“26. In Mitchell v News Group Newspapers Ltd[2013] EWCA Civ 1537 ,[2014] 1 WLR 795 at [52] this court said: “We start by reiterating a point that has been made before, namely that this court will not lightly interfere with a case management decision. In Mannion v Ginty[2012] EWCA Civ 1667 at [18] Lewison LJ said: “it has been said more than once in this court, it is vital for the Court of Appeal to uphold robust fair case management decisions made by first instance judges.””
“… the enjoinder that the Court of Appeal will not lightly interfere with a case management decision and will support robust and fair case management decisions should not be taken as applying, whenCPR 3.9 is in point, only to decisions where relief from sanction has been refused. It does not. It likewise applies to robust and fair case management decisions where relief from sanction has been granted.”
"The fact that different judges might have given different weight to the various factors does not make the decision one which can be overturned. There must be something in the nature of an error of principle or something wholly omitted or wrongly taken into account or a balancing of factors which is obviously untenable."” "
“13.4 If the claimant might instead want to refer to the Raubenheimer claim, it is denied that there has been any receipt of any commission (as that term is properly understood); rather, if this is a reference to what has been called a ‘commission’ in that claim, it was in fact a legitimate claims-handling fee for services payable to a separate group company who was appointed by the ATE Insurer to provide claims handling services and manage the claims fund. Further there have not been other unexplained payments.”(The bold and underlining are mine). (3) In relation to the CFA terms the Defendant pleaded they expressly provided for deductions from damages of URCs up to 25% of the damages and that the requirements of informed consent were complied with and that the Defendant had provided each Claimant with the best possible information and there was no omission of material information given to the Claimants. [48]. CLL are the Claimants’ solicitors in these claims. Having been challenged on their retainer, the Defendant challenged back by applying on26 May 2021 for a stay of all of the claims on the basis that the CLL retainers with the Claimants were unlawful insurance contracts and/or that CLL were acting in a champertous manner by providing indemnity to the Claimants for ACOs and by taking their fees out of any sum recovered. The Defendant also applied for security for costs on the basis that CLL were funding the claims and were impecunious and could not afford to honour the indemnities. [49]. On14 June 2021 the Claimants applied for disclosure from the Defendant of documents on their files or in their possession, custody and power relevant to the pleaded issues including the audio files of each lead Claimant’s sign up process. [50]. The hearing before CJ Rowley in Edwards & Ors took place on7 July 2021 . Judgment was given on15 September 2021 . The Defendant’s appeal notice was filed on27 September 2021 . A stay pending appeal was granted by Saini J. on28 September 2021 in relation to the costs order and the disclosure order and permission to appeal was granted by Martin Spencer J. on16 December 2021 . [51]. On3 February 2022 at the request of the parties I ordered both appeals in Edwards v S&G and Raubenheimer v S&G to be heard together and (not by consent) I set aside the stays. On2 March 2022 Bennathan J re-imposed the stay on the disclosure order but left the costs order in force. I assume it has been paid by Slater & Gordon. [52]. On18 June 2021 CJ Rowley gave judgment on the Claimant’s part 18 application in Raubenheimer refusing the application. The order was made on16 July 2021 . That order is also appealed by that Claimant. [53]. I heard the appeals with a CJ sitting as an assessor to whom I am grateful for his wisdom and guidance. However the judgment herein is my own and I do not purport to make rulings on his behalf. The Judgments below [54]. To summarise again: in Edwards CJ Rowley granted the Claimants’ disclosure application and rejected the Defendant’s applications for a stay of the claims and for security for costs against CLL. In Raubenheimer CJ Rowley rejected the Claimants’ part 18 application. Those decisions are appealed. [55]. In Edwards my summary of the reasoning in the15 September 2021 judgment is as follows. [56]. The Claimants applied for standard disclosure underCPR part 31 because the usual process for assessment on a solicitor and own client basis was inadequate, omitting as it does any express disclosure requirement. In the alternative the Claimants invited the Court to exercise its general case management powers so to do. The Judge noted that in a part 8 claimCPR rule 46.10 did not provide for disclosure because in most part 8 SOCAs there was minimal dispute as to the facts. Although the Judge noted that in such assessments the judge may hear limited oral evidence or accept written evidence on factual issues. The Judge noted the Defendant’s objection to disclosure and assertion that there was no power inCPR rule 46.10 or elsewhere expressly for disclosure. The Judge noted that the Defendant accepted that a part 8 claim is a claim but asserted that once assessment was ordered it was an assessment not “a claim” and submitted thatCPR part 31 did not apply to assessments. At paragraph 16 the Judge noted that the Defendant accepted that the CPR applied to Solicitors Act proceedings. The Judge rejected the Defendant’s floodgate arguments, took into account the limited jurisdiction under part 8 and that part 8 proceedings should not generally be used where part 7 proceedings were more appropriate - for instance for professional negligence claims. The Judge noted that part 8 claims were treated as allocated to the multitrack. The Judge noted that disclosure on a standard basis would be limited to the issues identified in the pleadings and specifically mentioned the audio recording of the sign up of Mr. Turnbull and his belief, on the evidence, that the Defendant had audio recordings for the other lead Claimants which would be