Law Society CFA – Early termination
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 an increasing amount of my time is taken up advising on and drafting CFAs for solicitors.