Claim No: 6RM01623
SCCO Ref:  0607243
Neutral Citation Number: [2007] EWHC 90073 (Costs)
IN THE SUPREME COURT COSTS OFFICE
FROM ROMFORD COUNTY COURT

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

Date:  17 May 2007 

Before :

MASTER WRIGHT, COSTS JUDGE
(SITTING AS A DEPUTY DISTRICT JUDGE OF THE COUNTY COURT)
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Between :

	SHAUN BEVAN	Claimant	
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	POWER PANELS ELECTRICAL SYSTEMS LIMITED	Defendant	

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Mr Jamie Carpenter (instructed by Kenneth Elliott & Rowe) for the Claimant
Mr Robert Marven (instructed by Messrs QM) for the Defendant

Hearing date: 30 March 2007

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Judgment

Master Wright: 

BACKGROUND
1.	The Claimant (who was born on 15 March 1982) was employed by S Macneillie & Son Limited as an auto electrician.    On 31 March 2003 he was engaged to carry out general duties at the Defendant’s premises in Landywood Green, Cheslyn Hay, Walsall, West Midlands. 
2.	At about 9.45 am, at break time, the Claimant was making his way out of the factory when he slipped on oil which had been leaking from a forklift truck.   He fell heavily on his left knee and suffered pain, injury, loss and damage. 
3.	Correspondence was entered into with the Defendant and its insurers.   On 3 May 2005 the insurers admitted liability but settlement on the amount of damages was not reached. 
4.	On 8 March 2006 the Claimant’s solicitors notified the Defendant’s insurers that they were issuing proceedings in the Romford County Court to protect the Claimant’s position.    Proceedings were issued the next day. 
5.	On 15 February 2005 the Claimant entered into a Conditional Fee Agreement with a success fee (“the CFA”) with his solicitors Kenneth Elliott & Rowe (“KER”) who were on the Panel of Accident Advice Helpline (“AAH”).
6.	On 16 February 2005 the Claimant took out an After the Event Legal Expenses Policy with Europ Assistance at a premium of £950 plus £47.50 Insurance Premium Tax.
7.	On 26 May 2006 the Claimant made a Part 36 offer to settle in the sum of £6,000 net of CRU.    The matter was settled by a Consent Order on 22 June 2006 whereby the Claimant accepted the sum of £6,000 net of CRU in full and final settlement of his claim plus costs to be assessed on the standard basis if not agreed. 
8.	On 31 August 2006 KER served Notice of Commencement of assessment.   The Claimant’s bill totalled £8,706.77.    The parties have since agreed those costs at £7,500 subject to the Defendant’s Supplementary Points of Dispute. 
9.	The Supplementary Points of Dispute are dated 19 February 2007 and state as follows: 
“Preliminary Issue 
Breach of CFA Regulation 4(2)(e) SI No.692 2000
Upon disclosure of the Conditional Fee Agreement [CFA] (dated 15th February 2005), File Note (dated 15th February 2005) and “Oral Explanation”. 
The defendant objects to payment of the claimant solicitor’s costs on the basis that the CFA is un-enforceable having failed to comply with the CFA Regulations [CFAR] SI No.692 2000 specifically regulation 4(2)(e).
CFAR 4(2)(e) in circumstances where an insurance product is recommended requires:
(e)	whether the legal representative considers that any particular method or methods of financing 
any or all of those costs is appropriate and, if he considers that a contract of insurance is appropriate or recommends a particular such contract – 
(i)		his reasons for doing so and 
(ii)	whether he has an interest in doing so. 
In this case the claimant solicitors have received the claim from Accident Advice Helpline [AAH] at the material time they were AAH panel solicitors and that relationship itself is a indirect financial interest in recommending the insurance.   See Court of appeal judgment of Garrett [2006] EWCA Civ 1017 paragraph 89–91. 
The claimant solicitors state the following in writing in the CFA: 
“Save in so far as we are approved solicitors on the Panel of Accident Advice Helpline with whom you have entered into an agreement which provides for the Insurance to be arranged we confirm that we do not have an interest in recommending this particular insurance policy or funding arrangement.”
The above statement does not declare or rather convey the financial interest that the solicitor has in recommending an AAH insurance policy as it requires a lay client to infer the meaning panel.   The claimant’s are invited to concede that the CFA itself does not sufficient declare an interest in light of the judgment of the court of appeal in Garrett. 
