Legal Cost Specialists

Posts made in February, 2022

Conditional fee agreements – cap on success fee where terminated early

By on Feb 24, 2022 | 0 comments

Recent posts have looked at the problems that arise when a Law Society model CFA is terminated early. A linked problem (though not specific to the Law Society agreement) is where the client moves to new solicitors part way through the claim. A combination of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and the Conditional Fee Agreements Order 2013 means that where “a conditional fee agreement” in a personal injury case provides for a success fee, that success fee must not exceed 25% of the damages (limited to general damages and past pecuniary loss).  It is important to note that the rule relates to an individual (“a”) CFA. The rule is clearly designed to protect the client from having too much of their damages taken by way of the success fee. However, if a client moves firm part way through the case, and both firms act under their own CFAs with success fees, there appears to be nothing to prevent each firm from recovering up to 25% of the relevant damages.  It is therefore crucial that a new firm of solicitors taking over a case from another firm fully advises the client that they are losing the benefit of the cap by moving firm.  Although the exact scope of a solicitor’s duties when advising a client before a CFA is entered into currently remains a grey area, the courts are likely to look to see whether there has been informed consent in this situation. This problem of the 25% cap applying to the individual CFA, rather than the overall costs of the client, is not unique to this situation.  It would equally apply where a solicitor enters into a CFA with a success fee and counsel is then instructed to act under a separate CFA with a success fee.  I understand that, in reality, counsel is often expected to forgo any success fee in this situation. It does raise the interesting prospect that a solicitor could choose to act under more than one CFA with the client to avoid the CFA cap.  For example, CFA 1 covers work up until track allocation and CFA 2 covers work thereafter.  There appears to be nothing within the legislation/statutory...

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Law Society CFA – Early termination

By on Feb 21, 2022 | 1 comment

A recent post looked at one the drafting problems with the Law Society model conditional fee agreement that arises where the agreement is ended before the successful conclusion of the claim. The relevant clause was: “You can end the agreement at any time. Unless you have a right to cancel this agreement under Schedule 3 and do so within the 14 day time limit we then have the right to decide whether you must: pay our basic charges and our expenses and disbursements including barristers’ fees but not the success fee when we ask for them; or pay our basic charges, and our expenses and disbursements including barristers’ fees and success fees if you go on to win your claim for damages” A further problem arises when the solicitor chooses to insert the following optional clause in the Law Society model CFA into Schedule 2: “Overall cap on your liability for costs We will limit the total amount of charges, success fees, expenses and disbursements (inclusive of VAT) payable by you (net of any contribution to your costs paid by your opponent) to a maximum of [25%] of the damages you receive.” It is not clear how this is meant to apply in relation to early termination if the solicitor elects to be paid their basic charges immediately.  Unless and until the claim settles, the level of damages and the level of recovered costs from the opponent will remain unknown. As such, it would not be possible to determine what the maximum amount payable would be. The only way for this to logically work would be to disapply the cap in Schedule 2 if the solicitors opt to seek payment of their basic charges immediately, but Schedule 2 does not state that the cap is disapplied in this situation. It is certainly possible to envisage situations whereby the solicitor would be better off taking their basic charges immediately, assuming there is no applicable cap in that case, as opposed to waiting until the conclusion of the matter (and the conclusion of any subsequent settlement of costs with the other side) where the recoverable basic charges and success fee would be subject to the cap. It is not surprising that...

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Law Society Model CFA

By on Feb 14, 2022 | 1 comment

The Law Society model conditional fee agreement is not very well drafted.  (Cue gasps of astonishment.) Although, when I say Law Society model CFA, currently no such thing exists.  The last model agreement was updated in 2014 and, even then, appears to have been a temporary job as the header to the document stated: “This model agreement is in the process of being amended to take make it fully compliant with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. You should refer to those regulations before using this model.” The agreement has now been removed from the Law Society website (apparently in July 2021) with a message stating: “The Law Society’s model conditional fee agreement (CFA) is in the process of being reviewed, and so is not currently published. Solicitors using an old version should be aware that it does not reflect all of the recent changes to legislation, or case law, that may affect the viability of CFAs. The model CFA and guidance were last updated in 2014. The model is intended for use in personal injury and clinical negligence claims. We will issue a revised version in due course, taking into account ongoing judgments from 2021. Thank you for your patience in the meantime.” Ignoring any issues with the previous Law Society model CFA not being up to date with the law (and one does wonder how well it reflects on the profession that the representative body for solicitors is unable to keep up to date with developments in the law), it contains basic drafting errors. The body of the agreement states: “Otherwise if you end this agreement before you win or lose, you pay are basic charges and expenses and disbursements. If you go on to win you also pay a success fee.” This is written in commendably clear language that the average lay person should be able to understand.  If the client ends the agreement early, the basic charges, expenses and disbursements are automatically payable (win or lose) at the point of termination.  If the client then goes on to win the claim, they will be liable to pay the success fee in addition. However, when you turn to the Law Society Conditions,...

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