Jones v Wrexham Borough Council

The central issue in Jones v Wrexham Borough Council [2007] EWCA Civ 1356 concerned the, on first sight somewhat esoteric, issue of whether a pre-November 2005 CFA amounted to a “CFA Lite”. A “CFA Lite” is defined by regulation 3A of the Conditional Fee Agreement (Miscellaneous Amendments) Regulations 2003 as being a CFA where, with limited exceptions, “the client is liable to pay his legal representative’s fees and expenses only to the extent the sums are recovered in respect of the relevant proceedings, whether by way of costs or otherwise”.

The importance of whether the agreement was to be so treated rested with the fact that Regulation 4 of the Conditional Fee Agreement Regulations 2000, which required solicitors to inform clients as to whether they had an interest in recommending a particular ATE policy, amongst other things, did not apply to “CFA Lite” agreements. If the agreement was therefore caught by Regulation 3A then it did not impact on the validity of the CFA as what information was given to the client.

The Claimant, at the same time as being sent the CFA, was sent a client care letter. This letter purported to explain the effect of the CFA. There were a number of sections within the client care letter that were not entirely at one with the actual wording of the CFA. The Claimant’s solicitors sought to argue that taken as a whole, the effect of the agreement with the Claimant was such that he would not be liable (save for the allowable limited exceptions) for any own-side costs whatever the result of the proceedings save to the extent they would be recovered from the other side or covered by his ATE insurance policy.

The Court decided that there was no reason why a court could not look at the whole package produced by the solicitor: the CFA agreement, the client care letter explaining the effect of the agreement and the ATE policy. Having done that, the Court accepted that the agreement fell within Regulation 3A. This aspect of the decision causes some potential difficulties:

1. Insofar as there was a conflict between the information contained in the client care letter and the CFA, why should the former have precedence in resolving such conflicts, which was the approach adopted by the Court?

2. In future, in detailed assessment proceedings, should defendants automatically ask for client care letters and copies of full ATE policies to determine the true effect of the CFA? Will Claimants agree to such requests? Will Claimants wait until the matter reaches court and then produce such documents to try to rescue otherwise defective CFAs? Is this decision likely to lead to further uncertainty and satellite litigation in an already troubled area?

Given the above, it was not necessary for the Court to rule on whether the CFA would have been defective if it had not been held to be a “CFA Lite”. However, they chose to do so and the decision gives helpful guidance. The issue was whether there would have been a breach of Regulation 4(2)(e)(ii) of the Conditional Fee Agreement Regulations 2000, which required a solicitor to inform a client whether he had an interest in recommending a particular ATE policy. Here the claim had been referred through a claims management company Claims Bureau UK (CBUK). The solicitors advised the client that an ATE policy with CBUK was appropriate and asserted that they had no interest in recommending the policy. In fact, the ATE policy pre-dated the date when the CFA was entered into by the client. The Court held that the requirement to give the proper advice under Regulation 4(2)(e)(ii) applied equally where there was already an existing policy in place.

The Claimant sought to distinguish the facts in this case from those in Garrett v Halton Borough Council [2006] EWCA Civ 1017 on the basis that here there was no term established that if the solicitors did not recommend the policy their membership of the CBUK panel would be terminated. Under the terms of the CBUK operations manual the solicitors were required to recommend this policy. The Court held that:

“66. … It is an obvious inference not requiring any evidence that, if solicitors ignored the operation manual and recommended a different policy from CBUK, involving cancellation of the policy already entered into with CBUK, considerable damage would be done to the solicitor's business relationship with CBUK. An insurer in the position of CBUK in addition to receiving premiums under the policy received fees for doing the work that solicitors would otherwise do and would not view lightly a solicitor on the panel advising clients to go to different insurers.

67. In my view, Mr Bacon simply cannot distinguish this case from Garrett. The decision in Garrett was not, at least so far as the Court of Appeal was concerned, based simply on the fact that there was a term under which membership of the panel could be terminated. The language of the judgment is in general terms saying as follows (paragraph 97):

"There was a close relationship between Websters and Ainsworth. Websters were dependent on Ainsworth for referrals of cases, although it is unclear to what extent. As Mr Morgan point out, cases are the life blood of solicitors. Profit generated by cases is likely to be of greater significance to solicitors than commissions paid on insurance premiums, paid for ATEs in connection with CFAs. The indirect financial interest of maintaining a flow of work through membership of a panel of solicitors is greater than the direct financial interest in commissions paid for insurance premiums. The advice to use the Ainsworth insurance product came in a CFA that it had apparently supplied to its panel solicitors and which bore its livery."

In my view, the solicitors in this case clearly had an interest. It is not suggested that the fact that in some part of the CFA they disclosed that they were on the panel would be sufficient, having regard to the absolute terms in which they suggested they had no interest.”

As such, if this had not been a “CFA Lite” the agreement would have been held to be invalid. This aspect of the decision is extremely useful to Defendants. It considerably widens the scope of claims management schemes to which there will be a declarable “interest”.