Case No: SCCO REF 0606555
Neutral Citation Number: [2007] EWHC 90087 (Costs)
IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE
ON TRANSFER FROM THE MAYOR’S AND
CITY OF LONDON COUNTY COURT

Clifford’s Inn, Fetter Lane
London, EC4A 1DQ

Date:  19 October 2007 

Before :

MASTER ROGERS, SITTING AS A DEPUTY JUDGE
OF THE MAYOR’S AND CITY OF LONDON COUNTY COURT
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Between :

	ROGER BARLOW
	Claimant	
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	  LUCY EWART PERKS   	Defendant	

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Ms Judith Ayling (instructed by Irwin Mitchell) for the Claimant
Mr Roger Mallalieu (instructed by Berrymans Lace Mawer) for the Defendant

Hearing dates: 2 October 2007

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Judgment

Master Rogers: 

The Issue
1.	The issue I have to decide in this case is whether the CFA entered into by the Claimant and his solicitors on 15 December 2004 is valid and enforceable or not because of alleged breaches of Regulation 4 of the Conditional Fee Agreements Regulations 2000.
2.	The trial of this preliminary issue was directed to be heard by a Costs Judge by Costs Officer Martin by order dated 19 December 2006.
3.	This preliminary issue should have been heard much earlier but has been deferred several times at the request of one or other of the parties.
The Background
4.	On 8 May 2001 the Claimant was riding his motorcycle at the junction of Brixton Road and Stockwell Road in South London when the Defendant negligently drove her vehicle directly into his path whilst she was attempting an illegal right turn at that junction.
5.	The Claimant sustained a severe fracture and dislocation of his right shoulder together with other more minor injuries.  He was taken to hospital and operated on under general anaesthetic and had to wear a shoulder brace for eight weeks, undergoing intensive physiotherapy for 22 weeks.
6.	He was unable to work but was then made redundant for unrelated reasons on 1 June 2001, but his medical condition was such that he could not then seek alternative employment because he had not made a full recovery from his injuries.
7.	He decided to return to his native Australia in November 2001 where he remains.
The County Court Proceedings
8.	The Claimant instructed KSB Claims pursuant to a retainer dated 30 May 2001.  KSB Claims ceased to carry out personal injury work apart from run-off claims in mid-2004 and the Claimant’s file was transferred to Messrs Irwin Mitchell on or about mid-July 2004.  
9.	The nature of the retainers between the Claimant and KSB Claims and Irwin Mitchell are at the heart of this case and will be dealt with in more detail later in this judgment.
10.	Although liability was originally admitted by the Defendant’s insurers the issue of contributory negligence was raised by them in their defence and in negotiations for a settlement.
11.	On 27 January 2005 judgment was entered for the Claimant for liability and directions were given for the progression of his quantum claim with a trial window to open on 3 October 2005.
12.	On 4 July 2005 the parties were notified by the court that the trial would commence on 3 November 2005 and approximately a month later, on 1 August, the listing questionnaire was filed with the Defendant’s counter schedule of losses being received the following day.
13.	Shortly afterwards the matter was compromised and that compromise was incorporated into a Tomlin order dated 25 August 2005 which provided that the Defendant should pay the Claimant £13,750 damages and his costs to be assessed on the standard basis if not agreed.
The Detailed Assessment Proceedings
14.	Messrs Irwin Mitchell applied for a detailed assessment hearing on 5 October 2006.  As their total bill was for £30,330.25 it was allocated to a Costs Officer and balloted to Costs Officer Martin.
15.	The second preliminary point raised by the Defendants in their points of dispute was the retainer point and they sought disclosure from Messrs Irwin Mitchell of the relevant letters which would clarify precisely what had happened.
16.	By the time the matter was listed for hearing before Costs Officer Martin it was apparent that the Defendants intended to seek to have the validity of the CFA which covers Part 3 of the Claimant’s Bill of Costs heard as a preliminary issue.
17.	Probably believing that even if he did determine that preliminary issue, it was inevitable that the losing party would appeal to a Costs Judge, Costs Officer Martin on 19 December 2006 made the order referred to in paragraph 2 above for the trial of the preliminary issue with a one-day time estimate.
18.	He also ordered the Claimant to provide certain correspondence to the Defendant and directed that Ms Belinda Craig should attend at the hearing of the preliminary issue for the purpose of being cross-examined.
19.	The preliminary issue took one full day from 10.30 to 4.45, much of which was occupied by Ms Craig’s cross-examination by Mr Mallalieu on behalf of the Defendant preceded by a short examination in chief by Ms Ayling and re-examination by her at the conclusion of the cross-examination.
20.	I would also note that the documents were provided to the court in a rather haphazard and piecemeal way rather than as should have been the case, in an agreed and paginated bundle which all parties could use.
21.	Accordingly, some time was wasted in locating the correct copies of documents being referred to and ensuring that all parties were working from the same documents.  This became important because as the day wore on it became obvious that certain letters were sent out in a different form though bearing the same date.
22.	I am indebted to Ms Craig for her clear and helpful evidence and to both counsel for the restrained and economical way in which they dealt with the evidence and their submissions.
23.	At the conclusion of those submissions I reserved judgment and it is this reserved judgment that now follows.
The Claimant’s retainers with his Solicitors
24.	It is clear from the evidence I have heard and the documents I have seen that this case was conducted under three quite separate retainers:  one with KSB and two with Irwin Mitchell.
25.	The first retainer with KSB is evidenced by their letter to the Claimant dated 30 May 2001, part of which reads as follows:
“”We write to advise you that we have been appointed by Motor Law Ltd, your Legal Insurers, to act on your behalf in recovering compensation for you in respect of the above accident …
3.	Motor Law
Under the agreement and subject to the terms of it, Motor Law have agreed to indemnify you, that is discharge your legal costs, should your claim be unsuccessful or if for any other reason the costs of pursuing your claim are not recovered.  Motor Law have also agreed to indemnify, that is discharge any liability you may have in respect of your opponent’s costs.  What this means is that should the unlikely event arise where we are not able to recover your legal costs from the other side, or you are ordered to pay the other side’s legal costs, under the agreement with Motor Law, you will be entitled to ask them to pay them, unless you have breached your policy terms.  For your convenience, in the first instance, we will go to Motor Law to discharge such costs.  It should be noted that your policy through Motor Law will be subject to a financial limit of £50,000.
In order to finance the work we must carry out on your case, this firm has borrowed money from Singer and Friedlander Ltd.  Please note that it is an essential term of the agreement between you and this firm that you agree that all legal costs and all disbursements we recover on your behalf are held in trust for Singer and Friedlander Ltd.  By instructing us to act, you have strictly and irrevocably agreed to this.  Please be assured however, that the above arrangement will not affect in any way the damages we recover for you, or the transmission by us of those damages to you.”
26.	In other words it is clear that so long as he was represented by KSB Claims, the Claimant had the benefit of BTE insurance with Motor Law.
27.	The problem which has arisen in this case is that it was not possible apparently for the benefit of this policy to be passed to Messrs Irwin Mitchell when they took over the case, though unhappily the Claimant was never told that this was the situation in terms.
28.	A little explanation of the reason for and exact date of the transfer is now required.
29.	In November of 2003, KSB decided to wind up their P.I. litigation section and redundancy notices were given to apparently most, though perhaps not all, staff.
30.	Those staff made redundant included Belinda Craig, who was not responsible whilst with KSB for this case.  Naturally she had to find alternative employment and it would appear from the evidence which she gave, that her prospects of successfully obtaining such a post with Irwin Mitchell were enhanced by the prospect that she would bring with her a basket of cases which could no longer be handled by KSB after they wound up that arm of their business.
31.	Under cross-examination and re-examination Ms Craig thought that some 1500 cases in all had to be re-distributed on the closure of KSB’s PI section.  She believes that most of these were “sold” to an organisation in the North of England.  Whether or not that is right it is quite clear from her evidence, and this is accepted on behalf of the Defendant, that just under 50 cases (probably 47) were, as it were, offered to Ms Craig to take with her to her new employer.  