The matter does not end there as the claimant’s have produced an “Oral Explanation” document which was read out to the claimant (see File Note).    On this evidence the defendant submits that the CFA remains un-enforceable for the following reasons: 
1.		CFAR 4(5) requires the information to be given under 4(2)(e) orally and in writing.   In any case the oral and written explanations contradict and in Garrett regard was given to the CFA over and above the oral explanation.
2.		The Oral Explanation does not go far enough (in order to comply with 4(2)(e)) as it does not state that the claimant solicitors have a financial interest in recommending the AAH insurance policy and it merely states offer where the real reason they are obliged to recommend the policy is because of the dictates of AAH.  To put it more crudely the lay client without understanding the mechanics of the AAH scheme does not know what the solicitors is getting out of recommending the AAH insurance i.e. future referrals. 
3.		In all probability the claimant was signed up to the insurance policy/funding arrangements before the Oral Explanation was provided for cf CFA: 
“… you have entered into an agreement which provides for Insurance to be arranged.”
The defendant suspects the agreement alluded to in the CFA is a Credit Consumer Agreement and/or AAH Client Agreement.   Further disclosure is requested together with the applicable AAH Operating Manual. 
If that is the case in fact then the advice provided in the CFA and Oral Explanation has been provided after the point at which compliance is required see CFAR 4(1) and again the CFA is un-enforceable.   The solicitor is requested to confirm whether he received a endorsed CFA from his client prior to completing the “Oral Explanation”?   This would be consistent with the defendant’s appreciation of the AAH scheme as they are in receipt of an AAH Operating Manual.
In conclusion the defendant submits that the CFA as it stands is un-enforceable given the clear breach of CFAR 4(2)(e).   What the claimant solicitors have submitted as evidence of the oral explanation cannot go towards remedying the breach that occurred in writing.    The CFA is therefore un-enforceable and costs do not fall to paid by the paying party.
Other Points
The “File Note” does not evidence proper compliance with CFAR 4(2)(c) in fact as with Myatt the claimant solicitors have asked the wrong question and have not taken reasonable steps to ascertain whether there was legal expense cover.   There is an absence of enquiry rather a bland question “have you got insurance”.   On that footing exclusive to the issue taken above re. failure to comply with CFAR 4(2)(e) the CFA is un-enforceable for want of compliance with CFAR (4(2)(c)”
10.	Section 58 of the Courts and Legal Services Act 1990 (as substituted by Section 27 of the Access to Justice Act 1999) provides (so far as is relevant):
“(1)	A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement;   but … any other conditional fee agreement shall be unenforceable. 
(2)	… 
(3)	The following conditions are applicable to every conditional fee agreement – 
(a)	it must be in writing; 
(b)	…
(c)	it must comply with such requirements (if any) as may be prescribed by the Lord Chancellor.”
11.	The Conditional Fee Agreements Regulations 2000 (subsequently revoked with effect from 1 November 2005) were in force when the CFA was made on 15 February 2005. 
12.	Regulation 4 of those Regulations provides (so far as is relevant): 
“(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 – 
(a) 	…
(b)	…
(c) 	whether the legal representative considers that the client's risk of incurring liability for costs in respect of the proceedings to which 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,
(e) 	whether the legal representative considers that any particular method or methods of financing any or all of those costs is appropriate and, if he considers that a contract of insurance is appropriate or recommends a particular such contract – 
(i) 	his reasons for doing so, and
(ii) 	whether he has an interest in doing so.
(3) 	Before a conditional fee agreement is made the legal representative must explain its effect to the client.
(4) … 
(5) 	Information required to be given under paragraph (1) above about the matters in paragraph (2)(a) to (d) must be given orally (whether or not it is also given in writing), but information required to be so given about the matters in paragraph (2)(e) and the explanation required by paragraph (3) must be given both orally and in writing.
(6)	...”
13.	Regulation 5 of those Regulations provides (so far as is relevant):
“(1) 	A conditional fee agreement must be signed by the client and the legal representative.
(2)	…”
14.	The CFA says (so far as is relevant):
“OTHER POINTS
Immediately before the agreement was made, we explained the following points to you 
(1)	… 
(2)	Whether we consider that your risk of incurring liability for fees and disbursements (ours and your opponent’s) in these proceedings is insured under an existing contract of insurance. 
(3)	…
(4)	Where we consider that any particular method(s) of financing those fees and disbursements mentioned in (2) above is appropriate.    We explained that we consider the particular method(s) of financing those fees and disbursements appropriate in your case to be an insurance policy specified at number 8 in the Schedule as “The Insurance Policy”.    Our reasons for this are as stated in (5) below.
