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	England and Wales High Court (Senior Courts Costs Office) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Senior Courts Costs Office) Decisions >> Tel- Ka Talk Ltd v Revenue & Customs [2010] EWHC 90175 (Costs) (17 June 2010) URL: http://www.bailii.org/ew/cases/EWHC/Costs/2010/90175.html Cite as: [2011] STC 497, [2010] EWHC 90175 (Costs), [2011] STI 267

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IN THE SENIOR COURTS COSTS OFFICE
FROM THE VAT & DUTIES TRIBUNAL (LONDON)

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		17 June 2010

Chief Master Hurst:

BACKGROUND

1. The Appellant company commenced four appeals against decisions of HMRC to refuse repayment of VAT input tax credit claimed by the Appellant for VAT periods from November 2002 to February 2003. By direction of the VAT and Duties Tribunal ("the Tribunal") dated 9 October 2003, the four appeals were consolidated under the above reference.
2. The total VAT withheld was £2,385,421.17.
3. Mr John McCann set up the Appellant company, Tel-Ka Talk Ltd, in 1999. The company operated as a successful wholesaler of mobile phones, until in 2003, the Commissioners refused to repay input tax (VAT). This decision was apparently taken by the Commissioners, following a large scale MTIC fraud, in respect of a number of companies involved in the wholesale mobile phone industry.
4. Mr McCann instructed Mr Hassan Khan, a solicitor, to represent the company. Mr Khan was initially with Baker & McKenzie, and subsequently moved to Bark & Co in October 2004. Mr Khan left Bark & Co and established Hassan Khan & Co. Tribunal proceedings were commenced by the Appellant in April 2003.
5. As a result of the withholding of VAT, the company suffered cashflow difficulties, and experienced difficulty in funding the legal costs of the Tribunal hearings. In October and November 2005, Mr McCann discussed with Mr Khan the possibility of his firm acting on a contingency fee basis, which he agreed to do. On 25 November 2005, Mr McCann and Mr Khan entered into "a non-contentious business agreement pursuant to Section 57 of the Solicitors Act [1974]"^[1].
6. The appeal was due to be heard over nine days starting on 14 February 2006, but following a Judgment of the European Court of Justice in Optigen Ltd, Fulcrum Electronics Ltd and Bond House Systems Ltd v The Commissioners of Customs & Excise C-354/03, C-355/03, C-484/03, the Respondents notified the Appellant that the disputed decisions were withdrawn and that the VAT input tax credits would be paid. This information was given in letters dated 3 February 2006 and 7 February 2006 The second letter confirmed that the Respondents would pay all reasonable costs and that any dispute would be resolved by detailed assessment.
7. £2,385,421.17 was paid to the Appellant on 13 February 2006, a repayment supplement of £119,271.05 was paid on 14 March and interest of £381,271.32, plus costs, was awarded to the Appellant by the Tribunal at a hearing on 18 June 2007. Those sums were paid to the Appellant on 13 July 2007.
8. The Appellant was represented by Messrs Bark & Co, from February 2004 until October 2004 when he changed solicitors and instructed Messrs Hassan Khan & Co, which subsequently became known as The Khan Partnership LLP. The Appellant's costs for the period when Bark & Co acted were settled between the parties in November 2007. The costs now in dispute relate only to the period when Hassan Khan & Co were acting for the Appellant. By Notice of Change of Solicitor dated 16 May 2010, the Appellant's representative, Mr John McCann, gave notice that The Khan Partnership had ceased to act for the Appellant and that he was now acting in person on its behalf.
9. According to the narrative to the Appellant's Bill of Costs, the first retainer with Hassan Khan & Co was on the basis of hourly rates from October 2004, but, due to the financial circumstances of the Appellant, it could not pay all the costs subsequently billed. The narrative states:

"To date the Appellant is not liable for some of Hassan Khan & Co's profit costs billed under the original retainer. The Appellant was and is liable for disbursements, including Counsel's fees (which have been paid).

On 22 November 2005, the Appellant and Hassan Khan & Co entered into a non-contentious business agreement within the meaning of Section 57 of the Solicitors Act 1974. The agreement provided for a fixed fee to be payable immediately [£50,000 plus VAT], plus disbursements and, in the event of a successful outcome, further fees equivalent to a fixed sum of 33% plus VAT of all sums recovered by the Appellant from the Respondent as a result of the proceedings".

10. The bill sets out the fees claimed as follows:

(1) Fixed fee: £50,000.00 plus VAT

i) (2) 33% of £2,385,421.17 (VAT) net: £461,345.16 plus VAT

ii) (3) 33% of £119,271.05 (repayment supplement): £39,359.45 plus VAT

iii) (4) 33% of £381,271.32 (interest): £125,819.54 plus VAT

Total Profit costs: £676,524.15 plus VAT

11. In addition the bill claims Counsels' fees totalling £30,025 plus VAT, making a total claim of £706,549.15 plus VAT. The reason why the costs claimed under item (2) are substantially less than 33% of the total amount recovered is that, by virtue of a separate agreement, approximately £1 million was paid to the Appellant's parent company upon recovery from HMRC. The 33% is therefore calculated on the net figure, rather than the whole.

THE PRELIMINARY ISSUES

12. By their Points of Dispute dated 29 January 2009, the Respondents stated:

"The main Points of Dispute taken to this schedule relate to items (2), (3) and (4), which represent contingency fees and which totals £626,524.15 (sic) plus VAT. The Respondents submit that contingency fees are not enforceable in the VAT and Duties Tribunal and indeed are illegal on the grounds of champerty".

13. The matter came before me on 18 December 2009, when I made an order in the following terms:

"(1) The following issue shall be determined as preliminary issues ("the preliminary issues"):

(a) Whether the contingency fee agreement dated 22 November 2005 between Hassan Khan & Co and the Appellant ("the contingency fee agreement") is lawful and/or unenforceable as between Hassan Khan & Co and the Appellant.

(b) If the contingency fee agreement is unlawful and/or unenforceable, what effect does that have on the Appellant's claim for costs including disbursements.

(c) What are the reasonable costs that can be recovered by the Appellant from the Respondents".

14. The Order went on to grant, by consent, permission to The Law Society to intervene by written submission. The remainder of the Order set out a detailed timetable. Once the Appellant served notice that Mr McCann would represent it in person, that Order was amended by consent to permit The Law Society to make oral submissions.
15. Mr Nicholas Bacon QC, on behalf of the Respondents, provided me with a very detailed skeleton argument dated 20 April 2010, and Mr David Holland provided written submissions on behalf of The Law Society dated 10 May 2010. Supporting Mr Holland's submissions is a witness statement of David Mark Stobbs on behalf of The Law Society dated 26 March 2010, together with 25 exhibits. Mr Richard Drabble QC appeared on behalf of The Law Society at the hearing.
16. I have also received a witness statement of Caroline Elizabeth Cousins, a costs consultant with A&M Bacon Ltd, costs draftsmen who have been instructed on behalf of the Respondents, dated 4 February 2010. There are 19 exhibits to that witness statement.
17. The Appellant relies on a witness statement of Andrew Richard Dunn of The Khan Partnership dated 19 March 2010, and a witness statement of John McCann dated 20 March 2010, each of which has one exhibit.

THE LAW

18. The question to be decided in this case is whether, in the particular circumstances of the case, the contingency fee agreement between the solicitors and their client is enforceable. Mr Bacon argues that the contingency fee agreement could (indeed should) be construed as a contentious business agreement and, if it is so construed, it is unenforceable by virtue of Section 59 of the 1974 Act. In any event, he argues, it is contrary to the public policy enunciated in various authorities, which are not confined to suits in court, therefore, he argues it covers cases in the Tribunal and public policy should be applied to prevent the use of contingency fee agreements.
19. The other aspect of this issue depends upon whether proceedings before the Tribunal fall within the definition of non-contentious business in Section 87 of the 1974 Act. It is The Law Society's position that the Tribunal is not a court, and that accordingly, proceedings before it are non-contentious and thus a non-contentious business agreement in the form of a contingency fee agreement is permissible.
20. The relevant parts of the Solicitors Act 1974 are as follows:-

"Non-Contentious Business Agreements

57(1) Whether or not any order is in force under Section 56, a solicitor and his client may, before or after or in the course of the transaction of any non-contentious business by the solicitor, make an agreement as to his remuneration in respect of that business.

(2) The agreement may provide for the remuneration of the solicitor by a gross sum, or by reference to an hourly rate, or by a commission or percentage, or by a salary, or otherwise, and it may be made on the terms that the amount of the remuneration stipulated for shall or shall not include all or any disbursements made by the solicitor in respect of searches, plans, travelling, taxis, fees or other matters.

(3) The agreement shall be in writing and signed by the person to be bound by it or his agent in that behalf.

…

Contentious Business Agreements

59(1) Subject to subsection (2), a solicitor may make an agreement in writing with his client as to his remuneration in respect of any contentious business done, or to be done, by him (in this Act referred to as a "contentious business agreement") providing that he shall be remunerated by a gross sum, or by reference to an hourly rate, or by a salary, or otherwise, and whether at a higher or lower rate than that at which he would otherwise have been entitled to be remunerated

(2) Nothing in this Section or in Section 60-63 shall give validity to:

(a) …

(b) any agreement by which a solicitor retained or employed to prosecute any action, suit or other contentious proceeding, stipulates for payment only in the event of success in that action, suit or proceeding;

…

Interpretation

87(1) in this Act, except where the context otherwise requires –

…

Contentious business" means business done, whether as solicitor or as advocate, in or for the purposes of proceedings begun before a Court or before an arbitrator, not being business which falls within the definition of non-contentious or common form probate business contained in Section 128 of the Senior Courts Act 1981.

…

Non-contentious business" means any business done as a solicitor which is not contentious business as defined by this subsection."

