No. CH/2007/PTA/59

Neutral Citation Number: [2007] EWHC 2476 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Wednesday, 6th June 2007

Before:

MR. JUSTICE MANN

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B E T W E E N :

FENTON
Appellant

-  and  -

HOLMES
Respondent

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Mr. A. Hill-Smith  (instructed by Brookstreet Des Roches LLP)  appeared on behalf of the Appellant.

Mr. B. Williams  (instructed by DLA Piper UK)  appeared on behalf of the Respondent.

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J U D G M E N T
MR. JUSTICE MANN:  

1	This is an appeal from a decision of Master O’Hare given on 10th January 2007.  He was sitting in the matter of an assessment of the costs of a settled claim in respect of which there was a conditional fee agreement (“CFA”).  In this appeal I sat with assessors, Master Simons and Mr. David Abrahams, a solicitor.

2	The very brief background of this matter is as follows.  The action in this case was a professional negligence action brought by a Ms. Fenton against Mr. Anthony Holmes, a solicitor, who was alleged to have been negligent in the conveyancing of certain properties.  At the outset of the action a conditional fee agreement was put in place.  The form of that agreement was not conventional and that has led to one of the problems that arose in the assessment.

3	There is a formal conditional fee agreement document dated 6th August 2002, which was signed by both the solicitor and by Ms. Fenton.  It was sent to the solicitors under cover of a letter from her dated 1st August 2002.  If it matters, it is to be inferred that it has the date that it bears, because that is the date on which the solicitor received it, or at least when it came to his attention and probably when he signed it.

4	The form of that agreement is that it takes essentially three parts, all of which have to be read together.  The first is described as the conditional fee agreement and contains a number of sections, which are un-numbered.  The second is a number of conditions, which are all numbered.  The third is a risk assessment checklist.  I will in due course come back to the detail of the first two of those parts, so far as they are material to this appeal.

5	However, one bit of detail needs explanation at this stage.  Under condition 4, there is material under a heading “What happens if you win?”  This is said:

	“If you win, you are liable to pay our disbursements, basic costs and the success fee.  Normally, however, you will be able to recover part or all of our disbursements and basic costs from your opponent.  The court will decide how much you can recover if you and your opponent cannot agree the amount.  If the amount agreed or allowed by the court does not cover all our work, you pay the difference.  

“You may also be able to recover the success fee from your opponent.  However if it is not recoverable, you, not your opponent, pay our success fee”.
	It is now common ground that those particular provisions, and in particular the last sentence that I have read, does not actually encapsulate the true agreement between the parties on the point.

6	The formal conditional fee agreement itself, or perhaps a predecessor, first came into the hands of Ms. Fenton under cover of a letter from the solicitor dated 10th July 2002.  It is addressed to her and to a gentleman, and is headed “Re Solicitor’s Negligence” and it starts thus:

	“I write further to our meeting in the office on Tuesday and I now enclose a further Conditional Fee Agreement together with Risk Assessment Checklist and also a percentage fee assessment form which I feel I ought to explain to you”.

7	It is not absolutely clear from the evidence that the conditional fee agreement enclosed with that letter is that which was finally signed, but it rather looks to me as though it was.  There are then various paragraphs dealing with success rates, and there are then these two important paragraphs:

	“If the Defendant does not accept this figure [that is to say the percentage uplift] and the Judge ultimately decides that a lower rate should apply (e.g. 40%) then whilst I would be entitled to go through a separate assessment to recover any outstanding balance from yourselves, I am quite happy to confirm now that I am prepared to limit my success fee to the figure actually recoverable from the other side, save for the 5% delayed payment percentage outlined above.

	“I am sorry that I have had to write to you with additional figures.  However, the position from your point of view remains unaltered as, of course, I will only recover any percentage success fee as either agreed between ourselves and the Defendant or ordered by the Court”.

8	The letter conflicts with the provisions of the formal CFA because it makes it clear that the solicitor will not look to Ms. Fenton for any success fee which cannot be actually recovered from the other side.  The conflict between that and the CFA will be apparent from the extract from the CFA that I have read.

9	The CFA being signed at the date which it was is subject to not only s.58 of the Courts & Legal Services Act 1990, but also the Conditional Fee Agreements Regulations 2000 (“the regulations”).  Those regulations have now been revoked, but at the time they were regulations with which a CFA was obliged to comply.

