reply to their protocol letter. In the absence of a response to that letter, the application for PAD was issued.[9]On 13 August 2009, the Court was provided with a consent order signed by solicitors for the Claimant and Defendant, reciting that the order for pre-action disclosure was no longer required as the Defendant had complied with the request for disclosure by letter dated 13 July. Nevertheless, the matter of costs of the application was still to be decided.[10]On 7 January 2010, District Judge Hovington made the following

THE LAW

[11]On 24 June 2010, it was confirmed to the Defendants by letter that the claim being brought by the Claimant is proceeding against ISS (UK) Ltd, the cleaning contractor employed by the Defendants at the time that the accident occurred. THE LAW The following provisions of the Civil Procedure Rules 1998 are applicable: “Disclosure before proceedings start: 31.16(1) This rule applies when an application is made to the Court under any Act for disclosure before proceedings have started. (2) … (3) The Court may make an order under this rule only where:(a) The respondent is likely to be a party to subsequent proceedings;(b) The applicant is also likely to be a party to those proceedings(c) …(d) Disclosure before proceedings have started is desirable in order to: (i) dispose fairly of the anticipated proceedings; (ii) assist the dispute to be resolved without proceedings or; (iii) save costs. Orders for interim remedies 25.1 The Court may grant the following interim remedies: (i) An order under Section 33 of the Senior Courts Act 1981, or Section 52 of the County Courts Act 1984 (Order for Disclosure of Documents or Inspection of property before a claim has been made).” (a) The respondent is likely to be a party to subsequent proceedings; (b) The applicant is also likely to be a party to those proceedings (c) … (d) Disclosure before proceedings have started is desirable in order to: (i) dispose fairly of the anticipated proceedings; (ii) assist the dispute to be resolved without proceedings or; (iii) save costs.

CLAIMANT’S SUBMISSIONS

[12]The Claimant submitted that in construing the terms of the Conditional Fee Agreement, I should adopt a broad interpretation to the words “your claim”. It was submitted that applications for PAD are not excluded from the scope of the CFA. The words “your claim” is a broad concept and as such should be given a wide interpretation. Support for the contention that applications for PAD were included within the scope of the agreement comes from Rule 25.1(i) CPR which refers to applications for PAD being interim applications. The fact that the scope of the CFA covers appeals from interim orders is a clear indication that applications for PAD are included within the definition “your claim”.[13]The Claimant placed reliance on the definition of “claim” being a “demand for damages for personal injuries whether or not Court proceedings are issued”. An application for PAD is a fundamental part of the claim. It is part and parcel of the personal injury protocol. In addition the definition of basic charges means that the agreement covers work undertaken from the date of that agreement until conclusion of the case, whether by discontinuance, settlement or judgment.[14]It was submitted that there was no good reason why the PAD application should not be treated as part of the claim. The application has no purpose other than to progress the claim towards a conclusion one way or the other. In reality, most claims could not proceed without disclosure, given the need to establish the prospects of success for funding purposes. A PAD application therefore forms a vital and integral part of pursuing a claim for damages. It was submitted that even if the PAD application was regarded as a separate cause of action, it would remain covered by the necessarily broad interpretation that is to be applied to “your claim”. As far as the question of whether costs can be recovered in the absence of a win as defined in the CFA agreement, the Claimant submitted that the terms of the agreement explicitly provide for costs to be recovered, even in the event of loss. The words used in the agreement are:
“If on the way to winning or losing, you are ordered any costs by agreement or Court order, then we are entitled to payment of those costs, together with a success fee on those charges if you win overall. Therefore in the view of the Claimant, it was abundantly clear that a “win” was not required to recover costs. The Claimant’s liability to pay the costs of a PAD application is limited to what the Court awards pursuant to CPR 43.2(3).”
[15]In relation to the issue that the Claimant was not pursuing a claim for damages against the Defendant, but against another party, the Claimant submitted that notwithstanding the fact that proceedings have been commenced against a different party; the Claimant was originally pursuing the Defendant for damages for personal injury. It was clearly within the contemplation of the parties to the retainer that the claim would be pursued against the Defendant. The letter of claim dated 30 October 2008 written some six days after the CFA was signed, makes it clear that a claim was being pursued against the Defendant. The fact the proceedings were not in fact issued does not mean that the Claimant was not intending to make a demand for damages for personal injury against the Defendant. Accordingly the application for PAD was part and parcel of the claim. In terms of the construction of the written retainer between the solicitor and the client, the Claimant submitted that what I should be asking myself is what steps in the proceedings any reasonable Claimant would have thought the agreement was intended to cover at the time it was entered into.