21. The Report of the Review of Tribunals by Sir Andrew Leggatt in March 2001, states, at 4.43,

"The position in [Employment Tribunals] is distinctive. Cases before ETs are not included within the definition of "contentious business" to be found in Section 87 of the Solicitors Act 1987, although they are directly comparable to other forms of contentious business. As a result, contingency fees (which offer no protection against the proportion of awards which might be absorbed by "no win, no fee" agreements) are not prohibited, although they are in contentious business before the courts. This appears to be an anomaly …"

22. Lord Justice Jackson in his Review of Civil Litigation Costs Preliminary Report published in May 2009 stated (at Chapter 20):

"2.1 Tribunals

The first jurisdiction to consider is close to home, namely tribunals in England and Wales. Proceedings in all tribunals, other than the Lands Tribunal and the Employment Appeal Tribunal, are classified as "non-contentious" business.^[2] Solicitors are therefore permitted to conduct tribunal proceedings on the basis of contingency fees.

2.2 Employment Tribunals

The tribunals in which solicitors most frequently act on contingency fees are employment tribunals. The classification of the business of those tribunals as non-contentious is an oddity to say the least. Conducting cases in employment tribunals is just like adversarial litigation^[3] …"

23. We therefore have a situation which has, for some time, been recognised as "an anomaly" and "an oddity".
24. It is worth noting that if Lord Justice Jackson's recommendation that the indemnity principle be abrogated is put into effect, none of the arguments being put forward by the Respondents could be made. The Appellant would simply be entitled to a reasonable and proportionate amount in respect of its costs, regardless of any agreement which it may have with its legal representatives.

THE EVIDENCE

25. In his witness statement, dated 20 March 2010, Mr McCann set out the background facts and the circumstances in which he came to enter into the agreement with his solicitors Hassan Khan & Co. At paragraph 15 of his statement he says:

"I was happy with the content of the [client care] letter and I was happy to sign the final fee agreement on the basis that it fairly represented the reasons for entering into it, and the sums that would be payable in the event of success."

26. Mr Dunn of the Khan Partnership, in his witness statement dated 19 March 2010, dealt with the Respondents' challenge to the contingency fee agreement. He states at paragraph 7:

"Our contention … has always been that whilst the Tribunal is a court for the purpose of the Courts & Legal Services Act 1990, it is not a court for the purpose of the Solicitors Act 1974 and business conducted in the Tribunal is non contentious business."

27. Mr Dunn then went on to deal with various points raised by the Respondents' costs draftsman in respect of the agreement itself. Those matters have only been referred to in passing, and do not form part of the preliminary issues.
28. Caroline Cousins is a costs draftsman with the firm instructed by the Respondents. Her witness statement is dated 4 February 2010. In it she set out the background to the case, and the correspondence concerning the claim for costs made against the Respondents. The witness statement makes a number of detailed points about the wording of the contingency fee agreement, which again were not relevant to the preliminary issues.
29. David Stobbs of the Law Society signed a witness statement on 26 March 2010, and sets out in his statement and 25 exhibits the Law Society's contentions which have been encapsulated in the Law Society's written submissions, and in Mr Drabble's oral submissions. None of the witnesses gave oral evidence.

SUBMISSIONS

30. The submissions of both the Respondents and The Law Society were extremely detailed, and supported by copious authorities. Rather than attempt to set out their arguments in full, which would make this Judgment excessively lengthy, I set out below the main points of those arguments, and the supporting authorities. The headings are those used in Mr Bacon's skeleton.

THE RESPONDENTS' CASE

31. (1) General Prohibition against Contingency Fees

Mr Bacon argues that the principles of maintenance and champerty have been applied with particular rigour to those conducting litigation, or appearing as advocates, see Lord Philips MR in R v Secretary of State for Transport, ex parte Factortame and Others [2003] QB 381 [60]. Lord Philips cited a passage in the Judgment of Buckley LJ in Wallersteiner v Moir (No 2) [1975] QB 373 at 401:

"A contingency fee, that is, an arrangement under which the legal advisers of a litigant should be remunerated only in the event of the litigant succeeding in recovering money or other property in the action, has hitherto always been regarded as illegal under English law, on the ground that it involves maintenance of the action by the legal adviser. Moreover, where, as is usual in such a case, the remuneration which the adviser is to receive is to be, or to be measured by, a proportion of the fund or of the value of the property recovered, the arrangement may fall within that particular class of maintenance called champerty. It may, however, be worthwhile to indicate briefly the nature of the public policy question. It can, I think, be summarised in two statements. First, in litigation a professional lawyer's role is to advise his client with a clear eye and an unbiased judgment. Secondly, a solicitor retained to conduct litigation is not merely the agent and adviser to his client, but also an officer of the Court with a duty to the Court to ensure that his client's case, which he must, of course, present and conduct with the utmost care of his client's interests, is also presented and conducted with scrupulous fairness and integrity. A barrister owes similar obligations. A legal adviser who acquires a personal financial interest in the outcome of the litigation may obviously find himself in a situation in which that interest conflicts with those obligations."

32. Mr Bacon quoted further from Lord Philips in Factortame [38] where he cited passages from Steyn LJ's Judgment in Giles v Thompson [1993] 3 ALL ER 321, Steyn LJ concluded:

"The correct approach is not to ask whether, in accordance with contemporary public policy, the agreement has in fact caused the corruption of public justice. The Court must consider the tendency of the agreement. The question is whether the agreement has the tendency to corrupt public justice. And this question requires the closest attention to the nature and surrounding circumstances of the particular agreement. That is illustrated by the well known decision of the House of Lords in Trendtex Trading Corp v Credit Suisse 1982 AC679."

33. In Trendtex Trading Corp v Credit Suisse in the Court of Appeal 1981 QB629 at 633, Oliver LJ stated:

"There is, I think, a clear requirement of public policy that Officers of the Court should be inhibited from putting themselves in a position where their own interest may conflict with their duties to the Court by agreement, for instance, of so-called "contingency fees"".

34. Mr Bacon also relied on Lord Denning MR in Trepca Mines Ltd (No 2) [1963] 1 Ch 199 at 219:

"The reason why the common law condemns champerty is because of the abuses to which it may give rise. The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses. These fears may be exaggerated, but, be that so or not, the law for centuries had declared champerty to be unlawful, and we cannot do otherwise than enforce the law, and I may observe that it has received statutory support, in the case of Solicitors, in Section 65 of the Solicitors Act 1957."

35. Sections 13(1) and 14(1) of the Criminal Law Act 1967, abolished both the crimes and the torts of maintenance and champerty. Section 14(2) provided:

"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."

36. (2) Contingency Agreements are not confined to Suits in a Court

Mr Bacon submits that the common law rule against contingency fee agreements extends beyond just actions or suits in a court. He relies on Section 59(2)(b) of the Solicitors Act 1974 (which deals with contentious business) which I have quoted at paragraph 20 above. He argues that proceedings before the Tribunal are a "proceeding" within the meaning of Section 59.

37. Mr Bacon points out that Sir Richard Scott V-C held that the rule against contingency fee agreements extended to arbitrations in Bevan Ashford (a firm) v Geoff Yeandle (Contractors) Ltd (in liquidation) [1998] 3 All ER 238.
38. He argues that there is no discernable difference between Court proceedings on the one hand, and proceedings before the Tribunal on the other. Both have the jurisdiction to determine issues of private and public law, and proceedings before both fall within the broad definition of "litigation". He argues that there is no basis for the work of the Tribunal to be described as something other than "litigation" or "proceedings" to which the common law rules against champerty apply. Mr Bacon quoted extensively from the Judgment of Sir Richard Scott V-C who reviewed the series of cases dealing with the law of champerty. I quote selectively from his Judgment,

"Lord Denning MR said [in Re Trepca Mines Ltd] [1962] 3 ALL ER 351 at 355-356:

"… if champerty is an evil, as the common law believes it to be, it is just as much an evil in the one case as the other. In my opinion, it extends to any contentious proceedings where property is in dispute, which becomes the subject of an agreement to share the proceeds".

39. Sir Richard Scott V-C stated:

"The strong tenor of the cases decided since Re Trepca Mines Ltd is that the rules of champerty do not strike down contingency fee agreements outside the field of litigation."

40. He went on to quote Kilner Brown J in Jeremy Pickering (T/A CityAgents) v Sogex Services (UK) Ltd [1982] EGD 396 at 402:

"Negotiation, agreement and formal recording in a District Valuation Court is not litigation. There is no legal dispute between parties or, to use the Latin terminology, no lis inter-partes. The fact that a local authority is an interested party, or other neighbouring rate payers may be objectors, is an irrelevant consideration. It is not litigation; it is a process of administration".

41. Sir Richard Scott also referred to the Judgement of Judge J in Picton Jones & Co v Arcadia Developments Ltd [1989] 1 EGLR 43 at 46, where he said:

"Whatever else they may have been, the applications for gaining permits and planning permissions, were not in my judgment, a lis or litigation or even contentious proceedings in the sense referred to in the Judgments which I have cited. Equally, there were no proceeds of the litigation to be shared".

42. The principle which Mr Bacon seeks to draw from all these decisions is that the rules of law relating to maintenance and champerty apply to litigation generally and are not restricted to actions and suits in courts. He compares the processes in the Tribunal with those of other courts and suggests that there is no relevant distinction to be made between the two. Broadly similar procedural powers are exercised. On this basis, he argues that there are no policy grounds for making a distinction between proceedings conducted under a contingency fee agreement in a court, and proceedings conducted under a similar agreement in the Tribunal.
43. (3) Statutory exception to the use of Contingency Fee Agreements in certain tribunals

Mr Bacon argues that Parliament has specifically sanctioned the use of contingency agreements in Employment Tribunals by the Damages Based Agreements Regulations 2010.

