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Posts made in December, 2007

Jones v Wrexham Borough Council

By on Dec 26, 2007 | 0 comments

The central issue in Jones v Wrexham Borough Council [2007] EWCA Civ 1356 concerned the, on first sight somewhat esoteric, issue of whether a pre-November 2005 CFA amounted to a “CFA Lite”. A “CFA Lite” is defined by regulation 3A of the Conditional Fee Agreement (Miscellaneous Amendments) Regulations 2003 as being a CFA where, with limited exceptions, “the client is liable to pay his legal representative’s fees and expenses only to the extent the sums are recovered in respect of the relevant proceedings, whether by way of costs or otherwise”. The importance of whether the agreement was to be so treated rested with the fact that Regulation 4 of the Conditional Fee Agreement Regulations 2000, which required solicitors to inform clients as to whether they had an interest in recommending a particular ATE policy, amongst other things, did not apply to “CFA Lite” agreements. If the agreement was therefore caught by Regulation 3A then it did not impact on the validity of the CFA as what information was given to the client. The Claimant, at the same time as being sent the CFA, was sent a client care letter. This letter purported to explain the effect of the CFA. There were a number of sections within the client care letter that were not entirely at one with the actual wording of the CFA. The Claimant’s solicitors sought to argue that taken as a whole, the effect of the agreement with the Claimant was such that he would not be liable (save for the allowable limited exceptions) for any own-side costs whatever the result of the proceedings save to the extent they would be recovered from the other side or covered by his ATE insurance policy. The Court decided that there was no reason why a court could not look at the whole package produced by the solicitor: the CFA agreement, the client care letter explaining the effect of the agreement and the ATE policy. Having done that, the Court accepted that the agreement fell within Regulation 3A. This aspect of the decision causes some potential difficulties: 1. Insofar as there was a conflict between the information contained in the client care letter and the CFA, why should the former...

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Crane v Canons Leisure Centre

By on Dec 26, 2007 | 0 comments

The main issue considered in Crane v Canons Leisure [2007] EWCA Civ 1352 was whether the work performed by external costs draftsmen should attract a success fee. The claim had been conducted under a CCFA and, come the detailed assessment proceedings, the successful Claimant’s solicitors outsourced the work to external costs draftsmen. The Claimant’s solicitors then sought to treat the work performed by the draftsmen as forming part of their own profit costs such as to attract a success fee. The Defendant argued that the work should be treated as being a disbursement to which no success fee could be added. There was no dispute that if the work had been performed by internal costs draftsmen it would have formed part of the solicitors’ own profit costs and attract a success fee. There was also no dispute that the external costs draftsmen here would not recover the success fee themselves, this would go to the solicitors. The decision depended on a construction of the CCFA and the definitions therein of “Base charges” as being “charges for work done by or on behalf of the Solicitors” and of “Disbursements” which were defined as “expenses which the Solicitors incur on the member’s behalf in the course of an action”. By a two-to-one majority the Court of Appeal held that the work was to be treated as being part of the base charges and therefore attracted a success fee. In reaching this conclusion, the Court was required to make two findings: 1. That there was nothing to prevent a solicitor from delegating their own work to third parties and then charge the client a different amount, whether higher or lower, to that which they agree to pay the subcontractor. So long as the solicitor remains responsible for the work and it is work of the nature of “solicitors’ work” then it can be treated as forming part of the base costs. This part of the decision is of wider application as it gives general guidance as to the distinction between base costs and disbursements. 2. That the CCFA treated the work performed by the external draftsmen as falling within the definition of “Base charges” as opposed to “Disbursements”. This is an issue...

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Elstone v Knowles

By on Dec 26, 2007 | 0 comments

In our last two Costs Law Updates we reported the decisions in Myers v Bonnington Cavendish Hotel) Ltd [2007] EWHC 90077 (Costs) and McFayden v Liverpool CC (Liverpool County Court, 9/5/07). These cases also concerned alleged breaches 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 Protect scheme, a scheme which also produced referrals to the solicitors. A further decision concerning the same scheme has recently been handed down in Elstone v Knowles [2007] EWHC 90089 (Costs). It is worth comparing the outcomes of these different cases: Myers v Bonnington (Cavendish Hotel) LtdThere had been a breach of the Regulations due to the failure to make it clear to the client that there was an obligation on the solicitors to recommend the particular policy. However, even if the client had been informed of the interest it would have made no difference to him. Further, the interest not declared was de minimis, and the breach was therefore not material, as the referrals from Accident Line represented only 0.3% of the firm’s total income. The CFA was held to be valid. McFayden v Liverpool CC The Court found there was a declarable interest in that the insurance policy was recommended as a result of membership of the Accident Line panel, the solicitors received benefits from such membership and the client had no choice other than to insure with this scheme if the solicitors accepted the case on a CFA basis. These interests were not notified and the breach was material as the client was placed in a “no choice” position. The CFA was held to be invalid. Elstone v Knowles The evidence before the Judge as to the Accident Line scheme was limited. Based on the available evidence, it was held that the scheme was based primarily on the facility to insure clients through a delegated authority scheme. The referrals that a firm might receive were seen as additional benefits as opposed to being primary. The solicitors would have still chosen to insure through the...

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