32.	Accordingly Ms Craig was offered and accepted employment with Irwin Mitchell which started early in July 2004.  It began with three days’ induction, I believe at Irwin Mitchell’s Sheffield office, at which Ms Craig was introduced into the ethos of the firm’s practice.  She does not recollect during the course of that induction course being taken through the form of CFA which Irwin Mitchell used and which as Mr Mallalieu demonstrated during his cross-examination of Ms Craig, differs somewhat from what might perhaps be called the standard form of CFA then in general use.
33.	However Ms Craig believes that it was made clear to her in general terms that where a CFA was brought into force to cover a claimant in a personal injury case’s costs it would be emphasised that the client should be told that in practice, whatever the documents might say, that client would not be charged any shortfall on costs not recovered from the other side.
34.	What unfortunately did not happen during the period between November 2003 and July 2004 was any communication between KSB and Irwin Mitchell as to the transfer of the benefit of any BTE insurance which clients such as the Claimant in this case had.  This is clearly a contributory cause of the problem that has arisen in this case.
35.	Where a client transfers from one firm of solicitors to another it is usually done at the request or at the insistence of the client.  But even when that does not happen the client should always of course be asked if he or she has any objection to the transfer being proposed.
36.	Unhappily in this case it appears from the documents that the claimant was not ever asked in terms whether he objected to the transfer.
37.	Ms Ayling in her submissions at the conclusion of the evidence said, I think correctly, that although she accepted that the client had not been asked in advance to agree to the transfer, once he became aware of it and that his case was being handled in the new firm by Ms Craig, he raised no objection and therefore impliedly accepted the transfer.
38.	Nevertheless, firms of the eminence of Irwin Mitchell should ensure when they take on new clients that those new clients are agreeable to being taken on before such transfer actually takes place, for obvious reasons.
39.	After the transfer had been effected and Ms Craig had completed her induction course she started work in the London office of Irwin Mitchell and obviously got to work on the 47 cases which she had brought with her.
40.	Until the position regarding the Claimant’s BTE insurance benefit was clarified and confirmed or some alternative funding was arranged to replace it the Claimant would have been responsible for the costs incurred by Irwin Mitchell on a personal basis.
41.	It is obvious therefore that it was in both his interests and those of Irwin Mitchell that the position should be regularised at the very first opportunity.
42.	However that did not happen, for reasons which I will come to later in this judgment, until 15 December 2004 when the firm through Mr Ettinger, a partner, signed the CFA which they had sent to the Claimant in Australia some weeks earlier and which he had signed and returned to them.
43.	Accordingly from 15 December 2004 the Claimant was represented under a CFA with a success fee.  It is the validity of that CFA alone which is in issue in this preliminary issue, though the interrelationship of the three retainers is relevant to that issue.
44.	According to the summary to the bill, of the total claimed against the Defendant of £30,330.25, approximately half or £15,710 plus disbursements of £555 is dependent upon the validity of the CFA.
Ms Craig’s attempts to clarify the BTE Insurance position
45.	Although it will necessarily lengthen this judgment it is necessary for me to go through the steps which Ms Craig took to sort out the Claimant’s and the BTE insurance position and her ultimate decision to advise him to enter into a CFA in detail, not least because this was the subject matter of most of the lengthy but very fair cross-examination to which she was subjected by Mr Mallalieu.
46.	Obviously the documents to which we have made reference are nearly all privileged documents in respect of which the Claimant’s solicitors have waived privilege.  Their complete files in relation to the assessment have been lodged with me and I have obviously looked at these and there is nothing in them to suggest that there are other documents which should have been but which were not disclosed on those files.
47.	However, one of the problems which this case threw up was that of course Mr Barlow’s case was not the only case which was transferred to Irwin Mitchell and the very same problem which has arisen in this case obviously arose in other cases.
48.	This meant that in some cases a circular letter was sent to all or some of the transferees, if I can so call them, but other letters on the files relating to other transferees might be relevant and some of these surfaced very shortly before the hearing before me.
49.	In addition, it is clear that in late October 2004 Ms Craig telephoned the Law Society about the problem which this and other cases presented.  A very full attendance note of that conversation was made but it was not specifically relating to this file and therefore only came to light when Ms Craig was making her final preparations to give evidence the night before the hearing before me.
50.	Of course, as soon as she became aware of it, Ms Ayling disclosed a copy of this document to Mr Mallalieu, who took no objection to its late disclosure, although he said that if it was determinative against him of the issue then he might well have submissions to make in relation to costs.  In the event that has not proved to be the case, although of course my preparation for the hearing was not assisted by not having this significant document until the case was opened before me.
51.	Although some of this late disclosure can perhaps be explained by the fact that Ms Craig was on maternity leave when the matter came before Costs Officer Martin in January there is on the file a witness statement from Mr Ettinger, the partner in charge of her section, which did not disclose this document.
52.	Again, whilst appreciating the pressures which modern day practice impose on solicitors, particularly when they are dealing with bulk litigation of this nature, it is important that a full and comprehensive search is made of all relevant files at the earliest possible stage so that all parties, and indeed the Judge, can adequately prepare for what was clearly always going to be a hotly contested hearing.
53.	With that caveat I now turn to the correspondence but before dealing with the correspondence passing between Ms Craig and the Claimant I should refer to a letter sent by Hina Modha at KSB Law to Mr Barlow on 16 March 2004 which reads as follows:
“I write further to previous correspondence in this matter and note I am still waiting for a response from you.
Under your agreement with Motor Law, you are obliged to cooperate with this firm and respond promptly to any request for information throughout your claim.  As you have failed to respond to my letters, you are in breach of your agreement and therefore Motor Law reserves the right to withdraw indemnity.  This means you will then become liable for all legal fees, costs and disbursements incurred to date.
My legal costs to date are £7488.00 (including VAT) and disbursements incurred on your behalf are £1310.00.
You are entitled to instruct new solicitors to pursue your claim and also to advise you on the contents of this letter.  However, under your agreement with Motor Law, if you withdraw instructions, you will still be liable for this firm’s costs as detailed above.  If I do note [sic] hear from you by 31 March 20043[sic], I will advise Motor Law who are likely to withdraw indemnity and I will cease to act any further in respect to this claim.
Please note, that under the Limitation Act 1980, you must issue proceedings at Court within three years of the date of the accident (e.g. May 2004) in order to protect your claim.  If you do not do this, you are unlikely to be able to pursue your claim.
Clearly I do not wish to cease acting for you and should be grateful if you would contact me immediately upon receipt of this letter to discuss your claim further.”
54.	Two points need to be highlighted in relation to this letter.  Firstly it warned the Claimant that, unless he co-operated by giving Ms Modha the relevant information, there was a very real danger that Motor Law would withdraw their indemnity and indeed the letter says in its pre-penultimate paragraph that unless a reply is received by 31 March 20043 (clearly that is a mis-type for 2004) the writer would advise Motor Law to withdraw their indemnity.
55.	What the letter does not do, however, is tell the client that KSB Law’s PI section was being wound up and that his case would necessarily therefore have to be transferred to another firm.  On the contrary the last paragraph of the letter makes it clear that the KSB/Claimant retainer still persisted at that time.
56.	The first notification of the transfer occurred on 15 July 2004 when KSB Claims wrote to the Claimant at an address in London. (I queried with the parties why the letter was sent to such an address when it was known the Claimant was in Australia and I was told that the person to whom the letter was addressed was his sister and I believe it was also added that it was hoped that she would shortly be meeting the Claimant.)
57.	In any event, the letter which was dated 15 July indicates that KSB had agreed with Irwin Mitchell as to the transfer of his case, though obviously and clearly without his consent.  
“We are writing to provide you with important information about the current and future handling of your claim.  Please read this letter carefully, together with the accompanying sheet.
It is with regret that we inform you that KSB Claims, the Personal Injury Department of KSB Law, is now closing and the majority of its work ceased at the end of June 2004.  (This will not affect the rest of KSB Law, which will remain in practice).  This means that we are no longer processing Personal Injury claims.  As you will know, your case is still ongoing and the purpose of this letter is to inform you of how we intend to ensure your case is resolved and progressed following our closure.