relevant. [57]. At paragraph 27 the Judge ruled that he had jurisdiction and power underCPR part 31 , to order standard disclosure and even if he did not have that power he had the power under his general case management powers and that the proceedings did involve “claims”. [58]. In relation to the application for a stay the Judge noted that the Defendant was not asserting that the Claimants were companies that were unable to pay, they were individuals, nor that they were outside the jurisdiction. The Judge noted the Defendant’s application was a full frontal attack upon CLL based upon champerty and alleged unlawful insurance provision. The Judge went on to consider the evidence from the Defendant in relation to CLL's Welcome Pack and no win - no fee - agreements and the indemnity provided within those against ACOs. The Judge carefully considered the charging rates set out in the witness statement of Mr. Carlisle and the assertion that the hourly rates were higher than the Court’s Guideline Hourly Rates due to various stated factors. The first was “legal specialism” in the area. The second was the provision of the indemnity against ACOs. The Judge analysed Mr. Carlisle's evidence on the three different types of CFA retainer under which various of the Claimants were contracted. The first being an old retainer with no deduction from the Claimants’ sums recovered and with no success fee but with an indemnity against ACOs. The second being the same but with a higher hourly rate and the third being the same but with no indemnity. The Judge noted that Mr. Carlisle asserted that there was no causal connexion between the indemnity and the hourly rates because the hourly rates were not lower in the retainers where there was no indemnity when compared to the retainers where there was an indemnity. The Judge also noted that in a very limited category of cases, where the claim would be won but no order for costs would be made, CLL could recover their costs out of the sums awarded, capped at a maximum of 20%. [59]. The Judge rejected the Defendant’s submission that because Mr. Carlisle's witness statement had been provided a mere five days, (three working days) before the hearing it should be excluded and took into account that the Defendant did not ask for an adjournment and did not put before the Court any submission that they were so disadvantaged that they could not deal with it without an adjournment. [60]. The Judge then went on to deal with the Defendant’s assertion that CLL had inadequate capital and hence were unlikely to be able to pay out on the indemnities they had given to the Claimants. The Judge accepted that if CLL were providing unlawful insurance without regulation that would be a highly relevant matter for the stay. [61]. The Judge specifically considered Mr. Carlisle's evidence about the lack of an ATE market for ACOs in SOCAs and that CLL had stepped in to plug the gap in the market by providing the indemnity themselves. [62]. At paragraph 55 the Judge considered Morris v Southwark [2010] 4 Costs LR 526 and Sibthorpe v Southwark[2011] EWCA Civ 25 , and the decision by Mr. Justice MacDuff (sitting with assessors) on first appeal. The Judge noted that the indemnity and CFA provisions in those claims were characterised as legal services contracts with an indemnity clause and not as insurance contracts. The Judge noted that on appeal the Master of the Rolls stated in his judgment that he rejected the renewed application for permission on the unlawful insurance point and stated that he considered that Mr Justice MacDuff ‘s decision was right on that point. The Judge then considered the Defendant’s assertion that the ruling in Sibthorpe should be distinguished. He rejected that submission. He considered the text of MacGillivray on Insurance Law and the old definition of insurance contracts in Prudential Insurance v Inland Revenue(1904) 2 KB 658 by Mr. Justice Channell. The Judge went on to consider contracts with mixed elements: both insurance and non-insurance related. He also considered the text Collinvaux’s Law of Insurance and Fuji Finance v Aetna Life(1997) Ch 173 , and Marac Life v Commissioner of Inland Revenue (1986) 1 N.Z.L.R 694. In addition the Judge considered the Defendant’s submissions in relation to re Digital Satellite Warranty cover(2011) EWHC 122 (Ch) in which Mr. Justice Warren doubted whether the “principal object” test was the appropriate test in mixed contracts. Preferring, as he did, an analysis to distinguish between “principal objects” and “ancillary or minor elements”
“Difficult for there to be any conclusion that there is a payment of a sum of money or some corresponding benefit which is sufficient to provide consideration for a contract of insurance”. [66]. In relation to the application for security for costs, underCPR 25.14 , the Judge rejected the Claimants’ assertion thatsection 70 (1) of the Solicitors Act 1974 stood as a bar to any application for sums to be paid into court. The Judge ruled that the bar on making a Payment In order at the time of ordering the assessment did not extend to the whole of the assessment proceedings. I stop there to say that this decision was not appealed by the Claimants so I am not asked to reconsider it in these appeals. [67]. The Judge noted that there was no application for security for costs by the Defendant against the Claimants themselves. This was an application for security against a third party: CLL. The Judge identified that the real issue was whether CLL were providing the indemnity in return for a share of any money which the Claimants might recover in the proceedings. At paragraphs 134 & 137 the Judge rejected the Defendant’s assertion that because, in the small minority of cases, where there was a no costs order, CLL could recover their hourly costs out of the sums recovered (capped at 20%), that recovery could be regarded as “taking a profit share from the proceedings”