44. (4) Contingency Fee Agreement

The Respondents argue that the agreement between the Appellant and his solicitors is a contingency fee agreement, but argue that it is not a non-contentious business agreement. Mr Bacon suggests that the reference to "litigation" in the agreement between the Appellant and its solicitors, is significant, that the proceedings could extend to further litigation, for example an appeal to the High Court. It could therefore be a contentious business agreement, and if it is, it is simply unenforceable. With regard to the agreement itself, he suggests that "RHK's costs" of 33?% of any recovery is a contingent fee in respect of "litigation". The definition of success is, he says, wide enough to cover enforcement. The contingency fee agreement is clearly based on a conditional fee model and it refers to a success fee which appears to indicated that a further 33?% is payable in the event of success. Although the requirements of Section 57 appear to have been complied with, he argues that the agreement is not confined to tribunal work, but covers all forms of litigation. The agreement does not comply with the CFA requirements and the success fee is not related to base costs. In short he argues that this is an unlawful contingency fee agreement. Mr Bacon suggests that the nature of the agreement is such that it could tempt Hassan Khan & Co, for its own personal gain, to inflame the damages, to suppress evidence or even to suborn witnesses, i.e the test in Trepca Mines. He also refers to the Judgment of Lord Philips in Factortame at [84];

"A contingency fee agreement which entitles those providing litigation services to a percentage of anything recovered may give rise to particular objection, on the grounds that it poses a temptation to act in an unethical manner in order to achieve the maximum recovery …"

45. In respect of the question whether the agreement has the tendency to corrupt public justice, Mr Bacon relies on Lord Philips in Factortame at [76]:

"The public policy in play in the present case is that which weighs against a person who is in a position to influence the outcome of litigation, having an interest in the outcome."

46. Mr Bacon argues that the same public policy is in play in the present case. He suggests that in Factortame, the 8% payable in the event of success, was sufficiently low to escape a finding of unlawful champerty. He suggests, however, that an agreement providing for a 33.3% share of the spoils, is in a wholly different category. He points out that in the Damages Based Agreement Regulations, the cap is set at 35%, inclusive of VAT. The fee charged by Hassan Khan & Co is 33.3%, exclusive of VAT, and therefore, he suggests, it would exceed that maximum.
47. (5) The VAT and Duties Tribunal/The First and Upper Tier Tax Chamber

Mr Bacon argues that the issue for the Court is whether contingency fee agreements are permitted in the Tribunal. He points out that under the Tribunals, Courts and Enforcement Act 2007 ("TCEA 2007"), the Tax Chamber and the Employment Tribunal are treated completely separately, and he seeks to reinforce this argument by reference to the Damages Based Agreements Regulations 2010.

48. The Tribunal existed until 1 April 2009, and was subject to the Value Added Tax Tribunals Rules 1986. From 1 April 2009, that jurisdiction was transferred to the Tax Chamber under the TCEA 2007.
49. He argues that the Tax Chamber is divided into a First and Upper Tier, whereas the Employment Tribunal is separate from this system, "not being a creature of the First tier".
50. (6) Costs Awards in the VAT and Duties Tribunal/Tax Chamber

Mr Bacon makes the point that the TCEA 2007 provides the First tier Tribunal with the power to make costs orders in terms very similar to those in Section 51 of the Senior Courts Act 1981. Section 29 of the 2007 Act provides:

"(1) The costs of and incidental to, (a) all proceedings in the First tier Tribunal, and (b) all proceedings in the Upper tier Tribunal, shall be in the discretion of the Tribunal in which the proceedings take place"

his point being that the reference to "proceedings" is not restricted to actions or suits in a court, as he argued under head (2) above (paragraph 36). He argues that it is significant that the chairman of the Tribunal/Tax Chamber has exactly the same power to make costs orders as a Judge of the County Court or High Court, and he suggests that this is an important factor when considering whether the Tribunal is a "court" for the purposes of the Solicitors Act 1974.

51. At the relevant time, proceedings in the Tribunal were governed by the VAT Tribunals Rules 1986, which state:

"29(1) A Tribunal may direct that a party or applicant shall pay to the other party to the appeal or application –

(a) within such period as it may specify, such sum as it may determine on account of the costs of such party of and incidental to and consequent upon the appeal application; or

(b) the costs of such other party of and incidental to and consequent upon the appeal or application to be taxed by a Taxing Master of the Supreme Court or a District Judge of the High Court of Justice in England and Wales …"

52. The rule goes on to apply the provisions of Order 62 of the Rules of the Supreme Court 1965 to the taxation of costs "with the necessary modifications". In relation to this, Mr Bacon submits that references in Rule 29 to taxation of costs must now be taken as reference to assessment of costs under the CPR (see Broomco (1984) Ltd v The Commissioners of Customs & Excise [2000] V&DR 237). The costs are assessed on the basis specified by the Tribunal, i.e either the standard basis or the indemnity basis (see Patel v The Commissioners of Customs & Excise (1998) VAT Decision 15268; [1998] STI 266). The provisions of CPR Part 44 apply to the assessment of costs when determining the sums payable under Rule 29 (see Mahindra Dave v The Commissioners of Customs & Excise (Nov 2001). The relevant law governing the assessment of costs is the same whether the costs are determined by the Tribunal or by the Taxing Master (per Farquarson LJ in Nader v Customs & Excise Commissioners [1993] STC 806 at 810). Mr Bacon could find no case where it had been held that the costs incurred before the Tribunal were "non-contentious". He suggests this is not surprising, where the assessment of costs is being conducted in accordance with the contentious costs provisions within CPR 43-47.
53. Having quoted Rule 10 of the Tribunal Procedure (First tier Tribunal) (Tax Chamber) Rules 2010, Mr Bacon relies on Rule 10(7)(a), which provides:

" … the Civil Procedure Rules 1998 shall apply, with necessary modifications, to that application and assessment, as if the proceedings in the Tribunal had been proceedings in a Court to which the Civil Procedure Rules 1998 apply".

54. On that basis he argues that the rules contemplate that proceedings before the Tax Chamber are contentious proceedings. He submits that the phrase "detailed assessment of costs on the standard basis" makes no sense at all in the context of non-contentious costs, and further submits that the words which I have quoted, expressly treat the proceedings as contentious.
55. Relying on the Judgment of Sir Richard Scott V-C in Bevan Ashford v Geoff Yeandle, Mr Bacon submits that the law of champerty applies with equal force to proceedings before the Tribunal.
56. (7) Employment Tribunals

Mr Bacon makes the point that the powers of the Employment Tribunal with regard to costs are very limited. The Employment Tribunal is subject to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 and is not part of the generic tribunal system. Regulation 41 of the 2004 Regulations deals with the amount of a costs or expenses order and provides that the Employment Tribunal may order the paying party to pay the receiving party the whole or a specified part of the costs of the receiving party, with the amount to be paid being determined by the way of detailed assessment in a County Court in accordance with the Civil Procedure Rules 1998. Mr Bacon suggests that this also strongly points to the work of the Employment Tribunal as being contentious. He suggests that the Regulation does not make any sense if the business of the Employment Tribunal is non-contentious, because the County Court has no jurisdiction to assess non-contentious business. Secondly, an assessment under the CPR is, in his submission, plainly a reference to the contentious cost rules contained in CPR 43-47 and the Regulations do not make any reference to the Solicitors (Non-Contentious Business) Remuneration Order 1994.

57. (8) Section 58 of the Courts and Legal Services Act 1990

Mr Bacon, reviewed the history of Section 58 of the Courts and Legal Services Act 1990, both in its original form and as amended by the Access to Justice Act 1999. There is no need for me to re-state the provisions of that Section, other than to comment that the original version of Section 58 read:

"58(1) In this Section "a conditional fee agreement" means an agreement in writing between a person providing advocacy or litigation services to his client which …

(d) is not a contentious business agreement (as defined by Section 59 of the Solicitors Act 1974)."

58. The new Section 58 provides:-

"58(1) A conditional fee agreement which satisfies all of the conditions applicable to it, by virtue of this Section shall not be unenforceable by reason only its being a conditional fee agreement; but (subject to subsection (5)), any other conditional fee agreement shall be unenforceable.

(2) For the purposes of this Section and Section 58A

(a) a conditional fee agreement is an agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances …

…

(5) If a conditional fee agreement is an agreement to which Section 57 of the Solicitors Act 1974 (non-contentious business agreements between solicitor and client) applies, subsection (1) shall not make it unenforceable."

59. In relation to "advocacy services" and "litigation services" Section 119 of the 1990 Act has the following definitions:

""Advocacy services" means any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right of audience in relation to any proceedings, or contemplated proceedings, to provide;

…

"Litigation services" means any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or contemplated proceedings, to provide".

The new Section 58A provides:

"(4) In Section 58 and this section (and in the definition of "advocacy services" and "litigation services" as they apply for their purposes) "proceedings" includes any sort of proceedings for resolving disputes (and not just proceedings in a court), whether commenced or contemplated.

…"

60. On that basis, Mr Bacon argues that a CFA entered into for the purposes of proceedings before the Tribunal, whether the proceedings are commenced or contemplated, falls within the scope of the 1990 Act. Accordingly, if the CFA satisfies the conditions applicable to it, it will be enforceable. If it does not satisfy those conditions, it will be unenforceable, unless it is a non-contentious business agreement in accordance with Section 57 of the Solicitors Act 1974. Thus he argues, if the CFA is within Section 57 of the 1974 Act it is enforceable by reason of the provisions of that Act, because any such agreement is outside the prohibition in Section 58(1). Mr Bacon confirms that had the Appellant been represented under a CFA which met the requirements of the Act, the Respondents would not be able to object to it on the grounds that it was in some way not permitted.
61. (9) Section 57 Solicitors Act 1974
62. Mr Bacon, having referred to the relevant parts of the Solicitors Act 1974, also drew attention to the fact that The Law Society's Code of Conduct Rules 2007 state:

"2.04 You must not enter into an arrangement to receive a contingency fee for work done in prosecuting or defending any contentious proceedings in a court of England and Wales, a British Court-Martial or Arbitrator where the seat of arbitration is England and Wales, except as permitted by statute or the common law."

63. The word "court" is not defined either in the 1974 Act or in the Solicitors Practice Rules, which were applicable at the time. Rule 8 of the 1990 Rules stated:

"(1) A solicitor who is retained or employed to prosecute or defend any action, suit or other contentious proceeding, shall not enter into any agreement to receive a contingency fee in respect of that proceeding, save one permitted under statute or by the common law."

