Case No: HQ05X00067
Neutral Citation Number: [2008] EWHC 90102 (Costs)
IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

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

Date:  17 March 2008 

Before :

MASTER WRIGHT

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Between :

	YVONNE HIBBERD	Claimant	
			
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(1) FAWCETT OLD LIMITED (formerly known as BARE NECESSITY LIMITED)
(2) MICHAEL JANE HAIR & BEAUTY	

Defendants

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Mr Benjamin Williams (instructed by Leigh Day & Co ) for the Claimant
Mr Robert Marven (instructed by QM Solicitors) for the Second Defendant

Hearing date: 15 February 2008
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Judgment

Master Wright:

1.	The Claimant, who is an Australian citizen, was undergoing eyebrow hair removal by laser surgery at the Bare Necessity Clinic at Liverpool Street Station on 15 January 2002.  During the procedure the laser accidentally hit her eye, causing her significant permanent damage.  Negotiations took place but, in the absence of a settlement, proceedings were issued.  Counsel was instructed to advise on quantum and evidence was obtained.
2.	The Second Defendant made an offer to settle at £35,000 which was not accepted and preparations for trial were made.  Settlement was finally achieved.  A consent order was made whereby on 18 July 2006 judgment was given against the Second Defendant in the sum of £40,000 together with the Claimant’s costs to be assessed if not agreed.  The claim against the First Defendant was discontinued with no order as to costs.
DETAILED ASSESSMENT
3.	Detailed assessment proceedings were commenced.  The parties agreed the quantum of the claimant’s costs in the sum of £40,000 subject to one point only.  That is that the Defendant alleges that the Claimant’s Conditional Fee Agreement is unenforceable.
4.	The Defendant’s amended points of dispute state:
“Enforceability of Conditional Fee Agreement Following disclosure of the Conditional Fee Agreement.
“The Defendant refers the Claimant to Regulation 4 of the Conditional Fee Agreement Regulations 2000 which states,
“4.  Information to be given before a Conditional Fee Agreement made: (2) Those matters are:
(c) 	Whether the legal representative considers that the client’s risk of incurring liability for costs in respect of the proceedings to which the agreement relates is insured against under an existing contract of insurance.
(e)	When 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”
The Defendant alleges that Leigh Day & Co have a declarable interest in recommending this insurance policy and gives the following reasons.
Within your Conditional Fee Agreement under Accident Line Protect Insurance it clearly states:
“Accident Line Protect is an insurance policy only made available to solicitors who have joined Accident Line”.
Following on from this under heading “other points” (e)(iii) it states:
“We confirm that we do not have an interest in recommending this particular insurance agreement”.
It is clear that you are a member of The Accident Line panel and as such there is an interest that should be declared.
You will note we have disclosed in our letter to you of 21 March 2007 the following documents:
1.	What is Accident Line?
2.	The Accident Line application form.
We draw your attention to the section entitled “Membership Fees” in the document entitled “What is Accident Line?”  You will note that a fee applies should the panel member not refer more than 75 policies to Accident Line in one year.
In addition to the above under “What is Accident Line:” it is noted that new members are required to pay £2,750.00 plus £481.25 (a total of £3,231.25) to Accident Line.  Once 30 policies have been recommended/issued a refund of £1,000.00 will be given.  The Defendant is of the opinion that this is a financial interest as money is being exchanged for the referral of policies.
Further to the above the Defendant refers to the application form on page 4, section H entitled “Membership Obligations and Declaration”.  It clearly states:
“I understand that it is a condition of Accident Line membership that all eligible (i.e. not just referred) CFAs must be insured with Accident Line.”
The Defendant submits that the Claimant has breached the Conditional Fee Agreement Regulations 2000 namely Regulation 4(2)(e)(ii) by not declaring a financial interest in recommending The Accident Line Protect Insurance.  It is clear that the Claimant’s solicitor had a financial interest in Accident Line clearly set out above and was a member of Accident Line.  It is equally as clear that the Claimant’s solicitor was bound by the terms of the agreement with Accident Line that they had to refer all cases for the policy or their panel membership would be revoked.
The Defendant relies upon the case of Garrett v Halton Borough Council [2006] EWCA Civ 1017 and submits that the Conditional Fee Agreement is unenforceable.”