“72 Supplementary provisions as to [F1assessments]. (1)Every application for an order for the [F2assessment] of a solicitor’s bill or for the delivery of a solicitor’s bill and for the delivery up by a solicitor of any documents in his possession, custody or power shall be made in the matter of that solicitor. … (4)The certificate of the [F9costs officer] by whom any bill has been [F10assessed] shall, unless it is set aside or altered by the court, be final as to the amount of the costs covered by it, and the court may make such order in relation to the certificate as it thinks fit, including, in a case where the retainer is not disputed, an order that judgment be entered for the sum certified to be due with costs.” [96]. This provision makes it clear that in a SOCA the CJ can order delivery up by the solicitor of any documents in his possession, custody or power. I did not hear submissions on the scope of this provision from either counsel in relation to the disclosure application. [97]. Section 74 states: “74 Special provisions as to contentious business done in county courts. (1)The remuneration of a solicitor in respect of contentious business done by him in [F1the county court] shall be regulated in accordance with sections 59 to 73, and for that purpose those sections shall have effect subject to the following provisions of this section. F2(2). . . . . . . . (3)The amount which may be allowed on the [F3assessment] of any costs or bill of costs in respect of any item relating to proceedings in [F4the county court] shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.” [98]. This provision prevents a solicitor from recovering URCs from the client unless the Civil Procedure Rules allow such when the bill of costs relates to contentious business. I heard no argument on the definition of contentious business. That it will be relevant to the legal issues which will be before the CJ in the SOCAs in relation to the Defendant’s power to make deductions from the Claimants’ damages awards of their URCs. If the Claimants’ claims in the Portal are contentious business then the section is engaged. [99]. The PI Small Claims Protocol states: “Preamble General 2.1 (1) This Protocol applies where a claimant who has suffered personal injuries (including but not limited to whiplash injuries) because of a road traffic accidentwishes to make a claim for compensation and the amount claimed for their injuries is not more than£5,000 and for their overall claim is not more than£10,000 . This would mean that, if the claim was dealt with by a court, it would be normally be allocated to the small claims track and dealt with as a small claim. (2) The Protocol describes the behaviour expected from both parties before starting court proceedings. It establishes a process to help the parties to reach a fair settlement in respect of any claim to which the Protocol applies. (3) The Protocol also deals with the first steps the parties must take if they are unable to reach a settlement and the claimant wishes to start court proceedings. Claims can leave the Portal for the court to determine specific issues such as liability, then return to the Portal for later steps as directed by the court. (4)The Civil Procedure Rules 1998 enable the court to consider costs sanctions where this Protocol is not followed.” “The Portal 2.2 A key feature of this Protocol is the use of an online Portal. The Portal is an online service through which the parties communicate. The Portal is used to make a claim, to exchange information and documents, and to negotiate a settlement or start court proceedings. An unrepresented claimant also uses the Portal to obtain any medical report in support of their claim. The Guide to Making a Claim 2.3 (1) This Protocol should be read together with the Guide to Making a Claim Under the RTA Small Claims Protocol, which provides more information about when and how to use this Protocol. The Guide to Making a Claim can be found at: https://www.officialinjuryclaim.org.uk/ Copies may also be obtained from the Portal Support Centre. (2) For the avoidance of doubt, if anything in the Guide to Making a Claim conflicts with the provisions of this Protocol, this Protocol takes precedence.” (The bold is in the original text, the underlining is mine). The Guide to Making a Claim https://www.officialinjuryclaim.org.uk/ [100]. I understand from counsel in this appeal that in Belsner v Cam Legal [2020] Costs LR 1371, an appeal to the Court of Appeal may be considering whether the Portal claim involved was contentious business or not. I do not understand how that can be so when at para 42 of the judgment Lavender J. stated: “42. Although no claim form was issued in the present case, and although there appears to have been a dispute about this point before the district judge, it was not disputed before me that s 74(3) applies in the present case, except insofar as rules of court may otherwise provide.” [101]. I consider that the underlined words make it clear that the Portal deals with “claims”
“This court is also prepared to deal with certain limited factual issues which might arise on a Part 8 claim and does so by way of a hybrid procedure involving an element of fact finding. In those cases a short hearing can dispose of any disputed fact based on a decision after hearing oral evidence: see the observations of Coulson J in Vitpol Building Service v Michael Samen[2008] EWHC 2283 (TCC) at [18(b)].” [112]. The limited factual dispute gateway was considered in ING Bank v Ros Roca[2011] EWCA Civ 353 , per Stanley Burnton LJ at paras 77-78, in which the factual dispute about the fee due under a construction agreement involving an issue of estoppel was held to take the claim outside part 8 qualification through the first gateway:CPR r.8.1 (2)(a) but the case did not involve the second gateway:CPR 4.8 .1(6) so it was not considered. Stanley Burnton L.J. stated: “77 This case proceeded underCPR Part 8 . In general Part 8 proceedings are wholly unsuitable for the trial of an issue of estoppel. Once such a claim is disputed, save in exceptional cases, the proceedings will cease to comply withCPR r 8.1 (2)(a), since they will cease to be proceedings in which the parties do not seek the court’s decision only on questions which are “unlikely to involve a substantial dispute of fact”
“Part 31 (disclosure and inspection of documents), Part 32 (evidence) and Part 33 (miscellaneous rules about evidence) do not apply to any proceedings to which this Part applies”. [127]. I take into account thatCPR r.31.1 states that it applies to all “claims”