For the past recent month, we have been involved in finding and selecting a suitable firm of specialist personal injury solicitors, who we are satisfied would be suitable to take over the running of our personal injury cases.  This has been an exhaustive process.  We have been determined to select a firm who are not only specialists in the field of personal injury but also who are committed to providing excellent customer service and the highest level of professionalism.
We are pleased to inform you that we have found just such an excellent firm and that one of our senior members of staff, Belinda Craig is joining them.  This will be of great advantage for your case, because Belinda Craig is familiar with all of our procedures and she will personally take over the conduct of your claim.  For our part, we can be confident that your case is in good hands.
Irwin Mitchell are one of the largest Personal Injury practices in the country.  They aim to provide a dedicated and enthusiastic service that is ‘second to none’ to their clients, and pride themselves on excellent communication.  We are confident that you will be entirely satisfied with their conduct of your claim.
We have been working closely with Irwin Mitchell in recent weeks to ensure the transition is as smooth as possible and with seamless service to yourself.  They have already reviewed your file with us and are confident that they will pursue your case diligently and professionally for you.  Your file will be physically transferred to them in around 12th July 2004 and Belinda Craig will be familiarising herself with your file.  She will be in touch shortly after the physical transfer.
We hope that this letter from ourselves explains everything sufficiently.  Please also refer to the accompanying ‘answers to frequently asked questions’ sheet.  The transfer process is already activated, so KSB Claims will not be able to provide you with more specific information on your file at present, but Belinda Craig will shortly be contacting you by telephone to discuss matters further.  Your file is being transferred in a logical administrative order, in order to ensure a smooth and efficient transition.  Therefore, please wait for Belinda Craig to contact you.  In the meantime, if you wish to know more about Irwin Mitchell, we recommend their internet site to you.  Their address is www.irwinmitchell.co.uk.
We are sorry that we have been unable to finalise your case ourselves, but are confident that you will be fully satisfied with the excellent service that Irwin Mitchell will continue to give you.”
58.	Reference is made in a paragraph on the first page to a “answers to frequently asked questions” sheet said to be annexed.  That document does not seem to have survived the transfer to Irwin Mitchell but again, I do not think anything turns on its “disappearance”.
59.	Ms Craig in answer to a question which I posed to her believed that her induction course with Irwin Mitchell took place at around this time and it is clear that as soon as she was at her new desk in London she got to work on the transferred files and of course this file of Mr Barlow’s.
60.	Accordingly on 30 July she wrote to the Managing Director of the Special Risks Division of NIG, not merely in relation to this case, but in relation to all the cases in which it was suggested that there was cover under the Motor Law block policy scheme:
“We have taken over the conduct of the matters listed on the attached schedule from KSB claims who are in the process of closing their personal injury department.
KSB have advised that the clients were referred through Motor Law who as you know were an accident management company and were subsequently taken over by the Accident Group.  We understand from KSB Claims that all of the clients referred through this avenue had the benefit of before the event insurance policies.  We understand all of the policies were NIG policies and that they were either issued by brokers of Motor Law under a ‘block policy scheme’.  Unfortunately we have not seen copies of the policies and we are unable to say whether your requirements have been met by KSB or not.  We have received however the attached master policy or example policy.
We have asked our clients for copies of their insurance policies and/or insurance policy numbers if available.
We would be grateful in the circumstances if you would confirm that you:-
1.	Have no objection to Irwin Mitchell taking over the conduct of the various matters listed.
2.	That you will continue to indemnify the matters attached.
3.	We do not have information available as to how much has been incurred by way of costs by KSB claims in this event it is anticipated that some cases may have exceeded indemnity levels and some cases may not.  We thought as a way forward it would be easier if you would confirm that we have cover to a certain extent (say £15,000) for each claim.  We would ask you to bear in mind that some of the matters are now litigated.
4.	We would also be grateful if you could provide us with copy policies/terms in respect of each matter.
As you can imagine we are anxious to resolve matters urgently and this is why we have taken the above approach.  Many of the matters now have tight Court timetables in place.  We are more than happy to discuss matters with you either on the telephone or in a meeting.
 …”
61.	The day before that letter, i.e. 29 July 2004, Ms Craig wrote to Mr Barlow in Australia.  There are at least two versions of this letter because it would appear that it was sent to all the 47 claimants whose cases were transferred to Irwin Mitchell, being “personalised” by the insertion of the relevant personal details at the head of the letter.  Unfortunately the versions are not identical but I think it was accepted at the end of the day before me that the version which appears below was the version which is relied on by the Claimant in this matter:
“As you know your file has recently been transferred to us, along with a number of other cases, to represent you in this matter.
Conduct of your case
Belinda Craig will have day to day conduct of your case, she is an Associate and may be assisted by other members of the firm as appropriate from time to time.  She is ultimately supervised by Colin Ettinger, the Partner with overall responsibility for your case.  We will try hard to avoid changing the people who are working on your case, but if this cannot be avoided we will notify you promptly.  If you need to telephone our offices please ask to speak to Belinda Craig, or if she is unavailable then his (sic) secretary will be pleased to take a message for you.
Responsibility for Costs
You are primarily responsible for our costs.  You are also responsible for your opponent’s costs if you lose your case.  We understand from KSB Claims that your claim was initially referred to them through a claims management company called Motor Law.  Motor Law were subsequently taken over by The Accident Group who are now in liquidation.   We, however, understand that you have the benefit of an NIG Legal Expense Insurance Policy and we understand that in the circumstances NIG Legal Expense Insurer have no objection to indemnity being passed to Irwin Mitchell.  We will be writing to them to confirm the position.  Your Legal Expenses Insurance Policy will therefore pay these costs up to a limit of £50,000.00 provided that you comply with the terms and conditions of the Policy.  We refer to the attached leaflet entitled ‘Legal Expenses Insurance Explained’ and our Terms of Business for further details.  We also attach an EXAMPLE of NIG’s policy.  Your policy may vary slightly.
Hourly Rates
Our charging rates vary according to the seniority and the level of experience of the member of the team working for you and also the complexity of the case.  The levels of experience are as follows:
Grade 1 – Solicitors with over 8 years post qualification experience (including Partners).
Grade 2 – Solicitors and Legal Executives with over 4 years post qualification experience.
Grade 3  - Other Solicitors, Legal Executives and Fee Earners of equivalent experience.
Grade 4 – Trainee Solicitors, and Fee-Earners of equivalent experience.
The charging rates which apply to your claim for all work undertaken from 1st May 2003 onwards are as follows:
Grade 1 - £300 per hour
Grade 2 - £210 per hour
Grade 3 - £200 per hour
Grade 4 - £155 per hour
These hourly rates will continue to apply for all work done on your case until we notify you of any further revision of the rates which would normally become effective from 1st May of next year.  In any event we may have to review the rates started once we have reviewed your file and heard further from your Legal Expense Insurer.
We will explain to you the issues raised in your claim and keep you informed as to progress at appropriate stages.  In particular, we will advise you as soon as we know whether your opponent’s insurers are prepared to accept liability and to compensate you for your injuries and losses.
Once we have heard from NIG we will write to you to confirm the position.  The letter will be very similar to this one and we apologise if it may seem a duplication, but the detail may vary slightly.  In the meantime it may speed the process if you can confirm your policy number or the name of your broker.  We thank you for kindly bearing with us.
Please do not hesitate to contact us if you require any further advice, or if you have any questions to raise at this stage.”
62.	It appears that no doubt due to inadvertence that letter was sent to Mr Barlow by surface mail rather than by air mail and he did not receive it for several weeks later than Ms Craig believed he would have received it, as will appear later in this narrative.
63.	The section headed “Responsibility for Costs” seems to suggest that a BTE policy was in force and the benefit of which still accrued to the Claimant, although the letter written to NIG already quoted the following day suggests that this had not been confirmed by the Insurers.
