COSTS MONKEY

A HISTORY OF CFA’S IN ENGLAND AND WALES

Conditional Fee Agreements (CFA’s)

 

A conditional fee agreement is an agreement with someone who provides litigation or advocacy services which provides that person’s fees to be paid only in specified circumstances. Some CFA’s provide for success fees but not always.

 

CFA Regulations from 1995

 

These regulations allowed solicitors to act on a conditional fee basis. Note that these were not’funding arrangements’ as defined by CPR 43.2. Success fees and After The Event (ATE) insurance, now otherwise known as additional liabilities could not be recovered from the losing party. Additional liabilities remained by payable by the clients. The Law Society gave guidance that the success fee that had to be paid by a client should not be more than 25% of their damages recovered. Otherwise, without the protection of such a cap, in a heavily disputed but low value cases, clients could have ended up with very little compensation or, in theory owe their solicitors money! This provision was to carry over into the ‘new’ Law Society model CFA in 2000.

 

A conditional fee agreement was valid in any type of proceedings except:

 

Criminal

 

Matrimonial Causes Act 1973

 

Domestic Violence and Matrimonial Proceedings Act 1976

 

Adoption Act 1976

 

Domestic Proceedings and Magistrates' Courts Act 1978

 

Matrimonial Homes Act 1983

 

Matrimonial and Family Proceedings Act 1984

 

Children Act 1989

 

The inherent jurisdiction of the High Court in relation to children.

 

This was to change in 2000 when, under new provisions of the Access to Justice Act 1999 (replacing various sections of the Courts and Legal Services Act 1991). Most of the success fee, if not all of it, could then be recovered from the losing opponent. Whilst it was not until the 2000 Regulations came into effect that the ‘satellite litigation’ on funding arrangements really took off, there were various cases under the old 1995 Regulations.

 

Woods –v- Chaleff, 30th April 2002, Master Rogers

 

This was a case which looked at whether conditional fee agreements had breached the Conditional Fee Agreements Regulations 1995. It was decided that the CFA’s were unenforceable even the breaches were merely “technical”. Like many cases that followed (mainly with reference to the subsequent CFA Regulations 2000) failure to comply with a statutory instrument which set out express requirements made an agreement unenforceable.

 

Thai Trading & Co v Taylor & Taylor  [1995]

 

This was the case that said that it was fine for a solicitor to charge nothing if he lost so long as he did not charge more than his usual fees if he won. Here the solicitor was the Claimant’s husband.

 

CFA Regulations from 2000

 

Additional liabilities became recoverable between the parties with the new Regulations, introduced on 1st April 2000. There was a transitional period dealing with existing agreements up to July that year. Details can be found in Costs Practice Direction 57 of the Civil Procedure Rules.

 

The relevant sections of the Access to Justice Act 1999 on recovery of additional liabilities include:

 

s.27 – Conditional fee agreements and success fees

 

s.28 – Third party “Litigation Funding Agreements” – where a party other than the litigant agrees to pay for the legal services on behalf of the litigant, and that litigant agrees to pay costs to that funder in specified circumstances.

 

s.29 – Commerical ATE insurance

 

s.30 – Recovery of an insurance premium equivalent where a Membership Organisation, such as a trades union, has undertaken to cover the risk of a ‘member’ against incurring a liabilities for costs against an opponent.

 

The Access to Justice Act 1999 also required that Conditional Fee Agreements (that provided for a success fee) comply with the following:

 

·They had to be in writing

 

·They had to specify how much the success fee was

 

·The success fee could not be more than 100%

 

·They were not valid in matrimonial or criminal cases

 

·They had to follow any rules prescribed by what was then the Lord Chancellor (these were the CFA Regulations).

 

Paying parties had a lot to gain by challenging the enforceability of a CFA or CCFA. The Conditional Fee Agreement Regulations 2000 were nevertheless abolished on 1st November 2005 but the Regulations still applied to agreements entered into prior to that date.

 

CFA’s from 1st April 2013

 

Following Lord Justice Jackson’s recommendations, the LASPO Act 2012 was passed thereby preventing a  party from recovering a success fee or ATE insurance premium from a losing party (with some temporary exceptions, including privacy and publication proceedings, and cases involving mesothelioma).  The provisions took effect from 1st April 2013.

 

Relevant Links

 

Additional Liabilities

 

Collective Conditional Fee Agreements (CCFA’s)

 

CFA-Simple / CFA Lite

 

Notice of Funding

 

Third Party Funders

 

BTE (“Before The Event”) Insurance / Alternative methods of funding investigations

 

Richards -v- Davis, SCCO, 25th November 2005, Master Hurst

 

More satellite litigation involving TAG (The Accident Group). Another case on the question of a technical CFA breach of Regulation 4(2)(c) on whether the client’s existing insurance had been properly investigated by the solicitors. Here the client had actually misled his solicitors about his insurance documents.

 

Assignment of a CFA

 

John Holmes -v- Alfred McAlpine Homes (Yorkshire) Ltd [2006] EWHC 110 QBD

 

The solicitors had not explained to their client that the CFA was backdated but the agreement was still enforceable. The test had been whether there had been an adverse effect on the administration of justice and whether there had been a material effect client’s protection.

 

Myatt -v- National Coal Board

 

The original case in brief:

 

The background of the case is that there were 4 Claimants brining noise induced hearing loss claims against the Defendant. All matters were non-litigated in the main action, costs proceedings brought by way of Part 8. All claims settled for less than £5000.

 

The CFA was found to be unenforceable because the enquiries about alternative methods of funding and Before The Event insurance were inadequate. According to this judgment the CFA did not comply with Regulation 4(2)(c) because “the client was asked the wrong questions..... the client being asked to interpret what could well have been a complex document. Being unsophisticated clients, it would, in my judgment, have been an inadequate inquiry and would not have been compliant with Regulation 4(2)(c).”

 

Master Wright agreed that:

 

* The solicitors should have asked whether they or anyone living in their household had credit cards, motor or household insurance or were members of a trade union.

 

* The solicitors did not need to actually go and visit the client to view the insurance documents but the solicitors should have requested sight of them.

 

* It did not seem that the solicitors had asked “about relevant documents belonging to other members of the client’s household” but should have.

 

* The “ATE insurance premiums are high when seen in the light of the size of each claim”.

 

Overall, the CFA’s in all 4 cases were found unenforceable because of the breach of Regulation 4(2)(c) of the CFA Regulations 2000.

 

Cases quoted in the first appeal:

 

Jackson -v- Tierney (Liverpool County Court 1st November 2002 unreported)

 

Culshaw -v- Goodliffe (Liverpool County Court 24th November 2003 unreported)

 

Adair -v- Cullen (Manchester County Court 14th June 2004 unreported)

 

Samonini v London General Transport Services Ltd (2005) EWHC9001 (Costs)

 

Hollins -v- Russell [2003] 1 WLR 2487

 

CFA’s from 1st April 2013

 

From 1st April 2013 solicitors may still charge clients a success fees in specified circumstances but that success fee is no longer recoverable from the opponent (with some temporary exceptions in personal injury cases involving mesothelioma, privacy and publication proceedings, and insolvency proceedings.

Content last updated: 7/7/13