“6.1 A client and solicitor may agree whatever terms they consider appropriate about the payment of the solicitor’s charges. If however, the costs are of an unusual nature, either in amount or the type of costs incurred, those costs will be presumed to have been unreasonably incurred unless the solicitor satisfies the court that the client was informed that they were unusual and that they might not be allowed on an assessment of costs between the parties. That information must have been given to the client before the costs were incurred. 6.2 Costs as between a solicitor and client are assessed on the indemnity basis. The presumptions in rule 46.9(3) are rebuttable.” [133]. In Herbert v HH Law[2019] EWCA Civ 527 , the issue of informed consent was considered. This was a simple rear end collision in which a bus rear ended the claimant’s car. Despite the lack of risk in the claim (liability had been admitted on linked files) the solicitors charged a 100% success fee. This was limited by statute to be capped at a deduction from damages recovered at 25% of past loss and PSL. The client agreed. The claim produced a settlement offer which was accepted of£3,400 . HH deducted the ATE premium of£349 and their success fee of£829 . The claimant accepted the settlement and challenged the deduction of the success fee. In the part 8 assessment the District Judge found the success fee was “unusual” because it did not reflect the risk and so was not in line with the way most success fees were calculated. He reduced it to 15% of base costs and awarded the costs of the assessment to the claimant. He ruled that the ATE premium was a disbursement and was wrongly placed on the Cash Account. On appeal Soole J. agreed. The Court of Appeal ruled, through the lead judgment of the Master of the Rolls: Sir Terence Etherton, that once the issue of lack of informed consent had been raised by the client, the burden of proof was on the solicitor to satisfy the Court that consent which was properly informed had been provided. Only then could the solicitor recover URCs and deduct them from damages (para 38). He also ruled that the ATE premium was not a disbursement stating: “71 I appreciate that the consequence is that the client will not be able to challenge the amount of an ATE insurance premium through the convenient mechanism of an assessment under theSolicitors Act 1974, section 70 . That is not, however, a good reason to decline to apply the principle, which is clearly binding on us, in the light of the limited evidence before us, and so create a precedent which both undermines the coherence of the principle and may have unforeseen implications in other and different cases. No doubt, if this outcome is considered unsatisfactory within the profession, the Solicitors Regulation Authority and the Law Society can consider what could be done to bring an ATE insurance premium within the principle as to what is a solicitor’s disbursement.” [134]. The effect of this decision is that the ATE premium goes into the Cash Account and comes out of the bill of costs and is not “assessed” within the SOCA. I shall return to this below. Belsner [135]. In the notes toCPR r.46 in the SCP at 46.9.3, the editors summarise that the signing of the CFA requires the client’s agreement with “informed consent” and the solicitor’s ability to deduct URCs from damages requires the client’s approval thereto with “informed consent”
“A contract of insurance, then, must be a contract for the payment of a sum of money, or for some corresponding, benefit such as the rebuilding of a house or the repair of a ship, to become due on the happening of an event, which event must have some amount of uncertainty about it, and must be of a character more or less adverse to the interest of the person effecting the insurance.” [145]. There are two elements in this definition: the premium and the obligation on the insurer to pay out on the future happening of an event, the likelihood of which is uncertain and the financial consequences of which are unknown. Premium [146]. The editors of MacGillivray state (at 1-002) that the purpose of insurance is to spread the cost amongst many policy holders to pay for the few happenings of adverse events causing losses. Thus the premium is not the actual cost of the pay outs by insurers (if any) but the estimated future cost of the uncertainties split between the prospective customers who seek insurance, see para 1-002: “This characteristic distinguishes contracts of insurance from certain others. Thus a contract by which an engineer undertakes to repair a machine whenever it breaks down is clearly not a contract of insurance if the engineer is to be remunerated in accordance with the amount of work done. If, however the remuneration is fixed without regard to the amount of work done it is a consideration of the type of an insurance premium and the contract may be one of insurance. Premium need not necessarily be payable before any claim is made. A promise to reimburse a mutual insurer for sums paid to indemnify a member of an employer’s mutual society had been described as a form of premium.” [147]. The Judge found at paragraph 110 that it was: “Difficult for there to be any conclusion that there is a payment of a sum of money or some corresponding benefit which is sufficient to provide consideration for a contract of insurance”. [148]. The Defendant asserts that the premium paid by the Claimants was the entering of the CFAs by the Claimants. That enabled CLL to earn their fees in the claims if they were won. [149]. I take into account here the advice from the editors of Colinvaux’s Law of Insurance who described the test for ascertaining whether there was a premium thus (12th Ed. 1-044): “(FSA), the predecessor in title of the two current insurance regulators, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), has published guidelines on the meaning of “insurance”
“(a) A contract is more likely to be regarded as a contract of insurance if the amount payable by the recipient under the contract is calculated by reference to either or both of the probability of occurrence or likely severity of the uncertain event.”
