The judgment of Mr Justice Hickinbottom in Clarke v McDaniel & Co (15 October 2014, unreported) provided a salutary reminder to litigation solicitors of the need to ensure that in their initial discussion with a potential client they advise and explore with the client other sources of funding litigation.
The pertinent facts of the case are as follows. In June 2007 Ms Clarke had an accident at the premises of Eversheds LLP. Subsequently, some 2 ½ years later, she consulted McDaniels & Co, a firm that she had used in copyright work, about initiating a personal injury claim. McDaniels duly issued the claim but, crucially, failed to advise her that, if she was a member of a trade union, she might have an entitlement to legal representation and/or funding through her union. McDaniels managed the claim for the best part of year before Ms Clarke terminated their retainer and moved to personal injury specialists Nicholson Davis Solicitors.
The action with Eversheds subsequently settled and, as per the terms of the Tomlin order, Eversheds were to pay Ms Clarke’s reasonable costs. The order paved the way for an assessment under the Solicitors Act 1974 of both McDaniels’ and Nicholson Davis’ fees. McDaniels served their bill of costs on 18 June 2013. Just Costs, representing Ms Clarke duly served their points of dispute in which they highlighted the fact that McDaniels had breached code 2.03 of the Solicitors Code of Conduct 2007 in failing to advise of alternative sources of funding. They went on to argue that, because Ms Clarke would have been entitled to funding by virtue of her GMB union membership, all of the costs sought by McDaniels should be deemed unreasonable. In their reply, McDaniels conceded that they had failed to advise Ms Clarke about the availability of union funding but pointed out that: (i) Ms Clarke owned her business so they weren’t to know that she was a union member and (ii) in any event, when Ms Clarke had complained to the Legal Ombudsman he had stipulated that McDaniels should pay Ms Clarke the sum of £100 by way of compensation.
The matter came before Master Gordon-Saker in the SCCO who held that if he was satisfied as to both causation and remoteness then all the costs sought by McDaniels were unreasonable under the Solicitors Act by virtue of its failure to advise Ms Clarke as to her entitlement to free legal representation. McDaniels countered by arguing that, notwithstanding Ms Clarke’s contentions in her points of dispute, the absence of a witness statement from Ms Clarke or her attendance at the hearing, meant that the Master had to adjourn the hearing. The two points on which they wished to cross-examine Ms Clarke were that: (i) McDaniels were her family solicitor and, therefore, she would have retained them irrespective of the availability of union funding; and (ii) following the appointment of Nicholson Davis and when advised as to union funding she did not avail herself of it.
Master Gordon-Saker found, however, that a statement from Ms Clarke would be of little value; put shortly it would only be a post-rationalisation of what she would have done and of little use for that reason. Having come to this conclusion the Master held that: (i) McDaniels should have advised Ms Clarke of funding; (ii) they did not do so; (iii) Ms Clarke would have received union funding had she sought it; (iv) on the balance of probabilities she would have availed herself of it.
McDaniels subsequently appealed arguing (i) that the Master erred in law in making findings for which there was no evidence; and (ii) that his decision was unjust because of a serious procedural irregularity because they were denied an opportunity to cross-examine Ms Clarke. The appeal was heard by Mr Justice Hickinbottom sitting with Master Campbell as an assessor. He dismissed McDaniels’ first argument on the facts holding that the Master had ample evidence on which to make the findings he did. As to the second argument he held that a witness statement and/or cross-examination would been of limited use; not least because, had there been a witness statement, McDaniels would have sought to diminish its importance on the basis that it was self-serving and of little value. He also held that cross-examination would have been redundant: on the facts McDaniels were not Ms Clarke’s "family solicitor", they had only acted for her firm previously in copyright disputes . Further, because of the terms of the CFA Ms Clarke had with Nicholson Davis, she would have been in no better position had she sought union funding and as such nothing could be inferred from her decision to enter into the CFA rather than obtain funding from the GMB. Accordingly, the appeal was dismissed and McDaniels were unable to recover their fees.
The case history above offers a salutary reminder of the consequences of non-compliance with the Solicitors Code of Conduct and how, given the right facts, an assessment under the Solicitors Act can be such as to deem the entirety of a bill of costs unreasonable. The case underlines the importance of going through a comprehensive checklist with a client of potential sources of funding and giving informed advice about funding options at the outset of the retainer. Further, the checklist approach must be carried out regardless of any pre-conceived notions of the potential client’s background.
McDaniels’ downfall in the present case was its assumption that Ms Clarke, because she owned her own business, would not be a member of a trade union.
Finally, the case also gives an insight into the procedure of the SCCO when analysing what a Claimant would have done had he or she been correctly advised. It is clear that the absence of a witness statement does not inhibit the SCCO from making findings of fact as to causation and remoteness if the surrounding evidence is tolerably clear. However, it is questionable whether judges in other courts or tribunals would adopt such a flexible approach to questions of fact when dealing with costs.
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