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England and Wales High Court (Commercial Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Papera Traders Co Ltd & Ors v Hyundai Merchant Marine Co Ltd & Anor [2002] EWHC 2130 (Comm) (18 October 2002) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2002/2130.html Cite as: [2002] 2 Lloyd's Rep 692, [2002] 2 LLR 692, [2002] EWHC 2130 (Comm), [2002] 2 All ER (Comm) 1083 |
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QUEENS BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| (1) PAPERA TRADERS CO. LIMITED & OTHERS | Claimants | |
| - and – | ||
| (1) HYUNDAI MERCHANT MARINE CO. LIMITED | ||
| (2) THE KEIHIN CO. LIMITED | Defendants | |
| EURASIAN DREAM No.2 |
____________________
Mr. S. Rainey QC and Mr. G. Charkham instructed by Hill Taylor Dickinson for the Defendants.
____________________
Crown Copyright ©
MR JUSTICE CRESSWELL
a. Yasuda
b. Sumitomo
c. Mitsui
d. Nippon
e. Chiyoda
f. Adamji
g. Dowa
h. First Marine (Fedgen).
Yasuda contacted Websters on 27 July 1998, asking for information. This was provided by Websters who suggested that Yasuda contact other Japanese insurers.
Sumitomo contacted Websters on 28 July 1998, asking Websters to protect their interests including salvage and recovery.
"Regarding the recovery aspect, ... although (the writer) works in the General Average and Casualty Management Department, his background is in liability claims ... Normally in this department we deal with cases on a time and trouble basis, and it is on that basis that we will be pursuing the recovery for all the other cargo interests we represent. However, if you wish our involvement to be on a "no cure, no pay" basis, with disbursements for your account, we are prepared to do this. Our fee structure will be sent separately."
"Enclosed herewith is a copy of the Lloyd's scale of fees for recovery purposes which when calculated is slightly less than that you have quoted. In view (of) the amount of money that we are dealing with, kindly advise whether you are prepared to conduct the recovery as per the Lloyd's scale."
The enclosed Lloyd's scale of fees "applicable to recoveries affected by Lloyd's Agents themselves from third parties" provided that in cases where recoveries are effected through solicitors or other parties, Lloyd's Agents' fees were to be assessed on a time and trouble basis, with a minimum fee of £40. I refer to the Lloyd's scale below.
"... There is a slight difference in our scale of fees and ... Lloyd's ... Our fee scale is less than other London market competitors and is of course significantly less than the contingency fee arrangements which may be available with law firms in certain parts of the world ... On this occasion only we confirm that we are prepared to pursue this particular recovery on a no cure no pay basis with our fees of 5% of the recovered amount, with disbursements in addition for your account."
THE RECOVERY SERVICES WHICH WEBSTERS ALLEGE THEY PROVIDED TO ALLIANZ.
"1. Participating in investigations leading to the obtaining of statements given by the crew to the local police
2. Discussing with Hill Taylor Dickinson the question of security for the loss, and a mechanism for dealing with the freight forwarders' Bills of Lading. Securing agreement as to jurisdiction and proper law with the defendants.
3. Receiving a declination of liability from Hill Taylor Dickinson dated 17 June 1999, and an indication that a time extension would not be granted.
4. Instructing Richards Butler on 15 July 1999, securing a time extension from the shipowners themselves and demise charterers and maintaining that extension throughout.
5. Reviewing the claim form before issuance; providing a Power of Attorney on behalf of our Principals for Richards Butler to present to the Sharjah authorities in respect of their investigations there; getting Power of Attorney notarised; providing copies of the statements obtained in Sharjah to the fire expert for comment; reviewing draft Particulars of Claim; reviewing schedules of documents obtained and documents outstanding; conducting extensive searches of files for these documents including the cargo claims settlement files.
6. Reviewing further correspondence from the fire expert regarding the fire extinguishers; reviewing the Points of Defence and the Reply thereto; discussing further the impact of package limitation; considering obtaining security from the shipowners and/or demise charterers; searching files for, and obtaining direct from cargo owners and/or insurers, cargo documents evidencing title to sue and the quantum of the loss for more than 125 bills of lading and more than 1,000 vehicles for at least seven underwriters. Discussing with our Principals a claim for security for costs.
7. Attending conference with Counsel in November 2000; reviewing fire expert's further comments and request for further information in relation to the Defence and the response to the request for further information.
8. Identifying and making contact with Sten-Erik Haakonsson, car carrier expert. Attending a meeting in our office with Hyundai Merchant Marine to discuss settlement, which was unsuccessful.