64. Mr Bacon points out that in the 2007 Code, the word "court" is stated to be "any court, tribunal or enquiry of England and Wales …". He goes on to argue that The Law Society's assertion that a "court" does not include the Tribunal is flawed because it ignores the meaning of the word "court" as developed by the courts of common law, and it ignores the fact that Parliament has "expressly legislated to treat the Tribunal as a court". He suggests that when considering the meaning of the word "court", the courts have applied a functional test and asked themselves whether the body discharges a judicial function as part of the judicial system, or an administrative function in order to resolve problems that arise in the course of the administration of the country. He says, however, that the courts have not been able to identify or articulate any particular test capable of drawing a definitive distinction between the two concepts, and it is clear, in his submission, that in any particular case, the approach of the court has been influenced by the policy considerations underpinning the particular statutory provision in issue.
65. In support of his argument, Mr Bacon relies on a number of authorities and pieces of legislation. In Attorney General v BBC [1981] AC 303, the House of Lords had to consider whether a local valuation court was a court for the purposes of the powers of the High Court relating to contempt. The consensus was that a body, which has a judicial function, was a court, whereas if it has an administrative function, albeit carried out judicially, it would not be a court. Viscount Dilhorne stated at 338 to 339:

"While every court is a tribunal, the converse is not true. There are many tribunals which are not courts, despite the fact that they are charged with dealing with certain matters, and have features in common with courts. The distinction is drawn in this Country between tribunals which are courts and those which are not … Generally I would say that just because a tribunal has features resembling those of a court, it should not be held to be a court. Tribunals created by or under acts of Parliament are not, as a general rule, courts, unless constituted as such by the act creating them. The only exception to this that I can find is the Lands Tribunal … Parliament has on occasions enacted that a tribunal shall be a court. When it has refrained from doing so, say in the case of the Lands Tribunal, I am not prepared to hold that a tribunal it has created, no matter how much it resembles a court, is a court … I think that a distinction has to be drawn between courts which discharge a judicial function and those which discharge administrative ones, between courts of law which form part of the judicial system of the Country on the one had, and courts which are constituted to resolve problems which arise in the course of administration or the government of this Country. In my opinion, a local valuation court comes within the latter category. It discharges functions formerly performed by assessment committees. It has to resolve disputes as to the valuation of hereditaments, while its decisions will affect an occupier's liability for rates, it does not determine his liability. It is just part of the process of rating."

66. Lord Edmund-Davies stated at 351:

"At the end of the day, it has unfortunately to be said that there emerges no sure guide, no unmistakable hallmark by which a "court" or "inferior court" may unerringly be identified. It is largely a matter of impression. My own firm view is that a local valuation court is not such a body. I would add to that, if Parliament had it in mind to bring local valuation courts within the contempt procedure by which the Divisional Court is empowered to protect "inferior courts", it is regrettable that they did not make this clear by legislation, as they have already done in several other Acts of Parliament cited to your Lordships."

67. Mr Bacon submits that the local valuation court is very different in its characteristics from the Tribunal, both in its composition and procedures, including appeal procedures.
68. Section 19 of the Contempt of Court Act 1981 states that a court includes: "Any tribunal or body exercising the judicial power of the state", i.e in the context of the contempt jurisdiction of the High Court. In Pickering v. Liverpool Daily Post and Echo Newspapers [1990] 1 All ER 335, the House of Lords held that "this definition must be intended to reflect the common law concept of what is a "court" for the purposes of the common law jurisdiction of the courts in relation to contempt of court".
69. Mr Bacon also points out that in Peach Grey & Co v. Sommers [1995] 2 All ER 513 the Divisional Court held that an industrial tribunal fell within the common law notion of "inferior court", and the definition of "court" in section 19 of the 1981 Act stating:

"An industrial tribunal has many of the characteristics to which the authorities refer as being those of a court of law. It is true that it is not a court of record and that its monetary awards have to be enforced and taxation of its costs carried out by the county court; that, although in practice it observes the rules of evidence, it is not strictly bound to do so; that there are conciliation proceedings available involving the Advisory, Conciliation and Arbitration Service, and rights of audience that are not limited to lawyers. But it was established by Parliament, it has a legally qualified chairman appointed by the Lord Chancellor, and (like the Employment Appeal Tribunal, which is a court of record) other members representing employers and employees drawn from panels compiled by the Secretary of State for Employment. It sits in public to decide cases which affect the rights of subjects and it has power to compel the attendance of witnesses, administer oaths, control the parties' pleadings by striking out and amendment and order discovery; the parties before it can have legal representation; it has rules of procedure relating to the calling and questioning of witnesses and addresses on behalf of the parties; it can award costs; it must give reasons for its decisions which, on a point of law, can be appealed to the Employment Appeal Tribunal and Court of Appeal. In all, it appears to me to exercise judicial functions."

70. Each of these factors, says Mr Bacon, is equally apposite to the Tribunal.
71. In Ewing v The Security Service [2003] EWCA Civ 581, the Court of Appeal held that the Investigatory Powers Tribunal was an inferior court for the purposes of Section 42(1)(a) of the Senior Courts Act 1981, applying the decisions in both Attorney General v BBC and Peach. Mr Bacon argues that it is impossible to discern any difference between the Tribunal and the other tribunals mentioned above, which have been found to be courts. Like the other tribunals, the Tribunal is created by statute; the Value Added Tax Act 1994 Schedule 12 provides for the appointment of a legally qualified President of the Tribunal by the Lord Chancellor, and the appointment of Chairman and Members by the Tribunal; provides for Rules of Procedure to be made by the Lord Chancellor; and those rules provide for the Tribunal to exercise the functions associated with a court, e.g giving directions as to the filing of pleadings, striking out or dismissing an appeal, ordering disclosure, etc. On the basis that the question whether a tribunal is a court is one of impression, Mr Bacon argues that the impression given by the Tribunal is clearly that it is a court of law.
72. In his submission, the fact that the Tribunal would fall within the definition of a body exercising the judicial power of the State and would be regarded as an inferior court for the purposes of the Contempt of Court Act 1981 and the Senior Courts Act 1981, provides strong support for his argument that it should also be regarded as a court for the purposes of Section 87 of the 1974 Act. If this is not the case, he suggests that "court" for the purposes of Section 87 would have to be restrictively interpreted as meaning a court which is not an inferior court, but a court of record which has the power to fine or imprison for contempt itself. There are, he says, no policy justifications for taking such a narrow approach. Given that contentious business also covers proceedings before an arbitrator, which are not part of the judicial system at all, there is no logical justification for excluding from the definition, proceedings before a tribunal exercising judicial functions which would be regarded as an inferior court in other legal contexts.
73. Mr Bacon argues further that Parliament has legislated so as to treat the Tribunal as a court. To make good that submission, he points out that the Courts and Legal Services Act 1990 has been amended by the TCEA 2007. In the original version of the 1990 Act, the definition of "court" was as follows (Section 119):

""Court" includes:

(a) Any tribunal which the Council on Tribunals is under a duty to keep under review;

(b) Any court martial;

(c) A statutory inquiry within the meaning of Section 19(1) of the Tribunal and Inquiries Act 1971."

74. Paragraph 5 of Schedule 8 of the TCEA 2007 substitutes a new paragraph (a) in Section 119(1) of the 1990 Act:

"(a) A tribunal, that is (to any extent) a listed tribunal for, or for any of, the purposes of Schedule 7, to the TCEA 2007 (Functions, etc., of Administrative Justice and Tribunals Counsel);"

75. Accordingly, Mr Bacon argues that the Tribunal was one of those which the Council on Tribunals was under a duty to keep under review under the 1990 Act, and was therefore a "court". Similarly, under the amended definition, the First tier Tax Chamber is a listed tribunal and is therefore a "court". The Administrative Justice and Tribunals Council (Listed Tribunals) Order 2007 provides for the Tribunal and the Employment Tribunal to be listed tribunals for the purposes of Schedule 7 of the TCEA 2007. Thus in Mr Bacon's submission, both are courts. Mr Bacon accepts that the fact that the Tribunal is regarded as a court within the definitions which I have quoted does not provide the answer to the issue which is before me in this case, but it is, he suggests, an important factor to be taken into account. Given the examples which he has demonstrated of tribunals being treated as a court in various statutes, he argues that it would be inconsistent to treat the Tribunal as something other than a court when applying the provisions of Section 87 of the Solicitors Act 1974.
76. (10) Law Society Guidance

Mr Bacon argues that The Law Society guidance, to the effect that tribunal work is non-contentious business, has never been part of the Practice Rules or the Code of Conduct. The guidance is to be found in Practice Advice booklets and, as such, is guidance only and is not binding on solicitors. The 2009 version of the advice booklet contains the qualification: "while every effort has been made to ensure the accuracy of the information in this booklet, it does not constitute legal advice and cannot be relied upon as such. The Law Society does not accept any responsibility for liabilities arising as a result of reliance on the information given." In Mr Bacon's submission, the guidance is either out of date (having its origins in 1936) or is simply wrong. He points out that the guidance has not been adopted or followed by the Bar Council; Barristers are not permitted to enter into any contingency fee agreements.

77. Mr Bacon then refers to Hansard for 26 January 1999. It is perhaps worth quoting, at slightly greater length, the passages to which he refers. The House was debating the Access to Justice Bill. Lord Kingsland said (at page 959):

"The background to this is that contingency fees were, and probably remain, unlawful at common law except in certain specific circumstances. For example a solicitor may charge on a contingency basis for non-contentious business which includes debt recovery by writing letters or negotiating settlement of any claims without starting proceedings. It also includes acting in tribunal cases, planning inquiries, criminal injuries compensation claims, and any other tribunal case. That is because the definition of non-contentious business in the Solicitors Act 1974 is seriously outdated. It only covers litigation before courts, making no mention whatsoever of tribunals. The definition dates back to the nineteenth century when there were hardly any tribunals."

78. A little later, the Lord Chancellor responded (at page 960):

"It was not the intention of this legislation to make unlawful other kinds of fee agreements that solicitors presently use. For example, it is perfectly lawful for solicitors to work on a contingency fee basis where they are undertaking work in "non-contentious business" as defined by the Solicitors Act 1974. When we turn to contingency fees in relation to other work undertaken by lawyers, I am not convinced that the use of contingency fees in relation to non-contentious business should be unlawful. I have a different view, of course, in relation to contentious business properly so described.

…

The noble Lord, Lord Kingsland, referred to proceedings in employment tribunals. Under the Act non-contentious business includes all proceedings in employment tribunals because they are neither proceedings before a court nor an arbitrator. However, everyone knows that in practice they are just as contentious as court proceedings. It is only the Employment Appeal Tribunal which is treated as contentious."