10	I will set out the relevant provisions of those regulations verbatim at a later stage in this judgment.  For the moment, and by way of background and by way of explaining the Master’s judgment in this case, it is necessary for me to refer to Regulation 3(2)(b).  This provides that, if an agreement relates to court proceedings, which this agreement does, it must provide that any disallowed amount of the percentage uplift (in an assessment) shall not be recoverable by the solicitor from the client unless the court otherwise orders.

11	It is common ground in this case that the strict CFA document itself does not comply with that provision of the regulations, but it has now become common ground, although it was not before the Master, that the letter is capable of fulfilling the requirement.  Before the Master, there was an issue as to whether the letter, which was the only way in which the requirement could be fulfilled, was to be treated as part of the overall arrangements.

12	In para.5 of his written judgment, the Master dealt with that point and he decided it against the claimant.  Paragraph 5 of his judgment reads as follows:

	“I turn to the three challenges raised in this case.  In order for the defendant to win, it is necessary to win on only one of them.  In order for the claimant to win, she must defeat all three of the challenges.  The first concerns regulation 3(2).  The defendant points to the absence of any words which the regulations require to be inserted, confirming that the client will not have to pay any shortfall, if there is a shortfall in what is recovered in respect of the success fee claimed.  In this case the document dated 6 August 2002 provides the opposite; if there are shortfalls, the client must pay them.  The claimant’s case on this is that all the protection she needed is afforded to her in the letter dated 10 July 2002.  I am invited to treat that letter as one of the contractual documents in the case.  I am told that the CFA includes the assurances by the former solicitor which he gave in that letter.  I cannot treat the letter as part of the contractual documents in this case.  As is usual with a written agreement, the position is that all its express terms are presumed to be included in the terms of the writing.  Here the writing must be signed by both client and solicitor.  I cannot accept that this letter forms part of the contract.  It is no help to the claimant to describe this letter as a “collateral contract” because a collateral contract in the circumstances of this case would not supply that which the regulations require.  The regulations require that a CFA must expressly state certain protections for the client.  I view the letter of 10 July 2002 as being a representation of a price indication given by a solicitor, which as a Costs Judge I would willingly hold a solicitor to; but as a collateral contract it has no relevant effect.  In making that finding, I rule against the claimant in this case recovering any more than pre-CFA costs and costs of paid disbursements”.

13	That was the principal basis of the Master’s decision.  He went on, as a result of that, to hold that the CFA was unenforceable.  He dealt with two other attacks on the CFA, which he held were not well founded and I will revert to those in due course.

14	At the heart of the Master’s decision, therefore, is his finding that the letter did not and does not fall to be treated as part of the contractual documentation and part of the CFA and, therefore, cannot be taken into account in considering whether the CFA arrangement in this case complied with the regulations.

15	The claimant appeals from that decision.  The appeal is on the footing that the Master was wrong to treat the letter of 10th July as not being part of the contractual arrangement and, when viewed as part of the contractual arrangement, it can be seen that that letter sufficiently complies with the requirements of Regulation 3(2)(b).  On the appeal, obviously, the appellant adopts what the Master said about the other two attacks on the CFA, those attacks having failed before the Master.

16	As will appear later in this judgment, that particular ground of appeal effectively became conceded.  It was in due course conceded by the defendant first, that the letter does fall to be treated as part of the contractual documentation and second, as such, it amounts to compliance with Regulation 3(2)(b).  In fact, it goes beyond what is required by 3(2)(b), in that it gives the client the additional benefit of preventing the solicitor from applying to the court for permission to recover from the client any otherwise irrecoverable part of the percentage uplift, but that does not matter.  It has been accepted that it does comply.

17	The principal matters canvassed at the appeal before this court were first, a resurrection of the points which the Master had decided against the defendant, but principally, other points which were raised by the defendant by way of respondent’s notice, being other points which were not taken before the Master.  Although the skeleton argument of Mr. Hill-Smith, who appeared for the claimant in this case, originally foreshadowed an objection to those points being taken, at the end of the day, when it came to the appeal, he did not object, and they were duly canvassed before this court.  If I can respectfully say so, Mr. Hill-Smith’s response in relation to this was entirely well-placed.

18	Before coming to the actual points as they arose and were argued in the appeal before me, I should set out the relevant parts of the legislative provisions in order to provide a legislative framework for the consideration of this appeal.  The relevant statute is that which I have already indicated; that is to say the Courts & Legal Services Act 1990 and the relevant provision is s.58.  It reads as follows:

“(1)	In this section ‘a conditional fee agreement’ means an agreement in writing between a person providing advocacy or litigation services and his client which - 

“(a)	does not relate to proceedings of a kind mentioned in subsection (10);

“(b)	provides for that person’s fees and expenses, or any part of them, to be payable only in specified circumstances;

“(c)	complies with such requirements (if any) as may be prescribed by the Lord Chancellor; and

“(d)	is not a contentious business agreement (as defined by section 59 of the [1974 c.47] Solicitors Act 1974).

