Case No: A2/2011/1168+3115(B) + 3118(A) 
Neutral Citation Number: [2012] EWCA Civ 745
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR JUSTICE KING)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Wednesday 16th May 2012
Before:

LORD JUSTICE RIX
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Between:

	(1)	Flatman & Anr 
(2)	Weddall
	
Appellants	
	-  and  -		
	
(1) Germany
 (2) Barchester Healthcare Limited	

Respondents	

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Mr James Carpenter (instructed by Godfrey Morgan Solicitors) appeared on behalf of the Appellants.

Mr Simon J Brown (instructed by Plexus Law) appeared on behalf of the Respondents.

Mr David Holland QC (instructed by the Law Society) appeared on behalf of the Interveners, the Law Society.

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Judgment

Lord Justice Rix:

1.	This is a piece of litigation concerning costs which has arisen at the conclusion of two failed personal injury claims for quite small amounts brought by Mr Flatman and a Mr Weddall against their respective defendants, Mr Germany and Barchester Healthcare Limited.  

2.	The solicitors on the record for the claimants, Mr Flatman and Mr Weddall, were called Godfrey Morgan Solicitors Limited, trading as GMS Law (the “company”.  It is said, however, that both the retainers and the conditional fee agreements which were entered into in this case were made by a firm of solicitors going under the name of Godfrey Morgan Solicitors prior to the incorporation of the company.  Material before the court suggests that Mr Flatman gave a retainer to the firm on 29 September 2005; Mr Weddall retained the firm on 1 January 2007; the company was incorporated on 1 February 2007; it started trading on 7 October 2007; Mr Flatman's claim form was issued by the company on 5 September 2008; and Mr Weddall's claim form was issued by the company on 8 September 2009.  So the proceedings of both claimants occurred during the existence of the company when it was only the company which was registered with the Law Society and at a time when the firm had ceased to be registered with the Law Society.  It is the company which has always been on the record for the claimants, and submissions before me this morning suggest is still on the record for the claimants.  

3.	The claimants' claims failed; costs orders were made in favour of the defendants, who are respondents in this court, in circumstances to which I will refer in a moment.  

4.	Those defendant respondents wish to recover the costs which they have been awarded.  They see no prospect of recovering them from the claimants, who entered into CFAs.  It is asserted by Mr Carpenter, instructed by the company on behalf of the firm, that those CFAs were entered into by the firm and not by the company.  I do not doubt Mr Carpenter's statement, but the fact of the matter is that there is no evidence to that effect before the court other than for the reference by Mr Clegg, who has been the solicitor handling these cases, that the original retainers were taken by the firm.  That must have been the case because the company did not exist at that time.  

5.	There have been months of prevarication by the firm and the company; I am not sure that I know precisely to whom I refer when I speak about the prevarication, perhaps I refer to both of them, but that prevarication is plain in the correspondence which is before the court, and which is somewhat unedifying, in relation to perfectly understandable and reasonable requests for information by the defendant respondents, as to the status and existence of the firm in circumstances where their own investigations had disclosed to them that the firm had no registable status with the Law Society.

6.	It appears this morning for the first time on information given by Mr Carpenter that the firm as such no longer exists, because what used to be the firm has now come down to a sole practitioner practice, the sole practitioner in question being Mr Geoffrey Gordon.  

7.	In these circumstances, or at an earlier stage of these circumstances, the defendant respondents began proceedings for disclosure of information from the solicitors (if I can refer to both the firm and company in that generic term) as a possible preliminary to deciding whether there was a case for an application pursuant to Section 51 of the Senior Courts Act to charge the solicitors with responsibility for the purposes of non-party liability in costs.  The discretion to make a non-party responsible for costs may arise in a number of circumstances: it may be a shortcut in the circumstances where a wasted costs order might arise; it might arise in other circumstances, as for instance where a solicitor acts without authority or in excess of authority; it may also arise, but authority suggests only very exceptionally, where a solicitor has stepped outside the role of being a solicitor and has become a funder, wholly or in part (see for instance Myatt v National Coal Board (No.2) [2007] 1 WLR 1559).  

8.	When these costs proceedings were begun by the defendant respondents the matter which they focussed on in particular was the possibility that the solicitors had stepped outside the role of being a solicitor by funding disbursements.  

9.	HHJ Maloney QC refused the defendants’ applications for disclosure on grounds that there was no sufficient evidence to put the solicitors to the trouble of such disclosure in circumstances where he saw no prospect whatsoever of a Section 51 order being made against the solicitors as funders stepping outside their role as solicitors.  The matter was then taken to appeal to Eady J, who came to the opposite conclusion and therefore made the orders for disclosure, but stayed them pending the possibility of an appeal to this court.  An appeal was made by the solicitors, albeit the notice of appeal expresses that appeal as being made in the name of the firm but with the company acting as solicitors in the appeal for the firm.  The application for permission to make a second appeal came before me on paper last year, and I gave permission for it on the basis of the presence of an important point of principle or practice, and it is that permission to appeal constituting an appeal before this court which has led to the further complications which are before me this morning.  