“what premium will you pay?” the response would be: “if the claims are lost, you will pay out the ACOs we will pay you nothing at all.” (2) When asked: “what if you win the claims?”, the response would be: “you will receive an uncertain but small part of the hourly rate we receive for the legal work we had done on the claims to enable us to win them”. (3) If then asked: “do you mean the full hourly rate in the CFA?” the answer would be: “well no, not exactly, that may be reduced on assessment by the Court to a lower hourly rate.” (4) When asked: “well how much of your awarded fees are you going to pay us?” the answer on the evidence would be: “we are not sure but a small percentage, we have to cover our fluctuating staff costs, the property costs, the power and other services costs, our business overheads, the unrecovered costs incurred in the cases we lose and other costs.” [153]. This analysis shows how difficult it is to identify any premium in the hourly rates. The focus on the words used by CLL in their marketing and contractual material in the Welcome Pack to the effect that the hourly rates take into account the indemnity is unavoidable and no doubt correct but it can only make up a speculative and small part of the costs of running the legal firm. [154]. I rule that there was no discernible premium paid by the Claimants to CLL and uphold the Judge’s implied finding on that matter. [155]. I have no difficulty in finding that the second part of the definition of insurance contract is made out: namely that the agreement was to pay out on the future happening of an adverse event. [156]. It seems to me that the indemnity is more akin to a business expense used for marketing purposes than an insurance contract term. The evidence before the CJ was unopposed and to the effect that there was no ATE market for insuring ACOs in SOCAs. So CLL stepped up and took on the possible expense but not as an insurer, as a business person. [157]. I have also considered the regulatory side of the issue. Indemnities attached to CFAs were given the all clear in 2011 by the Court of Appeal approving the indemnity provisions by the solicitors in Sibthorpe. In that appeal the claimant was supported by the intervention of the Law Society. After the case on the evidence before the judge, the Law Society did not further regulate such indemnities provided by solicitors from 2011 onwards, nor advise solicitors to approach the insurance regulator to ask whether to be regulated when solicitors offered such indemnities attached to CFAs. Nor, on the evidence, has the insurance regulator issued any guidance on these solicitors’ indemnities. [158]. One evidential matter which was not raised in the appeal or before the Judge was whether CLL’s professional insurance would have covered their liabilities under the indemnities, should they go bust in future. It seems to me that this might have been a relevant factor. However the Defendant, who should have understood the scope of solicitors’ insurance, did not take the point that it would not cover the loss or give evidence upon it to the Judge. [159]. I rule that the CLL indemnity was not an insurance provision. [160]. If I am wrong about the characteristics of the indemnity, I should consider the overall characteristics of the whole CFA with the indemnity. Should that be characterised as an insurance contract? [161]. This issue arose in Morris & Sibthorpe v Southwark [2010] 4 Costs LR 526. MacDuff J. on appeal from Deputy Master Hoffman, was required to consider whether two similar CFAs, with an indemnity clause in each against ACOs, were insurance contracts or champertous. The claims related to housing disrepairs. The Master found the arrangement champertous but not unlawful insurance. MacDuff J. allowed the claimants’ appeal on Champerty. The Defendant cross appealed asserting the arrangement was unlawful insurance. MacDuff J. dismissed that ground. In relation to unlawful insurance he ruled thus: “45. I have been referred to the following extract from MacGillivray on Insurance Law. I do not apologise for quoting it, word-for-word, reflecting as it does my own view: “It is sometimes necessary to decide, in the context of fiscal or regulatory legislation, whether a contract containing insurance and non-insurance elements should be classified wholly or partly as a contract of insurance. The inclusion of indemnity provisions within a contract, or the supply of services, neither makes the indemnifier an insurer, nor justifies describing the contract as wholly or partly one of insurance. Where a contract for sale, or for services, contains elements of insurance, it will be regarded as a contract of insurance only if, taking the contract as whole, it can be said to have as its principal object the provision of insurance.”
“58 That leaves the issue on which Waller L.J. refused permission to appeal, namely whether the CFA is rendered unenforceable because, owing to the inclusion of the indemnity, it is a contract of insurance within the meaning of article 10 of theFinancial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544). If it is, then the indemnity, and hence, it is said, the CFA, could only have been entered into by an authorised or exempt person by virtue ofsection 19 of the Financial Services and Markets Act 2000 , and, as the solicitors were not authorised or exempt, the CFA is said to be void by virtue ofsection 26(1) of the 2000 Act . 59 I am of the view that permission to appeal this point should not be granted. I think that the judge was right in his view and reasoning on the point, which he expressed in the following terms [2010] 4 Costs LR 526, paras 45—46:” [163]. Now it is said by the Defendant that the Judge should not have and I should not rely on this decision as authority, because such is banned by the Practice Direction on citing authorities dated 2001 because it is a decision on permissions to appeal. I cannot be wilfully blind to the words of the Master of the Rolls in a Court of Appeal judgment. Nor do I consider that MacDuff J.’s judgment on this was wrong, quite the contrary. [164]. The Defendant sought to distinguish Sibthorpe on the basis that housing repair claims are easy to run and low risk and, in comparison, that the Claimants’ claims are bound to be lost in large numbers and so the indemnities provided by CLL are of a different order of magnitude. The Judge dealt with that submission partly from his own experience of such SOCAs issued in the Supreme Court Costs Office and I am not going to attempt to question the experience of CJ Rowley when I have no such experience. As to the assertion by Slater and Gordon, through their counsel, that housing repair claims are easy and low risk, no evidence was provided in support of that. As to the assertion that the current claims by the Claimants will fail in droves, one only has to listen to the audio recording of the sign up process for Mr. Turnbull to feel uncomfortable about lack of informed consent for the URC clauses in the CFA. I reject that submission. Classification of mixed contracts [165]. The editors of MacGillivray on Insurance Law deal with the classification of mixed contracts containing insurance provisions and other provisions at paras. 1-008 and 1-009 as follows: “Problems in classification It is sometimes necessary to decide the context of fiscal or regulatory legislation whether a contract containing insurance and non-insurance elements should be classified wholly or partly as a contract insurance. The inclusion of indemnity provisions within a contract for the supply of services neither makes the indemnifier an insurer nor justifies describing the contract as wholly or partly one of insurance. when a contract of sale or for services contains elements of insurance it will be regarded as a contract of insurance only if, taking the contract as a whole, it can be said to have as its principal object the provision of insurance.”