“(2)	Where a conditional fee agreement provides for the amount of any fees to which it applies to be increased, in specified circumstances, above the amount which would be payable if it were not a conditional fee agreement, it shall specify the percentage by which that amount is to be increased.

“(3)	Subject to subsection (6), a conditional fee agreement which relates to specified proceedings shall not be unenforceable by reason only of its being a conditional fee agreement.

“(4)	In this section ‘specified proceedings’ means proceedings of a description specified by order made by the Lord Chancellor for the purposes of subsection (3)”.

19	The requirements of the Lord Chancellor in s.58(3)(c) are those set out in the regulations.  Those regulations set out various other requirements, which a CFA must fulfil.  The regulations material to this appeal are as follows:  First Regulation 2(1):

“(1)	A conditional fee agreement must specify -
 “(a)	the particular proceedings or parts of them to which it relates (including whether it relates to any appeal, counterclaim or proceedings to enforce a judgement or order)”.

	I need not read any more of that regulation.

20	Next is Regulation 3(2).  This contains essentially three limbs, one relating to the disclosure of risk assessments, the one on which the Master decided the case relating to the element of the percentage uplift which might be ruled by a costs judge to be irrecoverable from an unsuccessful paying party, and the third referring to the circumstances where certain fees are agreed.  They are contained in paras.(a), (b) & (c) of Regulation 3(2) respectively.

21	At the start of the hearing before me, elements (b) & (c) were both in issue.  However, by the end of the hearing before me, they were no longer in issue and only Regulation 3(2)(a) was in issue.  In those circumstances, I will not read into this judgment para.(c), but it will be convenient if I include para.(b) at this stage, so that this judgment records the regulatory provision on which the Master founded his judgment.  Regulation 3(2)(a) & (b) read as follows:

“(2)	If the agreement relates to court proceedings, it must provide that where the percentage increase becomes payable as a result of those proceedings, then -

“(a)	if -

“(i)	any fees subject to the increase are assessed, and

“(ii)	the legal representative or the client is required by the court to disclose to the court or any other person the reasons for setting the percentage increase at the level stated in the agreement,

“he may do so

“(b)	if -

“(i)	any such fees are assessed, and 

“(ii)	any amount in respect of the percentage increase is disallowed on the assessment on the ground that the level at which the increase was set was unreasonable in view of facts which were or should have been known to the legal representative at the time it was set,

“that amount ceases to be payable under the agreement, unless the court is satisfied that it should continue to be so payable …”.

22	Next in terms of the order in the regulation are Regulations 4(3) & (5).  They relate to explanations to be given by the legal representative to the client.  Regulations 4(3) & (5) read as follows:

“(3)	Before a conditional fee agreement is made the legal representative must explain its effect to the client. ...

“(5)	… the explanation required by paragraph (3) must be given both orally and in writing”.

23	Last, there is Regulation (5), which reads as follows:

	“Form of agreement: 5 -

“(1)	A conditional fee agreement must be signed by the client and the legal representative”.

	I need not read Regulation 5(2).

24	I have already indicated briefly the central point on which the appeal originally turned.  To reiterate, without the benefit of the letter the formal CFA agreement, as I shall call it, did not comply with the provisions of Regulation 3(2)(b) and I have indicated what the Master held.

25	There was a change of legal representation for the defendant.  The consolidated skeleton argument of his new counsel, Mr. Benjamin Williams, essentially accepted that the letter of 10th July did indeed fall to be treated as part of the contractual documentation comprising the overall contractual relationship between solicitor and client.  It left open the question of whether that was by way of collateral contract, the agreement being collateral to the formal CFA agreement, or whether the two were to be read together as part of one overall contract.  

26	There was no debate before me as to which of those was correct.  What was accepted by both sides was that the letter could, one way or another, be read with the agreement so that they did form part of one overall contract, but not necessarily part of one overall document.  That was the position of the claimant throughout and, as I have indicated, it became the position of the defendant in the relevant skeleton argument.

27	By the time of argument from Mr. Williams in this case, he accepted that, since the letter was now part of the overall contractual relationship, then it was sufficient in compliance with Regulation 3(2)(b).  In those circumstances, it effectively became common ground that the basis on which the Master made his decision in this case could not be sustained.  However, as I have also indicated, that was not an end to the matter because Mr. Williams had a lot more shots in his locker.

