Legal Cost Specialists

CFAs

Law Society CFA unenforceable?

By on Mar 21, 2022 | 1 comment

Recent posts have looked at some of the drafting problems with the Law Society’s (old) model conditional fee agreement. I am grateful to loyal reader of the Legal Costs Blog, Jacques Hughes, for pointing out the rather more significant problem in that all these agreements are probably unenforceable. s58(1) of the Courts and Legal Services Act 1990 provides that: “A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement; but (subject to subsection (5)) any other conditional fee agreement shall be unenforceable.” By virtue of s58(4A) of the Courts and Legal Services Act 1990, additional conditions are applicable where the CFA includes a success fee and relates to proceedings of a description specified by order made by the Lord Chancellor for the purposes of the subsection. The Conditional Fee Agreements Order 2013 specifies personal injury claims as being subject to those additional conditions. s58(4B) of the Courts and Legal Services Act 1990 sets out those additional conditions: “(a) the agreement must provide that the success fee is subject to a maximum limit, (b) the maximum limit must be expressed as a percentage of the descriptions of damages awarded in the proceedings that are specified in the agreement, (c) that percentage must not exceed the percentage specified by order made by the Lord Chancellor in relation to the proceedings or calculated in a manner so specified, and (d) those descriptions of damages may only include descriptions of damages specified by order made by the Lord Chancellor in relation to the proceedings.” The Conditional Fee Agreements Order 2013 sets out the description of damages at s5(2): “(a) general damages for pain, suffering, and loss of amenity; and (b) damages for pecuniary loss, other than future pecuniary loss, net of any sums recoverable by the Compensation Recovery Unit of the Department for Work and Pensions.” s5(1) of the Conditional Fee Agreements Order 2013 sets out maximum percentage: “(a) in proceedings at first instance, 25%; and (b) in all other proceedings, 100%.” Personal injury solicitors should be familiar with all of the above. In simple terms, where there is a personal...

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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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Belsner v Cam Legal Services Ltd

By on Oct 19, 2020 | 0 comments

The decision in Belsner v Cam Legal Services Ltd [2020] EWHC 2755 (QB) will have sent a shiver down the spine of many claimant solicitors in the personal injury field, although the decision may well have wider implications. The case concerned a solicitor/own client assessment. The underlying matter concerned a low value RTA being pursued in the RTA portal.  The costs recoverable from the opponent to the RTA claim were limited to fixed costs plus disbursements. The client’s solicitors sought to charge their client the costs recovered from the opponent plus 25% of the damages recovered. Section 74(3) of the Solicitors Act 1974 provides: “The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in the county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.” Although the claim itself settled prior to proceedings being issued, it was not disputed that this section applied to the case. CPR 46.9(2) provides, in relation to the detailed assessment of solicitor and client costs: “Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.” The issue for the court was whether a solicitor seeking to rely on CPR 46.9(2) has to show that the client gave informed consent to the payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings. The terms of the CFA, which governed the costs payable between the solicitors and the client, contained standard Law Society wording: “Normally, you can claim part or all of our basic charges and our expenses and disbursements from your opponent. You provide us with your irrevocable agreement to pursue such a claim on your...

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Part 36 clauses in CFAs

By on Jun 26, 2019 | 1 comment

The Law Society Model Conditional Fee Agreement contains the following clause: “It may be that your opponent makes a formal offer to settle your claim which you reject on our advice, and your claim for damages goes ahead to trial where you recover damages that are less than that offer. If this happens, we will [not add our success fee to the basic charges] [not claim any costs] for the work done after we received notice of the offer or payment.” The section in bold gives an either/or option as to the relevant consequence if the offer is not beaten.  The vast majority of claimant solicitors’ CFAs that I have seen have a similar clause. This clause is contractual in nature and therefore, if the “not claim any costs” option is taken, also impacts on the indemnity principle. This would not be a problem, subject to what I say below, for claimant lawyers if the normal costs consequences of CPR 36.17 were automatic (ie the claimant cannot recover costs from the date on which the relevant period expired if an offer is not beaten).  But CPR 36.17 simply sets our the default position.  The consequences of failure to beat a defendant’s offer are not automatic as the court may order otherwise if “it considers it unjust” to apply the default position.  However, if this standard clause is used, the solicitors are unable to charge their client a success fee (at best, if the first option is chosen) or recover any costs from the client or the opponent (at worst, if the second option is chosen) from the date of receipt of the offer or payment, regardless of whether the court limits the period for which costs are recoverable. In any event, the wording of the clause itself is somewhat strange: It refers to “the work done after we received notice of the offer or payment”. CPR 36.17 anticipates that the trigger point will be “from the date on which the relevant period expired”.  The clause therefore also prevents recovery of either any costs or the success fee at least 21 days earlier than CPR 36.17 anticipates. It refers to “formal offer”, not “Part 36 offer”. It is therefore arguable...

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Why are legal costs so high?

By on May 30, 2019 | 1 comment

I’ve uploaded an old article from April 2011 that originally appeared Litigation Funding magazine.  This was written in response to research commissioned by the National Accident Helpline that formed part of their response to the original Jackson consultation process.  At the time, an article based on this report appeared in the Law Society Gazette, written by the National Accident Helpline.  The thrust of that article (and the research) was to try to justify the continued recoverability of success fees and ATE premiums on the basis that the true cause of high legal costs was delay/unreasonable behaviour by defendant insurers as opposed to recoverable additional liabilities.  In fact, what the research seemed to show was that success fees and ATE premiums were set at excessive levels in light of the very high success rate of claims.  In the event, the research made no difference and the Jackson proposals were...

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