79. Mr Bacon suggests that the cause of the problem is not the definition in the Solicitors Act, but the guidance given by The Law Society. He suggests that the introduction of the Damages Based Agreements Regulations 2010 represents a change in the law in the employment tribunals.

MR JOHN McCANN

80. Having heard Mr Bacon's submissions, Mr McCann had no points of substance to make other than a heartfelt plea that this matter be resolved without further delay, so that he could, as he put it, get on with his life.

THE LAW SOCIETY'S SUBMISSIONS

81. The Law Society's position is that, even if otherwise unlawful as champertous, a written agreement by which a solicitor acting for a client in the Tribunal is to be remunerated by payment of a contingency fee in the event of a successful outcome, is a lawful non-contentious business agreement within Section 57 of the 1974 Act. The Society submits that that Tribunal is not a "court" and relies not only on the wording of the 1974 Act, but also the history of the relevant provisions, the wording of subsequent Acts, relevant authorities, as well as accepted and long-standing practice.
82. The Society's position is that the word "court" in Section 87 of the 1974 Act is a reference to courts of law properly so-called, i.e courts of record, these include: the Supreme Court, the Court of Appeal, the High Court, the Crown Court, the County Courts and the Magistrates' Courts, and, perhaps, Coroners Courts, Consistory Courts and Courts-Martial. As to why the Section refers specifically to proceedings before an arbitrator, the Society submits that an arbitrator may (by agreement) hear the same disputes which could traditionally have been heard by the civil courts, that is disputes between private individuals.
83. On the other hand, a tribunal is a statutory body, set up to resolve disputes, usually between individuals and the State, relating to liabilities or entitlements under a particular enactment. Reference is made to the Report of the Committee on Administrative Tribunals and Enquiries (the Franks Report published on 15 July 1957 which states at paragraph 36:

"Tribunals today vary widely in constitution, function and procedure. Appointments of chairmen and members are usually made by the Minister responsible for the legislation under which they operate, but some are made by the Crown and some by the Lord Chancellor, even though he may have no direct responsibility for the subject matter of their work. Most tribunals deal with cases in which an individual citizen is at issue with a Government Department or other public body concerning his rights or obligations under a statutory scheme. But a few (for example Rent Tribunals) are concerned with disputes between citizens. Still others (for example the Licensing Authorities, for Public Service and Goods Vehicles) have regulatory functions and are therefore just as much administrative bodies as they are adjudicating tribunals. Some tribunals, like the courts, have a detailed code of procedure, with testimony on oath and strict rules of evidence. Most have a simple procedure, usually without the oath and sometimes with a ban on legal representation. Finally, there are differences regarding appeals. Sometimes there is no appeal, and further redress can only be had by seeking a court order to set aside the decision. But in most cases there is an appeal – either to an appellant tribunal, a Minister or the courts."

84. With regard to the Franks Report Mr Drabble argues that there had been a considerable growth in the Tribunal service since the Donoughmore Report in the 1930s and the Franks Report in the 1950s. Franks emphasised that tribunals should remain independent. Although that report post-dates the 1956 Act, it cannot, he submits, be suggested that, if the draftsman of the Act had wanted to include tribunals, the wording would have been left unaltered. Mr Bacon's assertion that the Commissioners of Inland Revenue are not a court, but that the Tribunal is, is not a principled approach. Parliament has drawn the line in Section 87 of the 1974 Act and it may be necessary to legislate further in order to alter it.
85. Reference is also made to the Leggatt Report. It is clear from these reports that a tribunal is generally intended to provide specialist expertise in a particular field, an informal and speedy means of resolving disputes in which individuals may prepare and present their own cases.
86. The Society submits that there was a significant change in the wording of the definitions of "contentious business" and "non-contentious business" between the Solicitors Act 1932 Section 81, and the Solicitors Act 1957. Section 81 of the 1932 Act provided:

"81(1) In this Act, unless the context otherwise requires –

…

"Contentious business" includes any business done by a solicitor in any court, whether as a solicitor or as an advocate;

"Non-contentious business" includes any business connected with sales, purchases, leases, mortgages, settlements and other matters of conveyancing".

87. Section 86 of the 1957 Act (a consolidating Act) states:

"86-(1) In this Act, except where the context otherwise requires, the following expressions have the following meanings respectively, that is to say –

…

"Contentious business" means business done, whether as solicitor or advocate, in or for the purposes of proceedings begun before a court or before an arbitrator appointed under the Arbitration Act 1950, not being business which falls within the definition of non-contentious or common form probate business contained in subsection (1) of section one hundred and seventy five of the Supreme Court of Judicature (Consolidation) Act 1925;

…

"Non-contentious business" means any business done as a solicitor which is not contentious business as defined by this subsection."

88. Those definitions were to all intents and purposes repeated in the 1974 Act which was also a consolidating Act. Thus, it is submitted, no change in the law was intended (see Bennion: Statutory Interpretation 5^th Edition Section 211, pages 204-5).
89. The word "tribunal" has not been used in any of those Acts and the Society submits that Parliament might not specifically have alluded to tribunals in 1932, but by 1956, 1957 and even more so 1974, tribunals were well established and an increasingly important feature of the legal landscape. The Tribunal itself had been established in 1972 by the Finance Act of that year. In 1956 Parliament chose to restrict the ambit of "contentious business" to courts, and the restricted definition was re-enacted in 1957 and 1974, in spite of the growth of tribunals. On this basis it is submitted that Parliament must be taken to have intended the word "court" in Section 87 of the 1974 Act to refer only to courts of record.
90. Mr Drabble points out that the definition of contentious business has remained virtually undisturbed since the 1930s, "Any business done by a solicitor in any court, either as a solicitor or as an advocate;" and that the interpretation for which The Law Society argues has been positively assumed to be correct in the drafting of Section 58 at the 1990 Act; and that assumption is still present in the up to date drafting of Section 55AA, i.e. contingency fees are permitted in non-contentious business. In the Damages Based Agreements consultation, the Ministry of Justice assumed that such agreements were lawful, but their use was causing concern, in both the Employment Tribunal and the Tax Chamber.
91. On this basis, Mr Drabble argues that the definition in Section 87 of the 1974 Act is perfectly sensible. The Government has had multiple opportunities to amend and it would, in his submission, be wrong for the Court to reverse 40 years of acceptance of the position. He seeks to demonstrate The Law Society's position by reference to the legislative history and case law. If it had been the intention of Parliament to include a wide spectrum in the definition of contentious business, it would not have used the words "before a court or before an arbitrator". By 1956 there was a wide range of bodies dealing with Government business which were not regarded as courts.
92. Mr Drabble referred to Section 58(1)(d) of the Courts and Legal Services Act 1990 in its original form, which I have set out at paragraph 57 above. The whole of Section 1 was replaced by the Access to Justice Act 1999 Section 27, Section 58(1)(5) which is set out at paragraph 58 above.
93. There was some discussion before me as to whether the original wording was used in error, or whether the concept of a contentious business agreement had been misunderstood by the Parliamentary draftsmen. It seems probable that CFAs were excluded from being contentious business agreements in order to retain full rights to detailed assessment.
94. Mr Drabble pointed out that it is clear from the Hansard Report that in the original debate on conditional fee agreements Lord Gardiner thought that nothing would change in relation to non contentious business. Under the new wording of Section 58 and Section 58A(4), if in an employment tribunal case a solicitor enters into a CFA, it is caught by those sections and it does not matter if the employment tribunal is a court or not. The solicitor has the freedom to use either a contingency fee agreement (now regulated) or a CFA in the employment tribunal where there is no regulatory control.
95. Section 58(5) of the 1990 Act, he submits, only makes sense if The Law Society's position is correct.

The Interpretation of Section 87 of the Solicitors Act 1974

96. A separate debate developed as to how Section 87 of the 1974 Act should be interpreted. The Law Society, for the reasons already given, argued that the word "court" in Section 87 must have been intended by Parliament to refer only to courts properly so called and not to any tribunal. Mr Bacon argued that the Act is an "always speaking" Act and relies on Bennion on Statutory Interpretation 5^th Edition at page 890:

"(2) It is to be presumed that Parliament intends the court to apply to an ongoing act a construction that continuously updates its wording to allow changes since the Act was initially framed (an updating construction).

While it remains law, it is to be treated as always speaking. This means that in its application on any date, the language of the Act, though necessarily embedded in its own time, is nevertheless to be construed in accordance with the need to treat it as current law.

…

(4) Where owing to developments occurring since the original passing of an enactment, a counter-mischief comes into existence or increases, it is presumed that Parliament intends the court so to construe the enactment as to minimise the adverse effects of the counter-mischief

…

(6) Nothing in the forgoing subsections of this section of the Code justifies a construction which alters the meaning of the words used in the enactment in ways which do not fall within the principles originally envisaged by the enactment"

97. Updating and construction must be structured rather than at large. Bennion states further:

"This structuring is directed to ascertaining the legal meaning of the enactment at the time, with respect to which it falls to be applied. The structuring is framed by reference to specific factors developed by the courts which are related to changes which have occurred

(1) in the mischief to which the enactment is directed,

(2) in the surrounding law,

(3) in social conditions,

(4) in technology and medical science; or

(5) in the meaning of words."

98. On the basis that words must be given their ordinary English meaning, Mr Bacon refers to the definition of "court" in the Oxford English Dictionary:

"11(a) An assembly of judges or other persons legally appointed and acting as a tribunal to hear and determine any cause, civil, ecclesiastical, military or naval."

99. Given that the word "court" is capable of having both a wider and narrower meaning, Mr Bacon again relies on Bennion (at page 1188):

"Where a word has both a wider and narrower ordinary meaning, the court will, other things being equal, select the meaning that most nearly corresponds to the mischief, so avoiding a casus omissus or casus male inclusus …"

100. In relation to construction, Bennion states (at page 869):

"Section 286: Presumption that consequential construction to be given

It is presumed to be the legislator's intention that the court when considering, in relation to the facts of the instant case, which of the opposing constructions of the enactment corresponds to its final meaning, should assess the likely consequence of adopting each construction, both to the parties in the case and (where similar facts arise in future cases) for the law generally. If, on balance, the consequences of a particular construction are more likely to be adverse than beneficent this is a factor telling against that construction."