28	I return to those alternative shots, those appearing in the respondent’s notice.  I will start with a point taken by Mr. Williams, on behalf of the defendant, in respect of Regulation 3(2)(a).  I have read Regulation 3(2)(a).  It is the regulation which requires the agreement to permit the disclosure of the reasons for setting the percentage increase in the CFA in the level at which it was set.  Such a provision does not appear in the CFA documentation in this case.  That much is accepted by Mr. Hill-Smith for the claimant.  Thus far there is, therefore, a literal non-compliance with the regulations.  

29	However, Mr. Hill-Smith resisted the conclusion that that made the CFA unenforceable pursuant to s.58(1) because he relied on what he said were the principles arising from Hollins v. Russell [2003] 1 W.L.R. 2487.  He said that that case decided that a contravention of the regulations only led to unenforceability if there was some material potential detriment to the client or some other relevant person.  

30	In this case, he said there was no detriment to the client in the omission of a clause complying with Regulation 3(2)(a).  The clause was, he said, there for the solicitor’s benefit.  It was not intended to benefit the other side to the litigation or the interests of justice.  He therefore argued that the departure from the regulations in this particular case was not a material one and, in accordance with the principles emerging from Hollins, it was not a breach which made the agreement unenforceable.  

31	In order to consider the correctness of Mr. Hill-Smith’s submissions, I need to turn to the Hollins decision itself.  The Hollins decision was, in fact, a case in which the Court of Appeal considered the enforceability of CFAs in six separate cases.  In particular, the Court of Appeal had to consider the extent to which a given departure from the regulations would inevitably make the CFA in question unenforceable and, in particular, whether every literal and technical departure from the requirements of the regulations, and indeed of the statute, would make the agreement unenforceable.  The relevant parts of the decision are that it was not every departure which make a CFA unenforceable.

32	The nub of its decision on this point appears in para.106 and, in particular, para.107 of the judgment of Brooke L.J., and in those paragraphs he said as follows:

“106	The question whether something is ‘satisfied’ inevitably raises questions of degree.  What is enough to satisfy?  There can be different degrees of satisfaction.  A court may be satisfied beyond reasonable doubt or on the balance of probabilities but it is still satisfied.  Different things can be satisfied in different ways.  Hunger is satisfied by enough to eat.  Greed may only be satisfied by more than enough.  Sufficiency produces satisfaction.  Conditions are satisfied when they have been sufficiently met.  How sufficiently must depend upon the purpose of the conditions.  It is not impossible to imagine conditions which would only be sufficiently met if they were observed in every minute particular:  the specifications for precision machinery might be an example.  But in general conditions are sufficiently met when there has been substantial compliance with, or in other words no material departure from, what is required.

“107	The key question, therefore, is whether the conditions applicable to the CFA by virtue of section 58 of the 1990 Act have been sufficiently complied with in the light of their purposes.  Costs judges should accordingly ask themselves the following question:  ‘Has the particular departure from a regulation pursuant to section 58(3)(c) of the 1990 Act or a requirement in section 58, either on its own or in conjunction with any other such departure in this case, had a materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice?’  If the answer is ‘yes’ the conditions have not been satisfied.  If the answer is ‘no’ then the departure is immaterial and (assuming that there is no other reason to conclude otherwise) the conditions have been satisfied”.

33	The key test is that set out in para.107, and that is the test which has been applied ever since in relation to CFAs which have to comply with the regulations.  Mr. Hill-Smith’s submissions obviously depend on the last 20 words of the test proposed by Brooke L.J..  He says that the omission in this case does not materially effect on the protection afforded to the client or on the proper administration of justice.
34	In considering whether he is right, therefore, I have to consider whether the protection for either client or the administration of justice has been impeded.  The important point to note in this context is that this has to be tested as at the date of the agreement.  Any prejudice or material adverse effect has to be judged as a potential adverse effect.  It is neither necessary nor appropriate to consider whether there has been actual detriment or prejudice in the particular case in question.  That much emerges clearly from Garrett v. Halton Borough Council [2007] 1 W.L.R. 554.  I need not read the particular passage from that case which determines that; it is common ground that that principle emerges.

35	The nature of and the degree of materiality and immateriality involved in the Hollins test is illuminated by certain other material.  First, in Hollins itself, at para.226 Brooke L.J. said this:

	“In future district judges and costs judges must be equally astute to prevent satellite litigation about costs from being protracted by allegations about breaches of the CFA Regulations where the breaches do not matter.  They should remember that the law does not care about very little things, and that they should only declare a CFA unenforceable if the breach does matter and if the client could have relied on it successfully against his solicitor”.