64.	It would appear that in addition to sending the letter of 30 July to NIG, Ms Craig also purported to send a copy of it to Craig Halblander-Smyth at Michael Taylor & Associates on 20 August 2004 though I do not think that that particular email has survived.  Significantly, however, there are three responses from Michael Taylor & Associates to the letter or email, and although all are dated 23 August it was established during the course of the hearing that the third of them was probably written on 29 August, but certainly not on 23 August. 
65.	The first of the letters from Michael Taylor & Associates contains three paragraphs, the second and third of which are the significant relevant ones:
“We are writing to indicate that we have been instructed by NIG in relation to the files previously handled by The Accident Group (TAG).  We understand that you are writing to indicate that you intend to take conduct of files from a firm of solicitors on the TAG panel (in this case KSB Claims).
We have now taken instructions from our client.  Irwin Mitchell Solicitors are not on TAG panel and therefore have no authority to continue.  Our client will be contacting KSB Claims about this matter.”
66.	The second letter from Michael Taylor & Associates on the same day bears a somewhat different reference but the relevant part reads:-
“We are writing further to our fax sent earlier today to indicate that our instructions are that Irwin Mitchell Solicitors are not on The Accident Group panel and therefore have no authority to continue. 
Our client will be contacting KSB Claims about this matter.”
67.	The third letter from Michael Taylor & Associates which purports to be dated 23 August but which the parties agreed was probably written on 29 August, if only because it refers to a fax sent by Ms Craig to them on 25 August and a subsequent telephone conversation between her and Craig Halblander-Smyth.  This seems to be confirmed by the fact that it is date-stamped as having been received by Irwin Mitchell on 1 September 2004.  Significantly it includes both the references of the two earlier 23 August letters and reads as follows:-
“We refer to your fax dated 25 August 2004 and the telephone conversation between your Belinda Craig and our Craig Halblander-Smyth.
We are writing to confirm that our instructions are:-
(1)	Irwin Mitchell is not an NIG panel solicitor,
(2)	the transfer of the files renders the policies voidable, and
(3)	Irwin Mitchell have no authority to continue.
As requested in the telephone conversation noted above, please send details of each file currently in your possession.  In the meantime, we will relay your position to our client.”
68.	At the beginning of September, on the 1st of that month, NIG themselves write to Ms Craig at Irwin Mitchell making it abundantly clear that she did not have authority to take over the handling of those claims on their behalf, these “claims” referring not merely to Mr Barlow’s claim but some if not all of the remaining 47 cases which went with Ms Craig from KSB to Irwin Mitchell.  That letter reads as follows:-
“With reference to your letters of 20th August 2004, please find attached hereto a copy of my letter to KSB Claims.
With the avoidance of doubt, you do not have our authority to take over the handling of these claims.
We would be obliged if you would provide your advices on the basis upon which these claims were transferred to you.
Your urgent advices are awaited.”
69.	Attached to that letter is a letter of the same date written to Mr Saiyid at KSB Claims emphasising the fact that NIG were never consulted nor did they ever consent to transfer of the claims away from KSB to Irwin Mitchell.
70.	On 3 September 2004 Ms Craig replied to Michael Taylor & Associates’ letter of 23 August 2004 and since Ms Ayling places significance on this letter it is I think important to quote it in full:-
“We thank you for your letter dated 23 August 2004 and note the contents of the same.
After we discussed matters with your Mr Halblander-Smyth Ms Craig had an opportunity of discussing mattes with KSB Claims.
“They have advised that the policies that we have been discussing are not TAG policies.  Therefore, the TAG scheme does not apply.
We would ask you in the circumstances to liaise direct with KSB Claims.
With regard to the authority to continue, with respect this is not something that we consider it necessary from NIG as legal expense insurers.  It is up to client who conducts their claim and the issue we are addressing is one of indemnity.
Whilst we don’t want to wish to be pedantic we felt it necessary to point the above out.
With regard to continuing to work on the said files we consider work is absolutely necessary given that a number of matters are litigated and have pressing Court dates to be met.  We would ask that your insurance client bears this in mind when deciding what to do.  We require details of the scheme prior to sending you further details in respect of these matters.  We don’t wish to be difficult however we may be breaching client confidentiality if we simply submit reports to you in respect of each of the matters.  Is there something under the relevant scheme that states that we have authority to provide you with information?
If not we will have to approach each individual client.
We appreciate that everybody is trying their best to resolve this matter which is somewhat complicated and your assistance is appreciated.”
71.	On 3 September a new company appears in the correspondence, the Colegate Group, and they wrote to Irwin Mitchell on that day as follows:
“We refer to the aforementioned matters.
These matters were referred to KSB in their capacity as Solicitors upon the Panel of Motor Law Limited.  The issue of indemnity is pursuant to the Motor Law Limited Legal Expenses Policy.  Please note an agreement exists between KSB and Motor Law to the effect that KSB retains all responsibility for cost and disbursements.  We suggest you discuss this further with KSB.
Unfortunately your requests for indemnity are superfluous under the agreement, as any grant of indemnity is subject to the fact that the responsibility for the costs and disbursements of both parties rests with KSB Claims.”
72.	It is clear therefore that by the beginning of September Ms Craig was fully aware that NIG were not prepared to underwrite the BTE insurance cover which KSB had negotiated, firstly because Irwin Mitchell were not on their panel but secondly because the transfer had taken place without their knowledge and consent and therefore the policy was voidable.
73.	It was now within Ms Craig’s knowledge that Motor Law had been taken over by The Accident Group which had by that time gone into liquidation.
74.	By the end of September it was apparent that Mr Barlow had not received the letters sent to him in July, probably because they were sent by surface mail, and accordingly on 30 September Ms Craig wrote to the Claimant by both airmail and email enclosing a copy of the 29 July letter.
75.	Again this is a very important letter and I therefore make no apologies for quoting it in full:-
“Thank you for your email dated 29th September 2004.
It appears that you have not received my letter dated 29th July 2004 and I attach a copy of the same.
However, I have now had the opportunity of perusing your file further and liaising direct with KSB Claims and since I wrote to you on the 29th July 2004 I have found out from KSB Claims that Motor Law had agreed to indemnify you, that is discharge your legal costs, should your claim be unsuccessful or if for any other reasons the costs of pursuing your claim are not recovered.  Motor Law had also agreed to indemnify, that is to discharge any liability you ay have had in respect of your opponent’s costs.  What this means is should the unlikely event arise where you were not able to recover your legal costs from the other side you are ordered to pay the other side’s legal costs, under the agreement with Motor Law you would have been entitled to ask them to pay them, unless you had breached your policy terms.  I have not seen the original policy so I am not able to advise you in this regard (please see KSB Claim’s letter dated 30th May 2001).  I do however know that Motor Law were subsequently taken over by the Accident Group who are now in liquidation.  I am concerned therefore that you will be left without cover from this date forward in respect of your legal costs.  If you would like to query this further please liaise direct with KSB Claims as I have no further information.  I was not involved with your file with[sic] at the time that the arrangements were made.
I think that it is in your best interests to arrange alternative funding.
There are two main options open to  you:
1.	To fund this matter yourself.
2.	To enter into a conditional fee agreement.
I would suggest option 2 is the most favourable method of funding as it means there will be no cost to you and you will be no better or worse off than previously under the Motor Law scheme.
If this is acceptable to you I will send my firm’s standard documentation in this regard.
I look forward to hearing from you.”
76.	It appears that there was no prompt reply from the Claimant to that letter and Ms Craig sent a reminder on 15 October 2004 and a further letter on 20 October 2004, both by airmail and by e-mail.  The letter of 20 October again is an important letter because of what it does not say as much as what it does say, and again I set it out below:
“I refer to my letter dated 15 October 2004 and would be grateful to hear from you as a matter of extreme urgency.
As time is of the essence I enclose my Firm’s standard letters relating to Conditional Fee Agreements.
It is important to enter into funding arrangements as soon as ever possible.  Until funding arrangements are being finalised we will not be able to progress matters on your behalf.  In the meantime, your opponents have made a Part 18 request for information which is attached.  You will see that you are obliged to deal with the attached by 4pm on 4 November 2004.
I am also obliged to file an allocation questionnaire at Court which will basically set out the next steps that I think are appropriate in your claim.
