MR H TV LIMITED V ARCHERFIELD PARTNERS LLP (INFORMED CONSENT AND CPR 46.9) : FULL CASE DETAILS
The preliminary issue in this solicitor and own client costs case was:
- whether the entirety of the solicitors’ fees were incurred with the client’s consent in the sum claimed; or, alternatively
- if not whether at least the level of success fee was incurred with consent.
The relevance of this determination was that if the fees were found to have been incurred with consent then the solicitors would be entitled to the benefit of a presumption under CPR 46.9 that they were reasonable in amount and reasonably incurred.
- The Defendant (“AFP”) alleged that their fees in the sum of £3 million plus VAT (profit costs) and £600,000 plus VAT (disbursements) had been consented to by the client in that fixed sum.
- On their case the sum paid by the defendant in the underlying action (“ITV2”) settled the damages claim, and paid their client’s costs in the sum of £3.6m plus VAT.
- The Claimant (“Mr H TV”) disputed this interpretation of the inter partes settlement and alleged that informed consent had not been given.
- Thus, it was the Claimant’s case that the Defendant was not entitled to the presumption in CPR 46.9.
The defendant’s position
AFP contended that :
- During the period of negotiations and the settlement of its claim, Mr H TV approved the total amount of AFP’s base costs and success fee for
the period prior to the appeal plus AFP’s disbursements, in the sum of £3.6m exclusive of VAT.
- The claimant instructed AFP to represent to ITV2 that the claimant’s liability for costs to AFP was £3.6m, and seek that same sum from ITV2
as the reasonable costs of the action, when entering into the settlement. ITV2 agreed to that figure and paid it, and the claimant thereby by means of the representation secured payment of that sum in full from ITV2 as part of the settlement of the proceedings in October 2017.
- In any case apart from the agreement as to settling for a fixed sum of costs, the claimant approved the percentage uplift in AFP’s CFA dated 21 June 2012 by its agreement to the CFA and that the success fee applies to all of AFP’s base costs.
- Accordingly, the presumptions at CPR r 46.9(3)(a) and/or (b) were engaged.
The claimant’s position
Relying on the decisions in Macdougall v Boote Edgar Esterkin (a Firm)  1 Costs LR 118 and Herbert v HH Law Ltd  EWCA Civ 527 the Claimant argued:
(1) “Approval” by the client under CPR 46.9(3) must be “informed approval” or “informed consent”. This means that:
(a) “approval was given following a full and fair explanation to the client” (Herbert); or,
(b) similarly by Holland J in Macdougall (as approved by the Court of Appeal in Herbert) “the solicitor must satisfy me that it was secured following a full and fair exposition of the factors relevant to it so that the [clients’], lay persons as they are, can reasonably be bound by it.”
(c) Informed approval must be given in respect of the particular cost or costs said to have been approved by the client.
(2) The burden of showing that informed consent was given is on the solicitor.
The Claimant alleged that it did not provide approval or if it did, such approval was not ‘informed’ within the applicable case law.
It said that there was no clear written agreement, no contemporaneous attendance note on any comprehensive basis, that the Defendants’ case rested on attendance notes which simply evidenced discussions about offers to be made to the opponent but that such did not evidence agreement by it that it was to be liable to pay such costs, let alone without any breakdown of them.
Accordingly, in the absence of a comprehensive written document detailing precisely what was agreed the Claimant invited the Court to view the Solicitors’ case with‘ a good deal of scepticism’.