	Note the reference to “breaches [which] do not matter”, and note also the reference to the law not caring about very little things.  

36	In that context, I note that at para.31 in Garrett v. Halton Borough Council a differently constituted Court of Appeal said as follows:

	“It is unnecessary to decide whether the test stated at para.107 [of Hollins] was no more than an application of the principle that the law is not concerned with very small things”.

	Nevertheless, I consider that the indications which I have referred to in Hollins are helpful in considering the degree of materiality or immateriality involved in the Hollins test.

37	It is also right to observe, as Mr. Williams pointed out, that the shortcomings in the various cases in Hollins, and in particular those which the Court of Appeal felt were not sufficient to bring down the CFA were in the context of an attempted compliance with specific provisions which fell short in some aspect of compliance.  They were not cases of a complete failure to provide for a particular specific requirement made by the regulations.

38	I do not consider that the test in Hollins permits drawing a sharp boundary line between those two situations; that is to say an obvious total non-compliance with a particular provision, and a partial compliance and partial 
	non-compliance, with the former being always fatal and the later being capable of being sufficiently insubstantial so as to permit the agreement to survive.  But I would observe that a complete failure to comply with a requirement of the regulations is obviously more likely to be material in Hollins terms than a partial incompliance.  

39	I also note that care must be taken in a determination that non-compliance has no material effect.  This emerges from what was said by the Court of Appeal in Jones v. Caradon Catnic [2005] E.W.C.A. Civ 1821.  At para.34 Laws L.J. observed as follows:

	“Hollins v. Russell [2003] 1 W.L.R. 2487 demonstrates that any putative departure from the conditions set out in section 58 of the Access to Justice Act 1999 (as amended) must, if it is in fact to constitute a departure so as to render a CFA (here a CCFA) unenforceable, have a materially adverse effect on the protection to be afforded to the client or on the proper administration of justice.  That approach must not be allowed to undermine the force of section 58(1).  That it does not do so is, with respect, shown by the outcome in Hollins itself.  So much is apparent from the relatively marginal nature of the irregularities in, at any rate, the first two Hollins cases which my Lord has described.  But I cannot categorise as marginal the failure in the present case to respect the statute”.

	Note in particular the reference to the “relatively marginal nature of the irregularities” in Hollins.

40	It is also significant to note that Brooke L.J., who delivered the leading judgment in that case, and who also delivered the leading judgment in Hollins, said this at para.25:

	“[The breach or breaches in Hollins] was a very, very minor breach of the Regulation which would have made no difference in the result”.

	At the very least, those later reflections on Hollins and the reflection in Hollins itself, demonstrate that the sort of breaches which can safely occur without imperilling the CFA are going to be relatively slight. 

41	Mr. Williams sought to put Hollins and the principles emerging from Hollins in what he described as “their wider habitat”, and in that context I was taken to Regina v. Soneji [2005] 3 W.L.R. 303 and other authorities.  I record that, with all due respect to Mr. Williams, I did not find that those cases provided any significant additional illumination as to the Hollins test and on how I should apply it.

42	Bearing the principles of Hollins in mind, I therefore turn back to the facts of the case before me, and the question in particular of the effect of 
non-compliance with Regulation 3(2)(a).  In order to consider the materiality and significance of the departure from the regulations, it is, in my view, necessary to consider the likely underlying purpose of the insertion of Regulation 3(2)(a) in the first place.

43	It was Mr. Hill-Smith’s submission that this provision was, in essence, for the solicitor’s protection.  The client, in one sense, does not care.  If the reasons for pitching the percentage uplift at the level at which it was put are not disclosed to the court, then the court is likely not to allow the percentage uplift at all.  The person who suffers from that, says Mr. Hill-Smith, is the solicitor who will, therefore, not be paid, or at least not be paid the uplift.  The client does not care about that because the client will, by and large, not have to pay if the court rules that the uplift was not justifiable.  He disclaimed any wider purpose for this provision.  

44	He therefore submitted that the absence of a Regulation 3(2)(a) provision in this CFA was immaterial.  It had no significant impact, potential or, if necessary, he would say actual, on any of the interests which are referred to in the Hollins substantiality test.

45	Mr. Hill-Smith’s submission, if it were correct, would have some perhaps surprising effects.  If it were good, it is a submission which could be made in every case.  It would seem to me to follow that, from his submissions (if they were right), compliance with Regulation 3(2)(a) is, in substance, optional because the omission of the relevant provision would never have a material effect.  That does, in my view, require a particularly close view to be taken as to the purpose of the provision.