“10. Effecting and carrying out contracts of insurance (1) Effecting a contract of insurance as principal is a specified kind of activity. (2) Carrying out a contract of insurance as principal is a specified kind of activity.” [170]. Schedule 1 article 17 sets out that one of the specified areas of insurance contracts which is a “specified activity” is: “17. Legal expenses Contracts of insurance against risks of loss to the persons insured attributable to their incurring legal expenses (including costs of litigation).” [171]. The PERG guidance states: “PERG 6/4 www.handbook.fca.org.uk Release 8, Jun 2021 6.3 Background The business of effecting or carrying out contracts of insurance is subject to prior authorisation under the Act and regulation by the FCA and PRA. (There are some limited exceptions to this requirement, for example, for breakdown insurance.) The Regulated Activities Order, which sets out the activities for which authorisation is required, does not attempt an exhaustive definition of a 'contract of insurance'. Instead, it makes some specific extensions and limitations to the general common law meaning of the concept. For example, it expressly extends the concept to fidelity bonds and similar contracts of guarantee, which are not contracts of insurance at common law, and it excludes certain funeral plan contracts, which would generally be contracts of insurance at common law. Similarly, the Exemption Order excludes certain trade union provident business, which would also be insurance at common law. One consequence of this is that common law judicial decisions about whether particular contracts amount to 'insurance' or 'insurance business' are relevant in defining the scope of the FCA's authorisation and regulatory activities, as they were under predecessor legislation. 6.3.3 The courts have not fully defined the common law meaning of 'insurance' and 'insurance business', since they have, on the whole, confined their decisions to the facts before them. They have, however, given useful guidance in the form of descriptions of contracts of insurance. 6.3.4 The best established of these descriptions appears in the case of Prudential v. Commissioners of Inland Revenue[1904] 2 KB 658 . This case, read with a number of later cases, treats as insurance any enforceable contract under which a 'provider' undertakes: (1) in consideration of one or more payments; (2) to pay money or provide a corresponding benefit (including in some cases services to be paid for by the provider) to a 'recipient'; (3) in response to a defined event the occurrence of which is uncertain (either as to when it will occur or as to whether it will occur at all) and adverse to the interests of the recipient.” [172]. Any Court placing reliance on PERG, when PERG itself relies in part on a summary of the common law, is of course circular. However I am assisted by the way in which the regulator focuses on the classic elements of an insurance contract when seeking to define the scope of its own field of regulation and takes into account the words “incidental to some other business”. [173]. Looking at the case law beyond Prudential, some assistance is gained from Fuji v Aetna [1996] LRLR 365. The Court of Appeal were determining the character of a life insurance policy and capital investment contract. This is therefore a different field of mixed contract and different principles may apply or they may directly assist this court. The trial judge had applied the test of looking at the overall position of contracts with more than one element (p184D). He then agreed with the “principal object” test stated in the then current 8th edition of MacGillivray. The judge ruled that it was not a contract of life insurance. The defendant submitted it was a contract of insurance on appeal. Morritt L.J. considered the case law worldwide, much of it criticising the use of the primary or dominant purpose test for distinguishing life insurance from investment return contracts. For instance Somers J. in Marac Life v Inland Revenue[1986] 1 NZLR 694 , has preferred to approach the question thus (p186E): “'I have reached the conclusion, however, that the insurance content of the Marac Life Bonds of whatever term, is not properly to be regarded as negligible. It is sufficiently substantial to justify the arrangement entered into between the insurer and the bondholder being regarded as a contract of life insurance.” [174]. Morritt L.J. then examined the particular facts and features of life insurance and how such policies had morphed over the years as the business had developed. The appeal was dismissed and he ruled as follows (p189G): “Insurance Companies Act 1982 and theFinancial Services Act 1986 are not relevant to this issue, but that question does not arise in the view that I have taken. Further, I do not accept that Sir Donald Nicholls V.-C. by his reference, at p. 133, to the principal object of the insurance indicated that he was adopting some inappropriate test. Reading his judgment on this issue as a whole it is clear that Sir Donald Nicholls V.-C. was correctly considering the characterisation of the policy as a whole and posing the question whether so read it was a policy of life insurance.” [175]. I do find that this judgment provides general guidance on how to apply the correct test to determine whether an indemnity in a CFA contact for legal services should be characterised as an insurance contract and hence regulated but not specific guidance. [176]. The editors of Colinvaux’s Law of Insurance described some of the factors for the test for ascertaining whether there was a contract of insurance thus (12th Ed. 1-044): “(FSA), the predecessor in title of the two current insurance regulators, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), has published guidelines on the meaning of “insurance”