THE ISSUES
5.	The parties have agreed that the issues to be decided are:
i)	Did Leigh Day & Co (the Claimant’s solicitors) have an interest in recommending the Accident Line Protect (“ALP”) policy which the Claimant took out in conjunction with the Conditional Fee Agreement dated 2 September 2002?
ii)	If so, was that interest declared to the Claimant?
iii)	If there was an interest, and it was not declared to the Claimant, did this amount to a material breach of Regulation 4(2)(e)(i) and (ii) of the Regulations?
LEGISLATIVE BACKGROUND
6.	The Courts and Legal Services Act 1990 provides (so far as is relevant):
“58(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.
     (3)	The following conditions are applicable to every conditional 	fee agreement –
		(c) 	it must comply with such requirements (if any) as may 		be prescribed by the Secretary of State”
7.	Regulation 4 of the Conditional Fee Agreements Regulations 2000 (“the Regulations”) provides (so far as is relevant):
“4(1)	Before a conditional fee agreement is made the legal 		representative must –
(a)	inform the client of 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)	These matters are:
(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.”
8.	The Regulations were revoked with effect from 1 November 2005 by the Conditional Fee Agreements (Revocation) Regulations 2005 but the revocation was not retrospective and so the Regulations continue to apply in the present case.  Accordingly, if it is found that Leigh Day & Co had an interest in recommending the ALP policy to the Claimant but failed to inform her of that fact there will have been a failure to satisfy section 58(3)(c) of the Act.  The conditional fee agreement will therefore be unenforceable (subject to the failure to comply being found to be material).
9.	The consequence of the conditional fee agreement being found to be unenforceable (subject to the relevant failure to comply with the Regulations being found to be material) would be that the solicitors’ costs would be irrecoverable.
THE EVIDENCE
10.	Two Witness Statements were submitted on behalf of the Claimant.   The first is dated 2 July 2007 and is made by Penny Knight, a solicitor in the firm of Leigh Day & Co.  The second is dated 27 November 2007 and is made by Sally Moore, a partner in the firm of Leigh Day & Co.  Ms Moore’s Witness Statement corrects the Witness Statement of Ms Knight in certain respects.  Ms Moore gave oral evidence at the hearing on 15 February 2008.
11.	Two Witness Statements were submitted on behalf of the Defendant.  Both were made by Stephen Irving, a partner in the firm of QM Solicitors, who represent the Defendant.  The first Witness Statement is dated 3 January 2008 and the second is dated 25 January 2008.  The latter exhibits a number of documents relevant to the Accident Line Protect Scheme.  These are:
i)	The Accident Line Application Form.
ii)	The Accident Line document entitled “What is Accident Line”.
iii)	The Accident Line Manuel.
iv)	The report and financial statements of the Accident Protection Group Ltd of 31 December 2006.
12.	At the hearing on 15 February 2008 the Claimant was represented by Mr Benjamin Williams and the Defendant was represented by Mr Robert Marven.  
13.	In her Witness Statement, Ms Moore explained how Leigh Day & Co had set about finding an appropriate “ATE” product that could be used to protect their clients against adverse costs orders.  She said that they identified ALP as being one of the few available at that time (they joined the scheme on 1 October 2000).  Having looked into it, she said that they came to the view that it was one of the best products on the market.  It was backed by the Law Society and offered a fixed level of cover of £100,000 which was sufficient to protect clients against adverse costs orders in all but exceptional cases.  They also considered that the premiums were competitively priced.
14.	In addition, the scheme delegated the issuing of policies to the solicitor once the prospects were assessed as good.  This allowed the solicitor to retain control and move on with the case without being involved in correspondence with the insurers.  A very important factor was that they considered ALP were “good for the money” in the event of a claim.
15.	Ms Moore said that in deciding to apply and become members of ALP, Leigh Day & Co’s only concerns were to protect their clients against the risk of adverse costs orders using an ATE product which would not delay the progression of their claims, which was competitively priced and which was offered by a dependable company.
16.	Ms Moore said that since then many more ATE policies had become available and that Leigh Day & Co reviewed these products each year but have concluded that the ALP scheme has remained competitively priced, provides a good level of cover and has a strong administrative backup.  Also the ability to self write policies remained one of its key advantages.
