Can a solicitor be liable for costs if he or she takes on a case for an impecunious claimant under a CFA where there is no ATE insurance policy in place and where he or she funds the disbursements necessary to allow the case to proceed?
Neil Hamilton famously sued Mohammed Al-Fayed for defamation over ‘cash for questions’, lost and was ordered to pay £1.3m in costs. Mr Al-Fayed then pursued Mr Hamilton’s financial backers (not parties to the litigation) for costs, lost and was ordered to pay their costs.
Unsurprisingly there has not been as much media attention and public interest in the case of Tinseltime v Eryl Roberts  EWHC 2628 which was a case in the technology and construction court. There was no personal injury involved: the claimant claimed that the defendant had created dust whilst demolishing a building and the dust had damaged machinery and caused a loss of profit.
The claim was unsuccessful and the claimant was ordered to pay the defendant’s costs. The defendants applied for an order under section 51(3) of the Senior Courts Act 1981 and/or CPR 48.2 that the claimant’s solicitor pay the costs as a non-party funder.
The claimant’s solicitor had entered into a CFA. He had been unduly optimistic about how straightforward the issue of liability would be. It was clear that he was aware that if the claimant lost it would not be able to pay costs. He estimated the overall costs likely to be incurred to be £20,000 and disbursements, £10,000. In the event disbursements amounted to £22,270 and so burnt a sizeable hole in his pocket. He had expected to recover the disbursements from the defendant (if successful).
The judge concluded that the following were the correct legal principles to apply. The first question was whether it just in all the circumstances to make an order. Secondly, when considering a solicitor, had he acted beyond or outside his role as a solicitor conducting litigation? Thirdly, the fact that a solicitor is acting under a CFA and stands to benefit financial from the outcome does not mean he has acted beyond or outside his role as a solicitor. Fourthly, the starting point is that the position of a solicitor funding disbursements is no different from one who is not as both positions are legitimate and meet a legitimate public policy aim.
The judge was of the view that, in order to be successful in applying for a non-party costs order there would have to be present either some financial benefit to the solicitor over and above the benefit which he could expect to receive from the CFA or some exercise of control of the litigation over and above that which would be expected from a solicitor acting on behalf of a client (or a combination of both).
By way of example the judge suggested that a solicitor’s desire to achieve a successful outcome might cause him to take over the running of the litigation for his own ends. Another example was of a case where the damages claimed were modest in comparison to costs incurred so that the client had lost interest in the proceedings but the solicitor was wedded to them in order to recover his costs. The circumstances of a case might justify the conclusion that a solicitor was making all the decisions for his own benefit.
The defendants argued that the claimant’s solicitor had acted improperly, unreasonably or negligently in his conduct of the case. The judge said this was the province of wasted costs (which were not awarded - although pursued in the alternative). He said courts should be astute to keep wasted costs and non-party costs separate.
The claimant’s solicitor may have misjudged the case but he came out of the judgment rather well. The judge commented that he was not motivated solely by financial self-interest but with the laudable aim of providing access to justice to the claimant. He thought the claim was genuine and had written a file note stating “the company has been crippled by the defendant tortfeasors and needs assistance.”
The judgment draws to a close effectively with a warning against letting financial self-interest get the better of you and an encouragement from a judge to practitioners to be motivated not solely by financial self-interest but by a concern for justice and access to justice. Such a consideration (and file-note for the record!) might well prove worthwhile…
Photograph courtesy of freefoto.com