Flatman v Germany

A solicitor acting under a conditional fee agreement may fund a client’s disbursements and make repayment conditional on success. That conduct alone does not make the solicitor a real party to the litigation or expose the solicitor to a non-party costs order.

Such an order may nevertheless be appropriate where the solicitor goes beyond the normal professional role by substantially controlling the litigation or pursuing it for a material personal benefit. Disclosure about funding requires caution and must be justified by the apparent strength of the prospective costs application, the probative value of the information sought, privilege and proportionality. Evidence that a solicitor pressed on contrary to the client’s instructions may justify disclosure, including in a sufficiently similar case conducted by the same solicitor.

These conjoined second appeals arose from two unsuccessful personal injury claims conducted by GMS Law under conditional fee agreements without after-the-event insurance. The successful defendants sought information about the funding arrangements to decide whether to pursue the solicitors for costs.

In each case the Norwich County Court refused disclosure, but Eady J allowed an appeal and ordered the solicitors to disclose how the litigation had been funded. Further material subsequently disclosed in Mr Weddall’s case suggested that the litigation might have continued contrary to his stated wish not to proceed without insurance.

The Court of Appeal considered whether funding a client’s disbursements could itself expose a solicitor to a non-party costs order and whether the available evidence justified disclosure in either case.

1. The appeals were dismissed unanimously. The disclosure orders were upheld, although the legal basis relied upon by Eady J was rejected. Richards LJ and Mummery LJ agreed with the judgment of Leveson LJ.

2. Section 58(2)(a) of the Courts and Legal Services Act 1990 permits a conditional fee agreement to make a solicitor’s fees and expenses payable only in specified circumstances. In this context, expenses include own-side disbursements. Once a solicitor pays such a cost, it is an expense of providing advocacy or litigation services. The credit afforded to the client is part of the solicitor’s service. The construction adopted in Jones v Wrexham Borough Council was correct.

3. A solicitor may therefore fund disbursements without thereby becoming the real party, or a real party, to the litigation. After-the-event insurance is not a prerequisite to bringing a claim under a conditional fee agreement. Solicitors may also act for clients whom they know or suspect cannot meet their own costs or an adverse costs order. Funding disbursements, without more, does not create potential liability for a non-party costs order.

4. The power under section 51 of the Senior Courts Act 1981 remains available where a solicitor acts outside the normal professional role. The ultimate question is whether an order is just in all the circumstances. A solicitor may fall within the jurisdiction by being a real party in important respects, particularly where the solicitor substantially controls the proceedings or stands to benefit from them.

5. Disclosure in support of a prospective non-party costs application requires considerable caution. The court should examine the apparent strength of the application, the likely probative value of the documents, legal professional privilege, and whether disclosure would be proportionate and just. Mere speculation that the solicitor funded disbursements is insufficient.

6. The material disclosed in Mr Weddall’s case arguably showed that GMS Law had pressed on without insurance contrary to his instructions and had sought to control the course of the litigation while standing to recover substantial costs. That justified full disclosure. It also supplied a sufficient similar-fact basis for disclosure in Mr Flatman’s case, which had been conducted under comparable arrangements by the same solicitor at the same time. Any disclosure order in Mr Flatman’s case had to preserve the right to assert legal professional privilege.

1. Court of Appeal (Civil Division): In [2013] EWCA Civ 278, dismissed both second appeals and upheld the disclosure orders, though for reasons different from those given by Eady J.
2. High Court, Queen’s Bench Division: Eady J allowed appeals from the county court and ordered GMS Law to disclose how each claim had been funded.
3. Norwich County Court: Judge Moloney dismissed the applications to join or obtain funding information from GMS Law following the unsuccessful personal injury claims.