Hollins v Russell [2003] EWCA Civ 718

Six conjoined appeals concerning the enforceability of Conditional Fee Agreements under the 2000 Regulations. The Court of Appeal held that only material breaches rendering CFAs unenforceable, rejected technical challenges by defendant insurers, and established procedures for CFA disclosure in costs assessments.

Facts

These six conjoined appeals concerned the new Conditional Fee Agreement (CFA) regime introduced by the Access to Justice Act 1999 and the Conditional Fee Agreements Regulations 2000, which came into force in April 2000. The new regime permitted success fees and After-The-Event (ATE) insurance premiums to be recovered from losing parties. Defendant liability insurers responded by systematically challenging CFAs for alleged breaches of the Regulations, seeking to rely on the indemnity principle to escape paying any costs.

The appeals raised three distinct issues through six cases: Pratt v Bull and Worth v McKenna concerned disclosure of CFAs in assessment proceedings; Hollins v Russell, Tichband v Hurdman, Dunn v Ward and The Accident Group (TAG) test cases concerned alleged breaches of regulations 2, 3 and 4. The TAG cases involved a commercial scheme in which TAG representatives, rather than solicitors, gave clients the regulation 4 information at home visits, with approximately 211,000 cases potentially affected.

Issues

The court identified three issues: (i) the circumstances in which a receiving party should be put to election to disclose its CFA to the paying party; (ii) the proper construction of “satisfies all of the conditions applicable to it” in section 58(1) of the Courts and Legal Services Act 1990, and the consequences of non-compliance; (iii) whether particular CFAs breached specific requirements in regulations 2, 3 and 4 of the CFA Regulations 2000, including whether a TAG representative qualified as a “legal representative” under regulation 4.

Arguments

Paying parties (defendant insurers)

Insurers argued that any breach of the Regulations, however minor, rendered the CFA unenforceable, and that by operation of the indemnity principle, they could escape paying any costs. They sought routine disclosure of CFAs and supporting attendance notes. In the TAG cases, Mr Burnett QC argued that regulation 4 duties could only be delegated to another qualified solicitor or Fellow of the Institute of Legal Executives, and that delegation to TAG representatives stripped out vital consumer protection.

Receiving parties and interveners

Mr Drabble QC for the Law Society argued that “unenforceable” meant only as between solicitor and client; alternatively that the regulations should be construed realistically; and preferably that section 58(1) should be read so that immaterial breaches did not render CFAs unenforceable. APIL and other bodies described the damaging effect of insurers’ tactics on access to justice and solicitors’ cash flow.

Judgment

Disclosure

The court distinguished Bailey v IBC Vehicles Ltd [1998] 3 All ER 570, holding that the solicitors’ certificate of accuracy was insufficient where enforceability of the entire CFA was in question. Costs judges should normally put the receiving party to its election under the Pamplin procedure to disclose the CFA or prove entitlement by other means. Attendance notes should not ordinarily be disclosed unless a genuine issue arose.

Construction of section 58(1)

The court rejected the submission that “unenforceable” meant only as between solicitor and client, noting Dimond v Lovell [2002] 1 AC 384. Applying purposive construction (R v Secretary of State for Health, ex parte Quintavalle), the court held that the conditions are “satisfied” when there has been substantial compliance with no material departure from what is required. Costs judges should ask:

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 yes, the CFA is unenforceable; if no, the departure is immaterial. The court also held that the ATE premium (recoverable under section 29 of the 1999 Act) and disbursements actually paid by the client could be recovered even where the CFA was unenforceable.

Specific cases

In Hollins v Russell, the April 2000 Law Society model CFA, read as a whole with the Law Society Conditions, sufficiently specified that charges were not limited by damages (regulation 2(1)(d)). In Tichband v Hurdman, although the cap position was not explicitly stated, the hourly rate calculation made the position plain; further, clauses 32 and 33 prevailed over the risk assessment regarding postponement (regulation 3(1)(b)). In Dunn v Ward, “whether” in regulation 4(2)(e)(ii) meant “if” — no positive declaration of no interest was required. The written explanation requirement in regulation 4(5) was satisfied by the plain-English Law Society Conditions attached to the CFA. In Pratt v Bull, the solicitor dealing with a seriously injured elderly woman in hospital had sufficiently complied with regulation 4(2)(c).

TAG cases

The court upheld Master Hurst’s decision that a solicitor could in principle delegate regulation 4 duties to non-qualified persons, including TAG representatives, applying the principles in Law Society v Waterlow (1883) 8 App Cas 407 and modern Practice Rule 13. The key requirement was that the solicitor retained supervisory responsibility. Whether the TAG scheme actually provided adequate supervision was a matter for the subsequent fact-finding trial.

Implications

The court emphasised that Parliament’s purpose in Part II of the 1990 Act was to enhance access to justice and foster new ways of delivering litigation services. The court strongly condemned satellite litigation, citing Latham LJ in Burstein v Times Newspapers that such litigation is “a blot on the civil justice system”. District judges and costs judges must prevent protracted disputes over immaterial breaches.

The decision established a workable materiality test for CFA compliance, protecting solicitors from windfalls to defendant insurers whilst preserving genuine consumer protection. It clarified that disclosure of CFAs should become normal practice in costs proceedings involving success fees, but that attendance notes are not routinely disclosable. The recognition that ATE premiums and disbursements remain recoverable even where the CFA itself fails significantly limits prejudice to clients.

The judgment is significant for access to justice, permitting innovative delivery models like TAG to continue subject to proper supervision, but emphasising that solicitors retain professional responsibility for delegated tasks. The court expressly left open questions of privilege in CFAs and the adequacy of the TAG scheme’s actual operation, which were to be determined at later hearings.

Verdict: The defendants’ appeals in Worth v McKenna and Pratt v Bull (disclosure cases) were allowed. The claimants’ appeals in Hollins v Russell and Tichband v Hurdman were allowed. The defendants’ appeals in Dunn v Ward and in The Accident Group test cases were dismissed.

Source: Hollins v Russell [2003] EWCA Civ 718