Finally, the Claimant argued that the offer made to ITV2 amounted to an offer to accept a sum from an opponent but that one could not take the step from that agreement to conclude that for the purposes of the CPR the client had waived his rights to challenge costs or that the costs had been incurred with his consent for the purposes of the CPR presumptions. The Claimant’s closing submissions on this point…
“The Defendant’s case now appears to be that merely because the figure of £3.6 million was put forward in negotiations to ITV2 as the Claimant’s costs with the agreement of the Claimant this in itself means that the Claimant had thereby given approval (within the meaning CPR 46.9(3), including “informed consent”) to its uncontestable costs liability being fixed at no less than £3.6m. But it is submitted that this cannot be, and is not, right. During negotiations over a settlement figure in almost any litigated case, D will ask what the C’s costs are in addition to the damages, and C’s solicitor may then find the figure X from the time recording system, draft a letter/email with X in it and pass it by the client who agrees it before sending it out/saying it on the phone to the other side. If the client thereby gave up their rights ever to later question that costs figure (notwithstanding the time limits in Section 70 of the Solicitors Act 1974 (“Section 70”)), then few solicitor-client detailed assessments in such litigated cases would ever be allowed to proceed.
“But that is plainly not the law, and there is no authority cited in support of such a surprising notion. Such a client (including the Claimant here) has not either (i) agreed that figure as its total liability without the right to take advantage of the right to assessment of the bills under Section 70, it has only agreed that this is the solicitors’ claim for costs against itself, subject to any possible later assessment proceedings and (ii) it has in any event not given approval of that figure as its liability “following a full and fair explanation to the client” (per Herbert) or in the words of Holland J in Macdougall “secured following a full and fair exposition of the factors relevant to it so that [the clients’], lay persons as they are, can reasonably be bound by it”. That was clearly not the case here in relation to the £1.5 million base profit costs.”
MASTER VICTORIA MCCLOUD:
My decision on the law
31. In my judgment it is clear that as a starting point, there is a general presumption that where there is an issue over the terms of a retainer, the client’s recollection is to be preferred on the whole (Griffiths v Evans). I accept also that the law as it stands is that based on the decisions referred above, the consent or agreement required for the presumptions in rule 46.9 must be ‘informed’. In my judgment this case does not relate to the terms of the retainer, save perhaps on the CFA success fee point, and hence the case law as to that and as to CBAs is of no real assistance. This case turns on what occurred in terms of the client’s informed – or not informed – consent in relation to the agreement with ITV2 and what it was that it consented to, and what the implications of that consent may be for the application of the presumptions in CPR 46.9
32. It seems to me that the degree to which consent must be informed – i.e. the nature of the information provided to the client – must be fact sensitive. In the case law where the question of informed consent has arisen the issues have been whether sums and rates have been incurred with consent in circumstances far removed from the facts of this case, and where the consent in question had significant implications for the shortfall between the sum paid by an opponent and that for which the client was liable. In Macdougall v Boote Edgar Esterkin (a Firm)  1 Costs LR 118 the client agreed to pay their solicitor £300ph but a rate of 171ph was claimed inter partes, such that there was a substantial shortfall in the recovered costs. The solicitors sought to rely upon the client’s agreement to pay £300ph. Holland J held that the fact, alone, of approval/agreement is not enough, it was the quality of the approval which counted:
“To rely on the Applicants’ approval the solicitor must satisfy me that it was secured following a full and fair exposition of the factors relevant to it so that the Applicants, lay persons as they are, can reasonably be bound by it.”
33. On the facts, the approval was insufficient, the information to the client was ‘misleading’ and the client was led to believe something which was incorrect as to the rate recoverable inter partes. The court, importantly, considered the facts and did not take a rigid or mechanistic approach.
34. The Court of Appeal in Herbert v HH Law Limited reached conclusions consistent with those in the above case, to the effect that a client’s approval will only bind them where their understanding is sufficient that they could be reasonably bound. In this case by contrast we see a very different situation from the above cases on the facts. This case represents a commonplace situation where negotiation takes place which is said to lead to a settlement in which a fixed sum of costs will also be paid to Mr H TV to discharge its liability for costs.
