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David Truex, Solicitor (A firm) v Kitchin [2007] EWCA Civ 618

Appeal by solicitors against a decision requiring repayment of fees to the respondent on the grounds that she had not been informed that she could be eligible for legal aid. Appeal dismissed.

Counsel for the appellant argued that no reasonable solicitor would have formed the view that the respondent could have been eligible for legal aid. However this view was dismissed by Waller LJ, partly because the firm the respondent subsequently contacted immediately recognized the potential for public funding and also beacuse it is the solicitor's duty to "at the outset to consider the question whether a client might be eligible for legal aid".

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Neutral Citation Number: [2007] EWCA Civ 618

Case No: B2/2006/0806
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Central London Civil Justice Centre
His Honour Judge Ryland
4CL02530
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 04/07/2007
Before :

LORD JUSTICE WALLER
and
LORD JUSTICE LAWRENCE COLLINS
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Between :

David Truex, Solicitor (A firm) (Appellant)

- and -

Simone Kitchin (Respondent)

(Transcript of the Handed Down Judgment of
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- - - - - - - - - - - - - - - - - - - - -

David Burrows (instructed by International Family Law Chambers) for the Appellant
Martin Westgate (instructed by Messrs Ole Hansen & Partners) for the Respondent

Hearing date : 7th June 2007
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Judgment
As Approved by the Court

Crown Copyright ©

Lord Justice Waller :
1. The appellant, a firm of solicitors, brought a claim against the respondent for professional fees for work done in connection with the respondent's divorce and family proceedings. The appellant alleged that some £21,000 worth of work had been carried out on the respondent's instructions. The respondent had paid £9,000 on account. In her defence the respondent denied that she was liable for making any payment to the appellants and counter-claimed for repayment of the sums that she had paid. She made various allegations against the appellant firm, but so far as this appeal is concerned the only significant allegation was that the appellants were negligent in failing to advise her that she might be eligible for public funding. By a judgment dated 7th December 2005, His Honour Judge Ryland decided that the appellants had been negligent in failing so to advise. He further found, on an issue no longer relevant on this appeal, that the appellants had failed to establish that if they had so advised the respondent would still have instructed them privately, rather than transfer to a firm who conducted proceedings on legal aid. The judge by his judgment accordingly dismissed the appellant's claim and gave judgment on the respondent's counter-claim for all monies she had paid to the appellants, save for a small figure relating to the first conference on 19th February 2003.

2. The judge refused permission to appeal and initially Lord Justice Parker refused permission to appeal on paper. At the renewed oral hearing Hallett LJ was persuaded to grant permission by reference to a point as to the importance of the date when the retainer commenced. As indicated when Mr Burrows commenced his oral submissions before us, the court was somewhat concerned as to the basis on which Hallett LJ had been persuaded to grant permission since, for reasons which will become apparent, it is difficult to see the significance of the date when the retainer commenced.

3. Looking at the matter broadly for a moment, the overall position seems to have been as follows. First, the respondent's marriage was in trouble and she was anxious about the position of the child of the marriage, C (child). The respondent was originally of German nationality, whose parents lived in Germany, and in December 2002 she took C (child) to Germany to be with her parents. In Germany she and her parents had the advice of a Dr Jens Martensen and it was through him that they first approached the appellant firm and in particular Mrs Beyer, who had basic charge of the respondent's case. Mrs Beyer was first approached on the 18th February 2003 and had her first meeting with the respondent on 19th February 2003. At that meeting it was clear that there were various possibilities so far as action was concerned. First, it was possible that the respondent could file for divorce; second, it was possible, and indeed likely, that an application would have to be made to seek a ruling from the court that C (child) should be allowed to remain in Germany pending proceedings in England; and third, it was likely that ancillary relief proceedings would be necessary. Discussions took place between the respondent and Mrs Beyer and between Mrs Beyer and Dr Martensen, resulting in instructions being given by the respondent to "go immediately for proceedings for divorce as well as for custody of C (child) "[see fax of 26th February 2003]. It seems that on 27th February 2003 advice was sought informally from counsel and it was that counsel who suggested that some proceedings needed to be taken to freeze the husband's assets. That resulted in instructions being given by the respondent to "take the advice of the barrister and to take proceedings to freeze her husband's assets/accounts", although she added that it was not "her intention to ruin the company" [see her fax of 28th February 2003]. There was then a great deal of activity as the various proceedings were put in train, which resulted in a great deal of time being spent by the appellant firm, for which they were ultimately going to charge their fees. They sent a fax to the respondent containing their terms of business which indicated that they did not as a firm do publicly funded work [see fax of 3rd March received by the respondent on 5th March because she had left her fax switched off].