46	In my view, Regulation 3(2)(a) is probably not there for client or consumer protection purposes.  Mr. Hill-Smith is, to that extent, right.  However, it does seem to me that the draftsman and the department must have perceived the provision required to be inserted to have an important part to play in an assessment of the costs payable to the successful CFA assisted party.  The reasons for the percentage uplift are obviously material to a consideration by a costs judge of the reasonableness of the amount of that uplift.  It may strictly be that the actual reasons perceived by the solicitors and the client at the time are not absolutely necessary to be disclosed for that purpose.  The point can be considered on evidence and material which does not include the subjective assessment of those parties of those risks at the date of the CFA.  Assuming that any written assessment is a privileged document, absent Regulation 3(2)(a), the receiving party would have the option of disclosing it in order to assist his case, or not disclosing it and proving the case otherwise.  It might be that, by refusing to disclose the document, the case of that party would be damaged.

47	How this all operates depends on an interaction between the laws of privilege and the process of assessment.  The Court of Appeal did not embark on a full consideration of that matter in Hollins and recorded that they did not do so.  I will not do so either; not least because I did not receive submissions on the point.  The particular interaction may become important in the future because Regulation 3(2)(a) has been revoked, so ever since their demise, CFAs will not have had a Regulation 3(2)(a) provision in them.  It is unnecessary for me to embark on a consideration of the point because Regulation 3(2)(a) effectively deals with it, and probably has the effect of overruling such privilege as might otherwise have existed in any risk assessment documents germane to the CFA.  It effectively requires the client to consent in advance to the disclosure of the material.

48	That being the practical purpose of the Regulation 3(2)(a) provision and, therefore, of Regulation 3(2)(a) itself, it seems to me that the legal purpose in terms of the Hollins test is that it furthers the administration of justice.  It therefore falls into that limb of the Hollins test.  As I have indicated, 
Mr. Hill-Smith is right to say that this particular provision is not there for consumer protection, but he is wrong to rule out its presence as supporting the due administration of justice.

49	When the matter is put that way, it immediately becomes apparent that the absence of the relevant provision from the CFA in this case is material and substantial for the purposes of the Hollins materiality test.  Its absence is not minor, trivial, of no significant effect or any other adjectival phrase which would help preserve the CFA.  In any given case, the assessment of the reasonableness of the percentage uplift is capable of being affected by the presence or absence of a Regulation 3(2)(a) provision, because the court and the paying party will or may be deprived of a significant piece of evidential material.  

50	It is true that this piece of material may no longer be compellable via this route, since the regulation has been revoked, but that does not mean that the whole provision can be considered always to have been immaterial.  The provision was material during the subsistence of the regulations.  When the regulations were in force, it was capable of having a real significance and it follows that its absence is capable of having a “materially adverse effect” on the proper administration of justice.

51	In those circumstances, the absence of a Regulation 3(2)(a) provision from a CFA is almost inevitably going to be fatal to its enforceability.  That is certainly the case in the CFA before me.  I find that the absence of the Regulation 3(2)(a) provision in this case did indeed have a potentially significant effect, not on client or consumer protection, but on the proper administration of justice and that, therefore, in this respect, the requirements of the regulations are not satisfied.  The effect of that is that the CFA is, on this ground alone, unenforceable.

52	I turn next to an alleged failure to comply with Regulation 5; that is to say the requirement that a CFA be signed by both the solicitor and the client.  As I have already observed, the actual formal document in this case was signed by both parties, but the letter which the claimant needs to rely on (and indeed does rely on) as part of the overall agreement was signed only by the solicitor.  As a pure question of fact, that is accepted by the claimant.  There is, therefore, a literal non-compliance with Article 5.

53	Mr. Hill-Smith’s answer to this is that there is no material prejudice to Ms. Fenton from this absence.  The principal document is signed.  On the facts of this case the infringement of the regulation is, he says, a trivial one.  There is no doubt what the contract is.  Indeed, the defendant accepts the existence of the contract and that its terms are contained in two documents.  The letter contained enforceable rights in favour of Ms. Fenton, in that it gave her rights to avoid paying an irrecoverable part of the percentage uplift, which actually went beyond the requirements of the regulation.  To that extent, the absence of her signature on that document is not significant.  Mr. Hill-Smith did not seek to argue that the letter should somehow fall to be treated as signed by virtue of any explicit or implicit cross-reference between other signed documents and the letter.  It seems to me that he was right to take that course.  The full CFA agreement does not refer back to the letter.  There is one other document signed by Ms. Fenton in the bundle placed before the court, namely the letter of 1st August 2002, under cover of which she returned the signed CFA agreement.  That letter also does not refer back to the 10th July letter.  In the circumstances, there does not seem to me to be any chain of cross-referenced documents which would enable one to say that the letter of 10th July somehow falls to be treated as having been signed by Ms. Fenton.