17.	Ms Moore’s Statement goes on to say that a by-product of the ALP scheme is that cases are referred to Leigh Day & Co by ALP.  However she said that this additional factor played no role whatsoever in the firm’s decision to join the scheme.  She said that ALP had provided a schedule of all cases which had been referred to Leigh Day & Co since they joined the scheme on 1 October 2000.  In all ALP had referred 134 potential cases to them.  She explained that, under the Scheme, Leigh Day & Co had a duty to call the client who had been referred to them and to provide preliminary advice.  In the vast majority of cases, she said, the matter went no further than that.  Many of the cases were already statute barred or below the small claims limit or did not have a reasonable prospect of success.  A fair number were not insurable under the ALP policy.
18.	Ms Moore’s Statement goes on to say that during the years of their membership of ALP a small number of referred cases resulted in an ALP policy being issued.  In her oral evidence she confirmed that of the 134 referred cases, ten had been accepted by Leigh Day & Co, of which eight cases took up ALP policies (two being funded under other policies because they were not insurable under the ALP scheme).  Of those cases, five had been successfully concluded, four of the others had been abandoned and one was ongoing.
19.	Ms Moore goes on in her Statement to say that rather than being a benefit to Leigh Day & Co’s practice, the requirement that they deal with ALP referrals was an obligation they would rather not have.  This was because of the poor quality of the cases referred.  Asked by Mr Marven whether they had ever considered opting out of the referral aspect of the Scheme, she said that they had only done so when the difficulties in the present case arose.  She said that ALP had said that they would consider it.  She said that Leigh Day & Co had not asked about opting out before because they thought that referrals were a necessary evil.
20.	In her Witness Statement Ms Moore said that in the financial year ending 31 March 2004, three referred cases were concluded with costs representing 0.33% of the firm’s turnover.  In the financial year ending 31 March 2006 one referred case was concluded which represented 0.07% of that year’s turnover.  In the year ending 31 March 2007 one referred case was concluded, again representing 0.07% of the year’s turnover.  No referred cases had been billed at all during the financial years ending 31 March 2001, 31 March 2002, 31 March 2003 and 31 March 2005.
21.	In response to the Defendant’s point that these percentages of turnover did not give a helpful indication of the amounts actually billed, a Schedule of Costs received in ALP referred cases was provided at the hearing.  This shows that of the three cases concluded in the year to 31 March 2004, £22,832.64 was billed (0.33% of turnover).  In the year to 31 March 2006, one case was concluded and was billed £4,320.44 (0.07% of turnover).  In the year to 31 March 2007 one case was concluded and was billed £5,760.51 (0.07% of turnover).  Ms Moore said that she did not know if these figures included VAT but that they did include the success fees.
22.	Ms Moore’s Witness Statement goes on to say that in fact ALP scheme firms are required to pay a membership fee which, up to the date when the Claimant’s case was taken on, were as follows:
		Year 1	-	£3,231.25
		Year 2	-	2001 – first instalment £1000 plus VAT.  							The	second instalment was £550 plus VAT.
23.	Ms Moore said that as the ALP scheme had developed, it had adopted a scheme whereby it reduced its membership fees to reflect the number of policies issued in the previous year.  However, she said that this was irrelevant because Leigh Day & Co’s decision to remain members of ALP and offer their clients this policy was based only on their assessment that it was one of the best products on the market for clients.
24.	Mr Marven (in the course of his cross-examination) referred Ms Moore to the document entitled “What is Accident Line”.  Under the heading “Membership Fee” it said:
“For those accepted for Protect, new members fees are £2,750 + £481.25 = £3,231.25.  A refund of £1000 + VAT will be given once 30 policies have been issued.  The membership year runs from 1 October to 30 September each year.”
25.	Ms Moore agreed that this provision had been in force when the Claimant’s policy was issued.  She reiterated that the size of the membership fee and the rebate were not relevant to Leigh Day & Co.  She said that it was relevant only that the ALP policy was a good policy.
26.	Mr Marven asked Ms Moore how many ALP policies had been recorded as having been issued by Leigh Day & Co.  She replied that ALP had told them that 375 policies had been issued and that they had qualified for a refund in most years.  She said that ALP would write on those occasions to say that their membership fee had been rebated and so they paid a reduced fee rather than getting a cheque back.