9. Obtaining confirmation from Hyundai that they do not require security for costs. Obtaining return of the salvage security lodged for second-hand cars. Obtaining details of the availability of the surveyor from International Surveyors and Adjusters to give evidence. Providing two statements in respect of the salvage settlement and our involvement in the case. Forwarding questionnaire to local cargo surveyor in Dubai. Carrying out a search for documents in all of the files contained in our offices, including cargo claims settlement files. Approaching Allianz regarding disclosure of their files, and Maritime Brokers and Consultants, sorting same forwarding to Richards Butler.
10. Advising Allianz that they may need to provide a statement clarifying why the claim was paid on C&F basis rather than FOB value. Providing copies of all the casualty reports available. Attending various meetings with the experts. Assisting in resolving the quantum of the claim, including the values of the cargo in various zones.
11. Discussing the question of the currency of the claim, pointing out Hyundai Motor Distributors were based in the British Virgin Islands, obtaining a company search on them to try and establish the currency of the account. Determining the status of the other cargo claim brought. Clarifying the charterers' liability cover for the Eurasian Alliance. Advising underwriters of without prejudice offers made.
12. Receiving correspondence direct from More Fisher Brown during the trial regarding the identity of carrier. Obtaining details of settlement for salvage made in respect of the other cargo on board.
13. Extensive investigations as to the mechanical arrangement relating to Toyota Hiace vans, careful examination of all of the chassis numbers in the manifest to determine which of those vans were petrol, which were diesel and which type they were, including discussions with Toyota UK and visits to the dealer. Attending when judgment was given to be available for any cross-examination required by HTD."
MARKET PRACTICE
(i) Obtaining cargo interests' instructions as to the nature of the cargo carried, the carriage arrangements, the parties to the contract of carriage, the ownership of the cargo at the relevant time and the insurance arrangements applying to this;
(ii) Contacting the carrier (or the owner of the carrying vessel if different) to obtain information as to the precise nature of the casualty and its effects on the cargo interests represented;
(iii) Arranging for survey of the cargo to assess its condition and retained value;
(iv) Where possible arranging survey of the carrying vessel in order to investigate the cause of the casualty and the extent, if any, to which the carrier's liability is involved;
(v) Obtaining the interests' represented instructions and arranging for the discharge, on-carriage, if necessary, and delivery of cargo or if its damaged condition precludes this, to arrange for a salvage sale, if possible, in order to realise any remaining residual value;
(vi) If salvage services have been provided, contacting the salvors in order to negotiate salvage security and subsequently attempting to negotiate cargo's proportion of salvage;
(vii) If general average has been declared, contacting and negotiating with the adjuster the provision of GA security;
(viii) Determining contributory values for salvage and GA;
(ix) Where appropriate, instructing lawyers to represent the cargo interests in advising, dealing with salvage security, defending salvors' claims, resisting claims for contribution in GA proceedings (although some agents have legally qualified staff and may conduct Arbitrations themselves).
(i) Where appropriate, advising the interests represented, including their underwriters, on the prospects of recovery of their losses, including identifying the party with title to sue, the relevant contract of carriage, the identity of carrier, the proper law of the contract of carriage, the appropriate jurisdiction in which to pursue claims, the potential bases of liability and the prospects of success;
(ii) Where appropriate, advising on the obtaining of security for a recovery action, including negotiating the form and amount of security, alternatively advising on the prospects of obtaining this by arrest;
(iii) Where appropriate, negotiating settlement of claims;
(iv) Where appropriate, instructing lawyers to represent the cargo interests in advising, obtaining security, bringing recovery proceedings (although some recovery agents have legally qualified staff and may conduct Arbitrations themselves);
(v) Co-ordinating all of the above, reporting regularly to the interests represented and obtaining their further instructions.
(1) Salvage/GA Work is usually charged on a time and trouble basis. The agent will charge on the basis of an hourly rate for the individual claims handler, according to the amount of time spent. These hourly rates vary, but will certainly be less than London City Solicitors' fees for doing the same work. They will be in the approximate region of £40-£175 per hour depending on the firm of agents instructed and the seniority of the claims agent involved. Where salvage security is provided under the terms of Lloyd's Open Form, it is market practice for the agent also to charge a bail bond fee for Guarantees given to the Corporation of Lloyd's on behalf of cargo interests. This fee is calculated as a percentage on the amount of security provided. This tends to be about 1-2% of the security, plus about 0.5% of the amount of the security for the indemnity premium. As far as general average is concerned, it is market practice for agents to raise a charge for each Guarantee provided to GA adjusters. This is usually on a fixed fee basis per Guarantee (which will be in the region of £100) or on a time and trouble basis.
(2) For Recovery Work the agent will charge on one of two bases:-
(a) Time and trouble as for Salvage/GA Work; or
(b) A percentage fee, calculated on the amount of the eventual recovery. Payment of this is therefore contingent on success. It is often referred to within the market as "no cure no pay". This is probably the commonest basis for charging for general recovery work.