4. Three letters before action were sent to the husband on 3rd March 2003, two relating to divorce, and C (child) and the third threatening him with injunctive proceedings to freeze various assets and seeking undertakings by 10 am on 5th March. The response to those letters, on 5th March, came from Dawson Cornwall, who said that they thought the time frame for seeking undertakings was unreasonable and further stated "we have submitted an application for public funding". At that stage there were further conversations between Mrs Beyer and Henry Rumbold, of Dawson Cornwall acting for the husband, in which the suggestion from Henry Rumbold was that he was instructed that the respondent had assets in Italy and Germany in the nature of properties. This was checked with the respondent on 6th March 2003, in a telephone conversation between Mrs Beyer and the respondent. The respondent told Mrs. Beyer that she only had an interest in one property in Germany and that interest had no value and explained why that was so. Mrs Beyer then spoke to the father, who stated that it was odd that it was the husband who had applied for public funding because "if anything, his daughter should get public funding".

5. Mrs Beyer indicated that the firm did not undertake legal aid work, and she referred to the letter dated 3rd March 2003, containing the firm's terms of business. She said that the respondent could be referred to another law firm but the father at that stage did not want that to happen.

6. Ultimately, further expenditure having been incurred and the costs having mounted, a decision was taken for the respondent to transfer to a firm who did do legal aid work. She transferred to Bindmans on or about 7th April 2003. The respondent was seen on that day and immediately Bindmans, under their devolved powers, granted her public funding on the basis that she was likely to succeed in an application for public funding.

7. An application for public funding was completed and Bindmans, in a letter enclosing that application to the Legal Services Commission, said:-

"Ms Kitchen (the respondent) was previously represented by a firm of solicitors who do not have a franchise for public funding. In our view she is now, and has always been, entitled to public funding. It is not clear as to the extent to which she was advised of that. Very substantial private costs have been incurred which she does not have the resources to pay. She has been advised, at very short notice, in view of the further hearings, to seek publicly funded help, which she has done with us. This is the reason for the very short notice in light of the pending hearings."

8. The hearings referred to related to a freezing application and to the position of C (child) and were fixed for the 10th and 25th April 2003.

9. The issue is whether the appellants should have advised the respondent that she might be eligible for legal aid earlier than they did. In considering that question, it is important to have in mind the relevant guide to the professional conduct of solicitors, which was then in force. It provided as follows:-

"5.01 A solicitor is under a duty to consider and advise the client on the availability of legal aid where the client might be entitled to assistance under the Legal Aid Act 1988." [See the Guide to Professional Conduct of Solicitors, 8th Ed, 1999]

10. Also relevant is the Family Law Protocol, which had been published in 2002, which contained the following guidance as to best practice for solicitors :-

"Availability of public funding.
2.3 Solicitors are reminded of their professional duty to consider and advise clients on the availability of public funding, where clients might be entitled to such assistance. Accordingly, the solicitor should be aware of the levels of eligibility for public funding. . . . . .

2.5 If clients who may be eligible for public funding, either at the outset of a case or at any time during it have consulted solicitors who do not undertake publicly funded work, they must be given the option of being referred to solicitors who do carry out publicly funded work (even if this means referring clients to another firm). . . . ."

11. The Legal Services funding code, made under Section 8 of the Access to Justice Act 1999, provides under the heading 'Emergency Representation Urgency':-

"Legal representation may only be granted as a matter of urgency where it appears in the interest of justice to do so.

5.52 Limited information
Where only limited information is available to determine whether the criteria for legal representation are satisfied, emergency representation may be granted only if it appears likely on the information available that those criteria would be satisfied."

12. What then was the information available to Mrs Beyer as she took instructions from her client? It seems that the first contact was with Dr Martensen on 18th February 2003, when he explained that Mrs Beyer should advise about the cost of any proceedings and when Mrs Beyer was told that the respondent's parents would have to lend her the money to pay any fees.