101. Mr Bacon lists as consequences of giving the word "court" a broader definition would be likely to be: (i) a lighter costs burden for the Respondents (not just in this case, but in other VAT Tribunal cases); (ii) the Appellant not being liable to pay its solicitors under the contingency fee agreement; (iii) the Appellant's solicitors recovering none of their fees under the agreement; and, (iv) the Law Society facing a finding that its long-standing guidance is incorrect. He suggests that none of those consequences are in themselves undesirable as a matter of policy.
102. Although The Law Society acknowledges that the 1974 Act might be "always speaking", it argues that a broader interpretation is only permissible if there can be reasonable certainty that the legislative intent underlying the statutory provision would envelop the new situation that had developed (see Victor Chandler International Ltd v Customs & Excise Commissioners [2001] WLR 1296, 1304 at [32] where Sir Richard Scott V-C stated:

"Before applying an "always speaking" construction to a penal statutory provision in order to take account of developments which have taken place since the provision was enacted, the court must, in my judgment, be very clear that the new situation to which the provision is to be applied is within the mischief at which the provision is aimed. It must be very clear that the new situation falls within the Parliamentary intention".

See also Oxfordshire County Council v Oxford City Council [2006] 2 AC 674 at [107]). In the Society's submission, if Parliament had intended to refer to a court as including a tribunal, it could have included that fact within the definitions. Tribunals existed in 1956, 1957 and 1974, but Parliament chose not to expand the definition, it is therefore submitted that this is not one of those situations in which an expanded definition has to be given because Parliament could not have foreseen the relevant circumstances at the date of the enactment.

103. The 1974 Act regulates the conduct of solicitors and the Rules of Conduct are made by The Law Society pursuant to Section 31 of the 1974 Act. There are disciplinary and financial consequences if solicitors fail to comply. The Society accordingly submits that the role and provisions of the 1974 Act are akin to the "penal statutory provision" referred to in Victor Chandler. The Society goes on to point out that the relevant provisions of the 1974 Act have been amended by subsequent legislation on a number of occasions, yet on none of these occasions was the opportunity taken to expand the definition of "court" in Section 87.
104. A number of other statutes (e.g. the Administration of Justice Act 1960, the Courts and Legal Services Act 1990, and the Legal Services Act 2007) include expanded definitions of the "court". Section 119 of the 1990 Act, and Section 207 of the 2007 Act make it clear that the definition applies only "in this Act". It is argued that because these later Acts contain expanded definitions of the word "court", the word does normally bear a more restricted meaning, which does not include "tribunal".
105. The Law Society refers further to Section 58 of the 1990 Act, which governs conditional fee agreements, and at Section 58(5) makes express exception for agreements lawfully made under Section 57 of the 1974 Act. If the word "court" in Section 87 of the 1974 Act had the same wide meaning as in the 1990 Act, then the subsection would be unnecessary, as there could be no possible overlap between conditional fee agreements authorised by Section 58 of the 1990 Act, and non-contentious business agreements authorised by Section 57 of the 1974 Act.
106. The Law Society argues that their submission is reinforced by Section 58AA of the 1990 Act which makes lawful contingency fee agreements relating to employment matters. If the definition of "court" in Section 87 included tribunals, there would be no need for Section 58AA(2) to provide that a contingency fee agreement relating to an employment matter which did not satisfy the conditions set out in the Act, would be unenforceable. If Mr Bacon's argument is correct, any contingency fee agreement which was not specifically validated by sub-section (1) would already be rendered unenforceable by Section 58(1) and could not be saved by Section 58(5).
107. Finally, in relation to statutory interpretation, The Law Society argues that it is wrong to interpret a term in a statute by reference to a term in a later statute, unless the later statute either expressly or impliedly overrules the former. Neither the 1990 Act nor any other subsequent Act can be said to amend the relevant provisions of the 1974 Act, or to be part of the same legislative scheme.
108. Mr Bacon seeks to counter this submission by suggesting that Section 58(5) of the 1990 Act may have been designed to accommodate a CFA relating to proceedings before those proceedings are begun. He says it would be very odd if Section 58 were to create a regulatory regime permitting CFAs in relation to work before the tribunal and yet at the same time permitting contingency fees in tribunal work, which is what would happen if a narrow definition of "court" is adopted. He suggested this position cannot be right and that the broad interpretation would avoid such an overlap.
109. Mr Drabble says that the Respondents' suggestion that the subsection refers to pre-commencement proceedings is not consistent.
110. The explanatory note to Section 58AA on the 1990 Act states that before tribunals, advocacy may be by a wide range of people, not necessarily counsel or solicitors. In tax tribunals representation may be by accountants. The legislation which was introduced was for the purpose of consumer protection not because the use of contingency fee agreements was previously unlawful.
111. Mr Drabble referred to a number of authorities, first: Shell Company of Australia Ltd v Federal Commissioners of Taxation [1931] AC 275. In that case the Privy Council had to decide whether the Board of Review, which had been created to review the decisions of the Commission of Taxation, was or was not a court. Lord Sankey LC stated (at 296):

"The authorities are clear to show that there are tribunals with many of the trappings of a court which, nevertheless, are not courts in the strictest sense of exercising judicial power. It is conceded in the present case that the Commissioner himself exercised no judicial power. The exercise of such power in connection with an assessment commenced, it was said, with the Board of Review, which was in truth a court.

In that connection it may be useful to enumerate some negative propositions on this subject:

(1) a tribunal is not necessarily a court in this strict sense because it gives a final decision;

(2) nor because it hears witnesses on oath;

(3) nor because two or more contending parties appear before it between whom it has to decide;

(4) nor because it gives decisions which might affect the rights of subjects;

(5) nor because there is an appeal to a court;

(6) nor because it is a body to which a matter is referred by another body."

112. On this basis Mr Drabble argues that the VAT Commissioners are not in any sense a court, and just because the Tribunal has the trappings of a court, that does not of itself make it a court.
113. With regard to Mr Bacon's reliance on Attorney General v BBC, the fact that the local Valuation Court had been held to be an inferior court for the purpose of the Contempt of Court Act was not relevant to the issue of whether the Tribunal is a court for the purposes of the Solicitors Act 1974. The Tribunal makes an assessment of tax, but does not enforce it. In rating appeals the Magistrates' Court makes a payment order.
114. The next authority relied on by Mr Drabble is Commissioners of Inland Revenue v Sneath [1932] 2 KB 362. In this case the Court of Appeal had to deal with the question of issue estoppel in relation to decisions of the Special Commissioners. Greer LJ stated (at 384 ff):

"The principal question arising for decision on this appeal is whether the Taxing Authority is so estopped. I have come to the conclusion that the Taxing Authority is not so estopped.

…

By Section 136 any person aggrieved may appeal in the case of income tax to the General Commissioners by giving 21 days' notice, and, in the case of Super Tax, to the Special Commissioners, and he must give notice of the grounds of his appeal. The Special Commissioners then determine upon the examination of the appellant, and any other evidence that is before them, and upon hearing his solicitor or counsel, what his assessment is to be for the year of tax with which the assessment is concerned, and they have power to increase the assessment.

…

The Assessors and the Commissioners have imposed upon them the duty of making the assessment in each year, and whether that assessment is made before or after an appeal, it is, in my judgment, the estimate of the Commissioners for the year in question, and the Assessors in any subsequent year have to make their own estimate, and are not bound by the estimate made in previous years. I think the estimating authorities, even when an appeal is made to them, are not acting as Judges deciding litigation between the subject and the Crown. They are merely in the position of valuers whose proceedings are regulated by statute to enable them to make an estimate of the income of the tax payer for the particular year in question.

…

Though the figure determined in one year is final for that year, it is not final for any other purpose. It is final not as a judgment inter partes but as the final estimate of the statutory estimating body. No lis comes into existence until there has been a final estimate of the income which determines the tax payable. There can be no lis until the rights and duties are ascertained and thereafter questioned by litigation."

115. Mr Bacon argues that the Special Commissioners are not a court, but Mr Drabble submits that Mr Bacon bases his policy arguments on the passage which I have quoted. If it had been intended by Parliament to catch a tribunal with slightly different functions, it would have been sensible to change the definition in the 1974 Act.
116. In Ranaweera v Ramachandran [1970] AC 962 the Privy Council held that the function of the Board of Review in respect of tax assessment was administrative, although judicial qualities were called for in its performance. The dictum of Greer LJ in Sneath was approved. Lord Diplock (who dissented on another aspect of the case) stated (at 972E):

"I recognise, however, that within the special field of taxation there is a line of authorities anterior in date to the constitution of Ceylon which discloses a tendency to treat as executive or administrative the function of deciding disputes between the Government and the tax payer as to his legal liability under fiscal legislation although the decision making function is of a kind which would have all the indicia of being judicial if the subject matter of the legal liability were anything other than tax. I am not myself convinced that even these authorities compel the conclusion that the functions of the Board of Review under the Income Tax Ordinance of Ceylon are not judicial. But I do not find the reasoning of Shell Co of Australia v Federal Commissioner of Taxation [1931] AC 275 easy to apply beyond the particular statute with which it was concerned. It enumerates characteristics of a tribunal which are not conclusive to constitute it a "court" but throws little light upon what characteristics are conclusive either of its exercising judicial functions or of its exercising executive or administrative functions. Despite my doubts, however, I should not have felt justified in expressing positive dissent to a decision that the members of the Board of Review were "public officers" rather than "judicial officers".