35. In that factual context, therefore,
where the proposed sum fully discharges the client’s liability for own solicitor costs, the nature of the consent required from the client is in my judgment that the client must be informed of the proposed terms of settlement accurately and must understand and consent. If he is so informed and consents then the solicitors are entitled to proceed on that basis, and to make the representations authorised by the client as to the level of costs sought, and it seems to me that if a client has agreed to those terms (absent fraud by the solicitors) then the client is consenting to the solicitors in fact having incurred those costs.
36. Thus in my judgment, where a settlement is reached in that way and in that form, the approach to ‘consent’ should focus on the form and content of the settlement and not on what would be wholly unnecessary extensive explanations and costs breakdowns of the sort one might expect to see – and the case law envisages – if the client was going to face a shortfall in costs and there was a proposed settlement on the table. To have to undertake such a process in the cut and thrust of negotiation as a matter of what would be essentially a formality is likely to impede negotiation. It would be different of course if the facts were akin to the situation in the case law where (e.g.) the rates used for inter partes settlement fell short of solicitor and own client liability.
37. In those circumstances,
what further information about those costs does the client need in order for it to be reasonable to bind them to their approval? None, in my view. It has recovered those sums on that basis and for that purpose.
38. I accept AFP’s counsel’s point that information is not ‘required for information’s sake’. The purpose of qualifying the effect of ‘approval’ by subjecting it to the requirement of being sufficiently ‘informed’ is to avoid undue or unfair prejudice being caused to the client as a result of the approval. Mr H TV would suffer no prejudice if held to its approval.
39. As to the argument presented by the Claimant that by making an offer to ITV2 and reaching settlement, the Claimant could not be taken to agree to losing its rights to a solicitor and client assessment, it must be noted that CPR 46.9(3) provides presumptions as to reasonableness which operate within a detailed assessment but it does not mean that a client is unable to have a solicitor and client assessment. The question for me is only whether those presumptions apply to the assessment or not.
40. As to the argument by the Claimant that negotiating a settlement which includes a sum of costs cannot be taken to amount to consent to those costs having been incurred for the purposes of CPR 46.9, I think one needs to take a context-dependent approach. The Claimant’s argument was that during negotiations over a settlement figure in almost any litigated case, D will ask what the C’s costs are in addition to the damages, and C’s solicitor may then find the figure X from the time recording system, draft a letter/email with X in it and pass it by the client who agrees it before sending it out/saying it on the phone to the other side. If the client thereby gave up their rights ever to later question that costs figure then few solicitor-client detailed assessments in such litigated cases would ever be allowed to proceed.
41. Whilst the above strictly talks in terms of waiving rights to assessment, I take the argument also as including the narrower point that one cannot go from the fact of proposing costs figures, and their acceptance, to agreement to those costs being incurred for the purposes of CPR 46.9. Addressing that,
in my judgment in the factual circumstances here it would be a serious distortion of the purpose of CPR 46.9 and of solicitor and own client assessments if a client could knowingly instruct solicitors to represent that his (impliedly, proper and reasonable) costs are £X, and for the client to receive those costs in full, with it having agreed that there was no shortfall between that sum and his liability to his solicitors, yet say later he did not consent to that sum having been incurred.
42. It is in that legal framework then that I approach the evidence. Does the evidence establish that Mr H TV was informed of the terms and consented to the settlement containing an agreed fixed sum of £3.6m costs which was to be paid in discharge of Mr H TV’s liability to its own solicitors?
The Master heard evidence from the parties as to their understanding of the settlement negotiations (paras 43 to 73).
Mr Hendricks’ (the sole director and shareholder of Mr H TV at all material times) essential evidence was that he understood the settlement to have been a global settlement with no distinction between damages and costs.
Mr Bateman (the fee earner handling the underlying claim at the material times) disputed this and maintained that Mr Hendricks had been fully aware of the nature of the settlement agreement to which he had consented.