(5)	There are risks in any litigation and for your peace of mind it is important to ensure that your exposure to payment of fees and disbursements is insured.  The insurance not only indemnifies you against the risk of having to pay our disbursements and your opponent’s fees and disbursements it also facilitates a funding arrangement with the bank specified at number 9 in the Schedule (“the Bank”) to provide payment of some disbursements and other expenses (for which you are primarily liable) as the case proceeds.    Save in so far as we are approved solicitors on the Panel of Accident Advice Helpline with whom you have entered into an agreement which provides for the insurance to be arranged we confirm that we do not have an interest in recommending this particular insurance policy or funding arrangement.   We shall be pleased to supply you with further details of our arrangements with Accident Advice Helpline before or after this agreement is made.
(6)	…
This agreement is expressly agreed by you and us to be the effective retainer for all work undertaken by us on your behalf whether such work is undertaken before or after the agreement is made.”
15.	The Insurance Policy referred to in the CFA is the policy with Europ Assistance. 
16.	On 1 March 2007 a Witness Statement was made by Mr Neville Blair Filar who is a partner in KER.
17.	In his witness statement Mr Filar explains his firm’s relationship with AAH and says that AAH is a claims management company which puts members of the public who may have a personal injury claim in touch with solicitors who can prosecute the claim for them with the benefit of a CFA and after the event (“ATE”) insurance.    He says that at around the time his firm was instructed by the Claimant, cases from AAH constituted less than 10% of the firm’s personal injury case load.    He says that the proportion of AAH work was never higher than this and is now much lower. 
18.	Mr Filar explains how the firm had considered the requirements of Regulation 4(2)(e).    He explains that having considered that they had a discloseable interest in recommending a particular ATE policy (because they were obliged to do so under their then arrangement with Accident Line Protect) they drafted an Oral Explanation sheet which addressed all of the requirements of the Regulations and declared their interest in the ATE insurance.
19.	He says that when KER joined the AAH panel, they considered that they had a similar interest in recommending the Europ Assistance insurance because that was the only insurance which could be provided under the scheme.    They therefore adapted their Oral Explanation sheet for use in AAH cases.  However he says that because the AAH scheme required the firm to use their CFA, the firm could not also incorporate this declaration into the CFA as they had done under the Accident Line Protect scheme.   He added “my experience is that clients take in more of what they are told than what they read”.
20.	He exhibited to his Witness Statement a copy of the Oral Explanation sheet which had been adapted for use in AAH cases.   He referred to paragraph 9 which reads as follows:
“We do have an interest in recommending this particular insurance because we are tied by our membership of AAH to offer all clients who enter into a CFA with us this insurance.    We are not insurance brokers and there may be cheaper different insurance available.    In all the circumstances we believe this is a reasonable insurance policy to fund this claim.”
21.	Mr Filar says in his Witness Statement that he had considered how to comply with Regulation 4(2)(c) as well.    He says that he had discovered that there was no point in asking potential clients if they had “legal expenses insurance”.    The vast majority had never heard of it and would simply deny that they had any.    However, the question “Do you or your family have any insurance” was overwhelmingly likely to be answered correctly one way or the other.   Once the question was answered in the affirmative he could then explore the question of legal expenses insurance and would usually ask the client to send him the policy so that he could see for himself whether he or she had before the event insurance (“BTE”).   He says this became his invariable practice.   Also, because of his 20 years experience dealing with Trade Union clients, it was second nature to him to ask a potential client if he or she had membership of a Trade Union and if so he could investigate whether the union scheme applied.    
22.	Mr Filar says in his statement that in this case he received AAH’s instructions to consider Mr Bevan’s claim on 7 February 2005.    He decided to accept the claim and AAH sent Mr Bevan a pack, which included an agreement with AAH, a loan agreement, an insurance proposal form and a CFA.   Mr Filar explained the procedure as follows: 
“The client signs these documents and returns them to AAH, who then forward the relevant ones to the solicitor.    It is important to note that, although the client signs the documents at that stage, they are only signed in escrow.   They are not forwarded to the loan and ATE providers and they have no effect until the CFA formalities have been completed by the solicitor and the solicitor has signed the CFA.   Until that point, the client has not taken out a loan and does not have ATE insurance.”
23.	Mr Filar goes on to say that once the solicitor receives the signed documents he has to telephone the client and ensure that he has complied with the Regulations.    Only then does the solicitor sign the CFA.    He says that AAH is then notified and the loan agreement and ATE insurance are put in place.   He says that the Defendant was wrong to suggest in the Points of Dispute that the Claimant was signed up to the insurance policy/funding arrangement before the Oral Explanation was provided. 