27.	Ms Moore said that during Leigh Day & Co’s first year of membership of ALP they were charged £50 for any case which was referred to them and which they took on.  She said that ALP had not kept records of referral fees paid but Leigh Day & Co’s records showed that they had paid for between two and four cases.  Since October 2001 they had paid no referral fees.
28.	Ms Moore said that when a case was referred to Leigh Day & Co and the case was taken on, they investigated all other means of funding (such as trade union membership and other legal expenses insurance).  Only if there was no other means of funding and where they agreed to enter into a conditional fee agreement and the case fell within the ALP scheme were Leigh Day & Co obliged to offer the ALP policy.  She said in her Statement that this was very different from other ATE schemes where solicitors are bound to an insurance policy prior to the client being referred to a panel solicitor.  She confirmed that the Claimant in the present case had not been referred to Leigh Day & Co by ALP.
29.	Mr Marven asked whether the ALP application form and the Manual which had been produced by the Defendant’s solicitors were in the same form as those used when Leigh Day & Co applied for membership and when the claimant’s policy was taken up.  She said that they were not because the forms used had changed.  She said that she was pretty sure that they had destroyed the old Manuals because they changed over the years and ALP had advised them to get rid of them.
30.	Mr Marven asked Ms Moore about the “key benefits” mentioned in “What is Accident Line”.  Referrals have already been mentioned.  Others (in addition to access to ALP policies) were Marketing Support service, Communications support and regular e-briefs on legal insurance and business developments, secure member’s website, Advice on current issues, Annual CPD accredited training programme with one free delegate place, Regulatory compliance advice on insurance mediation for new members.
31.	Mr Marven referred Ms Moore to the version of the Manual which the Defendant’s solicitors had produced (January 2003) which had not been in use when the Claimant’s ALP policy was taken out.  She said that she was not aware of how ALP got their referrals.  She said that she thought Leigh Day & Co received printed newsletters and e-briefs from ALP.  However they had not sought help from ALP about advertising or funding.  She said that she had attended one of  ALP's training conferences and that it was designed to assist members of the scheme in understanding how the Scheme and its policies work.  She agreed that the training conference would have been CPD accredited.
32.	Mr Marven referred Ms Moore to the Case Report Form which forms part of the Manual provided by the Defendant’s solicitors.  She agreed that this was the form which Leigh Day & Co would complete when an ALP policy was issued.
THE PAYING PARTY’S SUBMISSIONS
33.	When Ms Moore’s oral evidence was concluded Mr Marven referred to the conditional fee agreement which had been signed in this case.  It is dated 2 September 2002.  He referred to that part of the agreement under the heading “Other points”.  So far as is relevant, it says:
“Immediately before you signed this agreement, we verbally explained to you the effect of this agreement and in particular the following:
e	(i)	 In all the circumstances we presently believe, on the information currently available to us, that a contract of insurance with Accident Line Protect is appropriate.  Detailed reasons for this are set out in Schedule 2.
	(ii) In any event, we believe it is desirable for you to insure your opponent’s charges and disbursements in case you lose.
	(iii) We confirm that we do not have an interest in recommending this particular insurance agreement.”
34.	He then referred to Schedule 2 of the agreement, which says:
“The Insurance Policy
In all the circumstances and on the information currently available to us, we believe that a contract of insurance with Accident Line Protect is appropriate to cover your opponent’s charges and disbursements in case you lose.  This is because:
-	the cover is comprehensive and designed to meet the financial exposures you are likely to meet if you lose.
-	We receive no commission from this insurance
-	The premium has been designed to be reasonable, comply with the Civil Procedure Rules and to be recoverable from your opponent if you win
-	It is a delegated authority scheme which enables us to obtain insurance cover on your behalf immediately
-	It is a long established Conditional Fee Agreement insurance policy and is the only one that is endorsed by the Law Society of England and Wales.
We are not, however, insurance brokers and cannot give advice on all products which may be available.”
35.	Mr Marven drew attention to paragraph e(iii) where it is said:
“We confirm that we do not have an interest in recommending this particular insurance agreement.”
36.	He also drew attention to the paragraph in Schedule 2 which says:
“We receive no commission from this insurance.”