(a) It is contemplated from the outset that litigation and the instruction of solicitors will be necessary;
(b) The necessity for litigation and instruction of solicitors arises.
"The scale of fees applicable to recoveries effected by Lloyd's Agents themselves from third parties is on a 'no cure no pay' basis and is to be calculated as follows:-
1. When no solicitors or other parties are employed:
Recoveries up to £200
| 25% with a minimum of | £40 |
| 20% on the next | £300 |
| 10% on the next | £500 |
| 7½% on the next | £25,000 |
| 5% on the balance |
2. In cases where recoveries are effected through solicitors or other parties, Lloyd's Agents' fees to be assessed on a time and trouble basis, with a minimum fee of £40."
THE EVIDENCE OF MR. SHARMA
THE AMOUNT AT STAKE
THE RESPECTIVE CONTENTIONS OF THE PARTIES
(1) The agreement between Allianz and Websters relating to the 5% fee is champertous and accordingly unenforceable; and no claim can be founded on it against the defendants.
(2) If the agreement is not champertous and is enforceable, then any sum payable under it by Allianz can only be recovered from the defendants as costs of the action and subject to ordinary principles of costs assessment. The claim should therefore be referred to a Costs Judge for a detailed assessment.
(3) If the sum payable under the agreement is recoverable from the defendants as damages in principle, then there can be no recovery by Allianz in this case because:
(i) it has no cause of action against the defendants in respect of it;
(ii) the loss is too remote and unforeseeable; alternatively
(iii) it flows from failure by Allianz to mitigate its loss, alternatively
(iv) there can only be a partial recovery since some work done under the agreement was not caused by the defendants' breach.
(1) The allegation of champerty is unfounded.
(2) The "no cure, no pay" fee is recoverable as damages, alternatively costs. The fee is recoverable as damages because it is a loss or expense which flows from the defendants' breach of contract, in the same way as the other fees and expenses of third parties. Even if the fee is to be characterised as costs rather than damages, it was proportionate and reasonably incurred and proportionate and reasonable in amount (and should be allowed without any assessment).
CHAMPERTY
1. Champerty is a variety of maintenance. Section 14(2) of the Criminal Law Act 1967 provided that "the abolition of criminal and civil liability under the law of England and Wales for maintenance and champerty shall not affect any rule of that law as to the cases in which a contract is to be treated as contrary to public policy or otherwise illegal." Champerty survives as a rule of public policy capable of rendering a contract unenforceable.
2. 'A person is guilty of maintenance if he supports litigation in which he has no legitimate concern without just cause or excuse' - Chitty 28th Ed, vol 1, 17-050. Champerty 'occurs when the person maintaining another stipulates for a share of the proceeds of the action or suit' - ibid 17-054. Because the question whether maintenance and champerty can be justified is one of public policy, the law must be kept under review as public policy changes.
3. The introduction of conditional fees shows that the requirement of public policy that officers of the Court should be inhibited from putting themselves in a position (by agreement) where their own interests may conflict with their duties to the Court, is no longer absolute.
4. Where the law expressly restricts the circumstances in which agreements in support of litigation are lawful, this provides a powerful indication of the limits of public policy in analogous situations. Where this is not the case, the Court must today look at the facts of the particular case and consider whether those facts suggest that the agreement in question might tempt the allegedly champertous maintainer for personal gain, to inflame the damages, to suppress evidence, to suborn witnesses or otherwise to undermine the ends of justice.
5. In any individual case, it is necessary to look at the agreement under attack in order to see whether it tends to conflict with existing public policy that is directed to protecting the due administration of justice, with particular regard to the interests of the defendant.
6. There is good reason why principles of maintenance and champerty should apply with particular rigour to those conducting litigation or appearing as advocates. Section 58 of the Courts and Legal Services Act 1990, as originally enacted and as amended by the Access to Justice Act 1999, applies only to agreements concluded by those conducting litigation or providing advocacy services. The effect of the section extends more widely, however, for it reflects Parliament's assessment of the present state of public policy in this area.
7. Section 58 evidences a radical shift in the attitude of public policy to the practice of conducting litigation on terms that the obligation to pay fees will be contingent upon success. Whereas before this practice was outlawed, it is now permissible - subject to the requirements imposed by statute. The requirements appear designed to protect the litigants conducting conditional fee agreements who, when the section was first enacted, were required to pay any 'uplift' out of their recoveries. Conditional fees are now permitted in order to give effect to another facet of public policy - the desirability of access to justice. Conditional fees are designed to ensure that those who do not have the resources to fund advocacy or litigation services should nonetheless be able to obtain these in support of claims which appear to have merit.
