Tankard v John Fredricks Plastics Ltd

For the purposes of regulation 4 of the Conditional Fee Agreement Regulations 2000, a solicitor has an interest in recommending insurance where a reasonable person, knowing the relevant facts, would think that the interest might affect the solicitor’s advice. Membership of an insurance panel does not invariably create such an interest.

If a disclosable interest exists, consumer protection requires the solicitor to explain its true nature with sufficient clarity to enable an informed decision. Merely stating that an interest exists, or that panel membership permits recommendation of only one policy, is insufficient.

These linked first appeals concerned successful personal injury claims funded through conditional fee agreements. The claimants’ solicitors belonged to the Accident Line Protect scheme and recommended its after-the-event insurance. The defendants or their insurers contended that referrals, subscription rebates, exclusivity and other scheme benefits gave the solicitors an undisclosed interest under regulation 4(2)(e)(ii) of the Conditional Fee Agreement Regulations 2000, making the agreements unenforceable.

In Hibberd, Master Wright held that no relevant interest existed. In Jones, District Judge Dancey held the agreement unenforceable. In Tankard, District Judge Sykes determined preliminary costs issues after the solicitors had conceded that they possessed a relevant interest. The central question was the meaning of “interest” and its application to the Accident Line Protect scheme.

1. The defendants’ appeal in Hibberd was dismissed, the solicitors’ appeal in Jones was allowed, and the Tankard solicitors were permitted to withdraw their concession. None of the three firms possessed a disclosable interest under regulation 4(2)(e)(ii) of the Conditional Fee Agreement Regulations 2000.

2. A solicitor has an interest for this purpose if a reasonable person, knowing the relevant facts, would think that the interest might affect the advice given to the client. This objective test reflects the regulation’s consumer-protection purpose. It requires disclosure of self-interest which might affect the solicitor’s independent advice, but does not require disclosure of matters incapable of adversely influencing that advice.

3. Membership of an insurance panel does not invariably amount to a relevant interest. Garrett v Halton Borough Council [2006] EWCA Civ 1017 depended on a materially different relationship involving substantial dependence on referrals and the threatened loss of significant work. Under the Accident Line Protect scheme, the overriding reason for membership and recommendation was the quality of the insurance. Referrals were incidental, rebates were minute relative to turnover, and the exclusivity requirement served the legitimate insurance purpose of avoiding adverse selection. Delegated authority, funding access and ancillary services likewise created no relevant conflict.

4. The court therefore did not need to decide whether adequate disclosure had occurred. It nevertheless stated, obiter, that disclosure of an actual interest must identify its nature. A bare declaration that an interest exists does not enable an informed decision. Nor is it sufficient merely to state that panel membership contractually permits recommendation of only one policy. The solicitor must explain the benefits of continued panel membership clearly enough for the client to assess their significance. The contrary dicta in Garrett at [103] should not be followed.

5. Also obiter, a CFA stating that the solicitor has no interest would prevent a clear disclosure where another document purported to declare one. If a relevant interest existed, failure to disclose it would ordinarily be material and could not readily be treated as de minimis.

1. Court of Appeal (Civil Division): dismissed the defendants’ appeal in Hibberd, allowed the solicitors’ appeal in Jones, and permitted the Tankard solicitors to withdraw their concession so that the matter could be determined on its merits.

2. Supreme Court Costs Office: Master Wright held in Hibberd that the solicitors had no interest within regulation 4(2)(e)(ii) of the Conditional Fee Agreement Regulations 2000.

3. Southampton County Court: District Judge Dancey held in Jones that the conditional fee agreement was unenforceable and found no material distinction between the Accident Line Protect scheme and the scheme considered in Garrett.

4. Liverpool County Court: District Judge Sykes determined preliminary costs issues in Tankard after the solicitors conceded that they had a relevant interest.