24.	Mr Filar says that the documents in this case were forwarded to him by AAH on 11 February 2005.   He says: 
“15.	I telephoned Mr Bevan on 15 February 2005 to go through the requirements of the Regulations.    I made an attendance note of our conversation, which I produce as my exhibit NBF/2.    As can be seen from the attendance note, I followed my usual practice in asking about BTE insurance.    I asked Mr Bevan whether he or any member of his family had insurance at all and he said “no”.   He confirmed that he meant that they had no insurance at all when I repeated the question, which is my normal practice when somebody denies that they or their family have insurance.    I had no reason to doubt the accuracy of this answer.    Many of my clients do not have insurance of any kind, and I had already formed the view that Mr Bevan was intelligent and articulate.   To the best of my knowledge his answer was in fact accurate.
16.	As can be seen from the attendance note, I also read the Oral Explanation sheet to Mr Bevan.   Once I had ensured that Mr Bevan understood what I had said, I signed and dated the CFA … and notified AAH, who then procured Mr Bevan’s ATE insurance which was authorised on 16 February 2005, although effective from the day before … 
17.	I accept that what was read to Mr Bevan in the Oral Explanation was different from what was written in the CFA.    However I believe that there was no danger of him being confused as he would not have had the CFA in front of him when I explained it to him and my explanation would have been the last thing which he heard before I signed the CFA, making it effective.”
THE DEFENDANT’S SUBMISSIONS:   REGULATION 4(2)(e)(ii)
25.	The Defendant was represented at the hearing before me by Counsel, Mr Robert Marven.    He submitted that the Claimant’s solicitors had been in breach of Regulation 4(2)(c) and of Regulations 4(2)(e)(ii) and 4(5) of the Conditional Fee Agreement Regulations 2000 and further that the breaches of the Regulations had been material. 
26.	With regard to Regulations 4(2)(e)(ii) and 4(5) he referred to the passage in the CFA (see paragraph 14 above) where it is stated: 
“Save in so far as we are approved solicitors on the Panel of Accident Advice Helpline with whom you have entered into an agreement which provides for the insurance to be arranged we confirm that we do not have an interest in recommending this particular insurance policy or funding arrangement …”
27.	Mr Marven submitted that there had been a breach of Regulation 4(2)(e)(ii) in conjunction with Regulation 4(5) in that the interest which KER had in the policy had not been disclosed in writing. 
28.	He submitted that unlike an oral explanation, a written explanation is permanent and the client can refer back to it when the oral explanation has “disappeared into the ether”.    He also submitted that it was unsatisfactory that the Claimant did not have a copy of the CFA with him when the oral explanation was given to him over the telephone and that it was wrong that he had signed the CFA before the oral explanation had been given to him (albeit that contractual terms were not complete until after the oral explanation).    This did not, he submitted, enhance consumer protection.
29.	Mr Marven referred to paragraph 103 of the Court of Appeal’s judgment in Garrett v Halton Borough Council:   David Myatt & Ors v National Coal Board [2006] EWCA Civ 1017 (“Garrett”).    Dyson LJ said:  
“103.	Under a quite different legislative regime from that governing CFAs, the requirements imposed on solicitors by way of disclosure in relation to insurance policies which they recommend to their clients changed on 14 January 2005.  With effect from that date, the Solicitors’ Financial Services (Conduct of Business) Rules 2001, made by the Law Society in its capacity as a recognised professional body under the Financial Services and Markets Act 2000, were amended so as to introduce new provisions in this respect.  By virtue of rule 8A and Appendix 1, if a firm recommends a contract of insurance to a client, and does not conduct a fair analysis of the market for such policies, it must advise the client, among other things, whether it is contractually obliged to conduct insurance mediation activities only with one or more insurance undertakings.  “Insurance mediation activities” is defined in a European Directive on Insurance Mediation, 2002/92/EC.  It includes the activities of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance.  Thus, from 14 January 2005, a solicitor who proposes that his client should enter into an ATE insurance policy, and who recommends a particular policy because it is the only policy which, consistently with his firm’s membership of a panel, he is allowed to recommend, must tell the client that he is contractually obliged to recommend a policy with that insurer.  That would give the client notice of the particular interest which the firm has in recommending the policy, whereas just to tell the client that the firm is on a particular panel does not convey that information.  If that obligation was observed from 14 January 2005, the problem which we have had to consider in relation to the Garrett case will not have arisen between that date and the revocation of the Regulations on 1 November 2005.”