Master McCloud had this to say about the respective witnesses…
“In my judgment Mr Hendricks for Mr H TV was a witness who saw his role as that of arguing his case and giving evidence which as far as possible would make out the position he wanted to achieve in arguing his position. This regrettably led to the position where in my judgment he paid scant regard to accuracy and was prepared to vary his evidence to suit the question and to suit his perception of the reason why he was being asked a question. The examples (selected from the written closing submissions but they are essentially the examples I would also select as core to my impression even had I not had the considerable benefit of the written submissions) demonstrate that Mr Hendricks was a sufficiently unreliable witness that where on any material aspect Mr Bateman and Mr Hendricks differ in recollection I prefer the evidence of Mr Bateman.”
“Mr Bateman was consistent, gave considered evidence and was willing to accept shortcomings, was accurate in terms of his knowledge of the written evidence, and was also corroborated in my judgment by the underlying documents such as emails and attendance notes. Even though as he accepted, his taking of attendance notes was far from perfect, those shortcomings came nowhere near undermining the credibility of his evidence (and there were in any event plenty of contemporaneous documents). It appears to me that what has in truth happened here is that after the settlement, Mr H TV – and in essence that appears to mean Mr Hendricks – having consented to the clear terms of settlement which were for a sum of £5m damages and £3.6m costs in discharge of Mr H TV’s liability to its solicitors – have seen an opportunity to capitalise on a significantly beneficial settlement by alleging, after the event, that what appears from the contemporaneous evidence to be clear is in fact on the contrary some form of rather sly decision by AFP to ‘go global’ behind the back of the client. That is not at all the case.”
MASTER VICTORIA MCCLOUD:
The documentary course of the negotiations leading to settlement.
74. By December 2015, ITV2 had made a payment of c.£380,000 in respect of one part of the judgment (related to unpaid invoices) which was not being appealed.
75. On 11 December 2015, ITV2 made an offer to settle the litigation for £4.7m, expressly stated to comprise £2.6m for damages2 and £2.1m for Mr H TV’s costs, see paragraph 4 of the letter of that date:
“…subject to the additional terms below, our client will, within 14 days of Mr H’s acceptance, pay the sum of £4,700,000 (being £2,600,000 in respect of Mr H’s lost profits and £2,100,000 in respect of Mr H’s costs of the Proceedings) in full and final settlement of all disputes between it and Mr H (the “Offer”). For the avoidance of doubt, the sum of £4,700,000 is an all-inclusive sum that encompasses all legal and other costs.” [emphasis added by Master McCloud]
76. This is clearly an offer where ITV2 propose to pay a particular amount in respect of AFP’s costs.
77. At a meeting on 15 December 2015, Mr Bateman discussed ITV2’s offer with Mr Hendricks and took instructions on how to respond, as recorded in an Attendance Note which I accept. That attendance note records a discussion of the fact that total costs including success fee were in the region of £3.5/3.6m. Mr Hendricks by time of trial had accepted that costs were discussed at that meeting having previously taken the stance that costs were not discussed at all.
78. On 17 December 2015, Mr H TV (via AFP) rejected ITV2’s offer, inter alia stating that the £2.1m offered in respect of costs did not cover the base costs (including disbursements) incurred to date. That letter was approved by Mr Hendricks before it was sent (p726, and p40-42 of day 3).
79. On 17 December 2015, ITV2 responded by making a Part 36 offer of £2.6m “plus costs to be assessed on the standard basis”, p729.
80. On 11 January 2016, Mr Bateman emailed ITV2 to the effect that Mr H TV’s liability for costs (exclusive of VAT) was £3,620,291.48, and that ITV2’s total liability for damages and interest stood at c.£5.4m. This email had also been foreshadowed during a meeting between Mr Bateman and ITV2 on 5 January 2016, for which there is an Attendance Note. At that meeting, Mr Bateman advised Martin Davies that a settlement would require “^£5m damages” and “^£3.5m costs”. Those expressions in my judgment with their upwards caret marks probably mean ‘greater than’ the stated figures.
