Click on your business type in the menu bar below to find specific insurance and funding information for you

CFA Unenforceable Due To Failure To State Success Fee In Percentage Terms

computer law

By Matthew Best, Underwriting Manager.

District Judge Branchflower in the County Court at Barnsley found that the conditional fee agreement between instructing solicitors and the claimant was unenforceable on the grounds that the CFA provided for a success fee but failed to state that success fee in percentage terms. Counsel for the claimant commented that “the District Judge was wrong in law and the exercise of his judicial discretion in concluding that the CFA was unenforceable such that the claimant’s entitlement to costs is limited to disbursements for which she is liable irrespective of the CFA”.

The Case
The claimant tripped and fell due to a protective nosing on a flight of stairs becoming partially detached and proud such that it presented a hazard.

The Funding
In order to fund that claim the claimant and instructing solicitors entered into a CFA dated 21 June 2012, backed by a Temple Legal Protection ATE insurance policy. The defendant accepted, within time, a Part 36 offer in the sum of £15,000 made by the claimant on 10 November 2016. Pursuant to CPR 44.9, a costs order was deemed to have been made in the claimant’s favour on the standard basis.

Having served the bill of costs, the defendant argued that the CFA is unenforceable under section 58 of the Courts and Legal Services Act 1990 on the grounds that the CFA does not state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased.

The Arguments
At provisional assessment District Judge Branchflower accepted this argument of the defendant and assessed the bill at nil. The claimant requested an oral hearing pursuant to CPR 47.15 (7) & (8). The oral hearing took place on 31 January 2018.

The defendant relied upon the following provisions of section 58 of the Courts and Legal Services Act 1990:
(1) 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 it being a conditional fee agreement; but (subject to subsection (5) any other conditional fee agreement shall be unenforceable.

(3) The following conditions are applicable to every conditional fee agreement—
(a) it must be in writing;
(4) The following further conditions are applicable to a conditional fee agreement which provides for a success fee—…
(b) it must state the percentage by which the amount
of the fees which would be payable if it were not a conditional fee agreement is to be increased; and…

The argument of the defendant is that the CFA provided for a success fee but that it was unenforceable as it transgressed these provisions of section 58 for essentially two reasons. The first reason is that there are circumstances where the CFA does not “state the percentage” on the grounds that the percentage could be one of two percentages. For example, if liability is admitted after the issue of proceedings and more than 45 days before trial but the case does not settle until less than 45 days before trial then the CFA is difficult to interpret. One could argue that the success fee is either 75% or 100%.

The second reason is that there are circumstances where the CFA does not “state the percentage” on the grounds that no percentage is stated at all. For example, the CFA does not state what the success fee is in the event of a settlement before issue of proceedings without admission of liability. Further, the CFA does not state what the success fee is in the event of conclusion at trial.

The argument advanced on behalf of the claimant was that the claim settled less than 45 days before trial on acceptance of a Part 36 offer. There had been no admission of liability because the defendant denied causation. Hence the success fee that the claimant was required to pay her solicitors was unambiguously 100% and any ambiguity pertaining in other circumstances was therefore immaterial. Further, any ambiguity that could be identified could easily be resolved using well established canons of construction of contractual provisions.

Thus, in the example of a claim where liability is admitted after the issue of proceedings but the case does not settle until less than 45 days before trial, a client would not be able successfully to argue that she was not obliged to pay her solicitor’s charges on the grounds that the CFA is unenforceable. She would be held to pay those charges plus a success fee of at least 75%.

In the example of a claim where no success fee at all is identified then the conclusion would not be that the CFA is unenforceable but simply that no success fee is chargeable.

The Outcome
The District Judge reserved his judgment and handed down a written judgment on 12 April 2018.

DJ Branchflower concluded that the CFA “is unenforceable by virtue of it failing to meet the requirements of section 53 of the Act and, by reason of the indemnity principal, the receiving party is not entitled to recover any costs under the CFA from the paying party”.

If you would like more information on our clinical negligence and serious injury ATE/litigation insurance and funding products, please call 01483 577877 or email matthew.best@temple-legal.co.uk.

Matthew Best

Senior Underwriting Manager
Read articles by Matthew Best

Matthew Best

Matt has an insurance background and joined Temple in July 2011 having worked for 4 years in a leading insurance company where he was dealing with personal injury work.

Matt’s experience allows him to undertake a key role in Temple’s ATE insurance personal injury and clinical negligence teams. He also participates in the assessments of delegated schemes that Temple provide with the objective of helping our customers make the most beneficial and appropriate use of ATE insurance.

He has started studying for this CII exams which he will sit in the near future, which he will then use to develop himself, further into the company in order to provide Temple’s customers with the excellent service they expect.

 

Read articles by Matthew Best