117. In the light of these authorities the Law Society submits that the Tribunal is not a court, it is not constituted as, nor called a court. It is essentially a part of the administrative function of tax collection. It is there to decide disputes which might arise between the respondent and individual tax payers under various provisions of the 1994 VAT Act. It does not become a court merely because it adopts many of the procedural features of a court properly so called. The Procedural Rules for the Tribunal were originally to be made by the Commissioners themselves, and the powers contained in paragraph 9 to Schedule 8 of the VAT Act 1983 and paragraph 10 to Schedule 6 of the Finance Act 1972. This provision was amended by the 1994 Act, but it is submitted that it indicates the exercise of an administrative rather than judicial function.
118. Mr Bacon seeks to distinguish these authorities on the basis that the Special Commissioners and the Board of Review were not themselves tribunals, still less courts. In respect of this the Law Society suggests that there is a great deal of similarity between the position of the Special Commissioners in Sneath and that of the Tribunal. The Tribunal acts in effect as an administrative appellate tier from the decisions taken by the Commissioners, just as the Special Commissioners were acting as an appellate tier from the assessments of the Commissioners in that case. It is submitted that the Tribunal has the function of deciding disputes between the Government and the tax payer as to his legal liability under fiscal legislation, and its function should be treated as executive or administrative.
119. AG v BBC I have already quoted Viscount Dilhorne at paragraph 68 above. Lord Scarman stated (at 359-360):

"I would identify a court in (or "of") law, ie, a court of judicature, as a body established by law to exercise, either generally or subject to defined limits, the judicial power of the state. In this context judicial power is to be contrasted with legislative and executive (ie, administrative) power. If the body and review is established for a purely legislative or administrative purpose, it is part of the legislative or administrative system of the state, even though it has to perform duties which are judicial in character. Though the ubiquitous presence of the State makes itself felt in all sorts of situations never envisaged when our law was in its formative stage, the judicial power of the state exercised through Judges appointed by the State remains an independent, and recognisably separate, function of Government. Unless a body exercising judicial functions can be demonstrated to be part of this judicial system, it is not, in my judgment, a court in law. I would add that the judicial system is not limited to the courts of the civil power. Courts Martial and Consistory Courts (the latter since 1540) are as truly entrusted with the exercise of the judicial power of the State as are civil courts … My Lords a local Valuation Court fails this test. Its function is essentially administrative, though it must act judicially in discharging it. Its purpose is, upon objection being made, to give directions as to the manner in which a hereditament is to be treated in the valuation list.

…

The fact which is plain upon the face of the statute that it must act judicially in hearing and determining objections, does not alter its administrative purpose: compare Ranaweera v Wickramasinghe [1970] AC 951. The fact that it is a court (Parliament's description) with an administrative purpose does not make it part of the judicial system of the Kingdom.

…

Though I rest no part of my argument on the law relating to income tax, I would think it is wholly consistent with the view taken by the courts of the character of the Income Tax Commissioners: see Inland Revenue Commissioners v Sneath [1932] 2 KB 362."

120. It is argued that simply because a tribunal adopts procedures similar or identical to a court, and has to act "judicially" in exercising its functions does not mean that it is a court. Lord Scarman emphasised the difference between the exercise of administrative functions and the exercise of judicial functions.

Settled and Long-Standing Practice

121. The Society has long held the view that work in tribunals is non-contentious and can thus can be subject to a valid agreement under Section 57 of the 1974 Act. Mr Drabble points out that this is a widely shared view. He points to the Leggatt Review of March 2001 which informed very important legislation leading to the setting up of the tribunal system. The Civil Justice Council in its report dated August 2005 stated, under the heading Contingency Fees:

"(2) In addition to recommendation 9 [in all multi track cases bench mark costs should be provided for pre-action protocol work], the CJC believes that it is now time to give serious consideration to allowing contingency fees as a last resort additional means of plugging the funding gap and promoting access to justice.

(3) It is often wrongly assumed that payment by results by means of a contingency fee that deducts a percentage of monies recovered does not exist in our jurisdiction. On the contrary when conducting non-contentious business, solicitors are allowed to be paid on a no win (or no deal) no fee basis. Non contentious work is not restricted to the obvious example of commercial transactions which routinely operate on a no deal/no fee basis. It also includes the resolution of disputes that are outside contentious business as defined in the Solicitors Act 1974. These include for example, Employment Tribunal cases where lawyers are allowed to accept remuneration on a contingency fee basis of a percentage of compensation recovered …"

122. Lord Justice Jackson in both his Preliminary and Final Report expressed the views which I have set out at paragraph 22 above, also stated at Chapter 50:

"4.10 Contingency Fees The Employment Tribunals jurisdiction is characterised as non-contentious and so the use of contingency fees by solicitors is not prohibited by either law or professional conduct rules.^[4] I shall use the term "contingency fees" to describe a fee arrangement whereby solicitors are paid nothing for their costs if they lose and a fee based on the percentage of the client's damages if they win. Some commentators describe such remuneration as "damages based contingency fees".

The Preliminary Report then goes on to examine the research conducted by Moorhead and Cumming.

123. In the Final Report, Chapter 12 Contingency Fees, Lord Justice Jackson refers to the written submissions received, including those from the Ministry of Justice:

"3.2 Ministry of Justice. The Ministry of Justice ("MoJ"), although not making any submission to the costs review, in relation to the contingency fees issue has drawn my attention to its consultation paper "Regulating Damages Based Agreements".^[5] In that consultation paper the MoJ notes that contingency fees are permitted in tribunals. It notes that there are concerns about (i) failures to inform claimants about alternative methods of funding their claims and (ii) lack of clarity and understanding of the fee arrangements and the costs which claimants are likely to pay. Accordingly, the Government proposes to introduce regulations to address these issues."

124. Lord Justice Jackson also noted the submission of the Law Society:

"3.3 Law Society. The Law Society states in its Phase 2 submission that it is currently reviewing the issue, following consultation with its members. The Law Society adds:

"It is notable that contingency fees have been operating, broadly successfully in employment and similar Tribunal cases. While the Society recognizes that there have been a number of concerns about how these operate, particularly by unregulated providers, we believe that these can be dealt with by appropriate regulation.""

125. Under the heading "My Conclusion" Lord Justice Jackson states:

"4.1 Having weighed up the conflicting arguments, I conclude that both solicitors and counsel should be permitted to enter into contingency fee agreements with their clients on the Ontario model. In other words costs shifting is effected on a conventional basis and in so far as the contingency fee exceeds what would be chargeable under a normal fee agreement, that is borne by the successful litigant.^[6]"

126. In Chapter 3, dealing with collective actions, Lord Justice Jackson stated:

"4.5 If the recommendations set out in Chapter 12 above are accepted, it will be legitimate for both solicitors and counsel to conduct litigation on a contingent fee basis. This method of funding may be appropriate for group actions where (a) the lawyers have sufficient confidence in success; and (b) the claimants receive independent advice that the terms of the proposed contingency fee agreement are reasonable. The CJC has suggested on two occasions that contingency fees might be suitable for use in collective actions: see Recommendation 10 in the CJC's August 2005 paper "Improved Access to Justice – Funding Options and Proportion of Costs" and Recommendation 4 in its June 2007 Report "Improved Access to Justice – Funding Options and Proportion of Costs; The Future Funding of Litigation – Alternative Funding Structure".

As has already been pointed out the Ministry of Justice itself has accepted that contingency fee agreements are used in the Employment Tribunal and Tax Chamber.

127. Mr Drabble submits that The Law Society does not accept that there is any mistaken view of the law and the Court should be extremely slow to lean towards the interpretation of a statute which disturbs long-standing practice, even one which may be based on a mistaken view of the law (see Bennion Fifth Edition pages 913-914).
128. When used in tribunals, contingency fee agreements are seen as promoting access to justice.

CONCLUSIONS

129. In setting out my conclusions I have adopted the headings used by Mr Bacon in his skeleton.

(1) General prohibition against contingency fees.

130. Under this heading Mr Bacon put forward an uncontroversial statement of the law relating to maintenance and champerty. His argument, based on the authorities which he set out, was that contingency fee agreements are, in any event, contrary to public policy, and thus unenforceable. In my judgment this submission fails, since Section 57 of the 1974 Act specifically permits such agreements in non-contentious business. The question is, therefore, whether proceedings before the Tribunal are contentious or non-contentious business, and this in turn depends upon whether the Tribunal is, or is not, a court.

(2) Contingency agreements are not confined to suits in a court

131. Section 58A(4) of the Courts and Legal Services Act now makes it clear that "proceedings" includes any sort of proceedings for resolving disputes (and not just proceedings in a court) whether commenced or contemplated. The real question is in fact whether those proceedings are contentious proceedings, and whether we are in this case, dealing with contentious or non-contentious business. There may be no policy grounds for the distinction between proceedings conducted under a contingency fee in a court, and those conducted under a similar agreement in a tribunal. It is, however, the Solicitors Act 1974 which governs the situation.

(3) Statutory exception to the use of contingency fee agreements in certain tribunals

132. This argument is misconceived in that the initial consultation and subsequent legislation was based on the assumption that contingency fee agreements were already permitted and in use, in both the Employment Tribunal and in the Tax Chamber (the term "Tax Chamber" is taken from the consultation paper, but it is clear that it includes what used to be the VAT and Duties Tribunal). Mr Bacon's suggestion that Parliament has permitted the use of contingency fees in only very limited circumstances in respect of work before Tribunals is not borne out by the facts. His argument that "Parliament has restricted the circumstances in which contingency fee agreements can be entered into in employment cases", again does not accord with the facts. All that the legislation has done is to regulate those contingency fee agreements which are used in respect of proceedings before the Employment Tribunal.
133. Mr Bacon's comment that the contingency fee agreement entered into between the Appellant and his solicitors would not satisfy the conditions of Section 55AA of the Courts and Legal Services Act 1990, and the Damages Based Agreements Regulations 2010 is, in my judgment, irrelevant.

