Garrett -v- Halton BC

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Garrett -v- Halton BC
Myatt -v- National Coal Board

The above two cases, which were heard together, concerned further problems relating to breaches of the CFA Regulations 2000. 

On 18th July 2006 the Court of Appeal handed down judgment in the two cases in which the Law Society had been permitted to appear as interveners. 

Both cases will have serious consequences for many cases conducted on CFAs where the CFA was made before 1st November 2005 when the  CFA Regulations 2000 were revoked.

The Myatt case concerns Regulation 4(2)(c) which states that a solicitor should inform the client whether he considers that the client’s risk of incurring a liability for costs is insured under an existing contract of insurance.  In other words has the client got some form of before the event legal expenses cover, which he or she could avail themselves of. 

The case concerned ex-miners who were bringing a claim for damages for industrial deafness against their former employers. 

The solicitors had made some enquiries over the telephone about whether BTE cover was available and had been told that it was not.  They had not asked to see any policy documents and the Costs Judge when initially conducting the assessment had held that the enquiries that they had made were inadequate. 

The Court of Appeal agreed and found that the solicitors had asked the wrong questions.  The questions they had asked required unsophisticated clients to interpret any insurance policies which they had in order to ascertain whether they would cover a claim for noise induced deafness against their employer.  The Court of Appeal held that it was not reasonable to ask the Claimants to be able to make such a judgment about any policies which they had and that therefore the solicitors had not taken reasonable  steps to ascertain the insurance position and were not therefore in a position to comply with regulation 4(2)(c) and inform the clients whether they considered that the client’s cost risk was already insured. 

Since the regulations had not been complied with the CFA was unenforceable and no costs would be recoverable.    

In the Garrett case, consideration was given to Regulation 4(2)(e)(ii).  This regulation indicates that a legal representative who recommends a particular policy must declare whether he has any interest in recommending that policy. 

The claim had been referred to the Claimant’s solicitors by a claims management company and although it was not known what the claims management company representative had told Mrs Garrett when he had visited her at her home, there was an attendance note of a telephone conversation between Mrs Garrett and her solicitors indicating “that Websters (the solicitors) had no interest in the Insurance Premium and it is between the client and the AA although we are on the AA panel”. 

The reference to “AA” is a reference to the claims management company.  The Court below had held that failure to recommend the particular Insurance Policy would lead to a termination of panel membership.  That finding was not challenged before the Court of Appeal and it was held that the solicitors did therefore have a financial interest in recommending the policy. 

The Court further held that simply stating “…although we are on the AA panel” did not disclose their financial interest in remaining on the panel which would be lost if she did not accept their recommendation that she enter into this particular ATE policy. She would not have understood the significance of the solicitors being on the panel.  As they did have a financial interest and they had not declared their financial interest, there was a breach of the regulation. 

Both cases are important and will have consequences for many CFAs entered into before the 1st November 2005.  Practitioners should, in particular, bear in mind the following points:-

1. When asking clients about BTE cover, solicitors should be mindful of the nature of the client.  Few clients will have sufficient knowledge and understanding of insurance matters for the solicitor to simply rely upon the client to check whether the risk of incurring a liability of the costs is insured.
2. Whether a breach of the regulations was a material breach is not judged by its consequences.   
3. The fact that (as in Myatt) it emerged that a Claimant does not in fact have any BTE cover is irrelevant.
4. Membership or the referrer’s panel requiring the recommendation of a particular insurance policy is a discloseable interest.  It is not sufficient to simply disclose that you are a panel member without disclosing the implications of not recommending a particular Insurance Policy.