37.	Mr Marven referred to the copy of the Claimant’s ALP policy included in the agreed bundle showing the premium of £813.75 and the policy start date of 02/09/02.
38.	Mr Marven referred to paragraph 4(2)(e)(ii) of the Regulations.  Leigh Day & Co had recommended the ALP policy to the Claimant and had recorded this in paragraph e(i) under “Other points” in the conditional fee agreement.  They were therefore obliged to inform the Claimant whether they had an interest in doing so.  They had said in paragraph e(iii):
“We confirm that we do not have an interest in recommending this particular insurance agreement.”
39.	Mr Marven confirmed that the issues to be decided were those which he had set out in paragraph 1 of his Skeleton Argument.  These are recited in paragraph 5 above.  The first of these is:
“Did Leigh Day & Co have an interest in recommending the ALP policy?”
40.	Mr Marven referred to paragraph 29 of the judgment of the Court of Appeal in Hollins v Russell (and other appeals) [2003] EWCA Civ 718, where Brooke LJ (giving the judgment of the court) said:
“In February 2000 the Lord Chancellor published the Government’s conclusions following this consultation.  Although the Law Society and the senior costs judge, at paragraph 84, had told the Government that they believed the new Client Care Code adequately covered the need to provide additional information about CFAs, the Government decided on balance to prefer the views put forward by other respondents and to strengthen that part of the new Regulations which required the provision of such information.  It also decided to “draw on the example of the solicitors’ ‘Client Care Code’ to require the legal representative to provide explanations of different possibilities open to the client on the insurance front.  This part of the paper concludes, at para 83:
‘If the legal representative recommends a particular product, but also has an interest in doing so, for example because he or she will receive a commission or is a member of the insurer’s panel of  solicitors, then this must be disclosed to the client’.”
41.	He also referred to paragraph 35 of that judgment where Brooke LJ said:
“It will be noted that Regulation 4(2)(e)(ii) gives effect to the Government’s identification of the need for a legal representative to disclose any interest he may have when he recommends a particular insurance product.”
42.	Mr Marven also referred to the judgment of the Court of Appeal in Garrett v Halton Borough Council [2007] 1 WLR 554 where Dyson LJ (giving the judgment of the Court) said (at paragraphs 88 to 102) that there was no reason why regard to the legislative history of the 2000 regulations should not be given by the court nor that the 2000 regulations should be construed narrowly because of their potentially draconian effect on solicitors.  He said that paragraph 83 of the consultation paper clearly required the solicitor to disclose any interest that he in fact had in the particular insurance product, not merely any interest that the solicitor believed he had.
43.	Dyson LJ explains the background to the Garrett case in paragraphs 80 to 84 of the judgment.  In paragraphs 96 to 102 he gives the Court’s reasons for finding, on those facts, that the judge had been right to hold that Websters acted in breach of regulation 4(2)(e)(ii).
44.	Counsel for the Appellant had submitted that:  (i) there was no obligation on the solicitors to disclose any financial interest resulting from their membership of the Ainsworth panel; but (ii) if there was such an obligation, it was discharged by informing Ms Garrett that they were on the Ainsworth panel.
45.	Dyson LJ said:
“97.	We do not accept the first of these submissions.  There was a close relationship between Websters and Ainsworth.  Websters were dependent on Ainsworth for referrals of cases, although it is unclear to what extent.  As Mr Morgan points out, cases are the lifeblood of solicitors.  The profit generated by cases is likely to be of greater significance to solicitors than commissions paid on insurance premiums paid for ATEs in connection with CFAs.  The indirect financial interest in maintaining a flow of work through membership of a panel of solicitors is greater than the direct financial interest in commissions paid for insurance premiums.  The advice to use the Ainsworth insurance product came in a CFA that it had apparently supplied to its panel solicitors and which bore its livery.  As the judge pointed out at para 7 of his judgment on the application for permission to appeal the decision of the district judge:
‘But the crunch averment in the points of dispute was that failure to comply with recommending the NIG policy would lead to termination of panel membership, and I accept from the lack of response to that direct matter that it is a proper inference that in fact it would have done so, in the sense that the claimant solicitors, Websters, recommended to some clients to go elsewhere for their ATE insurance, then they would have been taken off the panel, or, as the deputy district judge put it slightly differently, “I am not satisfied that the claimant has established that the claimant solicitors have no interest in recommending this policy”.  Although not a direct financial interest, it would be a perfectly understandable indirect financial incentive, if by not recommending a particular policy, a solicitor  was taken off a panel of solicitors where there was a not insubstantial amount of work fed through to them because they were members of that panel.’