When replying I would be grateful if you could provide me with an updated position in respect of your injuries and also details of any further out of pocket expenses that you have
I look forward to hearing from you.”
77.	Amongst the documents disclosed by the Claimant is a letter sent to the claimant on 21 October 2004 which in evidence Ms Craig accepted was a circular letter in standard form personalised for Mr Barlow.  That is obvious because the first sentence is clearly inaccurate when it says, “Thank you for choosing Irwin Mitchell to handle your claim for compensation ...”
78.	I will not quote the letter in full but one paragraph is perhaps relevant which appears on page 2 under the heading, “Options for funding legal costs in personal injury claims” and reads as follows:-
“… Legal Expenses Insurance – you may have a legal expenses insurance policy or, more likely, you may have a legal expenses insurance section within an existing policy of insurance.  If you have been injured in a road traffic accident you may be covered by a section in your motor insurance policy.  Otherwise you may find that you are covered under a section in your home (buildings and contents) insurance policy; alternatively, there may be cover within a travel insurance policy. If you find that you have any such cover please contact us immediately.  We will then contact the legal expenses insurer to ask whether thy will cover legal costs on your case …”
79.	The next important event was a conversation which Ms Craig had with the Law Society Professional Conduct Department on 29 October of which a full attendance note exists, but which was only disclosed on the morning of the hearing before me.  Again, because of its importance I set it out in full.
“Telephone call out to the Law Society Professional Conduct Department.
Discussing with Heidi Potson the following.
BEC advised that she had worked for a company known as KSB Claims who were a law firm.
KSB Claims had a personal injury department.  However, due to a down turn in work the personal injury department was in the process of closing and as a result of this, a number of fee earners were made redundant.  The first round of redundancies was November 2003 and BEC was made redundant in July 2004.
Because the department was in the process of closing, fee earners were allowed to take a number of files with them if they wished to do so.  This helped the fee earners find new positions and in addition, assisted the firm with the problem of dealing with work once everyone had left.  A small team has been left in place to deal with run off matters.
BEC confirmed that she had the conduct of this particular file prior to leaving KSB Claims but only for a very brief time.
That aside, on 15 August 2002, KSB Claims sent al letter purporting to be a client care letter was [sic] sent to the Claimant.  It set out KSB Claims terms and conditions in terms of levels of service and their charges and funding options.
The client was advised that:
[reading from letter to Heidi]
‘under the agreement and subject to the terms of it, Motor Law Limited have agreed to indemnify you, that is discharge your legal costs, should your claim be unsuccessful or if for any other reason the costs of pursuing your claim are not recovered.  Motor Law have also agreed to indemnify, that is discharge any liability you may have in respect of your opponent’s costs.  What this means is that should the unlikely event arise where we are not able to recover your legal costs from the other side, or you are ordered to pay the other side’s legal costs, under the agreement with Motor Law Limited, you will be entitled to ask them to pay them, unless you have breached your policy terms.’
The indemnity is subject to a £50,000.00 limit.
BEC then advised that there was no copy of the insurance policy on the file, nor did it appear that a copy of the insurance policy and [sic, this should probably read: “had”] been sent to the client, although it was implied in the letter that the client would abide by Motor Law policy terms.  She then read the Colegate letter to Heidi.
‘These matters were referred to KSB in their capacity as solicitors upon the panel of Motor Law Limited.  The issue of indemnity is pursuant to the Motor Law Limited legal expenses policy.  Please note an agreement exists between KSB Claims and Motor Law to the effect that KSB Claims retains all responsibility for costs and disbursements.  We suggest you discuss this with KSB Claims.’
Unfortunately, your request for indemnity are surpless [sic] under the agreement, as any grant of indemnity is subject to the fact that the responsibility for the costs and disbursements of both parties rest with KSB Claims.
BEC then explained the link between Colgate and Motor Law Limited.  The first issue raised was whether there was privity of contract, ie. – who took out the insurance policy.  BEC said it appeared that the motor policy was taken out by KSB Claims on behalf of the Claimant.  However, there would appear to be no details of it on the file.  She was not certain.
Heidi was of the view that it was a sham arrangement as it would appear given the contents of the latter letter that it was never intended to be claimed upon me making it meaningless.  Now that the file was transferred to a new firm of solicitors the question was whether the appropriate course of action would be to try and enforce the terms of a policy that may or may not be valid and further the question of who should fund that, i.e. – the client who BEC is almost sure does not have the funds to pursue such litigation.  She felt in the first instance it was important to obtain an exact copy of the policy document to see if it provided any clues.
The second is to find out what consideration was paid if any and by whom and to whom the policy belongs.
It also appears that the Claimant never really knew the terms and conditions of the policy.
If the policy is not enforceable then the Claimant is liable for costs.  She is possibly not going to want to take the risk of being exposed to costs whatsoever, even though the risk is small and then if at the end of the day she was exposed to the Defendant’s costs, and/or Irwin Mitchell’s costs then it would be her that has to cover them and then she could seek to obtain them from Motor Law Limited and KSB Claims.  In the circumstances, it is important to find out what exactly was agreed to and what exactly the client was entitled to previously and as a practical way forward it would not be unethical to offer the Claimant an alternative method of fund that was ‘more certain’.  Is it possible for KSB Claims to contract out of the Claimant’s right to the benefit of an insurance policy even if they paid for it?  It appears in any event that the Claimant has agreed to be bound by Motor Law Limited’s policies by implication as set out in the client care letter.
Discussing matters in detail for quite some time and then being referred to Liz Lewis.
Liz Lewis works in the ethics department of the Law Society.
They apparently have a specialist who deals with insurance matters such as this.  However, that person was not available.
Going through the issues yet again.  Again there was no definitive answer, but the guidance was that we would be deemed to be acting properly if we informed the client of the position and advised her of her options and let the client decide.
It is unlikely that the client will want to enforce the terms of an insurance policy that may or may not be enforceable.  This could be expensive, no-body could make her do this.  For example, they did not think it was unethical for the client to not use Legal Aid (should our client be eligible for Legal Aid) even though it was available.
Our duty is to act on the client’s behalf and in her interests must certainly be that she is not exposed to a risk of costs to allow the client to make the choice.
This is the best guidance that can be given in the circumstances.
Time engaged with Law Society – 10 units.
Considering options open and dictating letters to client, Colgate and KSB Claims – 3 units.
BEC considers it is still appropriate to offer the client a Conditional Fee Agreement.  She will continue to look into the realistic prospect of obtaining legal expense cover from Motor Law given the complications.
This attendance note is relevant to many of the other files and a copy should be placed on each of the other Motor Law files, although each Motor Law agreement is or could be slightly different.
3 x letters out
Risk assessing file – 1 unit.”
80.	Although it does not refer to the Claimant, Ms Craig accepted in her evidence that it was a general query to cover all the cases transferred from KSB Claims where this problem arose, as indeed the last paragraph makes clear.
81.	By 5 November there was still no CFA funding in place and Ms Craig wrote again to Mr Barlow, the letter reading as follows:-
“I refer to your recent email when you advised that you had not received the items I had sent you by post.  I therefore enclose copies by fax.  If you could please sign and return the Conditional Fee Agreement by facsimile I would be grateful and once you have received the hard copies by post I would be grateful if you could sign and return those.  In the meantime I am obliged to explain to you how a Conditional Fee Agreement works and perhaps you could email me a time when we would be suitable for us to speak [sic].  I look forward to hearing from you.”
82.	On 15 November 2004 Mr Barlow sent a detailed email to Ms Craig.  For present purposes it is only necessary for me to quote Point 2 of that lengthy email, which reads as follows:-

“Point 2 – CFA
CFA – I was informed in a letter from KSB law (15rh July 2004), on changing over to Irwin Mitchell that my contractual arrangements would be the same as I had with KSB.  You also mention in your letter dated 29th July 2004 that I was covered by NIG Legal Expense Insurance and as [sic] should be covered.
Q3) Can you please confirm that there is no insurer now covering this case.
Q4) If that is the case, should I not be putting this back in the hands of the insurance company that I had my comprehensive insurance with?