DEFENDANT’S SUBMISSIONS

[16]The Defendant submitted that the CFA specifically provides for a claim for damages and the application for PAD is not a claim for damages, it is a claim for disclosure. In addition, it is pre-action, and therefore cannot form part of a separate substantive action for damages because it pre-dates the issue of any substantive claim and constitutes a separate action from the claim for damages.[17]Furthermore, obtaining an order for PAD cannot on any correct interpretation of the CFA come under the definition of “win” within the agreement, and it was argued that the precise terms of the Court order of 23 December 2009 were not such as to bring the Claimant within the definition of “win” for the purpose of the agreement. The order of District Judge Hovington makes no reference to the substantive action; neither does it order disclosure of documents.[18]In the light of the fact that the Claimant is not now proceeding against the Defendant, but against another party, fundamentally alters the position in this case. The PAD application cannot be “within the claim” by virtue of the fact that proceedings have now been brought against another party.[19]It was submitted by the Defendant that CPR 31.16(3)(a) refers to the fact that “the Court may make an order under this rule, only where the Respondent is likely to be a party to subsequent proceedings”. The Defendant submitted firstly that a PAD application is therefore separate to the proceedings for damages which are “subsequent proceedings” and secondly that in this case, this PAD application cannot be part of the “same case” as the claim brought by the Claimant is against another party. It was contended that on any view of Judge Hovington’s order, there was no liability on the Claimant to pay her solicitor’s costs and as a result and there is nothing to indemnify.

