Cleaning up costs draftsmen’s mistakes
At some stage, most experienced lawyers are instructed to try to sort out the mess that another lawyer has created. Over the past couple of months I have twice been instructed to clear up problems created by defective retainers.
On both occasions, the source of the problem was firms of solicitors who have traditionally undertaken defendant insurer work but had looked to move into dealing with some claimant matters. They had wished to undertake this work on a CFA or CCFA basis but lacked previous experience of running cases with these funding models.
In the first case, they had attempted to draft the relevant retainer documents themselves (and inadvertently created an unlawful hybrid DBA). Such are the dangers of dabbling in something one is not an expert in.
In the second case, a CCFA had been set up between a firm of solicitors and a claims management company (CMC). The solicitors had sensibly, you might think, instructed a costs draftsman to undertake this work. The firm instructed appears to have been a very well known costs firm. I say this because the name of the firm appears twice in the body of the CCFA notwithstanding the fact that they are not a party to the agreement and where there is nothing in the agreement to suggest they will undertake any work in connection with the handling of the claims.
The agreement itself is so badly drafted that is it difficult to determine how the various clauses operate in practice or, indeed, how certain aspects of the agreement were even intended to operate.
Time does not allow me to list all the shortcomings with the agreement, but these key ones that stand out, and it is a remarkable drafting achievement for so much to have gone wrong in a relatively short document:
- Combined with the individual CFA each claimant was expected to enter into, the agreement was an unlawful hybrid DBA.
- The overall success fee payable to the solicitors would exceed the 25% cap on general damages and damages for pecuniary loss, other than future pecuniary loss.
- The CCFA creates an unlawful referral fee arrangement between the solicitors and the CMC.
- There is a breach of the indemnity principle.
- The CCFA states that the applicable hourly rate is set out in Schedule 1. Schedule 1 contains no hourly rate.
- The CCFA states the costs the solicitors will charge to the clients will be limited to the costs recovered from the other side. The individual CFAs with the clients makes the clients responsible for any shortfall in recovered costs.
- The CCFA refers to “Legal Representative”, being distinct from the solicitors or the CMC. The meaning of Legal Representative is not defined and is not remotely clear to whom it is meant to refer from the context.
- The CCFA refers to the solicitors’ basic charges as being “calculated for each hour that [the solicitors] are engaged upon Legal Representative’s costs action…”. Even if it was clear what “Legal Representative” referred to, it is impossible to tell what “costs action” is meant to mean in the context of this agreement.
The best guess that I can make is that the costs draftsman who prepared this cannibalised an existing CCFA that governed costs work, that their costs firm undertook, and has tried to adapt this to the requirements of the firm of solicitors but without a proper grasp of contract law, costs law, current regulatory requirements, basic drafting or the English language.