30.	Mr Marven submitted that this passage did not deal with the problem that arose in this case where the Regulations had been breached and the solicitors’ interest in recommending the policy had not been stated correctly in writing or (he submitted) orally.    He drew attention to Appendix 1 to the Solicitors’ Financial Services (Conduct of Business) Rules 2001.    Paragraph 1(4) provides: 
“(4)	The information referred to in paragraphs 1(2) and 1(3) above must be provided to the client on paper or on any other durable medium available and accessible to the client.”
He submitted that this underlined the importance of the written explanation as opposed to the oral one.   He also referred to the FSA Handbook which made similar provisions (see for example COB 4.3.20).
31.	Mr Marven referred to paragraphs 8 and 9 of the Oral Explanation sheet.   Paragraph 8 reads: 
“8.	Having regard to the circumstances of your accident and the value of your claim we believe that the method of financing your case which consists of a solicitor working on a “no win – no fee” basis under a Conditional Fee Agreement with a legal expenses insurance policy arranged through Europ Assistance is an appropriate method of funding your case.    In particular this is because the legal expenses insurance premium is insured if you lose your case, and secondly the policy covers all your medical fees and other disbursements as well as your legal costs if you lose.”
32.	He submitted that this overwhelmingly gives the impression that the AAH policy is “a good thing”.   Paragraph 9 (see paragraph 20 above for its wording) on the other hand does not say that the solicitor has a financial interest.   The client is not, he submitted, told that the solicitor is obliged to recommend the policy, only that he is obliged to offer it.    He submitted that this was manifestly not a good enough oral explanation in the face of the wrong written explanation which had been provided.
33.	Further Mr Marven submitted that the explanation given to the client did not explain that the solicitor had a financial interest in recommending the Europ Assistance policy (failure to do so would mean loss of membership of the panel) but only that the solicitor was obliged to offer the policy. 
REGULATION 4(2)(c)
34.	Mr Marven submitted that paragraph 6 of the Oral Explanation sheet showed that the obligations imposed on the legal representative by Regulation 4(2)(c) to “consider” whether the client’s risk of incurring liability for costs was “insured against under an existing contract of insurance” had been “skimped”.    Paragraph 6 of the Oral Explanation sheet says: 
“6.	You have advised us that you have no other form of Legal Expenses Insurance available to you. 
-		In all other cases you have advised us that you do not have any legal expenses cover eg, say in our household insurance policy. 
-		You have informed us that you are not a member of a Trade Union or other Society or Organisation who will provide funding for your legal fees.”
35.	Mr Marven submitted that this left the responsibility to the client.   The attendance note exhibited to Mr Filar’s Witness Statement showed that the questions asked about existing legal expenses cover did not focus on what sorts of documents the client might have had.
36.	He said that he accepted Mr Filar’s assessment of the Claimant where he said (in paragraph 15 of his Witness Statement): 
“I had already formed the view that Mr Bevan was intelligent and articulate.”
However he submitted that there was no evidence that he had any knowledge of BTE.    There had been no urgency in arranging the funding (as there had been in Pratt v Bull, one of the cases considered by the Court of Appeal in Hollins v Russell).   The sum involved in the premium for the ATE insurance was substantial.   He referred me to the factors which should be taken into account as set out at paragraphs 72 to 76 of the Court of Appeal’s judgment in Garrett.  
37.	Mr Marven submitted that the Claimant should have been asked not simply whether he had any insurance at all, but whether, more specifically, he had credit cards, motor insurance or household insurance (see paragraph 72 of the judgment in Garrett).  
THE CLAIMANT’S SUBMISSIONS:    REGULATION 4(2)(e)(ii)
38.	Mr Carpenter, Counsel for the Claimant, has provided a skeleton argument which has been very helpful.    He accepted that – following Garrett – the written information given in the CFA that “we do not have an interest in recommending this particular policy or funding arrangement” did not sufficiently disclose KER’s interest in the Europ Assistance policy and that therefore there had been a technical breach of Regulation 4(5) in that KER’s interest had not been disclosed in writing.
39.	However, he submitted, before the CFA was made, the Claimant was given oral advice which did properly disclose the interest (see paragraph 20 above for the wording of the oral advice).