DISCUSSION AND CONCLUSIONS

[20]The issues in this case require me to construe the terms of the contract entered into between the Claimant and her solicitors on 24 October 2008.[21]Lord Hoffman summarised the principles by which contractual documents are nowadays construed in Investors Compensation Scheme Ltd –v- West Bromwich Building Society [1998] 1 WLR 896. At page 912g, he said this:
“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. (2) The background was famously referred to by Lord Wilberforce as the “matrix of fact”, but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man. (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification … (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meaning of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co Ltd –v- Eagle Star Life Assurance Co Ltd [1997] AC 749. (5) The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.”
[22]Counsel for the Claimant referred me to a decision of District Judge Culleton, sitting in the Liverpool County Court on 1 October 2009 in the case of Billy Mae Smith –v- MacDonalds which concerned a claim for costs arising in connection with an application for pre-action disclosure. At paragraph 13 of his judgment, the District Judge said this:
“It is in my view well established that work done prior to commencement of an action generally, when you are talking generally outside, not necessarily limited to a CFA circumstance, would be covered and recoverable; the work you have to do in preparation for a case if you issue it, will be recovered. In my view the CFA would generally cover damages and costs, but would include the costs incurred throughout including preparation for and in contemplation or in anticipation of proceedings. If a pre-action application proves necessary and is reasonably undertaken, then in my view a costs order maybe expected, particularly if when one looks at 48.3(b) if a pre-action protocol has not been complied with.”
[23]At paragraphs 15 and 16 of his judgment, he went on to say:15. In my view, the indemnity principle is not breached, because the Claimant is entitled to recover costs from the individual when the individual is entitled to recover those costs from the defaulting party, or in this case, this Defendant……………. … . He is looking simply for the costs of issuing this application. I say principally. In my view I am persuaded by an application of Part 48 and paragraph 13(b), and the fact that that paragraph refers to compliance with the protocol. There was not compliance. I have not heard any compelling reason to explain why there was not compliance. In my view the Claimant was then perfectly entitled to make an application which the Claimant did.16. In my view, the Claimant is perfectly entitled to seek the costs of that in principle. Those costs would be limited to base costs and the costs would then need to fall to be assessed. In my view, 48.3(b) which I have been referred to deals with the assessment of the costs, not the principle of the application of the costs liability……………………..”[24]Deputy District Judge Smith, sitting in the Manchester County Court on 10 February 2009 in the case of Leslie Roche –v- Newbury Homes Ltd, took the contrary view. In his judgment, Deputy District Judge Smith said:
“(4) The work undertaking in this application says the Defendant is not covered by the agreement. On page 1 of the agreement, about 8 lines down, it says “What is covered by this agreement,” and then there are five particular matters listed. The Defendant says this application does not fall within the ambit of any of the five areas as to what is covered. (5) Not surprisingly the Claimant takes a different view and argues that this application is intrinsically linked with that which the Claimant wants to do in bringing a claim against a proposed Defendant. It is not possible, argues the Claimant, to separate the two. (6) I do not accept that argument advanced by the Claimant. The application is for pre-action disclosure. If it is pre-action disclosure, then it cannot by definition be the action, because what is sought proceeds and pre-dates the issue of any substantive claim. (9) I reject the suggestion that a pre-action matter is intrinsically linked with a post-issue matter that clearly would have been covered by a CFA. The Claimant fails. The Claimant has not provided evidence that it is covered in respect of this work by the CFA.”
[25]Master Gordon-Saker, in the case of Brierley –v- Prescott, SCCO Ref: 0504718 dealt with the construction of a CFA, and in particular the scope of the work that was covered by the agreement in that case. At paragraph 25 of his judgment he said this:
“25. In my view the words “your claim against Hertz UK Ltd Car Hire for damages for personal injury suffered on 7 January 2000” meant the “the claim for damages arising out of the accident and which was being handled by Hertz”, and therefore must be taken to include the claim that was subsequently issued against Mr Prescott. The intention of the parties is obvious. The 2002 agreement was to provide funding for continuation of the claim which had been the subject of correspondence between Pinto Potts and Hertz for the proceeding three years. There was only ever one “claim”.”
[26]Mr de Berry, Counsel for the Claimant, urged me to take a broad interpretation of the words “your claim” in this case, and not to construe the CFA too narrowly. CFA agreements serve a number of different purposes. They provide details of the solicitor’s charges, the relevant success fee together with the obligations expected by the solicitor of his client. The scope of the agreement is outlined, together with any detailed conditions, which in this case formed a separate document. They generally contain substantial elements of client care and information which are, to some extent, in my view a throw back to the detailed requirements of the Conditional Fee Agreement Regulations 2000. The agreement is there to inform the Claimant of her rights and obligations under the terms of the retainer with her solicitors, as well as to provide the solicitor with a vehicle with which to recover costs in the event that the Claimant is successful in her claim.[27]In this case I prefer the submissions of the Claimant to those of the Defendant. I intend to adopt a broad interpretation of the CFA applying the principles referred to by Lord Hoffman in Investors Compensation Scheme Ltd –v- West Bromwich Building Society. In adopting a purposive approach in accordance with the overriding objective I agree with the approach of Master Gordon-Saker, in the case of Brierley –v- Prescott and District Judge Culleton, in the case of Billy Mae Smith –v- MacDonalds and respectfully disagree with the approach adopted by Deputy District Judge Smith in the case of Leslie Roche –v- Newbury Homes Ltd for the following reasons.[28]In my judgment, although the scope of the agreement does not specifically include applications to pre-action disclosure, neither does it exclude them. The fact is that applications for PAD are interim orders in accordance with Part 25 CPR, and I am persuaded by the reference in the CFA to “appeals from interim orders” being included within its scope as an indication that by analogy an application for a PAD is also included within the definition of “your claim”. In that regard, the word “claim” refers to a “demand” for damages for personal injuries, whether or not Court proceedings are issued”. In my judgment this application was part and parcel of the Claimants claim for damages arising out of the accident which occurred on 2 September 2008. It was a natural consequence of the Defendant’s failure to comply with the personal injury pre-action protocol. Furthermore, District Judge Hovington considered that on the material before him, it was appropriate that the Defendant should pay the Claimant’s cost of the application, subject only to the issues being determined by me today.[29]As far as the second issue which arises in this case, namely the absence of a “win”; again I am persuaded by the Claimant’s submission that the terms of the agreement explicitly provide for costs to be recovered, even in the event of loss. “If on the way to winning or losing you are awarded any costs by agreement or Court order, then we are entitled to payment of those costs together with a success fee on those charges if you win overall.”[30]I accept that in those circumstances a “win” is not required to recover costs. There is a liability for the Claimant to pay the costs of a PAD application, albeit limited to what the Court awards. In this case the liability of the Claimant is £2,206.41 ordered by District Judge Hovington on 23 December 2009. The Defendant’s argument that no “win” has been achieved is in my judgment not significant. The scope of the liability for costs contained in the agreement is broader than acknowledged by the Defendant.[31]Finally, in relation to the third issue that the Claimant is not now proceeding against the Defendant, but against another party and therefore the CFA cannot relate to the claim for damages, is in my view misconceived. Notwithstanding that proceedings have now been issued against the Defendant’s cleaning contractor, the Claimant was originally pursuing the Defendant for damages for personal injury. That is clear from the letter of claim dated 30 October 2008, written some six days after the CFA was signed. In my judgment it was clearly within the contemplation of the parties to the retainer that a claim would be pursued against the Defendant. The fact that proceedings have not been issued against the Defendant, does not meant that the Claimant was not claiming against the Defendant in accordance with the definition of “claim” within the CFA. In that respect the Claimant was demanding damages for personal injuries from the Defendant. The application of PAD was part and parcel of the claim.[32]Standing back from this agreement, and considering what is a reasonable interpretation of the scope of the retainer, I am satisfied that a lay-person’s reasonable expectation would be that non-compliance with a pre-action protocol which was part of the pre-litigation process and necessitated an application to the Court, would be covered under the terms of this CFA.[33]For all those reasons, I am satisfied that the Claimant’s retainer with her solicitors in the form of the CFA entered into on 24 October 2008 covered the application for pre-action disclosure. The Claimant has a liability for the costs ordered by District Judge Hovington. In that respect there is no breach of the indemnity principle and accordingly I find for the Claimant. The Defendant shall pay to the Claimant the sum of £2206.41 ordered by District Judge Hovington on the 23rd December 2009.[34]In relation to the costs of this application, I order that the Defendant shall pay the Claimant’s costs, such costs to be agreed if possible. In default of an agreement, I direct that the Claimant shall file and serve a statement of her costs within 14 days of the handing down of this judgment. The Defendant shall within 14 days thereafter provide any comments thereon. I will then carry out a summary assessment of those costs.