 98.	Mr Bacon has not challenged this finding.  Accordingly, Websters did have a financial interest in recommending the NIG insurance to Ms Garrett.  Was there sufficient disclosure of that interest?  In our judgment, the judge correctly concluded that there was not.  In considering the effect of the explanation given to Ms Garrett during the telephone conversation on 19 June 2003, it is important to have regard to the unequivocal statement in the CFA itself: ‘we confirm that we do not have an interest in recommending this particular insurance agreement’.  In the light of that clear statement, it would be surprising if during the telephone conversation the legal representative had said that Websters did have an interest in recommending the policy and had told Ms Garrett what that interest was.
99.	The statement that Websters had no interest in the insurance premium “although we are on the AA Panel” did not disclose to Ms Garrett that Websters had a financial interest in remaining on the panel which would be lost if she did not accept their recommendation that she enter into an ATE with NIG.  She could not have known from what she was told that Websters were recommending the NIG policy because this was dictated by their financial interests.
100.	She would not have understood the significance of Websters being of the Ainsworth panel.  As Mr Morgan suggested in argument, most laypersons would be likely to believe that membership of a panel was a mark of quality control.  This is borne out by the evidence of Chris Ward, who is managing director of Abbey Legal Protection.  He explains that Accident Line is a scheme managed by Abbey Legal Protection on behalf of the Law Society.  It is a membership scheme for which firms pay a fee in return for a range of services, including referrals.  Membership is based on quality criteria, one of which is that solicitors must have an individual member of the Law Society Personal Injury Panel in their office.
101.	At para 90 of Hollins v Russell, the court recorded the submission of Mr Drabble that the statutory regulation had two distinct aims.  The second, he submitted, was ‘to protect the client – to ensure so far as possible that she understands what she is letting herself in for and is able to make an informed choice amongst the funding options available to her’.  The court seems to have accepted this submission.  We certainly would.  In our judgment, by informing Ms Garrett that they were on the Ainsworth panel, the Websters representative did not disclose the real financial interest they had in recommending the NIG policy.
102.	Ian Austen-Jones is a partner in Websters.  He says that most clients are not interested in their explanations about insurance.  Only a handful make enquiries about the insurance they recommend, and he has never known a client to refuse an insurance product that he has recommended.  If clients are never told that membership of the Ainsworth panel means that Websters can only recommend the NIG policy, this may not be surprising.  But even if clients rarely show any interest in these mattes, that is not a good reason for not giving effect to the plain intention of Parliament.
46.	Mr Marven said it was true that the throughput of referrals in the present case was much lower than in the Garrett case but that, even so, this did not mean that Leigh Day & Co had no interest in recommending the ALP policy.  The receipt of work at any level was, he submitted, an interest.  Further the interest was not in the referrals which had already been made but in the expectation of future referrals.
47.	Mr Marven submitted that paragraph 102 of the Court of Appeal’s judgment showed that it was no answer to say that the ALP policy was a good policy which the client would have taken up anyway.  He said that the regulations required that the client be informed of the solicitors’ interest so that he or she could make an informed choice.
48.	Mr Marven submitted that, absent any contrary evidence, the court should assume that there had been no fundamental changes in the ALP Manual since the claimant took out the ALP policy on 2 September 2002.  The January 2003 Manual set out Terms and Conditions of Membership.  On page one it states:
The Manual contains the operational procedures for Accident Line, compliance with which forms part of the Terms and Conditions for membership of Accident Line and its associated services:
•	“The Referral Service
•	The Marketing Service
•	The Training Service
•	The Funding Service”
49.	The Manual sets out the duties of members as follows:
“To issue an Accident Line Protect insurance policy in all eligible CFA cases.
To comply with all requirements in the manual or published form Accident Line from time to time in relation to your delegated authority to issue policies and to conduct cases.
To ensure that your office has a member of the Law Society’s Personal Injury Panel with responsibility for supervision of Accident Line cases.