81. On 12 January 2016, ITV2 emailed Mr Bateman noting that, if Mr H TV’s liability for costs was c.£3.6m (and the same were recoverable on assessment) then ITV2’s Part 36 offer had a value of £6.2m, or c.£6.6m including sums already paid.
82. Pausing there, at this point ITV2’s indication that the offer in effect amounted to £6.6m was not quite correct in that their most recent offer was not for a fixed sum of costs but was instead expressed as damages plus costs to be assessed, and hence placing a total figure on it was not precise but could only be a ‘best case’ from Mr H TV’s point of view.
83. Sensibly in my judgment by an email in reply on 13 January 2016 Mr Bateman noted that there were two formats of offer currently on the table (if one assumes that both previous offers were still open – which may or may not have been the case, nothing turns on it): the ‘without prejudice’ offer of 11 December 2015 (£4.7m, being £2.6m damages and a specified sum of £2.1 for costs) and the Part 36 offer of 17 December 2015 (£2.6m plus unspecified costs to be assessed). Therefore, he said, on the basis that Mr H TV’s costs were indeed recoverable at £3.6m it was correct to value the Part 36 offer at £6.6m but that strictly speaking “an offer of £6.6m [was] not currently on the table” (i.e., because of the fact that costs could be reduced on an inter partes assessment of costs).
84. He explained that he did not want to pull together detailed information on costs unless it was actually necessary for the purposes of having an assessment (though he also displayed willingness – at paragraph 3 – to have his costs assessed if required). By an email later the same day Martin Davies of ITV2 confirmed that he would “have a look and think and get back to [Mr Bateman]”.
85. Martin Davies of ITV2 met with Mr Bateman on 16 March 2016, and their discussions are recorded in an attendance note. Mr Bateman records:
P.36 = £3.6 + £2.6 offered (+0.4 paid)
– But no actual offer of £6.6m made?
86. On 22 March 2016, ITV2 increased its December 2015 offer from £4.7m to £6.2m (i.e. c.£6.6m, once the sums already paid were factored in, and note that the offer expressly refers back to the December form of offer which was a split costs and damages basis offer):
I went back to ITV2 following our meeting. In full and final settlement of the Proceedings, ITV2 is prepared to increase the all-in offer (inclusive of any VAT to the extent applicable) that it made in December from £4.7m to £6.2m (and subject to the other terms at paragraph 6 of our letter dated 11 December 2015…). To be clear, that is £6.2m in addition to the amounts already paid by ITV2 in November 2015.
87. This was expressly stated to be an “increase [of] the all-in offer… that it made in December”, that is to say it is an increase upon the sums used in the broken down format of the 11 December 2015 offer. The headline figure rose to £6.2m (effectively £6.6m in total taking into account already paid sums), and in light of the letters, emails, and meetings recorded by attendance notes (particularly that of 16 March 2016) it is also clear how that headline figure was comprised. Per the format of the 11 December 2015 offer which it modified as to sums, it was now some £6.2m (being £2.6m for damages, and £3.6m for costs), plus c.£0.4m already paid. ITV2 had plainly decided to waive the need for assessment if settlement was reached on that basis, and to make an offer that reflected a costs liability of £3.6m, using the format of the 11 December 2015 offer but varying the numbers in it.
88. Mr Bateman’s response to ITV2 on 22 March 2016 then stressed that damages were the real problem which needed to be addressed and the 22 March offer did nothing to improve upon the damages element of ITV2’s proposal.
89. Shortly thereafter on 26 April 2016, ITV2 increased its offer to £7.2m “…(i) subject to the other terms at paragraph 6 of our letter dated 11 December 2015, and (ii) in addition to the amounts already paid by ITV2 in November 2015.”. This offer was then forwarded to Mr Hendricks, for him to consider (p768). Again it refers back to the broken down approach of the original 11 December offer.