Either way I need to understand what it is you are proposing to me.  The main point is that the costs in your CFA proposes the following Success Fee –
a)	20% of the basic charges if settled within 3 months …
b)	100% if it settles any time thereafter.
Can you please explain these to me, in particular the following:
Q5) The timing of the 3 months – for instance has this clock started? When is the trial scheduled for?  How is this handled with me being in Australia?
Q6) The percentages are of what – what do you mean by ‘basic charges’?  Are they a % of the total claim or a % of your charges?
Q7) How has the existing costs incurred by KSB been handled.  Have you purchased these costs on the understanding they will be paid back?  Have any costs been paid by the 3rd part insurer?
Q8) Can you also please let me know the current account balance for this case.
With regards to the Schedule of risks I do not agree with your assessment, which I feel you are putting on the high side …
a) I have 2 independent witnesses.
b) We know who the insurer is and they have admitted liability.
c) All documentation has been provided at every stage, by both myself and medical experts.”

83.	Ms Craig responded to that email on the same day, part of which reads as follows:-
“… With regard to the Conditional Fee Agreement, I would refer you to my previous correspondence.  KSB Claims had no authority to write to you to say that the contractual arrangements would be the same.  When I wrote to you on the 29th July 2004 I believed that you had the benefit of an NIG Legal Expenses Insurance Policy.
When you state that you perhaps should be putting this matter back in the hands of your insurance company I am not sure what you mean.  That aside, if it materialises that you do not have the benefit of an insurance policy you are not protected in respect of costs and costs will therefore remain your responsibility.  If you do have the benefit of a Legal Expenses Insurance Policy then I would recommend using that and I will continue to look into the current situation.
With regard to the CFA you are correct in respect of the success fee.  However, you are not being charged the success fee.  The success fee is recovered from your opponents.  I hope this clarifies matters for you.
The timing runs from the date that the Conditional Fee Agreement starts.
If there is a trial in respect of this matter you will need to attend.
With regard to basic charges, I would refer you to previous correspondence.  When I took over your case from KSB Claims it was agreed that my firm would endeavour to recover their costs from your opponents if we are successful.  We have no other costs arrangement with them.
I will write separately to update you in respect of costs.
With regard to the update in respect of your injuries, I would be grateful if you could provide me with a copy of your Curriculum Vitae so that I have full information in respect of your previous jobs.
So that we can progress matters I would be grateful if you could sign and return the Conditional Fee Agreement so that we have a formal costs arrangement and please deal with the outstanding request for information from your opponents as a matter of urgency.”
84.	Although the CFA had been sent to the client for his signature he had not been given the oral advice which the Regulations require but this defect was remedied on 24 November when Ms Craig spoke to the Claimant on the telephone.  Again, in her evidence Ms Craig accepted this was a pro forma document personalised for the Claimant’s case though she also said that the matter was discussed in more depth than this attendance note suggests:-
“Belinda Edith Craig giving oral explanation to the client prior to entering into a Conditional Fee Agreement of the following matters:-
1.	Whether costs risk is insured
Whether there is a policy of legal expenses insurance which could cover the client in relation to the risk of having to pay their opponent’s legal costs in pursuing the claim.
e.g. cover under a section of their home insurance (your building and contents) policy.
e.g. cover under a credit card company
Advising the client to let us know if any of these apply so that we can contact them.
2. Other methods of funding
Re-affirming that the client is not a member of a Trade Union, or similar organisation and neither do they have a policy of legal expenses insurance which will cover their legal costs in this case.
Re-affirming why public funding not available.
3. Paying our costs
Advising the client that if they do not have the benefit of legal expenses insurance, and are not a member of a Trade Union, the best option would be for them to take advantage of our Conditional Fee Agreement.
4. Assessment of our costs
Advising the client that at the end of the claim Irwin Mitchell will seek to recover all the client’s legal costs from their opponent.  Sometimes an insurance company asks to have the costs assessed by the Court.  The client also has the right to ask Irwin Mitchell to have their costs assessed by the Court.  The client also has the right to ask Irwin Mitchell to have their costs assessed by the Court.  The client would have to notify us and we would then let you have the details of the procedure in writing.

5. Taking out insurance
Explanation given of the need for insurance to pay the Defendant’s costs if the client loses their case.  Where delegated insurance to be taken out, explanation given of the level of protection provided.  Where insurance not in place at this time, the client was reassured that insurance would be taken out when it became necessary to do so.”
Total time engaged in providing oral explanation to client in 5 minutes; 1 unit
85.	Apparently satisfied, the client signed the Conditional Fee Agreement and returned it to the solicitors.  His signature bears the date 3 December 2004.
86.	However, despite his signature it is clear from the next document that he remained unhappy at having to sign the CFA when he believed that he had the benefit of BTE Insurance.
87.	By 15 December Ms Craig had left on annual leave and the attendance note is recorded by someone, probably her secretary, and again, it is an important document and therefore I set it out in full:-
“Telephone attendance 
Client:  Roger Barlow 
Ref: PH/BEC/TC/01316181-1
Date:  15 December 2006
Attending:   Scott Dickenson from Devitts
Devitts are the client’s insurance brokers – he also mentioned involvement of Motor Law – and Mr Barlow has been in touch with them and has explained that we want him to sign a Conditional Fee Agreement.  However, he has got in touch with Devitts by saying that he should be covered by them under his legal expenses insurance and he doesn’t see why he has to pay out for a Conditional Fee Agreement.
Mr Dickenson is very concerned that we have taken over the case from KSB Claims and they have not been advised of this.  He wants to know what the present position is as he has to get back to Mr Barlow.  I explained that BEC was on annual leave until the New Year and Mr Barlow should phone BEC and she will be able to go through the position with him.  I said that I will leave a message for BEC on her return to the office to phone both Mr Dickenson at Devitts and the client to go through the position with them.”
88.	It is accepted that the CFA was not “live” until signed by the solicitors and this took place, perhaps coincidentally, on 15 December 2004, the same date as this telephone attendance note.  Clearly Ms Craig could not give evidence about any of this part of the matter because she was not in the office, but it seems clear by inference that the recipient of that telephone call did not think it appropriate to contact Mr Ettinger, who was identified as having signed the CFA on behalf of the solicitors on that day, or indeed, anyone else.
89.	To complete what might be called the contractual documents, Irwin Mitchell wrote to the claimant on 14 January 2005 enclosing his copy of the agreement and their terms of business and asking him to sign both letter and the attached terms of business and return them to the solicitors, which he duly did and they are date stamped as having been received by the solicitors on 21 February 2005.
90.	Ms Ayling accepts that events after the signing of the CFA cannot affect or influence its validity but nevertheless she prays in aid the fact that Ms Craig did not simply rely on the CFA but continued to press NIG and their agents to honour the agreement and this is evidence of her commitment to the case and attempts to do her best for her client.  Ms Craig said in evidence that if she had been able to persuade NIG to accept responsibility she would have “torn up” the CFA.
91.	I do not intend to quote that correspondence, extensive though it is, in extending through almost until the case is settled, because, in my judgment, Mr Mallalieu is right in submitting that it cannot influence the decision that I have to make.
The Witness Statements and the Oral Evidence
92.	There are two witness statements from Ms Craig and two further short statements from Mr Ettinger.  Costs Officer Martin’s order only required Ms Craig to give oral evidence and she alone attended the hearing and did so.
93.	Although there were some discrepancies between her first and main witness statement made on 10 December and the oral evidence which she gave I do not think that these were significant or should be, so to speak, held against her.   She was after all attempting to recollect one of a substantial number of cases which she had inherited when she moved across to Irwin Mitchell and to reconstruct some quite complex communications over two years after the event.
94.	Two matters however did become quite clear from her evidence.  The first was that she never told the claimant that the BTE insurance was not available to him because Irwin Mitchell were not on the Panel and/or because the transfer of the case from KSB to Irwin Mitchell had been without consent and therefore had caused the insurance contract to become voidable.