10.	In the meantime the defendant respondents continued to press for information about the existence and status of the solicitors in circumstances where there was prevarication even as to who should properly be regarded as the solicitors acting for the claimants on the record.  The record speaks for itself; it is the company who are the solicitors on the record, but there still appears to be uncertainty and an unwillingness to state the matter firmly as to whether, or to what extent, over the whole of the period of the proceedings in question, the firm has been acting in some sense for the claimants, albeit not as solicitors on the record.  This is a sorry state of affairs, as it seems to me, in circumstances where the defendant respondents have been pursuing clarity about this matter for some time, that they and this court should be left with any uncertainty about it.  How, I ask rhetorically, not expecting an answer at this point, can it be right that litigants and the court should be left in any doubt as to who are the solicitors acting for litigants before the court in proceedings before the court?  

11.	In these circumstances one of the claimants, Mr Weddall, wrote to Mr Rennie, who acts for both defendant respondents, on 17 April 2012; that is almost exactly one month ago.  He says that his solicitors, GMS Law (that is the trading name of the company, but whether it is in truth a reference to the company or to the firm I cannot be sure), were unhappy that his case proceeded without insurance in place (that is a reference to ATE insurance which so often accompanies a CFA), and he states that he had instructed the solicitors not to proceed in circumstances where insurance was not available.  He also sent to Mr Rennie, under cover of that letter, another letter of the same date, in which he wrote to Mr Richard Clegg, who was handling his case at his solicitors, in which he refers to having been sent a bill of costs for £50,000 and cites, by reference to various letters of various dates in 2010, what might be described as chapter and verse for his concern that his case should not proceed in circumstances where the "necessary insurance" was not in place.  He says that his case, contrary to his concerns, was then “bulldozed through”, which he describes as "a gamble at my expense" to protect the solicitors' own investment in the case.  He states that unless a satisfactory reply is forthcoming he will look to take the case up with the legal complaints service.  I am not sure whether he has done so.  

12.	At any rate, it was in the light of that letter that over the last month the defendant respondents have issued various respondents' notices  and applications to this court in the matter of the appeal before this court, asking this court in various terms for relief, such as even to amount to striking out the appeal, or at any rate setting aside permission to appeal, asking for any permission to be subject to a condition requiring security for costs to be provided, and asking for other relief by way of further information, and so forth.  It is only under the pressure of those applications that the solicitors have seen fit to provide further information inter alia by the witness statement of Mr Clegg, but they have, until this morning in court, continued to resist even the request for disclosure or information relating to whether or not the claimants were acting with the benefit if not of ATE insurance, at any rate, in the absence of that, an indemnity from the solicitors.  It was only with the greatest reluctance that Mr Carpenter was finally instructed to say that he would state openly what the position was about that.  It was only under pressure from the court that his promise to state that matter openly was vouchsafed to the court this morning (he had thought that his open position could be postponed to another occasion).  He informed the court that there was no indemnity in place in either case, as I understand it.  

13.	In the meantime, the Law Society, quite understandably, had become interested in Eady J's judgment, the judgment under appeal, which proceeds upon the basis that in a case such as this, by reason only of having funded disbursements, a solicitor may have stepped pro tanto, or perhaps entirely, outside the role of solicitor.  Although it is possible that the matter of Section 58 of the Courts and Legal Services Act 1990 may have been mentioned before the learned judge, there is no reference to it in his judgment, and an important branch of the submissions made in the solicitors' skeleton argument before the court, and now in the skeleton argument from the Law Society before the court, makes the point that reference to expenses in Section 58 of the 1990 Act must, properly interpreted, include disbursements, which would suggest, it is submitted, that a solicitor making a CFA does not step beyond his role of solicitor by reason only of the funding of such disbursements.

14.	That is the point which has excited the interest of the Law Society, because if the learned judge is right it is plainly a point of general application, or may well be a point of general application, in the context of solicitors entering into CFAs.  So the Law Society has asked to intervene.  That has not been opposed by the parties; I have given permission to the Law Society to intervene.  It has been represented this morning by Mr David Holland QC and I have been grateful for his helpful submissions.