40.	He submitted that this sufficiently disclosed KER’s interest because: 
a)	The obligation under Regulation 4(2)(e)(ii) was only to state whether the solicitor had an interest in the insurance;    it was not a requirement to state the nature of that interest.    If the client wanted any further information he could ask. 
b)	The mischief at which Regulation 4(2)(e)(ii) was aimed was the possibility that the client would think that he was being given an objective survey of the insurance market when in fact he was not.    This could be avoided by simply telling the client that the solicitor had an interest in the policy.    In this case the solicitor went further by telling the client that he was obliged to recommend the policy.   Thus, the client was in no doubt that he was not being given an objective recommendation.    The client would understand “what he was letting himself in for”.    
c)	At paragraph 103 of Garrett (see paragraph 29 above) the Court of Appeal had referred to the effect of the Solicitors’ Financial Services (Conduct of Business) Rules 2001.   The Rules did indeed require no more than that the solicitor should tell the client whether he was being given a “fair analysis of the market” or was contractually obliged to offer insurance only from one or more providers (Rule 1 and para 1, Appendix 1).    If this requirement was satisfied then Regulation 4(2)(e)(ii) was satisfied.
d)	A similar attitude was taken by the Financial Services Authority in regulating financial advisers:   the adviser must tell the client whether products are offered from the whole market, from a limited group of companies or from a single company (see FSA Conduct of Business Rules). 
e)	The Oral Explanation sheet was drafted after careful consideration by the fee earners of KER (see paragraphs 5 to 8 of Mr Filar’s Witness Statement).   This was, in this respect, different from Garrett where the solicitor had evidently given no thought at all to the issue.
41.	Mr Carpenter submitted that the information given by Mr Filar in the Oral Explanation sheet did therefore comply with Regulation 4(2)(e)(ii) and that had it also been given in writing there would have been no breach of that Regulation at all. 
42.	He submitted that the technical breach in not giving the appropriate information in writing was not material within the meaning of paragraph 107 of the judgment of the Court of Appeal in Hollins v Russell [2003] 1 WLR 2487.   The paragraph says:
“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 departure in this case, had a materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice?”
43.	Mr Carpenter submitted that just as a CFA has to be read as a whole (see Hollins paragraphs 126-128), the effect of the written advice in this case must be considered in conjunction with the oral advice.    In reality, he said, clients were much more likely to take in what they are told than what they may or may not read in the small print of a CFA.    He referred to paragraph 17 of Mr Filar’s Witness Statement (see paragraph 24 above).   In this case, he said, the Claimant did not have the CFA with him at the time the oral explanation was given.    There was therefore no question of the Claimant being confused by the contradictory statements.   The Claimant had been told quite clearly before the CFA was signed that KER had an interest in recommending the ATE insurance and “understood what he was letting himself in for”.    (See Hollins paragraph 112.) 
44.	Furthermore, Mr Carpenter submitted, there had been no adverse effect on the administration of justice which was not served by paying parties generating satellite litigation by taking unmeritorious points.   
45.	Mr Carpenter referred to what Mr Marven had submitted (see paragraph 31 and 32 above) about the “overwhelming” impression given in paragraph 8 of the Oral Explanation sheet that the AAH policy was a “good thing” without at the same time being told that the solicitor had a financial interest.    He also referred to Mr Marven’s submission that the client was not told that the solicitor was obliged to recommend the AAH policy, but only that he was obliged to offer it. 
46.	Mr Carpenter submitted that paragraphs 8 and 9 of the Oral Explanation sheet were directed at different parts of Regulation 4, Regulation 4(2)(e)(i) and 4(2)(e)(ii).   The former related to the legal representative’s reasons for considering that a contract of insurance was appropriate or recommending a particular such contract.   The latter related to whether he had an interest in doing so.   The Oral Explanation sheet followed the order in which those matters appeared in the Regulations and the solicitors should not be criticised for dealing with them in that order. 
47.	With regard to the use of the word “offer” in the Oral Explanation, Mr Carpenter submitted that paragraph 9 of the Oral Explanation sheet used the word “recommending” as well as the word “offer”.   The meat of the oral declaration was that the solicitor was tied by membership of AAH to “offer” “recommend” or “suggest” the Europ Assistance policy. 
REGULATION 4(2)(c)
48.	With regard to Regulation 4(2)(c), Mr Carpenter accepted that a solicitor must make reasonable enquiries about the possibility that the client has legal expenses insurance, but what is reasonable, he submitted, must depend on all the circumstances of the case.   He referred to the judgment of the Court of Appeal in Garrett.
49.	He submitted that in paragraph 56 of Garrett the Court of Appeal identified three levels at which a solicitor, making enquiries by telephone, might ask the client about legal expenses insurance: 
a)	The client is asked whether he or she has any credit cards or home or motor insurance at all and, if so, to send the policies to the solicitor. 
b)	The client is asked whether he or she has any legal expenses insurance at all and, if the answer is “yes” or “I don’t know”, the solicitor should ask to see the policy. 
c)	The client is asked whether he or she has legal expenses insurance which would cover them for the particular claim contemplated.