order

“ IT IS ORDERED THAT: (a) Whilst the solicitor for the Defendant was only served with a copy of the Notice of Application and date of hearing on 22 December 2009, the said solicitors had written to the solicitor for the Claimant on 18 November 2010 stating that they were no longer instructed in this matter. (b) On 26 November 2009, the solicitor for the Claimant wrote directly to the Defendant notifying it of the intention to pursue this application. (c) The solicitor for the Claimant has conducted this application under the terms of a Conditional Fee Agreement. (d) The Defendant has raised a substantive issue as to the entitlement of the Claimant under the terms of such agreement to recover any costs in respect of an application for pre-action disclosure. (e) On the material before the Court, it is appropriate, pursuant to Part 48.1(3) of the Civil Procedure Rules 1998 to order, in principle, that the Defendant should pay the Claimant’s costs of the application; (f) The summary of assessment of the Claimant’s costs, as set out below, is subject to determination of the issue as to the Claimant’s entitlement under the terms of the Conditional Fee Agreement retainer to recover costs from the Defendant.” made the following order: (a) Whilst the solicitor for the Defendant was only served with a copy of the Notice of Application and date of hearing on 22 December 2009, the said solicitors had written to the solicitor for the Claimant on 18 November 2010 stating that they were no longer instructed in this matter. (b) On 26 November 2009, the solicitor for the Claimant wrote directly to the Defendant notifying it of the intention to pursue this application. (c) The solicitor for the Claimant has conducted this application under the terms of a Conditional Fee Agreement. (d) The Defendant has raised a substantive issue as to the entitlement of the Claimant under the terms of such agreement to recover any costs in respect of an application for pre-action disclosure. (e) On the material before the Court, it is appropriate, pursuant to Part 48.1(3) of the Civil Procedure Rules 1998 to order, in principle, that the Defendant should pay the Claimant’s costs of the application; (f) The summary of assessment of the Claimant’s costs, as set out below, is subject to determination of the issue as to the Claimant’s entitlement under the terms of the Conditional Fee Agreement retainer to recover costs from the Defendant.” made the following order: 1) Subject as stated above, the Defendant shall pay the Claimant’s cost of the application assessed in the sum of £2,206.41. 2) The file be transferred to the Supreme Court Costs Office for determination of the issues relating to the nature and extent of the Claimant’s retainer and entitlement to recover costs from the Defendant in respect of the Pre-Action Disclosure Application.