15.	In these circumstances, by which I mean both Mr Weddall's letters and further information to which that has given rise, and the gathering storm represented by the Law Society's interest over the point for which I gave permission to appeal, the defendant respondents' interests have, unsurprisingly, turned to the additional or different issues potentially created by the possibilities in the case: such as the solicitors providing an indemnity to the claimants.  That point has always been there and has always been the subject of a request for disclosure and information, but has not figured highly, if at all, in the rationalisations of the judgments below.  And now there is the further possibility raised by Mr Weddall that the solicitors have been acting without, or beyond, their instructions from at any rate one, if not both, of their claimant clients.  Mr Brown for the respondents submits, in effect: why were these unmeritorious cases brought without insurance in circumstances where there is evidence before the court now from Mr Weddall that he had no wish to proceed without insurance?  Mr Weddall, I think it is, also refers in one or other of his letters to counsel's advice that he had only a 20/25 per cent chance of success.  Mr Brown is right to submit that there is a question as to why a case with such poor prospects was brought to trial.  

16.	So the parties have been making submissions for my benefit this morning about how the court should proceed in these circumstances.  In essence Mr Brown's concerns to strike out or set aside or even to impose condition upon the appeal which is before the court have slid away.  His dominant concern at this moment is to get to grips with the Weddall allegations and the possible inferences to which they give rise.  Although there is no formal application before the court for disclosure with respect to the Weddall allegations, the court has heard submissions from counsel before it as to the possibility of such disclosure.  Mr Brown urges it so that this court on the appeal before it can see the possibility of a Section 51 claim being made for reasons above and beyond the question of whether the funding of disbursements turns a solicitor into something other than a solicitor.  Mr Carpenter, on the other hand, on behalf of the solicitors urges this court to put back any question of disclosure to a court of first instance; he submits that it would be untidy and difficult and dangerous for the court to give any directions for such disclosure.  In this context he was ultimately, but only after some considerable judicial encouragement, willing to make a statement in respect of whether there was any indemnity provided to the claimants, the existence which would have been an alternative route through to a possible Section 51 application.

17.	In my judgment this court should direct at any rate limited disclosure arising out of the Weddall letters.  I have considered and I have been asked by Mr Brown to make disclosure in relation to the CFAs and the funding generally.  I will not do that, because that is the bone of contention in the judgments below and in the appeal which is before the court; so I do not think that it would be right to sidestep that bone of contention by making a direction in respect to those matters.  But, in respect to the Weddall letters, I think that it is right for me to make a direction for limited disclosure.  There is an issue as to whether those letters may be admissible material before this court in the appeal.  I direct that they should be.  What the consequences of that are is a matter for the court, but I see absolutely no reason at all why this entirely new material, which meets all the Ladd v Marshall tests, including that of relevance, not to the disbursements issue which is the Law Society's main concern, but to the underlying issue of whether there is material before the court which should lead the court to make ancillary orders for disclosure in advance of a possible Section 51 application.  It seems to me that the disturbing allegations of Mr Weddall should be bottomed out for the benefit of the court and the parties before the court as far as that may safely be done at this stage.  I bear in mind, of course, questions of legal professional privilege in making directions which I now proceed to make.  I emphasise that it is no intention of mine to go beyond legal professional privilege, albeit it seems there may be an issue as to the extent to which it may have been waived.  I do not propose to grapple with that issue today, but it seems to me that I can safely -- subject to any issue of legal professional privilege -- order disclosure of the letters referred to in Mr Weddall's letter of 17 April 2012 to Mr Richard Clegg and to any other matters on file, whether letters or internal notes or memorandum of the solicitors, in relation to the complaints made by Mr Weddall in those letters and directed to the question of what instructions Mr Weddall was giving to his solicitors by reference to the presence or absence of funding.  I do not mean, of course, the instructions on the merits of the case: those are not matters of concern to the court on this appeal.  I am not going there at all.

18.	Whether, as a result of that disclosure, a further respondent's notice of any kind may be called forth, or whether the present appeal takes some other course, is a matter for the parties before the court, which, as I have already pointed out, now include the Law Society as an intervener and, as we have agreed this morning in court, should also formally include both the firm and the company as parties joined to these proceedings for the purposes of costs only.  

19.	In the light of that joinder Mr Brown drops his application for any condition to be imposed on the appeal, and for his part Mr Carpenter has dropped his application for permission to appeal from a separate judgment of King J, and it is agreed that there should be no order for costs in respect of that application.  I will say nothing further than that in my personal view that was a well judged move.

20.	So, to resume, the application to strike out or set aside is refused; the application to impose conditions upon the appeal has not been proceeded with; the application for permission to appeal from the judgment of King J is refused by consent, if that needs to be said, perhaps it is simply withdrawn, with no order as to costs. The firm and the company of solicitors are joined as parties for the purposes of costs only; the Law Society is joined as intervener for the purposes of making such oral and written submissions as it sees fit, or for the provision of such evidence as it sees fit, on the basis that it may seek no costs in these proceedings and there will be the disclosure to which I have referred. I would suggest within 14 days, but I will hear the parties as to that.  I give leave to admit the Weddall letters as evidence in the appeal, and I think that covers all the matters which have been debated before me.  If there are outstanding matters with which I must deal, I will deal with them.