50.	Mr Carpenter said that the question in (a) was the least specific, the question in (c) the most specific.   The question in (b) was somewhere in between.   Which it was reasonable to ask in any given case would, he submitted, depend on the circumstances of that case, but plainly a solicitor could not go wrong by erring on the side of caution and asking a less specific question that might in fact be reasonable. 
51.	In this case, Mr Carpenter submitted, Mr Filar asked question (a), the least specific (see paragraphs 9 to 11 and 15 of his Witness Statement and the attendance note NBF/2).   It was, he submitted, the blandness of the question that was its virtue:   it is the question least likely to miss available legal expenses insurance.  A solicitor who asked this question in every case would never be in breach of Regulation 4(2)(c). 
CONCLUSIONS:   REGULATION 4(2)(e)(ii) and (5)
52.	In my judgment there has been a failure to comply with Regulations 4(2)(e)(ii) and 4(2)(5) because the written information given in the CFA that “we do not have an interest in recommending this particular policy or funding arrangement”, did not sufficiently disclose KER’s interest in the Europ Assistance policy.   This is admitted by the Claimant as a “technical breach” of Regulation 4(5) in that KER’s interest had not been disclosed in writing (see paragraph 38 above). 
53.	Mr Carpenter submitted that nevertheless the oral explanation did comply with Regulation 4(2)(e)(ii) and that the Regulation 4(2)(e)(ii) point was a short point as to whether what was properly explained orally but not put in writing amounted to a material breach of the Regulation. 
54.	Mr Marven has submitted (see paragraphs 31 to 33 above) that quite apart from his submission that the oral explanation given under paragraph 8 of the Oral Explanation sheet gave an overwhelming impression that the AAH policy was a good thing giving the impression that it should be accepted as “done and dusted”, the oral explanation given under paragraph 9 does not say that the solicitor has a financial interest and does not explain to the client what the solicitor was getting out of membership of the panel.   Further the client was not told that the solicitor was obliged to recommend the policy but only that he was obliged to offer it.  He submitted that those factors amounted to a breach of the Regulation and should be taken into account by the Court in determining whether the breaches of the Regulation are material. 
55.	However I accept Mr Carpenter’s submissions (see paragraphs 39 to 41 above) that the Claimant was given oral advice which did properly disclose KER’s interest in the Europ Assistance policy.    I consider that KER’s obligation under Regulation 4(2)(e)(ii) was only to state whether they had an interest in the insurance and that the mischief against which the Regulation was aimed was the possibility that the client would think that he was being given an objective survey of the insurance market when in fact he was not.    This was avoided by simply telling the client that the solicitor had an interest in the policy.   In fact the explanation went further than this because paragraph 9 of the Oral Explanation sheet shows that the client was told that KER had an interest in recommending this particular insurance “because we are tied to our membership of AAH to offer all our clients who enter into a CFA with us this insurance.”
56.	Thus in this case the solicitors went further than Regulation 4(2)(e)(ii) requires by complying (in part) with the Solicitors’ Financial Services (Conduct of Business) Rules 2001 and telling the client that they were contractually bound to offer insurance from Europ Assistance.   Compliance with the 2001 Rules was not, of course, complete because the information was not given “on paper or on any other durable medium available and accessible to the client” (see paragraph 30 above).
57.	I also accept Mr Carpenter’s submission (paragraph 47 above) with regard to the use of the word “offer” in the oral explanation.   Mr Marven had submitted that the solicitors had had a duty to explain that they had a financial interest in “recommending” the Europ Assistance policy whereas they had only said that they had an obligation to “offer” it (paragraph 32 above).    I accept that the wording of paragraph 9 makes it clear that the words “offer” and “recommend” are interchangeable. 
58.	The question remains.   Did the fact that an oral explanation which complied with Regulation 4(2)(e)(ii) was not put into writing (and indeed was put incorrectly into writing so as to contradict the oral explanation) amount to a material breach of the Regulation?
59.	In my judgment Mr Marven was correct to submit that it did amount to a material breach of the Regulations.   Regulation 4(2)(5) requires that the explanation as to whether the legal representative has an interest in recommending the policy should be given in writing as well as orally.   It is very difficult to see why Parliament should have expressly required this written explanation if a written explanation which stated the position incorrectly could be put right by an oral explanation. 
60.	I do not consider that Parliament intended such an outcome.   With respect to Mr Filar’s observations in his Witness Statement (see paragraphs 18 and 19 above), Mr Marven drew attention to Appendix 1 to the Solicitors’ Financial Services (Conduct of Business) Rules 2001 (see paragraph 30 above).   Paragraph 1(4) provides:
“(4)	The information referred to in paragraphs 1(2) and 1(3) above - (these deal with the position where a firm recommends a contract of insurance) – must be provided to the client on paper or on any other durable medium available and accessible to the client.”
