With the very large extension of fixed recoverable costs for civil litigation from 1 October 2023, many solicitors will be considering whether their charges to their client should mirror the amount of the fixed recoverable costs (perhaps with a success fee if the matter is being dealt with on a CFA basis).
An interesting issue arises as to whether this is lawful. (The same point arises in relation to fixed costs in portal claims and certain other fixed costs regimes.)
The problem arises from the way that the fixed recoverable costs are structured. For example, in the new Intermediate Track if a claim settles at Stage 3, and the matter has been assigned to Complexity Band 4, the recoverable costs are:
“£13,000 + an amount equivalent to 14% of the damages”
There is no problem with the £13,000 figure.
However, does the 14% of the damages figure not fall squarely within s58AA(3) of the Courts and Legal Services Act 1990:
“For the purposes of this section—
(a) a damages-based agreement is an agreement between a person providing advocacy services, litigation services or claims management services and the recipient of those services which provides that—
(i) the recipient is to make a payment to the person providing the services if the recipient obtains a specified financial benefit in connection with the matter in relation to which the services are provided, and
(ii) the amount of that payment is to be determined by reference to the amount of the financial benefit obtained”
In the above example, charges based on the fixed recoverable costs would be a form of hybrid DBA.
Zuberi v Lexlaw Ltd [2021] EWCA Civ 16, arguably, permits hybrid DBAs. However, the DBA element would clearly need to comply with the DBA Regulations 2013. Failure to do so would render the retainer unenforceable.