90. In my judgment
it is abundantly clear that the offer format of 11 December 2015 by which damages and costs were separately spelled out was consistently applied in the thread of negotiation which led to this offer of £7.2m. Taken as a whole the breakdown had plainly risen to £3.6m damages and £3.6m costs, based on the negotiations reviewed above.
91. Mr Bateman passed on ITV2’s increased offer dated 26 April 2016 to Mr Hendricks, and suggested that Mr Hendricks consider a counter-offer, perhaps now for £8.6m (p768).
92. Mr Bateman and Mr Hendricks discussed the idea of making that counter-offer on 28 April 2016, as recorded by Mr Bateman’s attendance note of that date. As recorded in that note, Mr Hendricks gave Mr Bateman instructions to make an offer to accept £8.6m “Split as £5m damages and £3.6m costs as per email? Y”. That offer was then made on 5 May 2016. See also Day 2 at p59-60.
93. Mr Hendricks’ evidence on this offer and the events of 28 April 2016 was unconvincing. He refused to accept that the discussions took place at all but could not identify an alternative source of the relevant instructions between 26 April 2016 (when the idea of an offer at £8.6m was first posited) and 5 May 2016 (when the offer at £8.6m was made). Yet he agreed that the offer of 5 May 2016 was made on his instructions arguing instead that his consent was only because Mr Bateman had given him the impression that ITV2 had agreed costs at £3.6m, see Day 3 p62. As I find, he was correct in having gained that impression in the sense that that was the very basis on which the parties were dealing. He was correctly informed of the material provisions to be proposed and gave his instructions to proceed with them.
94. An Attendance Note dated 8 September 2017 then records Mr Bateman asking Martin Davies to take instructions on “£8.6m as previously offered in light of above (on basis discussed re amounts)…”. Martin Davies finally responded on 10 October 2017 to confirm that ITV2 were willing to settle at that level and on that basis. Mr Bateman gave evidence which confirmed that throughout these negotiations £3.6m of the settlement sum was to be a component to reflect Mr H’s liability for costs, though based on the documentary material leaving aside the oral evidence such is I think clear in any event. Referring to the Attendance Note:
Q And – and the bit above, the instructions, so what does that mean, the word “instructions”?
A I’m saying that he should go and get instructions on whether ITV are now prepared to accept the offer that we’d made of 8.6 million, previously offered in light of the various discussions we’d had earlier in that meeting, on the basis discussed re amounts, which were the earlier basis of 5 million damages and 3.6 million costs. So I’m saying to him, “Do you – do you now want to accept the offer” of 20 – well, 5 May, but communicated to Mr Hendricks on 28 May.
Q So the words “(on basis discussed re amounts)” is a reference to specifically—
A The 5 million and 3.6.
95. It took time to finalise the draft agreement due to concerns about whether Mr Hendricks would be a party to the settlement. An agreement was signed by Neville Hendricks for Mr H TV and by ITV2, under which ITV2 paid Mr H TV a total of £8.6m (less the sums paid previously). In my judgment that embodiment of the settlement gave effect to the agreement reached in the above prior communications reflecting a total which had been agreed between the parties, but on the basis set out above.
I agree with the submission made to me that once the figure for costs had been accepted as £3.6m and was not going to change in the event of settlement (as a result of agreement between AFP and Mr H TV4) there was no longer a need for the parties to repeat how each offer was comprised in each subsequent offer and it was clear from the exchanges what was meant. The use of a total figure was plainly shorthand given that costs had been agreed and fixed at £3.6m.
All subsequent increases to the headline figure represented negotiations in relation to damages and the discussions were proceeding on the basis that it was so obvious as no longer to need to be spelled out.