To permit us to inspect any of your documents or records relating to Accident Line and its associated services, files of cases referred to you by us or insured with Accident Line Protect and to provide such information as we may require about those cases.
To comply with the Accident Line Standards Charter.
To provide facilities (whether through your firm, the Bank of Ireland or other banks or finance houses) to all Accident Line products for the funding of premiums and disbursements.
To pay all membership fees when due.”
50.	The Manual then provides:
“We may suspend your membership of Accident Line when we reasonably consider that you have breached the obligations set out in ‘Your Responsibilities’ and/or there are significant or persistent breaches of Your Duties.
We will give one month’s notice of suspension unless, in our opinion, we feel by your actions, conduct or otherwise, that you have prejudiced or are likely to prejudice our position or that of Underwriters, when we reserve the right to suspend your membership with immediate effect.
In the event of suspension of Membership, you will receive no further allocated referrals and you will not be authorised to issue Accident Line Protect policies until and unless the membership is reinstated.”
51.	Mr Marven referred to the Application Form which the Defendant’s solicitors had provided.  He submitted that there was no evidence that the Application Form which Leigh Day & Co had signed was significantly different.  It said, under Section H:
“I understand that it is a condition of Accident Line membership that all eligible (i.e. not just referred) CFA cases must be insured with Accident Line.”
52.	He referred to the document ‘What is Accident Line?’ and to the Key Benefits referred to.  He submitted that this showed that a member firm would receive the following benefits from ALP:
“(1)	Maintaining the referral of work from ALP.
(2)	The other benefits which membership provided such as marketing support, practice funding, advice and guidance, free training and CPD.
(3)	A discount to the firm’s membership fee if the firm recommends the ALP policy in a certain number of cases per year.”
53.	Mr Marven submitted that those benefits, or for that matter any of them, constitute a financial interest in recommending the ALP policy.  The interest in making the recommendation lay in the solicitors’ interest in supporting and maintaining the scheme and their membership of it from which the solicitors derived a benefit.  Moreover, the terms of the ALP scheme place members under an obligation to recommend the ALP policy, and a breach of that (or any) obligation entitles ALP to terminate panel membership.  The obligation to make the recommendation was itself and by itself a declarable interest.  It was immaterial that the benefits derived from membership of the scheme were negligible.  Any interest had to be declared.  It could not, he submitted, have been intended that the court should analyse the extent of the interest in each case.
THE RECEIVING PARTY’S SUBMISSIONS
54.	Mr Williams, in reply, said that the basic legal framework put forward by the Defendant was accepted and was not controversial.  The issue in the case boiled down to “what is an interest within the meaning of the Conditional Fee Agreements Regulations 2000?”
55.	He said that in Garrett v Halton Borough Council the Court of Appeal had been concerned with a claims farming scheme operated by a company called Ashley Ainsworth.  The central question was simply whether the ALP arrangement was to be treated as being the same as the claims farming scheme in Garrett.  He submitted that there were very obvious differences and that accordingly there was no basis for finding that the ALP conditional fee agreement was defective.
56.	He submitted that the essence of schemes such as the Ashley Ainsworth scheme was work referral.  The claims management company acquired cases and farmed them to solicitors, who ensure in return that their clients subscribe to the claims farmer’s scheme (which generates income for the claims farmer via commissions and referral fees from solicitors, doctors, ATE underwriters and others).  The solicitor must recommend the farmer’s insurance, or the flow of referrals will dry up.  From the solicitors’ perspective, work referral could only be described as the raison d’être of the arrangement.  These facts were, he submitted, central to the Court of Appeal’s conclusion in Garrett that the solicitors had an interest in recommending the Ashley Ainsworth product.  This appeared from paragraph 97 of Brooke LJ’s judgment (see above).
57.	Mr Williams submitted that there was a real qualitative difference in the ALP arrangements.  ALP did not operate as a work referral scheme.  Its primary purpose was the provision of effective and high quality ATE insurance.  Work referral was a peripheral and subordinate element in a much broader package and did not create a declarable interest within the meaning of the Regulations.
58.	He submitted that in order to be declarable as an interest under the Regulations, the commercial pressures on a solicitor to recommend a particular policy had at least to be sufficient to give rise to a reasonable concern that the solicitor might fail in his duty to act in the best interests of the client.