95.	Accordingly, she gave only two options to Mr Barlow as to what he could do, namely what Mr Mallalieu referred to as the “deeply unpalatable suggestion of personal underwriting of the costs” or entering into a CFA as the only two alternatives open to him if he was to continue to pursue his case with Irwin Mitchell.  She did not tell him that it might be possible to find another firm of solicitors who could deal with the case under the BTE policy because they were on the Panel, or for some other reason.
96.	Secondly, she acknowledged that she was aware of the Insurance Companies (Legal Expenses Insurance) Regulations 1990 in general and Regulation 6 in particular, which would have enabled the Claimant to compel NIG to allow Irwin Mitchell to continue to conduct the case on behalf of the Claimant under the BTE policy entered into with KSB.
The relevant regulatory provisions and the case law quoted to me
97.	Paragraph 4 of the Conditional Fee Agreements Regulations 2000 reads as follows:
“4(1) Before a Conditional Fee Agreement is made the legal representative must
(a) 	inform the client about the following matters, and
(b)	if the client requires any further explanation, advice or other information about any of those matters, provide such further explanation, advice or other information about them as the client may reasonably require.
(2)  Those matters are –
(c) 	whether the legal representative considers that the client’s risk of incurring liability for costs in respect of the proceedings to which the agreement relates is insured against under an existing contract of insurance,
(d) 	whether other methods of financing those costs are available, and, if so, how they apply to the client and the proceedings in question,
(3) Information required to be given under paragraph (1) about the matters in paragraph (2)(a) to (d) must be given orally (whether or not it is also given in writing) … ”
98.	Both advocates referred me to the leading Court of Appeal Authority on these matters, namely Garrett v Halton Borough Council;  Myatt v National Coal Board [2006] 5 Costs LR 798; [2006] EWCA Civ 1017, though naturally each advocate relied on different paragraphs of Dyson LJ’s judgment in support of their respective contentions.
The Defendant’s submissions
99.	Reminding me of the relevant regulatory provisions quoted above, Mr Mallalieu took me straight to Garrett, starting with paragraphs 18 and 19:-
“18.	Nor does the phrase ‘materially adverse effect either upon the protection …’ indicate that the court intended that there should be a consideration of the actual consequences of a material departure.  The court did not say ‘has the departure had a materially adverse effect on the client’.  The focus on the adverse effect was on the protection afforded to the client, not whether, as a matter of fact, the client had actually suffered any prejudice.  In his skeleton argument, Mr Morgan illustrates the difference by reference to burglar alarms.  A person is protected against burglaries if he installs a burglar alarm, whether or not anyone attempts to burgle his home.  If a burglary does take place, then an inquiry into the protection he had will focus on the quality of the burglar alarm, the fact of the burglary merely being evidence that the protection was not as good as it might have been.  By analogy, he is protected against buying a poor insurance policy if measures which are intended to help him avoid doing so are implemented.  He might buy the policy despite these measures, and he might avoid buying it even if such measures are not taken.  Neither of these facts is relevant to whether he had ‘protection’.
19.	In our judgment, this analogy is apt.  The ‘protection afforded to the client’ is a reference to the protection afforded by virtue of the Regulations.  If paras 106 and 107 [of Hollins v Russell] are read as a whole, the court was saying that, if there has been a failure of substantial compliance or a material departure from what is required by the Regulations, that failure or departure of itself has a material adverse effect on the protection afforded to the client or upon the proper administration of justice.”
He posed the rhetorical question did the solicitors do what they should have done?  
100.	He also placed heavy reliance on paragraphs 27, 28, 30 and 31:-
“27.	We reject these submissions largely for the reasons given by Mr Morgan.  The starting point must be the language of section 58(1) and (3) of the 1990 Act.  It is clear and uncompromising:  if one or more of the applicable conditions is not satisfied, then the CFA is unenforceable.  Parliament could have adopted a different model.  It could, for example have provided that where an applicable condition is not satisfied, the CFA will only be enforceable with the permission of the court or upon such terms as the court thinks fit.  There is nothing inherently improbable in a statutory scheme which provides that, if the applicable conditions are not satisfied, the CFA shall be unenforceable with the consequence that the solicitor will not be entitled to payment for his services.  Such a scheme can yield harsh results in certain circumstances, especially if the client has not suffered any actual loss as a result of the breach.  It can also produce results which, at first sight, may seem odd:  see the point made by Mr Bacon mentioned at para 26 above.  But the scheme is designed to protect clients and to encourage solicitors to comply with detailed statutory requirements which are clearly intended to achieve that purpose.  The fact that it may produce harsh or surprising results in individual cases is not necessarily a good reason for construing the statutory provisions in such a way as will avoid such results.
28.	Our attention was drawn to other statutory regimes which introduce a bar on the enforcement of rights which can operate harshly in certain circumstances.  Thus, in Wilson v First County Trust Ltd (No.2) [2003] UKHL 40, [2004] 1 AC 816, the House of Lords was concerned with a claim based on a loan agreement between a pawnbroker and a borrower.  The pawnbroker sought repayment of the loan.  Relying on section 127(3) of the Consumer Credit Act 1974, the borrower claimed that the loan was unenforceable because the agreement did not contain all the prescribed terms.  This was a harsh result for the pawnbroker, since the borrower could not point to any prejudice suffered by her as a result of the failure to include all the prescribed terms in the agreement.  Lord Nicholls of Birkenhead said:
72.	Undoubtedly, as illustrated by the facts of the present case, section 127(3) may be drastic, even harsh, in its adverse consequences for a lender.  He loses all his rights under the agreement, including his rights to any security which has been lodged.  Conversely, the borrower acquires what can only be described as a windfall.  He keeps the money and recovers his security.  These consequences apply just as much were the lender was acting in good faith throughout and the error was due to a mistaken reading of the complex statutory requirements as in cases of deliberate non-compliance.  These consequences also apply where, as in the present case, the borrower suffered no prejudice as a result of the non-compliance as they do where the borrower was misled.  Parliament was painting here with a broad brush.
73.	The unattractive feature of this approach is that it will sometimes involve punishing the blameless pour encourager les autres.  On its face, considered in the context of one particular case, a sanction having this effect is difficult to justify.  The Moneylenders Act 1927 adopted a similarly severe approach.  Infringement of statutory requirements rendered the loan and any security unenforceable.  So did the Hire Purchase Act 1965, although to a lesser extent.  This approach was roundly condemned in the Crowther report (Report of the Committee on Consumer Credit, under the presidency of Lord Crowther, March 1971) (Cmnd 4596) vol I, p311, para 6.11.4:
‘It offends every notion of justice or fairness that because of some technical slip which in no way prejudices him, a borrower, having received a substantial sum of money, should be entitled to retain or spend it without any obligation to repay a single penny.’
74.	Despite this criticism I have no difficulty in accepting that in suitable instances it is open to Parliament, when Parliament considers the public interest so requires, to decide that compliance with certain formalities is an essential prerequisite to enforcement of certain types of agreements.  This course is open to Parliament even though this will sometimes yield a seemingly unreasonable result in a particular case.  Considered overall, this course may well be a proportionate response in practice to a perceived social problem.  Parliament may consider the response should be a uniform solution across the board.  A tailor-made response, fitting the facts of each case as decided in an application to the court, may not be appropriate.  This may be considered an insufficient incentive and insufficient deterrent.  And it may fail to protect consumers adequately …’
29.	…
30.	In our view, this is the approach which should be adopted in relation to section 58(1) and (3) of the 1990 Act.  To use the words of Lord Nicholls, Parliament was painting with a broad brush.  It must be taken to have deliberately decided not to distinguish between cases of non-compliance which are innocent and those which are negligent or committed in bath faith, nor between those which cause prejudice (in the sense of actual loss) and those which do not.  It would have been open to Parliament to distinguish between such cases, but it chose not to do so.  The conditions stated in section 58(3)(c) and in particular the requirements prescribed in the Regulations are for the protection of solicitors’ clients.  Parliament considered that the need to safeguard the interests of clients was so important that it should be secured by providing that, if any of the conditions were not satisfied, the CFA would not be enforceable and the solicitor would not be paid.  To use the words of Lord Nicholls again, this is an approach of punishing solicitors pour encourager les autres.  Such a policy is tough, but it is not irrational.  The public interest in protecting solicitors’ clients required that the satisfaction of the statutory conditions was an essential prerequisite to the enforcement of CFAs.  It is to be noted that in September 2000, the Lord Chancellor issued a consultation paper entitled ‘Conditional fees:  Sharing the Risks of Litigation’.  The Law Society and the Senior Costs Judge responded that the Law Society’s new Client Care Code adequately covered the need to provide additional information about CFAs.  But in the view of Government such was the need to ensure client protection that this response was not accepted.
