Zenith Personal Injury Current Awareness

The fruits of iniquity: RTA Protocol fixed costs and the solicitor’s lien

27 April 2018

Peter Yates

On 18th April 2018 the Supreme Court gave judgment in Gavin Edmondson Solicitors Ltd v Haven Insurance Company Ltd. The case represents an important victory for Claimant solicitors, who would be well advised to review their files for previous cases falling within its ambit.

The case concerned the recoverability of Claimant solicitors’ costs in circumstances where, the Claimant having entered into a CFA with their solicitors and the claim having been logged on to the Portal, the Defendant insurer settled the claim directly with the Claimant. The Defendant’s purpose in proceeding in this manner was evident from transcripts of telephone calls between them and the Claimants; it would allow the Defendant to avoid paying the solicitors’ costs. The inducements for the Claimants were said to be that the payment would be speedier and more generous than if the matter proceeded through the Portal.

The solicitors’ remedy in these circumstances is in equity. Broadly, equity will intervene to protect a solicitor’s interest in the fruits of the litigation where the Defendant had sufficient notice of that interest to make the Defendant’s interference in it (by direct payment to the Claimant) unconscionable.

In each case the Claimants and their solicitors had entered into a “CFA Lite”, supplemented by a standard form Law Society document and a client care letter. The Court of Appeal held that these documents created no contractual liability of the Claimants for the solicitors’ charges, and that the proposed equitable security could not therefore be based on that liability. The Claimants nevertheless succeeded at this stage on the basis that the equitable jurisdiction could be extended either on the basis of the solicitors’ interest in receiving their fixed costs under the Protocol, or on the basis that the CFA allowed the solicitors to sue the Defendant for the charges in the Claimants’ names.

In the Supreme Court, the solicitors succeeded on the simpler, traditional basis; the CFA agreement between created a contractual liability on the Claimants for the solicitors’ costs. Thereafter, there are two further hurdles for the solicitors to overcome.

First, did the settlements owe their creation, to a significant extent, to services provided by the solicitors pursuant to the CFAs? The Supreme Court held that they did. In each case Edmondson had, pursuant to its retainers under the CFAs, completed the CNFs and lodged them on the Portal. The CNFs contained sufficient information about the Claimants’ claims to galvanise Haven into making an offer of settlement.

Second, did the Defendant have notice or knowledge of the solicitors’ interests in the settlement debts? It was agreed that by the time of payment Haven knew of the existence of a CFA between Edmondson and its clients, but not of its detailed terms. This, said the Supreme Court, was sufficient to make direct payment to the Claimants unconscionable, as an interference with Edmondson’s interest in the fruits of the litigation.

Having decided the case on the basis of the traditional principles of equitable liens and on the solicitors’ contractual interest arising out of the CFA, the Supreme Court’s consideration of the Court of Appeal’s extension of the doctrine was strictly obiter. It went on, however, to overrule the Court of Appeal’s approach as unarguable and, in any event, unnecessary.

Current Awareness

By the Personal Injury team