54	It is, therefore, necessary to consider whether Mr. Hill-Smith is right in seeking to label this shortcoming as something which has no “materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice”, to quote, yet again, the Hollins test.

55	I am afraid that I have difficulty in seeing how a failure to sign important contractual documentation can ever be capable of falling within that description.  Parliament not only prescribed that a CFA be in writing (s.58(3)(a)); it also required that it be in writing signed by both parties.  There are clear policy considerations underlying both those requirements.  They achieve that the terms of the agreement (which are capable of impacting not only upon the parties to it, but upon a paying party in litigation) are clear and clearly subscribed to.  These considerations clearly have implications, both in terms of consumer protection for the client and in terms of the administration of justice.  One might be able to have a workable system without one or other of those requirements, but that is not the point.  Parliament has required that those requirements be fulfilled, and any material departure from them is almost inevitably going to be material for the purposes of the Hollins test.  It might, I suppose, be possible to imagine a case in which an unsigned document contained only a term of such insignificance that the failure to have one’s signature upon it could be regarded in the circumstances as immaterial, but I tend to doubt it.  In any event, I do not intend to consider whether that is correct.

56	The relevant terms included in the letter in the present case are very material terms, and that letter was not signed by Ms. Fenton.  I do not consider that that omission can be regarded as immaterial or insubstantial.  In the circumstances, this breach too is fatal to the enforceability of the CFA arrangement in this case.

57	Accordingly, on those two bases, I find that the CFA is unenforceable, and that the Master’s decision was therefore correct, albeit for different reasons.  Those two decisions make it strictly unnecessary for me to go on and consider the other grounds on which the defendant alleged the CFA was unenforceable as being non-compliant with the regulation, so far as those grounds survived the hearing.  However, since I heard argument on them and since some of them sought to impeach the Master’s decision on those points (which he decided in favour of Ms. Fenton), I will deal with them briefly.

58	First, there is the allegation that the CFA arrangement failed to comply with Regulation 2(1)(a).  It is said by the defendant that the CFA in this case does not adequately specify whether it relates to an appeal made by the defendant.  It is true that the CFA in this case does not explicitly deal with the question of such appeals.  There is only an express reference in the agreement to appeals by Ms. Fenton.

59	Under the heading of “What is not covered by the agreement”, there is included “Any appeal you make”.  However, I think that it is sufficiently clear from other provisions of the principal document that it does cover appeals by the defendant.  The agreement deals with the payments that have to be made by Ms. Fenton if she “wins”.  “Win” is defined as follows in the conditions.

“(k)	Win.
	“The case is finally decided in your favour, whether by a court decision or an agreement to pay you damages.  ‘Finally’ means that your opponent:

“-	is not allowed to appeal against the court decision; or

“-	has not appealed in time”.

	This clearly contemplates that, were Ms. Fenton to succeed at trial but were the defendant successfully to seek to appeal in time, then she would not have won.  That by itself does not mean that the CFA would extend to the appeal.  By itself, it would merely mean that she could not at that point tell whether she had won or not.  However, other provisions seem to me to indicate that the solicitors are obliged to continue to act under the CFA into the appeal itself.  Under “Our responsibilities”, they are obliged to:

	“Always act in your best interest in pursuing your claim for damages and obtaining for you the best possible result, subject to our duty to the court”.

	What is explicitly said to be covered by the agreement is “An action against Anthony A. Holmes (Solicitor)”.  That does not naturally cover any particular appeal, but the immediately following section of the agreement indicates what is not covered, which is in the terms referred to above.  That conjunction tends to suggest that an appeal by the defendant is covered.  Other parts of the agreement refer to the “case” being “won”.  

60	For the reasons given above, I will not develop the detail of this matter further.  Suffice it to say that, taking all these matters and all the other provisions of the agreement into consideration, I consider that it does, on its true construction, cover appeals by the defendant.  That, however, is not quite an end of the matter.  Under the regulations, the agreement must “specify” whether it relates to any appeal and, as observed in Hollins at para.125, “The ordinary meaning of ‘specify’ is to state explicitly”.