61.	He also referred to the FSA Handbook which makes similar provisions.   In my opinion he was right to say that this underlines the importance of the written explanation which is something to which the client can refer back when the oral explanation has “disappeared into the ether” (see paragraph 28 above).
62.	Mr Carpenter submitted (see paragraph 42 above) that the failure to give a proper written explanation of KER’s interest in the Europ Assistance policy was not material within the meaning of paragraph 107 of the judgment of the Court of Appeal in Hollins v Russell and that the CFA has to be read as a whole, the written advice being read in conjunction with the oral advice.
63.	In my judgment it is the failure to observe the requirements of Regulation 4(2)(5) (that there should be both an oral and a written explanation of the solicitors’ interest in the policy) which has a materially adverse effect on the protection afforded to the client by the Regulations.   It also has, in my judgment, a materially adverse effect on the administration of justice because express provisions relating to the steps to be taken in litigious matters should be observed.    It follows that in my judgment the conditional fee agreement is unenforceable.   
REGULATION 4(2)(c)
64.	Mr Filar says in his Witness Statement (see paragraph 21 above) that he had discovered that there was no point in asking potential clients if they had “legal expenses insurance”.   The vast majority had never heard of it and would simply deny that they had any.    He says in paragraph 10 of his Witness Statement: 
“10.	However the question “Did you or your family have any insurance” was overwhelmingly likely to be answered correctly one way or the other.   Once the question was answered in the affirmative I could then explore the question of legal expenses insurance and would usually ask the client to send me the policy so that I could see for myself whether he or she had BTE insurance.   This became my invariable practice.”
65.	Mr Filar says in paragraph 15 of his Witness Statement that he telephoned Mr Bevan on 15 February 2005 to go through the requirements of the Regulations.   He made an attendance note of the conversation.   He says that he followed his usual practice in asking about BTE insurance.   He says:   
“I asked Mr Bevan whether he or any member of his family had insurance at all and he said “no”.   He confirmed that he meant that they had no insurance at all when I repeated the question which is my normal practice when somebody denies that they or their family have insurance.   I had no reason to doubt the accuracy of that answer.   Many of my clients do not have insurance of any kind, and I had already formed the view that Mr Bevan was intelligent and articulate.   To the best of my knowledge his answer was in fact accurate.”
66.	In my judgment Mr Marven was right in his submissions that the questions asked about existing legal expenses cover did not focus on what sorts of documents the client might have had.   There was no evidence that Mr Bevan had any knowledge of BTE insurance.   Indeed the attendance note of Mr Filar’s telephone conversation with him on 15 February 2005 says: 
“I explained about Before the Event Insurance.   He said he’d never heard of it.”
67.	Paragraph 72 of the judgment of the Court of Appeal in Garrett begins the list (not intended to be exhaustive) of steps which a solicitor should reasonably take to discharge his obligation under Regulation 4(2)(c).    It says: 
“72.	First, the nature of the client.  If the client is evidently intelligent and has a real knowledge and understanding of insurance matters, it may be reasonable for the solicitor to ask him not only (i) whether he has credit cards, motor insurance or household insurance or is a member of a trade union, (ii) whether he has legal expenses insurance, but also (iii) the ultimate question of whether the legal expenses policy covers the proposed claim …”
68.	It is accepted by the Defendant that Mr Bevan was intelligent and articulate.   But in my opinion he was not likely to have had much if any experience of insurance policies because he was not yet 23 years of age in February 2005 and was an electrician by trade (see paragraph 1 above).    Furthermore he told Mr Filar that he had never heard of before the event insurance. 
69.	For those reasons I do not agree with Mr Filar’s view (at least in this case) that the question “Do you or your family have any insurance” was overwhelmingly likely to be answered correctly.   The question most likely to produce a correct answer would, in my judgment, have added words which focussed on the sorts of documents there might have been such as credit cards, motor insurance or household insurance and whether he or any of his family had trade union membership.
70.	It follows that I do not accept Mr Carpenter’s submission that the blandness of Mr Filar’s question was its virtue.   I do not consider that, in the circumstances of this case, it was the question least likely to miss available legal expenses insurance.   In my judgment the more specific question suggested by the Court of Appeal would have been much more likely to have been effective. 
71.	Accordingly I must conclude that in the circumstances of this case Regulation 4(2)(c) has not been correctly complied with and that the breach is material. This is a further reason why, in my judgment, the conditional fee agreement is unenforceable.