97. As Mr Hendricks and hence Mr H TV understood, the offers contained what he calls ‘two ladders’ at the start. I find that such ‘ladders’ remained all the way up to and including the settlement ultimately reached in October 2017 and that such is clear from the documents. It is as Mr Hendricks appears to have believed at the time, albeit not now – see day 3 p103:
A Yeah. I, I, I, I’m sticking to the figure based on Mark’s telling me, yeah, that he’s got—- I’m still on the assumption that ITV have agreed 3.6. That’s what I’m at. Okay. So now we’re at: ITV have agreed 3.6 on your ladder, and 5 million on mine, that’s what I’m signing off on. [emphasis added by Master McCloud]
98. .Mr Hendricks, when he said that, was correct. He was, at all material times after March 2016, working on the basis that ITV2 had agreed to pay £3.6m in respect of costs as a component part of the settlement offers being discussed, as he himself explained repeatedly in oral evidence. That evidence is consistent with that of Mr Bateman. Where he differs and where I do not accept his evidence is that there had been any material change away from the ‘two ladders’ type of settlement (damages and costs separately agreed). The figure of £8.6m ultimately reached was a simple shorthand expression for what as it seems to me all concerned knew was a combination of £5m damages and £3.6m costs.
99. C’s counsel argued that the eventual form of the settlement was of legal significance: it was in writing, specified only the global figure, did not break down the settlement into costs and damages, and, importantly, contained an entire agreement clause and a statement that it was not made on the basis of previous representations. This is a significant point on its face, potentially. It seems to me that I cannot ‘add in’ extra terms to the agreement or say that the document does not amount to the entire contract in settlement. That is ousted by the entire agreement clause. However in my judgment the issue for me is one of interpretation of the ‘global’ figure in the entire agreement, and for that I can look to what the parties reasonably must have understood in the context.
In my judgment the understanding of the parties was unequivocally that the total sum stated was a shorthand expression for the figures previously canvassed. Not only is it supported by the documentary evidence leading to the drafting of the agreement but also it has the benefit of logic given the realistic size of the Claimant’s damages which could not have amounted to £8.6m.
100. All that aside, the question here for me is not, strictly, what the terms of settlement were with ITV2 but rather whether when Mr Bateman sought and obtained instructions from Mr Hendricks to put forward figures based on £3.6m costs and £5m damages, Mr Hendricks was aware and consented, and whether that and the rest of the context suffices to bring rule 46.9 into play, which I find in this case it does. The detailed argument on behalf of the Claimant which sought to spell out from the evidence and documents different conclusions as to what was understood by Mr Hendricks and what the settlement represented did not amount to be sufficient to persuade me that the course of events is anything other than plainly as above, and counsel for the Claimant made every effort to make points which he could legitimately put forward given what was evidentially a ‘sticky wicket’ for his clients given the lack of credibility of his client’s key witness.
Allegations of dishonesty
101. Mr Hendricks accuses Mr Bateman of dishonesty and I must deal with that given its gravity. Mr Bateman has given credible evidence about the negotiations with ITV2, supported by attendance notes and emails. Mr Hendricks appears to believe that there was some scam or conspiracy to cheat him by way of ‘going global’, now that he has looked at matters after settlement. His evidence was that Mr Bateman’s account of what happened and interpretation of his discussions with Martin Davies was not an honest one in terms of what Mr Bateman led Mr Hendricks to believe at the time. It is an accusation which lacks merit and is not supported by any credible evidence.
102. Separately from the general application of the presumptions AFP contends that Mr H TV approved the 100% success fee in AFP’s CFA in the conventional way of signing and agreeing to the CFA which set out that success fee. It is not in dispute that I do not need to decide this point given my conclusions above but I will in any event set out, in short form, my view but this is strictly obiter.
103. Mr Hendricks knew that Mr H TV needed a lawyer to act on a CFA, and as was said in argument and I agree, this was a point of regular discussion between him, BDO (the proposed CVA supervisor) and HSBC (Mr H TV’s major creditor). Mr Hendricks approached AFP when he found out they were acting on a CFA in another case which he was aware of.
