Brady v Rec-Tech Leisure Ltd

In the case of Brady v Rec-Tech Leisure Ltd (Tunbridge Wells County Court, 24/4/07), the Claimant, through her litigation friend, instructed Branton Edwards solicitors (now Branton Bridge) to act under a CFA. The case had been referred to Branton Edwards through Result Management Ltd (Result), a claims management company. The CFA recommended that the Claimant obtain an ATE policy with NIG or IOMA. The CFA stated that Branton Edwards had no interest in recommending the policy. In fact, the policy that was being recommended was issued by Result with the insurers being either NIG or IOMA. In a covering letter sent to the Claimant’s litigation friend the following information was provided:

“Result

Please note that Tim Branton and David Edwards who are Partners in the firm of Branton Edwards have a financial interest in Result Management Limited. We confirm that Branton Edwards receives no financial benefit from the arrangements for the funding and insurance of you case.”

During the detailed assessment proceedings it emerged that the two partners, at the relevant time, each owned 50% of Result and that for each policy issued Result received a commission of £300 out of a premium of £900. Branton Edwards was the only firm who received referrals from Result. There were no other “panel” members.

It was argued for the Defendant that in truth the solicitors did have a financial interest by virtue of the commission payments received by Result, which in turn was owned by the partners, and by virtue of the fact that the firm had a financial interest in the success of Result to ensure the continued stream of referrals. It was further argued that the information given to the Claimant’s litigation friend failed to properly advise of these interests as required by Regulation 4(2)(e)(ii) (see above). The litigation friend was not properly informed of the relationship between NIG/IOMA and Result or of what that interest actually was – the payment of a £300 commission. As such, she was unable to make an informed decision as per paragraph 101 of Garrett.

District Judge Lethem, sitting as Regional Costs Judge, accepted the Defendant’s submissions and ruled the CFA to be invalid resulting in a saving to the Defendant of approximately £20,000. Of wider significance, he accepted the Defendant’s arguments over those of the Claimant in that the Regulations required a claimant to be informed as to what the actual interest was. It was not sufficient to simply inform a claimant whether or not there was an interest. This was the effect of reading Regulation 4(2)(e)(ii) together with 4(2)(e)(i). The requirement to explain why a policy is being recommended (Regulation 4(2)(e)(i)) must therefore include the details of what that interest is under Regulation 4(2)(ii). DJ Lethem accepted that this was the effect of the Court of Appeal’s decision at paragraph 101 of Garrett with the reference to the failure by the solicitors there to “disclose the real financial interest”.

It seems probable that the defective wording used in this case was also used in other CFA cases run by this firm during this period.

These two cases show that successful challenges continue to be available for claims where the old CFA Regulations apply. Although the volume of these claims is reducing over time, the outstanding cases are by their nature likely to be those where the level of costs is relatively high. Such claims are those where a careful consideration of the merits of a technical challenge is most justified. Gibbs Wyatt Stone remains committed to providing its clients with the best possible advice and advocacy in this area of the law.