(4) Contingency fee agreement

134. In respect of this submission, the costs claimed by Hassan Khan & Co are in fact based on a 30% increase, as claimed between the parties. In my judgment, if the agreement falls within the statutory exception it is enforceable; if it is without the statutory exception the agreement will not be valid because of Section 59(2)(b) of the 1974 Act, even if there is no maintenance or champterty. So far as inflaming the damages is concerned, there are no damages involved in this case, the question was whether the Appellant company was entitled to repayment of the VAT or not. Given that the contingency fee agreement was entered into barely three months before the date set for the hearing, the opportunity, and therefore the temptation, to suppress evidence or even to suborn witnesses was to all intents and purposes non-existent. Prior to the agreement, the solicitors were expecting to be paid for all the work which they had properly done on an hourly rate basis. With regard to Lord Phillip's comment in Factortame, that the public policy in play is that which weighs against a person who is in a position to influence the outcome of litigation having an interest in that outcome, it is difficult, in the context of this case, to see how the solicitors could be in a position to influence the outcome of the litigation, except possibly by suppressing evidence, but there is no evidence that that is in fact the case, nor is there even any suggestion that this has happened. In those circumstances the court assumes that the solicitors have acted appropriately throughout.
135. With regard to Mr Bacon's suggestion that the agreement was wide enough to extend to further litigation, for example an appeal to the High Court; on the facts of this case there were no further proceedings. Had there been, the question might then have arisen whether those later proceedings, which would undoubtedly have been contentious, would have the effect of striking down the whole agreement, or merely making it invalid in respect of those later proceedings. That question does not arise in this case, and I express no view about it.

(5) The VAT and Duties Tribunal – First and Upper Tier Tax Chamber

136. This argument is in my judgment largely irrelevant. At the time when the agreement was entered into, and the case disposed of, the Tribunal was in existence and subject to the 1986 rules. The position under the TCEA 2007 is not, in my view, relevant in this case. Under that Act the Upper Tribunal is designated a superior court of record (see Section 3(5)). It would therefore seem, although I make no finding about this, that contingency fee agreements would not be permissible in cases proceeding in the Upper tier. Whether the position before the First tier Tribunal is affected by the new Act, I leave for others to decide.

(6) Costs awarded in the VAT and Duties Tribunal – Tax Chamber

137. The issue in this case turns on whether the proceedings before the Tribunal are or are not contentious business. In respect of Mr Bacon's submission, it must be borne in mind that Costs Judges assess costs every day, both contentious and non-contentious. It is clear from the discussion in Bilkus v Stockler Brunton [2010] EWCA Civ 101 that the issue of what work is contentious or non-contentious in proceedings is far from settled.
138. I do not accept that the phrase "detailed assessment of costs on the standard basis" makes no sense in the context of non-contentious costs, and as I have already stated, I express no view about the effect of the 2009 Tribunal Procedure Rules on proceedings before the Tax Chamber. Those rules have no application in the present case.
139. In Dean & Dean v Angel Airlines SA [2007] EWHC 399 (QB) (in which Mr Bacon appeared for the Appellant Solicitors), MacKay J refused to allow a new case to be run on appeal, but in respect of the Costs Judge's finding stated:

"In my judgment, CPR 48.8(2)(a) to (c) applies to the detailed assessment of the Defendant's bill … the application of 48.8(2)(c) is not limited to circumstances where proceedings have begun and the subject matter of the work is contentious costs."

140. MacKay J stated:

"I am not satisfied that the Judge's finding as to this status of the work done was wrong. The whole of CPR 48.8 applies in terms to "every assessment of a solicitor's bill to his client", and it is without qualification and without any distinction between contentious and non-contentious business. It effectively reproduces its predecessor, RSC Order 62, rule 50 which had been in place since 1986. Mr Bacon says that this rule was beyond the powers of the Rule Committee. I cannot accept that argument, particularly where in other parts of the rule the existence and impact of the 1994 [Remuneration] Order is, as it were, recognised and catered for.

17. At least in the case of proceedings such as these, which involve a known adversary, threats of proceedings in this country and in Romania leading to a settlement, all of the provisions of 48.8 are apt and capable of being applied with ease."

141. A little later the Judge stated:

"The text book authority Cook on Costs, Chapter 21.5 describes the difference between contentious and non-contentious costs as more apparent than real … and go on to say that non-contentious costs are covered by 48.8(2) in that it says they shall be assessed on an indemnity basis unlike contentious costs which, as CPR 44.4 says, can be on either the indemnity or the standard basis. So Cook's conclusion is that "there are no inherent distinctions of principle necessitating different approaches to quantification of contentious and non-contentious costs." So even if it were appropriate to let Mr Bacon run his new case, it would fail in my judgment."

(7) Employment Tribunals

142. In my view, none of Mr Bacon's submissions under this head assist the Respondents. The County Court, as a general rule, has no jurisdiction to assess non-contentious costs, but Regulation 41 of the 2004 Regulations makes a specific provision for costs in the Employment Tribunal to be dealt with in the County Court. If those costs are in fact non-contentious, the County Court has had the jurisdiction conferred upon it. I do not accept that CPR 43-47 are exclusively "contentious costs rules", see the judgment of MacKay J in Dean & Dean. Finally, the fact that the Regulation does not make any reference to the Solicitors (Non-Contentious Business) Remuneration Order is irrelevant. In the context of those regulations, there is quite simply no need for such a reference to be made.

(8) Section 58 of the Courts and Legal Services Act 1990

143. Whilst I accept that it is possible for proceedings in the Tribunal to be conducted under a Conditional Fee Agreement, this does not address the issue of whether proceedings conducted under a contingency fee agreement are non-contentious proceedings, and that therefore the contingency fee agreement is enforceable.

(9) Section 57 of the Solicitors Act 1974

144. The submissions under this head led to the debate with regard to statutory interpretation, which I have set out above in paragraph 100 ff.

The interpretation of Section 87 of the Solicitors Act 1974

145. If the word "court" is given a narrower definition, the consequences would be a mirror image of those set out at paragraph 105 above. What Mr Bacon does not mention is the effect on other cases before tribunals, not just the Tribunal, where solicitors act on a contingency fee basis. Whilst there are no statistics as to how frequently contingency fee agreements are used, the consultation paper Regulating Damages Based Agreements, acknowledges that such agreements are used predominately in employment tribunals and in the Tax Chamber. A narrow interpretation of the word "court" would result in that practice continuing whereas if the Tribunal is found to be a court, this would have a fundamentally adverse affect on the funding of litigation in tribunal proceedings. Contrary to Mr Bacon's submission, in my judgment the aggregate consequences on the parties and (since similar situations are likely to arise in future cases) for the law generally, of a broader construction are significantly worse than the aggregate consequences of a narrow construction. There is no evidence that Parliament ever intended, within the context of the Solicitors Act, to enlarge the meaning of "court" to include tribunals. The various Acts containing wider definitions, upon which Mr Bacon relies, refer only to themselves, and do not alter the long established definitions in the 1974 Act.
146. With regard to Mr Bacon's submission that Section 58(5) of the 1990 Act may relate to pre-proceedings work, I reject it. The position is that in the Employment Tribunal, solicitors may act under regulated damages based agreements or under CFAs. Failure to comply with the Damages Based Agreements Regulations may render the agreement unenforceable. It seems likely that in the future, legal representatives in the Employment Tribunal will rely on conditional fee agreements which are no longer regulated and which can be drafted in such a way as to produce the same result as a contingency fee agreement.
147. In my judgment Mr Drabble's submissions, and the authorities on which he relies, provide the complete answer, and I accept them.

(10) Law Society Guidance

148. Mr Bacon's suggestion that it is the Law Society's guidance which is the cause of the confusion between what constitutes contentious and non-contentious business, is in my view, unfounded. The definition itself in the 1974 Act is clear, albeit anomalous and an oddity. I do not accept that the Damages Based Agreements Regulations 2010 brought about any change in the law as to what constitutes contentious and non-contentious business. Those regulations merely regulate contingency fee agreements in the Employment Tribunal. The consultation paper Regulating Damages Based Agreements states at paragraph 3:

"DBAs have long played a role in access to justice by helping consumers in England and Wales to pursue claims in tribunals, principally in employment tribunals … legal aid for representation is not generally available in most tribunals because the process is inquisitorial and does not generally require professional legal advice.

…

(7) The proposals in this paper are limited to consumer protection issues arising out of their existing use^[7] predominately in Employment Tribunals and in the Tax Chamber. Although the new clause in the Coroners and Justice Bill allows the Lord Chancellor to restrict the use of DBAs in certain types of proceedings, as well as extending their use in litigation, we have no current plans to change the cases or processes in which they can be used. This paper therefore does not invite views on making DBAs more widely available as an alternative method of funding litigation at this stage; instead your views are sought specifically on introducing requirements to regulate DBAs' existing use."

149. The term "Tax Chamber" is not defined in the consultation paper, but the parties accept that it must include the Tribunal and the First tier Tax Chamber.
150. In summary, therefore, none of Mr Bacon's arguments have persuaded me that the Tribunal is a "court", or that proceedings before the Tribunal are contentious business. I accordingly answer the question raised in the first preliminary issue: The contingency fee agreement dated 22 November 2005 between Hassan Khan & Co and the Appellant is lawful, as between Hassan Khan & Co and the Appellant. In the light of that finding the second preliminary issue does not require an answer; and, with regard to the third preliminary issue: "What are the reasonable costs that can be recovered from the Appellant by the Respondents", that issue will have to await the service of the full Points of Dispute and detailed assessment in due course. When detailed assessment does take place, the purpose of the exercise will be to decide what reasonable and proportionate costs the respondents should pay. This may well entail allowing appropriate hourly rates, and arriving at the appropriate number of hours for the work actually and reasonably done.

Note 1    The agreement actually refers to the Solicitors Act 2000, but this was acknowledged by Mr Dunn, in his witness statement, to be a mistake.    [Back]

Note 2    See the definition of “contentious” and “non-contentious” business in Sections 87 of the Solicitors Act 1974.    [Back]

Note 3    This was my experience in the 1970s and 1980s and I am told this is still the case    [Back]

Note 4    Conversely, barristers are prohibited from entering into contingency fee arrangements. See http://www.barcouncil.org.uk/about/instructingabarrister/fees.    [Back]

Note 5    Consultation Paper CP 10/09, published on 1st July 2009, which can be found online at http://www.justice.gov.uk/consultations/docs/regulating-damages-based-agreements.pdf. The website has recently been updated to include a summary of responses, as well as the MoJ’s consultation letter dated December 2009.    [Back]

Note 6    This recommendation is consistent with my proposals in respect of conditional fee agreements. The success fee, which by definition is an excess over the normal fee, is borne by the client, not the opposing party.    [Back]

Note 7    Anecdotal evidence suggests that they are used in Employment Tribunals and the Tax Chamber.    [Back]