8. To give evidence on a contingency fee basis gives an expert, who would otherwise be independent, significant financial interest in the outcome of the case. As a general proposition, such an interest is highly undesirable. It would be in a very rare case indeed that the Court would be prepared to consent to an expert being instructed under a contingency fee agreement.
To the above principles I add a ninth (drawn from the judgment of Steyn LJ in Giles v Thompson [1993] 3 All ER 321 at 332).
9. The doctrine of champerty is further limited in application to the extent that it only applies to agreements governing English litigation: see Re Trepca Mines Ltd [1963] Ch 199 at 218. An agreement of a champertous nature made in England is valid if it relates to litigation in a country where champerty is lawful. This again illustrates that the Court is not dealing with an overriding public policy, which applies wherever the agreement is made or to be performed, such as an agreement to pay a bribe abroad. It is designed to protect the integrity of the English judicial system.
(i) The first defendant's bills of lading had stipulated for Korean law and jurisdiction. The second defendant's bills of lading provided for Japanese law and jurisdiction. The terms of Websters' fax of 14 September 1998 were accepted by Allianz by conduct on about 9 December 1998. It was not until April 1999 that it was agreed that the claims against the defendants were to be subject to English law and jurisdiction (although the possibility of such an agreement had been suggested in without prejudice correspondence prior to December 1998).
(ii) A contingency fee agreement which entitles those providing litigation services to a percentage of anything recovered may give rise to particular objection on the ground that it poses a temptation to act in an unethical manner in order to achieve the maximum recovery. It is necessary to consider the role played by Websters in order to see whether the nature of their interest in the outcome of the litigation carried with it any tendency to sully the purity of justice on the facts of this case.
(iii) On my view of the agreement (for the reasons set out below) the defendants are protected to the extent that they are only liable to pay reasonable costs in accordance with the order set out below. I refer in particular to the protections and limitations included in paragraphs 1, 2 and 4 of the order set out below. The detailed assessment under CPR 47 will no doubt be on an hourly rate basis. The 5% will of course operate as an upper cap, but I anticipate that the assessment of costs in accordance with the order set out below will produce a sum far less than that which is admittedly payable by Allianz to Websters.
(iv) Mr Rainey QC for the defendants referred to the role played by Websters in relation to
(a) disclosure
(b) evidence as to quantum
(c) the instruction of a fire expert and
(d) instructions to Richards Butler.
I do not consider, however, that there was much scope for Websters to influence the outcome of the litigation. The litigation was conducted by Richards Butler, a well known and highly experienced firm of commercial solicitors. Richards Butler instructed counsel. Thus the litigation was actually being conducted by solicitors and counsel. The activities of Websters were subject to the control of Richards Butler (and counsel). The interest that the rule of champerty exists to protect (the individual interest) is that of the opposite party. In the present case that was protected by the involvement of the solicitors (and counsel) actually conducting the action.
(v) The great majority of claims of this type are compromised without the need for instructing lawyers or commencing litigation.
(vi) Websters were already acting for other underwriters, and for this reason there was good commercial sense behind the decision of Allianz to retain Websters. The initial retainer was to provide GA/Salvage Services on a time and trouble basis.
(vii) The relevant agreement was not exclusively concerned with litigation.
DAMAGES OR COSTS?
THE APPROPRIATE FORM OF ORDER
1. To the extent that Websters provided services to Allianz (under the agreement made on about 9 December 1998 and evidenced by the fax dated 14 September 1998) in relation to or incidental to this action, Allianz's claim to recover in respect thereof from the defendants is recoverable as costs, as defined in CPR 43.2(1)(a), to be assessed (if not otherwise agreed) on the standard basis and as further set out below.
2. Allianz is entitled to claim a reasonable and proportionate amount for services provided by Websters, being services for which costs are in principle recoverable in accordance with CPR 44.4(2).
3. Allianz will serve a Bill of Costs in respect of the services performed by Websters for which it claims to recover costs in accordance with CPR 44.4(2), such Bill to comply with section 4 of the Costs Practice Direction (43PD.4) and to set out in particular; (a) the items of services claimed for; (b) the amount of costs claimed for each item of the services claimed for; (c) the time spent on each item and (d) the hourly rate claimed to apply to such time.
4. Allianz's claim for costs shall be subject to a detailed assessment under CPR 47. The Costs Judge shall determine on that assessment (a) what services provided by Websters to Allianz are properly recoverable in costs; (b) what is the appropriate amount to allow in respect of the same.
5. The defendants are to pay to Allianz such costs as are so assessed as costs of the action.
6. Allianz shall serve a Notice of Commencement of detailed assessment proceedings under CPR 47.6(1) and the Bill of Costs referred to in paragraph 3 within 4 weeks from the date of this judgment; thereafter the usual timetable for detailed assessment and CPR 47 will apply.
