News focus: Breaking protocol on client capture

For tourists and school parties traipsing into the Supreme Court last week, it was barely interesting enough to keep them in their seats for more than 10 minutes.

But for solicitors and insurers, the arguments debated in the highest chamber could have huge consequences.

By Supreme Court standards, Edmondson v Haven appears a mundane dispute: Edmondson initiated six claims for low-level RTA damages which Haven settled directly with the clients. This arrangement deprived the lawyers of around £12,500 in fixed costs that would have been due had the claims proceeded normally. But was it within the spirit – and, crucially, the legal obligations – of the pre-action protocol for these claims?

The arguments heard in court demolished the relative harmony between insurers and solicitors that has prevailed since the protocol was conceived to bring down the costs of low-value claims. What Haven has done, Edmondson argued, is to undermine that entente cordiale at a time of high controversy over other civil litigation reforms. A rulebook painstakingly drafted over many months – and created in the public interest – has been overridden.

‘The protocol was established after long and careful negotiation between a number of different stakeholders,’ Jonathan Crow QC, representing Edmondson, told the court.

It is the aim of the protocol that the insurer pays fixed costs at pre-determined stages, he said. ‘Quite deliberately the insurer has avoided the quid pro quo of using the protocol. Haven has acknowledged the claim, got to know the name, contact details and nature of the injury and been given a good estimate of the offer – all by the information provided by the efforts of Gavin Edmondson Solicitors which has been lodged into the protocol.’

The court heard that one draftsman, who helped to create the protocol in the first place, described Haven’s behaviour as ‘astonishing’ – though Crow said other insurers may have been involved in similar conduct.

The 4 Stone Buildings QC said Haven had initially apologised to Edmondson when the claims were settled directly, but it quickly became apparent the insurer had ‘taken advantage’ of its adversary and ‘bucked the regime’ to meet its own ends.

‘There was deliberate deception,’ Crow alleged. ‘Far from being a lapse, this was actually a policy of the insurer and they were encouraging their staff to make these approaches. They had an active policy of subverting the protocol.’

Crow pointed out that Haven apparently stands alone in fighting this battle, with no intervention from the Association of British Insurers.

By contrast, the Law Society was granted permission to intervene. Its written evidence broadly supported Edmondson’s arguments. The Society said the principle of equitable intervention where existing remedies are inadequate had to be extended to this case if the court wanted to maintain fairness. The future of many of its members may hinge on the Supreme Court backing Edmondson.

The Society said the court ought to deploy the principle of equitable interference to protect the entitlement of the solicitor to receive these costs. Solicitors were entitled under the terms of the protocol to fixed fees from insurers, as there is no contractual liability applying to the clients, Chancery Lane said.

‘There is constituted a tripartite arrangement which is binding between the client, the solicitor and the insurer,’ the submission stated. ‘If the insurer chooses to become an authorised user and a claim is properly made by a solicitor acting on behalf of a client then, if the insurer sends an electronic acknowledgement [to the CNF], it becomes liable to pay the stage one costs.’

It added that solicitors now want guidance from the court as to whether and to what extent equitable interference can apply in a fixed costs regime in which the indemnity principle does not apply.

‘The right of parties to settle disputes directly is a matter of individual freedom and the protocol should not be used as a tool for preventing private settlements’

Yet insurers know this is a case worth fighting for. If Haven, which never admitted liability, can persuade judges they should be entitled to bypass solicitors and deprive them of their costs, it is potentially lucrative.

Its arguments advanced in court were around contractual entitlement and public interest. On the latter point, Haven posed a simple question: where is the harm? Edmondson insisted – backed by independent research – that represented RTA victims stand to secure much greater compensation by sticking with their solicitors.

But claimants are not generally in this process for the long haul; they have suffered and they want recompense as soon as possible. Were the six individuals at the heart of this case upset at their solicitors missing out on their costs? Haven would suggest not.

Lord Marks QC, of 4 Pump Court, argued the Court of Appeal had placed the interests of solicitors above those of the public in ruling in favour of Edmondson.

He said: ‘The right of parties to settle disputes directly is a matter of individual freedom and the protocol should not be used as a tool for preventing private settlements. All the evidence suggests the claimants were delighted to be able to settle their claims quickly.’

He added that Edmondson failed to protect itself by working on a funding arrangement that did not prevent direct settlements, and included no provision for costs if settlements were made.

Was Haven obliged to pay costs to Edmondson when the law firm’s involvement had effectively stopped after the issuing of a claims notification form? Could costs really be claimed for stages in the protocol that were never encountered?

Marks insisted that solicitors had no entitlement or contractual provision to any costs and indeed that the aim of the protocol was not to ensure a solicitor can achieve a right to payment simply by issuing a claim notification form.

Notification gave solicitors ‘no more than a contingent expectation’ of costs, he said, suggesting that the Court of Appeal had created a new jurisdiction where solicitors would be granted costs in the absence of any payments from their clients.

Marks said the claims notification forms had given notice that Edmondson was instructed and working under a CFA, but crucially did not establish any right to costs. ‘Haven believed they were perfectly entitled not to pay the fees – they are not trying to cheat anyone,’ said Marks.

While these arguments might not have kept the Supreme Court day-trippers enthralled, insurers and lawyers await its verdict with apprehension. Business models the length and breadth of the country hinge on the outcome.