61	Mr. Williams drew attention to para.128 of the same decision, in which Brooke L.J. said:

	“In the present case, we consider that the effect of the CFA read as a whole is sufficiently clear and that the failure to specify the position did not affect the protection given to the client or the administration of justice to any material degree.  The result would have been different if the CFA was less clear as to its effect, that is if it would not have been reasonably comprehensible to a lay person”.

62	The second of those two sentences is particularly material.  The effect of those two paragraphs is that my merely arriving at the meaning of the agreement as a matter of construction may not be sufficient to enable compliance with the regulations.  The relevant matter will only be sufficiently “specified” if the meaning and effect would be sufficiently clear to a layperson.  

63	Is that the case in respect of this CFA?  In my view, it is.  It is a matter of impression, but, taking the documentation as a whole, I do consider that the matter is sufficiently clear.  Were it relevant, therefore, I would have found that the CFA was sufficiently compliant in this respect.  In this respect, I agree with the Master, who came to the same conclusion.

64	The last surviving point taken by the defendant is one turning on Regulations 4(3) & 4(5).  The point is a short one, which Mr. Williams said he did not rely on as a standalone point, but which he relied on as having a cumulative effect when taken with other shortfalls, so far as he needed to rely on such a cumulative effect.

65	He said that the inconsistency between the letter of 10th July and the formal CFA document, so far as the recoverability of percentages from the client is concerned, meant that the obligation to give a written explanation of the agreement was not sufficiently complied with.  In my view, this is not merely a short point; it is a bad point.  I do not think that any material confusion would have existed in the mind of the client and, therefore, so far as it is necessary and appropriate to look to the contractual documentation as providing the written explanation required, the documentation complies.  In this respect, as well, I agree with the Master.

66	In all the circumstances, and with the same regrets that the Master expressed as to a result which leaves solicitors who have performed well without remuneration, I dismiss this appeal.

LATER

67	The principles on which I propose to deal with the costs of this matter are these.  First of all, so far as the costs of this appeal are concerned, the starting point is that the respondent has won and that he should have his costs.  That much is not disputed by Mr. Hill-Smith.  

68	Second, there should be an abatement to reflect the fact that the shape of this appeal was really rather different by the time it came to be argued and indeed changed during the case, and a significant amount of costs will have been incurred in relation to issues which were effectively abandoned or conceded by the respondent.  That should be reflected by a percentage reduction.  The percentage reduction which I have in mind will reflect not merely the points that did not have to be argued, but also the fact that the appellant will have wasted, in my view, a significant amount of costs preparing skeleton arguments and preparing oral arguments on the points which were not pursued.  The point I principally have in mind here is the contractual documentation point.

69	Mr. Williams realistically accepted that this was probably a case for a percentage abatement and, equally realistically, accepted it should be (if there was to be one) in the amount of about a third.  I think he is right about all that.  

70	I have a costs schedule and, doing the best I can with a costs schedule which shows costs not including costs of today, but costs up to yesterday to be £9,890 on the part of the respondents, I shall apply roughly a 40 per cent abatement to the overall costs, and order that in round terms the appellant should pay the respondent £6,000 in respect of the costs of this appeal.

71	So far as the costs below are concerned, the position is rather more complicated.  The Master’s decision has been upheld, but effectively on different grounds.  The principal ground on which the Master determined the case was a ground which has now been abandoned by the respondent.  On the other points on which the Master was asked to rule, he determined in favour of the appellant, and I have held that he was right to do so.

72	It seems to me to be wrong in those circumstances that the appellant should be left bearing the costs of the hearing below.  The question which then arises is whether I should overturn that by saying there should be no order for the costs below, or whether I should actually make a positive order in favour of the appellant in respect of those costs, on the footing that, had the Master determined the points which he had before him in what I have determined to be the correct manner, the appellant ought to have won below.

73	I was tempted at one stage to find that the appellant should receive the costs of the hearing below on the effect that she had putatively won below and the grounds had changed here.  However, I do not think that that achieves quite the right balance in this case.  I think it would be an odd result, were the appellant to receive the costs of the hearing below, and I will not so order.  However, I will order that there be no order as to the hearing before the Master and each side should be left bearing their own costs.  That is, I think, the best way of achieving justice in this case, and taking into account, as I do to a limited extent, the fact that the letter which ought to have enabled the appellant to succeed on the principal point argued below was disclosed only fairly late in the day.  

74	The order I will make, therefore, is that there should be no order as to the costs of the hearing before Master O’Hare (and I stress that is the costs of and incidental to the hearing which he dealt with, and his order) and that, in relation to the appeal, the appellant shall pay £6,000 towards the costs of the respondent.