COSTS MONKEY

The Conditional Fee Agreement (CFA) Simple or CFA-Lite (apparently Prof. John Peysner’s nickname for the new version of the CFA which seems to have stuck) was meant to be the ‘relaxed’ version of the CFA Regulations 2000 which were amended on 2nd June 2003. The basic premise of the CFA-lite is that the client's liability for costs is limited to sums recovered. No account to be taken of any obligation to pay costs of the premium against the risk of incurring a liability in the proceedings. Regulation 3 A (1) states that ".... The client is liable to pay his legal representative's fees and expenses only to the extent that sum are recovered in respect of the relevant proceedings, whether by way of costs or otherwise ". It is not clear what the “otherwise” was intended to mean. Neither case law nor statute has offered any form of definition. It presumably could include circumstances where a global settlement incorporating damages and costs is reached.

 

Regulations 2, 3 and 4 of the CFA Regulations do not apply to CFA-Lite. This, in theory, should make life much easier. However CFA-Lite MUST:

 

1. Specify the proceedings it relates to. This might be particularly important if there are consolidated proceedings, there are multiple claimants or if the identity of the defendant is likely to change.

 

2. The circumstances in which the legal representative's fees are payable.

 

3. If a success fee is being sought we have to give reasons for the level of the percentage increase (in the same way as with CFA's). Ideally there still needs to be a risk assessment carried out and of course done before the CFA is entered into.

 

4. Provide for disclosure of the reasons for the increase to the court and/or the opponent.

 

What's the key difference between CFA and CFA-Simple?

 

The latter was meant to be an easy solution to all the technical challenges going through the Court of Appeal in 2002/3. It was to do away with the Regulation 3 and 4 challenges. It also apparently abrogated the indemnity principle in respect of the cases run under CFA-Lite. The general gist is that the client only has to pay the costs recovered from his opponent. There are various other technical challenges to do with the wording of the new Regulations but no doubt such arguments might materialise in the Court of Appeal in the next couple of years.

 

The Senior Costs Judge Hurst in TAG Tranche 2 said that the new Regulation did not really change the existing law regarding the client's liability to only pay his solicitor the amounts recovered. This was not fully appreciated by some practitioner but there are some provisions in Solicitors Act assessments for costs against a solicitor to be limited to the amount of costs recovered between the parties s.74(3) but not if the Rule 15 provides for otherwise. One would assume this is what the Senior Costs Judge was thinking in his judgment.

 

The main problems with CFA-lite is that most solicitors were too cautious to enter CFA-lites. This may be because of the problems caused by the CFA Regulations 2000 which no one could have possibly foreseen. It seems that CFA-lites never really caught on. Very few solicitors entered into them but no doubt, for those who did, there is bound to be a paying party with a technical challenge up their sleeve. One challenge that was foreseen was where, for example, at the end of a Trial where a District Judge is about to make an order for Detailed Assessment asks what the Claimant's costs are before deciding what order for costs to make. The Defendant could submit that at that precise moment in time the Claimant's does not have any liability to pay any costs and no order for costs should be made thus wiping out the claim for costs. It is a circular argument that could have legal academics arguing endlessly. The CFA-Lite nevertheless came to end with the abolition of the CFA Regulations on 1st November 2005.

 

Cases to consider:

 

Jones -v- Wrexham

 

 

 

Costs Monkey