59.	In ALP cases, he submitted, the solicitor’s obligation to recommend the policy arose not as a hidden quid pro quo for the referral of a case, but as the ordinary consequence of a conventional ATE arrangement, where the concern of the underwriter was to avoid adverse selection.  Such arrangements had been approved by the Court of Appeal in Rogers v Merthyr Tydfil CBC [2006] EWCA Civ 1134.  Giving the judgment of the court, Brooke LJ had said:
“113.	Mr Williams, who appeared for the defendant, boldly asserted that in tying himself to DAS in the way he did, Mr Cater was in breach of section 4(1) of the Solicitors’ Introduction and Referral Code 1990, which reads:
‘If a solicitor recommends that a client use a particular firm, agency or business, the solicitor must do so in good faith, judging what is in the client’s best interest.  A solicitor should not enter into any agreement or association which would restrict the solicitor’s freedom to recommend any particular firm, agency or business.’
“114.	This was a surprising submission, given that the success of ATE insurance has been dependent from the outset on arrangements like these.  They are designed to prevent ‘cherry picking’ and to ensure that very many low risk cases are available as a counterweight to the few high risk cases.  Mr Cooksley immediately disavowed this proposition on behalf of the Law Society.  He told us that solicitors had been advised by the Law Society that they would not act in breach of the Code if they made reasonable contractual arrangements of this kind with ATE insurers.  The use of the milder word ‘should’ as opposed to the more prescriptive word ‘must’ shows that this approach by the Law Society to the construction of this part of its own Code was not an unreasonable one.”
60.	Mr Williams said that there was no suggestion that the client had, in that case, been informed of the arrangement with DAS.  Although that was not a Regulation 4 case, it showed, he submitted, that the Court of Appeal did not consider that there had been any breach of the Introduction and Referral Code 1990.
61.	Mr Williams submitted that 
(a)	ALP differs fundamentally from the claims farming arrangement considered in Garrett, which had work referral as its raison d’être.
(b)	Work referral was a subordinate part of the ALP scheme, and in any event recommendation of the policy is not its quid pro quo.  Recommendation was always required, in suitable cases, regardless of the provenance of the claim, for the conventional (and beneficial) insurance purpose of avoiding adverse selection.
(c)	The driver of the ALP arrangement was the quality of its product.
(d)	Even if this were not so generally, it was so specifically.  Leigh Day & Co derived so little benefit from ALP’s minimal level of work referral that they had no declarable interest in the policy.  Either there was no interest at all, or any interest was de minimis.
CONCLUSION
62.	I accept Ms Moore’s evidence.  In my judgment the ALP scheme is described sufficiently in the documents which were before the court for it to be properly understood.  It is a scheme whereby the quality of the legal representative’s work is an integral part and the policy is restricted to those who satisfy the insurer as to that quality.  If a legal representative wishes to offer the policy to clients, he or she must comply with the rules of the scheme.
63.	The benefits of the scheme as described in the documents consisting of (among other things) referrals, marketing support, regular e-briefs, advice on current issues and annual CPD accredited training are, in my judgment, peripheral to (so far as the legal representative is concerned) his or her wishing to be part of the scheme in order to be able to offer the policy to clients.
64.	This scheme is, as Mr Williams submitted, fundamentally different from the claims farming arrangements of the kind which was the subject of Garrett v Halton Borough Council.  In such arrangements the legal representative was obliged to declare an interest in recommending the policy.  The interest was, however, one where he or she had an advantage or profit in recommending the policy.  Self-interest would be a description which would apply in those circumstances.
65.	It is clear from the judgments to which I was referred that the Regulations were made for the purposes of client protection.  In the circumstances of this case, the interest which the legal representative has in recommending the policy is (as Ms Moore’s evidence demonstrates) simply that it is a good policy.  To be able to recommend it the legal representative is obliged to join the scheme and obey its rules.  Those rules, as described in the documentation, appear to be designed to avoid adverse selection (a perfectly acceptable aim by the insurer) and to ensure the quality of those who recommend the policy (another acceptable aim, in my judgment).
66.	Accordingly, in my judgment, Leigh Day & Co did not have an interest (within the meaning of the Regulations) in recommending the ALP policy.