104. AFP was working on this case from late 2011 and wrote a Letter of Claim to ITV2 confirming that it was acting on a CFA basis on 14 February 2012. On the same day, Mr H TV’s CVA proposal was approved at a meeting of creditors in light of the fact that the litigation was to be conducted by AFP on a CFA.
105. It is not in dispute that Mr Hendricks met with Mr Bateman at the Marriott Hotel near Mr Hendricks’ house on 20 June 2012. Mr Hendricks however says that he was handed only the first two pages of the CFA and asked to sign it, and that he then did. I have already concluded that Mr Hendricks is unreliable as a witness and that I prefer Mr Bateman’s evidence where they differ. On this issue also, Mr Hendricks shifted position in cross-examination on the third day of trial:
Q Now, is it really your evidence that, despite your knowledge of working with lawyers and the business affairs that you have had in the past, that you simply said — you simply signed it without reading it?
Q. It sounds as though you are being a little bit more sensible, if I can term it that way, that you are now accepting that it is unlikely you would have just signed it without reading it.
A That is right.
Q You do not strike me as being the sort of person that would have signed it without actually reading the document, right? A pretty foolish thing to do?
106. It is in any case very implausible that Mr Hendricks would have read the two pages which he initially said were all he was shown without realising that there were other parts of the document which he ought to read and consider as an experienced businessman. When taken to the passages within the two-page letter which refer to other parts of the CFA, Mr Hendricks downplayed the extent to which he had in fact read or considered those pages. The exchanges with counsel on this at p19 of day 3 of trial are entirely consistent with Mr Hendricks’ general approach to his evidence in this case:
Q Yes, it was convenient to you both to meet in the hotel. So let’s move away from that point, but I just want to get back — I want to understand what your evidence is because you said earlier that you must have read it and then, when you explained a moment ago what you think happened was, “Oh, I read the conditional fee agreement at the top, yes, read that, looked through it and signed it”, that is not reading a document.
And I want to know which one of those versions of events I should be writing down.
A Well, whatever one you – whatever one you prefer.
107. Mr H TV’s Defence to AFP’s Statement of Case on the preliminary issues, at paragraph 9 admits and avers that he signed and agreed the CFA, and attaches the whole CFA to the statement of case. In evidence when this was put to him he responded by giving the evidence about his diary – as addressed above and which he now
accepts was itself “mistaken”.
108. Mr Hendricks’ evidence regarding the email of 22 June 2012 is relevant here. He belatedly accepted as discussed above that he was provided with the signed version of the CFA and digital copies of the relevant documents but his position was that he did not notice this email or open it. I think that is highly implausible.
109. I find that Mr Hendricks received a full copy of the CFA at the meeting. Mr Hendricks then signed it knowing its contents.
110. Herbert addressed the question of what information was required at the time of entering into a CFA. The Court of Appeal contrasted HH Law’s approach in that case with the ‘traditional’ approach of fixing the success fee uplift by reference to the risk of losing the proceedings. In his evidence
Mr Bateman confirmed that the CFA percentage uplift was set and/or justified entirely on the orthodox basis of litigation risk. Mr Bateman had discussed the case and its risks in detail with Mr Hendricks, BDO and HSBC when the CVA proposal was being considered.
111. I accept AFP’s submission that
it is implicit from Herbert (reading para 48 and 53 together) that where a success fee is set on that traditional basis, and the essential terms are set out in a document or explained to the client before signing, then the client’s agreement to that CFA will constitute approval for the purposes of engaging the presumptions at CPR 46.9(3)(a) and (b).
112. Mr H TV in my judgment approved the 100% success fee contained in AFP’s CFA. Criticisms were made of paucity of attendance notes but in my judgment the evidence suffices to establish the position as above.
113. My conclusion therefore is that the presumptions in favour of AFP set out in CPR 46.9 apply to this assessment.