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In February 2018 the Supreme Court heard the appeal by Haven Insurance (the “Appellant”) contending that it did not cheat Gavin Edmondson Solicitors (the “Respondent”) out of costs owed by six clients represented by the Respondent through conditional fee arrangements (a “CFA”) in road traffic accidents when the Appellant reached direct settlements with all six of the Respondent firm’s clients.

The facts

Six individuals were involved in road traffic accidents involving vehicles insured by the Appellant. These individuals all entered into CFAs with the Respondent. The Respondent lodged six separate personal injury claims for these individuals on the Road Traffic Accidents Portal (“RTA”) notifying the Appellant that there were six claims against defendants they insured. The Appellant proceeded to contact the six clients and offer money to settle the claims since it was more cost effective for the Appellant to settle the claims directly. All six clients accepted the settlement and cancelled CFAs with the Respondent leaving the Respondent firm unable to recover its costs for representation.

The Respondent firm brought a claim against the Appellant for the fixed costs, success fees and disbursements that it could have recovered were the claims settled through the RTA.

Earlier decisions

The High Court dismissed the claim on the basis that the Appellant had not broken any laws by making direct contact with clients, and rejected the claim for equitable intervention. Judge Jarman QC concluded that, on the basis of previous case law, equity would only intervene to protect a solicitor’s claim on funds due to be recovered by a client if (i) the paying party is colluding with the client to cheat the solicitor of his fees or (ii) the paying party is on notice that the other party’s solicitor had a claim on the funds for outstanding fees. The High Court decided there was no evidence that the Appellant knew of the contractual terms as to payment between the individuals and the Respondent, and therefore there was insufficient notice for a claim of equitable intervention.

In contrast, the Court of Appeal found for the Respondent accepting the firm’s equitable intervention claim. In the leading judgment, Lloyd Jones LJ rejected the Appellant’s argument that previous cases demonstrated that the principle of equitable interference would only apply in cases where there is express notice of the lien (the CFA with the Respondent). There was nothing stopping the court from applying existing authorities and extending equitable intervention to cover the situation where there was an implied notice of a lien. In any case, the Court considered that the Appellant had express notice anyway from the RTA that a lien existed. The Court found for the Respondent on the basis that the Appellant had acted with the intention of defeating the Respondent’s entitlement to its fees from representing all six clients.

Decision of the Supreme Court

The issue for the Supreme Court was whether the Court of Appeal erred in allowing the claim for equitable intervention for the Respondent.

The Supreme Court ruled that the Appellant should not have approached clients after the Respondent had filed the claim and thus depriving lawyers of costs to which they would otherwise have received for their representation of the six personal injury clients subject to the CFA. In finding for the Respondent, the Court made the following points:

  • Equity depends upon a solicitor having a claim for his charges against the client and that there must be something in the nature of a fund against which equity can recognise that his claim extends and that for equity to intervene there must be something sufficiently affecting the conscience of the payer either in the form of collusion to cheat the solicitor or notice of the solicitor’s claim against or interest in the fund;
  • The Client Care Letter which at paragraph 18 read “The solicitor has no recourse against his client for the fees and is limited to what he can recover from the losing side”, did not “destroy” the basic liability of the client for the Respondent’s charges expressly declared in the CFA and Law Society’s standard terms, rather it limited the recourse from which the Respondent could satisfy that liability to the amount of its recoveries from the Appellant. The Client Care Letter had to be read in accordance with the CFA and the Law Society’s terms; and
  • The Appellant insurers had the requisite notice and knowledge once the Respondent had lodged the claim notification form on the portal supplying details of the claim, and demonstrating the claimant’s intention to pursue the claim. At that point, the Appellant knew that the Respondent would be looking to “the fruits of the claim for recovery of its charges” and at this point, it was “unconscionable” to interfere with the Respondent’s interest.

The Supreme Court also stated however that it would be a mistake to assume from cases in this area that there is a “general principle” that equity will protect solicitors from any unconscionable interference with their expectations in relation to recovery of their charges.

Comment

The decision in Edmondson will have some important ramifications for personal injury lawyers that represent claimants through CFAs on the RTA portal. Although they cannot take the principle for granted, they may take comfort that interference after a claim has been lodged on the portal will be scrutinised by the Court and they may rely on the principle of equitable intervention to reclaim their expected earnings. This case also serves as a reminder for solicitors to take due care when constructing client care letters, to ensure that specific wording does not “destroy” the basic obligation of a client to pay.