13. It was then on 19th February that Mrs Beyer saw the respondent and on that date the respondent handed her a note, which explained the background and some of the facts surrounding the problems that the respondent was having. It set out the position as to the employment of the respondent, suggesting that a salary of £4,000 had been fixed as payable by a company jointly run and owned by the respondent and her husband, but that the money had not been paid. It referred to loans being made to the company jointly owned by the respondent and her husband by the respondent's parents. In its final paragraph it said this:-

"In the meantime, the market value of the flat has risen almost to a factor of three. In addition to this mortgage and other debts for the flat itself as well as for the business, which was developed from zero through mutual work of my husband and I, have been paid back partially, i.e. all this must have created some values! In spite of extreme hard work during the last three years my daughter and I are standing today empty handed completely. For all what happens it is only always the others that are to blame! Due to his self-pity, over-sensitiveness, feigning and his ability to twist things, he always induces others with a guilty conscience."

14. At the meeting itself, Mrs Beyer's attendance note reflects that many details were given of the problems as between husband and wife, but so far as available assets or income of the respondent was concerned, the note recorded that the respondent said "she did not have a clue about the finances of the company". In the final paragraph of the note it recorded the respondent indicating that she estimated dividends of some £100,000 per year being shared between her and her husband. The trial judge did not accept that as an accurate record of what the respondent had said to Mrs Beyer he preferring the evidence of the respondent to the effect that what she had said was that her husband had estimated that they withdrew £100,000 from the company but she did not know whether that was correct or not.

15. The note finally records Mrs Beyer as urging the respondent to find out more about the finances because the respondent would need to have some assets at the side in the case of an emergency. It also records her as saying that the respondent "must be able to pay us" if she wants to start a leave to remove application. It does not record any consideration of the question of possible public funding.

16. That evening Mrs Beyer spoke again to Dr Martensen. In that conversation he said that he told her that he was concerned about the legal costs and he told Mrs Beyer that "it was important that I should know how much any proceedings were likely to cost because Simone did not have any money and would have to borrow from her parents". Mrs Beyer evidently informed him that a divorce in England would probably cost about £1,000, but normally the husband would have to pay for everything, but she did not say anything about the cost of other proceedings at that stage.

17. On 26th February the respondent sent a further note to Mrs Beyer in which she said "Today after such a hard and industrious life the assets have increased rapidly but C (child) as well as me are standing empty handed without a penny???"

18. The judge's conclusion on this aspect of the case was in the following terms:-

"I am . . . satisfied that the claimant has departed from the reasonable standard of service which the defendant was entitled to expect from the claimant. I accept that Mrs Beyer did not give advice initially on 19th February 2003 about the availability of legal aid. I accept that Mrs Beyer may have thought that the claimant would not have been eligible even if she had told her about the availability of legal funding. I consider that Mrs Beyer may well have been genuinely mistaken in thinking (incorrectly as I find it) that the defendant said that she and her husband drew £100,000 dividend from the company. I doubt if Mrs Beyer considered that she was under a duty to give advice about legal aid on that occasion. I think she probably genuinely thought that such duty did not arise because of the drawing said to amount to £100,000 for the preceding year. That belief should have altered very quickly. On 19th February 2003 Mrs Beyer wrote in an attendance note that the defendant said that she did not have a clue about the finances of the company. Mrs Beyer recorded that the defendant was employed by the company for a fee of £4,000 and that she did not receive that. Mrs Beyer obviously considered the defendant's ability to pay fees was in doubt because she wrote 'I say she needs to have some assets at the aside in case of emergency. I say she must be able to pay us if she wants to start a Leave to Remove application . . .' On 19th February 2003 Mrs Beyer was given a note from the defendant in which she said that she had not received any salary from the company and that she was standing at today empty handed. On 26th February 2003 the defendant sent a further note to Mrs Beyer in which she stated that 'Today, after such a hard and industrious life, the assets have increased rapidly but C (child) and me are standing empty handed without a penny'. By this date, to the knowledge of Mrs Beyer, the defendant had separated from her husband and was initiating divorce proceedings. Soon after this Mrs Beyer knew that the defendant was borrowing the monies needed to pay the claimant's fees from her parents under a written loan agreement, because Mrs Beyer had caused such a statement to be set out in an affidavit of the defendant. I find that the claimant was put on notice that the defendant might qualify for public funding by the telephone call of Dr Martensen on 19th February 2003 and in the conversations with the defendant on that date. I consider that she may well have genuinely considered in the interview that the claimant would not be eligible for legal funding. I find that by 26th February 2003 at the latest, the claimant was put on notice that the defendant might be eligible for public funding. I find that Mrs Beyer neglected to give the defendant adequate advice at the start of the case, namely after 19th February 2003 and by 26th February. I find that she failed . . . ."

