McFayden v Liverpool CC

In our last Costs Law Update we reported the decision of Myers v Bonnington (Cavendish Hotel) Ltd [2007] EWHC 90077 (Costs), where a costs judge had held there to be breach of Regulation 4(2)(e)(ii) where the Claimant’s solicitors had recommended an ATE policy but had failed to notify the client that they had an interest in recommending the policy because they were obliged to recommend the policy as part of their membership of the Accident Line scheme. However, he held that the breach was not material because the number of referrals received from the Scheme represented only a small proportion of the firm’s income and that the interest they had not notified of was therefore de minimis.

The Court was faced with an identical challenge, also concerning the Accident Line scheme in the case of McFayden v Liverpool CC (Liverpool County Court, 9/5/07). District Judge Heyworth also found there to have been a breach of the Regulations. However, unlike in Myers, he found the breach to be material as it adversely affected the client’s protection. The client “was placed in a no choice situation” because this was the only policy that could be recommended to him. The Claimant here does not appear to have tried to argue the de minimis point.

Combined with the Myers decision, there are now strong grounds for believing that similar challenges to claims conducted under this scheme will also succeed in showing that there has been a breach of the Regulations. There must also be good grounds for believing that some, if not all, such breaches will also be found to be material.

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