31.	The only mitigation of this strict approach is that, as was made clear in Hollins v Russell, the breach must be material in the sense described at para 107 of the judgment.  Thus, literal but trivial and immaterial departures from the statutory requirements did not amount to a failure to satisfy the statutory conditions.  It is unnecessary to decide whether the test stated at para 107 was no more than an application of the principle that the law is not concerned with very small things.”
101.	As to the general guidance given by Dyson LJ in paragraphs 72 to 76 of that judgment Mr Mallalieu submitted that the fact that the client was clearly intelligent and asked questions on numerous occasions about the matter did not avail the claimant but on the contrary made it that much more important for Ms Craig to comply properly with the Regulations in advising him as to the wisdom or otherwise of entering into a CFA.  He emphasised the importance of the wording of paragraph 4(1)(b) of the Regulations.
102.	He reviewed the documentation quoted extensively earlier in this judgment and confirmed as being correct by Ms Craig in her evidence.  He particularly emphasised that the responses from Michael Taylor & Associates in August 2004 were never conveyed to the client and the option of re-transferring his case elsewhere to a firm which might be able to take advantage of the NIG policy was never put to the client.
103.	He also emphasised the fact that no steps were taken in the fairly lengthy period between Ms Craig being given notice of her redundancy by KSB and the transfer of the files from that firm to Irwin Mitchell for the two firms to have clarified, and hopefully resolved, any issue that might arise in relation to the continued validity of the insurance policy, which related not just to this one case, but also to a substantial number of others.
104.	He dismissed the relevance of the conversation with the Law Society, pointing out that it appears to have been with two persons at the Law Society who were giving “off the cuff” advice on a professional matter and not in relation to the CFA and he also dismissed any reliance by the Claimant on what happened after the CFA was signed as being of any assistance to the Claimant.
105.	He also reminded me that the oral evidence given to the client before he signed the CFA (para 84 above) based as it was on a pro forma document took no account of the fact that Ms Craig knew that Mr Barlow did have the benefit of BTE insurance with KSB.
The Claimant’s submissions
106.	Ms Ayling opened her submissions by reminding me of what Dyson LJ said in paragraph 55 of Garrett:
“It is common ground that, in order to discharge the obligation to inform the client whether the solicitor ‘considers’ that the risk of costs is already covered by a BTE, the solicitor must ask the client one or more questions.  That is obviously right.  It is implicit in the Regulations that the solicitor must take steps to ascertain what the insurance position is, in order to be in a position to say whether he considers that the client’s risk of costs is already insured.  To some extent, the solicitor is bound to rely on the client for this purpose.  In our judgment he is required to do no more than take reasonable steps.  What is reasonable will depend on the circumstances of the case.  We discuss this further at paragraph 65-77 below.”
107.	Ms Ayling submitted that although the transfer of the file from KSB to Irwin Mitchell had not been conducted in an ideal manner, nevertheless the client had suffered no prejudice and once he was aware of what had happened readily accepted the transfer and by continuing to instruct Irwin Mitchell impliedly accepted that they were now representing his best interests.
108.	She further suggested that the letter of 3 September from the Colegate Group which for the first time suggested that there may never have been a BTE policy upon which the Claimant could rely at KSB and was therefore a sham, “changed everything” and made it imperative that alternative funding arrangements were put in place by Ms Craig and Irwin Mitchell.
109.	She too reviewed the evidence in relation to the documents and submitted that, on a fair reading of that evidence, Ms Craig had indeed discharged her duty under the relevant Regulations.
110.	In support of her contention that events that happened after the CFA was signed can be relevant, she referred me to paragraph 39 of Garrett:-
“39.	We see no basis for interpreting the statutory provisions as having that effect.  In some cases it may be helpful to have regard to what actually happened, because that may shed light on the potential consequences of a breach (if the matter is judged at the date of the CFA) and therefore on the extent to which the breach had a material adverse effect on the protection afforded to the client.  In our view, however, in most cases the court should focus its attention principally on the terms of the FCA and the advice and information given by the solicitor and other relevant circumstances which existed at the date of the CFA and make a judgment as to whether, in the light of that material, the departure from the requirement in question had a material adverse effect on the protection afforded to the client.”
111.	She continued that in the light of that guidance what Ms Craig did after the CFA was signed was very much to her credit and this should be weighed in the balance in considering whether or not there had been any material breach which affected the Claimant’s rights or the administration of justice generally.
My decision
112.	This has been an unusually difficult case to resolve because of the very complicated factual position which I felt it necessary to set out at some length in this judgment.
113.	I would also like to take this opportunity of saying that I unreservedly accept that Ms Craig was an honest, straightforward witness who at all times was seeking to assist the court and not to conceal or to obscure the facts.  At all times she was clearly acting in what she believed to be the client’s best interests and there is only one example in her evidence of something that was not factually correct.
114.	This was a letter (not quoted) which she wrote to the defendant’s solicitors shortly before the case settled informing them that Irwin Mitchell had in fact taken out an ATE policy, whereas it was quite clear that although she was contemplating doing that, it had not happened and of course never did happen because the case then settled.  
115.	However I do not consider that very small slip in any way undermines the rest of her evidence.  I also take into account that she was undoubtedly under considerable pressure in respect of not merely Mr Barlow’s case but the other 46 cases that came with her.
116.	She informed me that once KSB decided to close down their PI department and declare her and others redundant, major efforts were made to settle as many cases as possible for obvious reasons.  
117.	Equally I think it is reasonable to infer that Irwin Mitchell would expect her to either settle or put the cases which she brought with her, so to speak, on to a clear financial footing at the earliest possible time and such pressure could easily cause her to overlook certain points such as, for instance, advising the client about the client’s right to rely on Regulation 6 of the Insurance Companies (Legal Expenses and Insurance) Regulations 1990 by insisting that the insurers allowed Irwin Mitchell to conduct the case under the BTE policy.
118.	However, having said all that, at the end of the day as so many of the reported cases on the Regulations make clear, it was Parliament’s clear intention that certain conditions should be complied with as set out in the Regulations before any CFA should be enforceable.
119.	In this case I am afraid that on the totality of the evidence I am not satisfied that paragraph 4(1)(a) or 4(1)(b) have been fulfilled.
120.	Unusually, perhaps, this client was very persistent in trying to continue to receive the benefit of the BTE policy which he had been told by his first solicitors was in force and protected him against any liability for costs.
121.	However the real reasons for Irwin Mitchell not being able to continue were never conveyed to him so he was never given the opportunity to consider his position, either in letter form or indeed in the oral advice apparently given to him on 24 November as recorded in the attendance note.
122.	Although the decision is clearly harsh, I am driven to the clear conclusion that on the evidence I have heard in this case and the documents I have seen, there has been material non-compliance with Regulation 4 of the 2000 Regulations which has adversely affected both the client’s position and the administration of justice generally.
123.	Thus I hold that the CFA executed by the solicitors on 12 December 2004 is not enforceable, from which it necessarily follows that Irwin Mitchell cannot recover any costs in respect of Part 3 of the bill.  
The way ahead
124.	As the amounts claimed under Parts 1 and 2 of the bill are much less than that claimed in Part 3 it is to be hoped that the parties can agree on a figure in respect of those costs so that perhaps when this judgment is formally handed down the matter can be resolved without the further expense which would be involved if the matter has to be remitted to Costs Officer Martin to deal with the assessment of these relatively small parts of the bill.
125.	Obviously when this judgment is handed down I will also deal with the issue of the costs of this preliminary issue and any other issues that the parties may wish me to consider.