“(a) A contract is more likely to be regarded as a contract of insurance if the amount payable by the recipient under the contract is calculated by reference to either or both of the probability of occurrence or likely severity of the uncertain event. (b) A contract is less likely to be regarded as a contract of insurance if it requires the provider to assume a speculative risk (i.e. a risk carrying the possibility of either profit or loss) rather than a pure risk (i.e. a risk of loss only). (c) A contract is more likely to be regarded as a contract of insurance if the contract is described as insurance and contains terms that are consistent with its classification as a contract of insurance, for example, obligations of the utmost good faith and the duty of fair presentation. (d) A contract that contains terms that are inconsistent with obligations of good faith may, therefore, be less likely to be classified as a contract of insurance; however, since it is the substance of the provider’s rights and obligations under the contract that is more significant, a contract does not cease to be a contract of insurance simply because the terms included are not usual insurance terms.” [177]. Having looked and the authorities and taken into account the Acts and Regulations, the Guidance and the texts books, I consider that, in relation to this CFA and this indemnity, the correct approach I should take when trying to determine whether it is a contract of insurance (thus requiring regulation) is as follows. [178]. The Court should take the following steps: (1) Determine whether the indemnity term / wording on its own can be properly characterised as an insurance provision by reference to the two necessary factors: (a) does the alleged insurer contract to pay out money or money’s worth on the future occurrence of some chance or fortuity. (b) Does the alleged insurer receive a premium in money or money's worth for the contract so to pay, whether it be upfront or delayed? (2) If the answer to the first question is: there is no insurance provision, then no further analysis is required. (3) If the answer to the first question is: this is an insurance provision, then this Court should consider the various factors necessary to determine whether or not the whole contract is to be characterised as an insurance contract and hence needs to be regulated by the insurers’ regulator or not. In this second step the Court should determine whether the contract is a single purpose contract. (4) Single Purpose contract: the Court should determine whether there is a single purpose for the contract or multiple purposes. Put another way whether there is a single objective or multiple objectives. Put another way whether the contract is just for insurance or indemnity or also for something else as well. If the contract is a single purpose contract, so for instance the provider seeks to provide insurance for premiums, then the Court doesn't need to go any further. However if the contract has multiple purposes or objectives or contracted for activities then further analysis is required properly to categorise the contract. (5) Mixed purpose contracts: What factors are to be taken into account when characterising a mixed purpose contract? I consider that the following are relevant in these claims: (a) the purposes and objectives of the parties; and (b) the proposed and contracted future activities of the parties; and (c) the moneys or benefits in kind moving between the parties and third parties and how they are calculated; and (d) the full terms of the contract including termination clauses, arbitration clauses and variation clauses; and (e) where the risks fall; and (f) the marketing carried out by the parties; and (g) the businesses of the parties; and (h) the regulators of the parties (if any); and (i) all factors relating to the contract and what it looks like to an objective bystander. (6) Once those factors have been considered, it is for the Court to determine whether the main purpose or purposes, objective or objectives of the contract is/are insurance business or whether those purposes are in fact the supply of goods, like washing machines with a guarantee or warranty, or the supply of services, like legal services with an indemnity. Then the Court has to determine whether or not the indemnity is a mere adjunct to, or is peripheral to, or is ancillary to the main purposes of the contract. [179]. On the basis that I am wrong above and the indemnity clause can be classified as an insurance clause, looking at the CFA which CLL offered to the Claimants, it is clearly a mixed contract, so I need to move on to step two. Taking each factor in turn. [180]. The purposes and objectives of the parties The Claimants wished to obtain specialist legal services to obtain refunds from Slater and Gordon. They were not looking to buy insurance. CLL were trying to sell their legal services. CLL were not trading as insurers or insurance brokers and were not going to work to sell indemnities. It is likely that they would have preferred not to have offered any indemnities if they could have obtained ATE cover in the market. [181]. The proposed and contracted future activities of the parties The activities which the Claimants were to provide were evidence and instructions to enable CLL to obtain a refund of money. The activities for CLL to perform were legal work and legal services at a profitable rate. The future activities involved the Claimants assisting CLL and authorising them. For CLL there was legal work and court work. [182]. The moneys or benefits in kind moving between the parties and third parties No money was to come from the Claimants to CLL. Nor did any money pass from CLL to the Claimants. CLL merely provided legal services. CLL did hope for and work for a win and hence the Claimants would receive refunds from the Defendant and CLL would receive their hourly rates, maybe assessed downwards. CLL paid Court fees and disbursements. [183]. The full terms of the contract including termination clauses, arbitration clauses and variation clauses This Court has not been provided with the full terms of the CLL CFAs but did have enough to determine that they were for the issuing of part 8 claims, the seeking of SOCAs and refunds, under part 8 or if necessary part 7. The indemnities were part of the terms inducing the Claimants to enter the CFA. [184]. Where the risks fell No risk fell on the Claimants’ shoulders. The risk was all taken by CLL’s business model. [185]. The marketing carried out by the parties CLL marketed themselves as specialist lawyers not insurers. The indemnity was a marketing tool to help persuade the Claimants