How then does the appellant attack the above finding of the judge?
19. Mr Burrows suggests that no reasonable solicitor would have formed the view on the facts as Mrs Beyer knew them as at 26th February 2003 ( the date when he submits the retainer commenced) that the respondent might be eligible for legal aid. A solicitor, he submits, believing that a dividend had been paid by the company of £100,000 would have formed the view that legal aid simply would not be awarded. The difficulty is firstly that that piece of information was on the judge's finding by no means as clear cut as that. Secondly in any event it could not be taken on its own. The so called dividend had to be assessed together with the information that the respondent did not have a clue about the company's finances, had no money and was borrowing from her parents. Any reasonable solicitor would have formed the view that she might be eligible for public funding. Once Mrs Beyer knew the respondent had no money and was having to borrow from her parents, then only if inquiries of the respondent revealed assets which put public funding out of the question could she have ignored the question of public funding.

20. Mr Burrows sought to rely on the fact that Mrs Beyer was informed on 6th March by Henry Rumbold, acting for the husband, of the existence of certain assets in the form of properties in Italy and Germany. Details of those properties are set out in an attendance note dated 6th March 2003 at p 53 of the supplementary bundle. The answer to that point is that, also on 6th March the accurate position was given by the respondent to Mrs Beyer, showing that in fact that the respondent had an interest in one property only, in Germany, and that interest had a nil value. If Mrs Beyer had made proper inquiries of her client she could not have relied on what she was told by those acting for her husband. If (as I agree she should have been doing) she had checked further the asset position of the respondent she would have been informed of the accurate position by the respondent or her family, and not the inaccurate position as being portrayed by the husband.

21. A further confirmation that a reasonable solicitor should have contemplated that the respondent might be eligible for legal aid is confirmed by the reaction of Bindmans, once the respondent went to them on 7th April 2003. They immediately formed the view that she was likely to be eligible and thus issued an emergency certificate, and there was no material change in circumstances as between 19th February and 7th April 2003.

22. What Mr Burrows' submissions really came to was that a solicitor such as the appellant was entitled to a period of time during which they continued to take instructions and run up costs while they gathered information in relation to the proceedings contemplated, and only once the gathering of that information had prompted them to consider that their client might be eligible for legal aid, were they obliged to act. It was on this basis that he was submitting that it was important that the retainer only commenced on 26th or 27th February, since it was only a short period of time before the appellants advised that the respondent could go to another firm because she might be eligible for legal aid (that happening on 6th March 2003). That, as it seems to me, simply cannot be consistent with the duty of a solicitor. A solicitor must be bound at the outset to consider the question whether a client might be eligible for legal aid. There are various reasons why that must be so. First, it would be quite wrong to incur substantial expenditure chargeable privately to the client if public funding was available. Second, a client is in more difficulties changing firms of solicitors if work has been done and a relationship built up, before advice is given that a different firm could become involved.

23. As previously indicated, the appellant did not pursue on the appeal any point as to causation. That, as it seems to me, was an entirely proper attitude to take, consistent with what I have said in the previous paragraph. In this case, clearly, if the financial position of the respondent had been properly considered, and considered in the context of whether she might be eligible for public funding, the result would have been advice to go to a different firm, such as Bindmans, at a very early stage. There is no reason to think that if that had happened the respondent would not have accepted that advice, rather than borrow money from her parents.

Conclusion
24. We indicated at the conclusion of the oral hearing that we would be dismissing the appeal and the above are my reasons for so doing.

Lord Justice Lawrence Collins:
25. I agree.