to sign up, as part of CLL’s offered CFA light retainers. [186]. The businesses of the parties The Claimants were consumers or injured ex-parties to successful civil litigation. CLL were lawyers and costs draftsmen. [187]. The regulators of the parties (if any) CLL were regulated by the Law Society. The evidence does not disclose any other regulation, and the Claimants were consumers. [188]. All factors relating to the contract and what it looks like to an objective bystander I stand back and look at the CFAs which were “lite” and so involved no deduction of URCs and had indemnities against ACOs. I compare them to those in Sibthorne and they are similar. I compare them to a guarantee for repairs, if needed in future, provided on the sale of a new or old car. I compare them to a warranty for a washing machine sold by a shop. In my judgement an objective bystander would say this is a lawyer’s contact with lots of terms, one of which (the indemnity) is an inducement to use CLL’s legal services to make a claim. [189]. Taking the above into account I rule that these CFAs had the character of a lawyer’s business deal, for the provision of legal services, made with members of the public in a particular category (ex-claimants in PI claims). I rule that the indemnities were a minor or ancillary term in that business model. I rule that the CFAs were not insurance contracts, even if the indemnities were insurance terms (which I have ruled they were not). [190]. The Defendant’s appeal on the basis of unlawful insurance is therefore dismissed. Champerty [191]. MacDuff J. in Morris considered the test in relation to Champerty this way: “38 … Is there a real and significant risk (those are my words) that this agreement containing as it does this indemnity clause, might tempt the claimant’s solicitor for his personal gain to inflame the damages? The answer to that is “No”
“40 In my judgment, when it comes to agreements involving those who conduct litigation or provide advocacy services, the common law of champerty remains substantially as it was described and discussed in Wallersteiner v Moir (No 2)[1975] QB 373 and Awwad’s case[2001] QB 570 . This is for two main reasons. The fist is to be found in the passages in the judgments of Buckley LJ in the former case at[1975] QB373 , 401, and of Oliver LJ in the Trendtex case[1980] QB 629 , 663. The second reason, articulated in Awwad’s case[2001] QB 570 , 593, 600, by Schiemann and May LJJ, is that, in section 58 of the 1990 Act (as amended) the legislature has laid down the rules as to which previously champertous agreements may be entered into by those conducting litigation and those providing advocacy services, and which may not. 41 There is a third reason, at least in my judgment, for this conclusion. As already indicated, there is obvious attraction in the notion that there should be no general rule as to whether an agreement with a person conducting the relevant litigation which involves him benefiting from the success of the litigation, is unlawful, and that each case should be assessed on its merits. However, there is also much to be said for clear rules so that all parties, solicitor and claimant client as well as the defendant, know where they stand rather than waiting for a determination as to the validity of a potentially champertous agreement on the overall merits. There is also much to be said for a properly funded legal profession, which has no need to have recourse to conditional fees or contingency fees or the like. It is a matter for the legislature if such arrangements are thought to be necessary for economic or other reasons, and, if they are so necessary, then it is for the legislature to decide on their ambit.”
“It is understandable that a contingency fee which entitles the solicitor to a reward over and above his ordinary profit costs if he wins should be condemned as tending to corrupt the administration of justice. There is no reason to suppose that Lord Denning MR in Trendtex Trading Corpn v Credit Suisse[1980] QB 629 or any of the members of the court in Wallersteiner v Moir (No 2)[1975] QB 373 had in mind a contingency fee which entitles the solicitor to no more than his ordinary profit costs if he wins. These are subject to taxation and their only vice is that they are more than he will receive if he loses. Such a fee cannot sensibly be described as a “division of the spoils”
“Of particular relevance in assessing whether an interlocutory order against a non-party underCPR r 25.14 (2)(b) to secure a contingent liability pursuant to section 51 is appropriate and just will be: (1) whether it is sufficiently clear that the non-party is to be treated as having in effect become in all but name a real party motivated to participate by its commercial interest in the litigation; (2) whether there is a real risk of non-payment such that security against the contingent liability should be granted; (3) whether there is a sufficient link between the funding and the costs for which recovery is sought to make it just for an order to be made; (4) whether a risk of liability for costs has sufficiently been brought home to the non-party, either by express warning, or by reference to what a person in its position should be taken to appreciate as to the inherent risks; (5) whether there are factors, including for example, delay in the making of an application for security or likely adverse effects such as to tip the overall balance against making an order. 20 As to (1) in para 19 above, amongst the important considerations in play is as to the reasons and motivation for the funder’s involvement. In particular, the court will seek to ascertain whether the funder has become engaged by way of business with a view to profiting from an action in which it otherwise has no interest, or whether it is what is sometimes called a “pure funder”, acting altruistically to enable access to justice and what it perceives to be a worthwhile case to be adjudicated.” [201]. Looking at those factors andCPR r.25.14 , I do not consider that the recovery of hourly rates for legal work on winning a case can be categorised as “a share of any money or property which the Claimant may recover”
“has contributed or agreed to contribute to the Claimant’s costs”