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Modern CFAs - Sometimes Less is More!

As many practitioners will recall (although probably not with any fondness), following the introduction of CFA's, Regulations were created which provided numerous hoops which had to be jumped through with the Client to ensure that the CFA remained enforceable. Failure to provide all the requisite information, for instance, in relation to an interest in the after the event insurance1, could result in a 'material breach'2 with the the CFA being deemed unenforceable which could lead to no costs being recovered at the end of the case!3

Thankfully, some help came in 2003 with the introduction of the CFA Lite4; a simplified agreement where it was specified that the Client would only be liable to pay the legal fees and disbursements to the extent that is recovered in respect of the relevant proceedings. Thus, if you could prove the existence of a CFA Lite, then you were allowed a reprieve from at least some of the Regulations5.

A significant amount of satellite litigation was created over the technical aspects of CFA's with dire consequences in the event of the finding of a 'material breach'. Consequently, it was sensible to make sure all bases were covered, provide as much information as possible, mention everything in the agreement and even throw in the kitchen sink for good measure! The revocation of the Regulations from 1st November 2005 6 resulted in the modern CFA and certainly provided some relief for the majority of practitioners 7.

Have we been left with a mindset whereby every fact possibly known is thrown into the wording of the agreement and is that wise?

With the advent of the 51st update to the Civil Procedure Rules in April 2010, it became mandatory to disclose the CFA (or provide a Statement of Additional Liabilities) on service of a Bill where the success fee is not fixed by the CPR. Consequently, it is essential to make sure that your CFA stands up to scrutiny!

Currently, to be a valid CFA, the agreement must:

  • be in writing; and
  • not relate to Proceedings which cannot be the subject of an enforceable CFA8; and
  • where a success fee is claimed – the percentage uplift must be stated and which must not exceed 100 percent!

Generally, when the CFA is entered, very little information will be known about the claim, for instance, there might be question marks over the correct identity of the Defendant. As the law stands, relatively little information in relation to the actual case needs to be included within the CFA and problems can certainly arise where extraneous detail is included which subsequently turns out to be incorrect.

It is commonplace for a Paying Party to grab any mistake within a CFA to suggest that the agreement doesn't actually cover the claim that has just been concluded, quoting the case of Law v. (1) Liverpool City Council (2) Berrybridge Housing Association [2005] EWHC 90020 (costs) in support of their position.

The case of Law, an appeal heard by His Honour Judge Stewart, concerned a CFA which specifically listed the First Defendant but made no mention of the Second Defendant. Utilising the principles of Contract Law, the first instance decision was upheld on the basis that, because the agreement specifically mentioned the First Defendant it could not cover the Second Defendant9. Had the CFA not specifically mentioned a Defendant then it is likely that the agreement would have been deemed to have covered all the relevant parties.

Some common areas where less is more includes:

  • Name of the opponent – if you are unsure about the precise identity of the Defendant or there is a possibility that further Defendants may be added then it would be prudent to use language such as “....your claim against your opponent(s)...” without making reference to their actual name;
  • Date of the accident – if you put the accident date in your agreement, but this date turns out to be incorrect then using the principles in Law, the agreement would not cover the right accident. Therefore, inserting terminology such as “...on or about...” might help to rectify any potential pitfalls;
  • Detailing unnecessary figures – in a claim for clinical negligence or professional negligence, you may be tempted to insert dates or figures to give better identification to the action. However, if the type of action has already been detailed then the insertion of further possibly incorrect information could cause problems when it comes to the recovery of costs.
  • Detailing the injury (particularly before any medical evidence has been obtained) – problems could occur where you detail physical injuries, e.g. “...claim for whiplash arising out of...” and it later transpires that the Client also has psychological injuries. Would the CFA cover the costs incurred in investigating and settling the psychological injuries? Similarly would it be restricted if the Client also had a shoulder injury? By leaving out any reference to the injuries sustained you obviate the risk of narrowing your retainer and restricting the costs you can claim under the CFA.

If you have restricted your CFA in some manner, all is not lost! Provided that the claim has not settled 10, you should be able to vary the original agreement with the variation made in writing and signed by the necessary parties.

If you have already settled the matter and you are concerned that your CFA has potentially incorrect details in relation to the claim, then you may be able to gain some assistance from the case of Brierley v. Prescott [2006] EWHC 90062 (Costs) and the principles by which contractual documents are construed as expounded by Lord Hoffman in Investors Compensation Scheme Limited v. West Bromwich Building Society [1998] 1 WLR 896 at 912. The case of Brierley turns on interpretation of the construction of the agreement and the intention of the parties and it should be kept in mind that the party mentioned within the CFA was in fact linked to the actual Defendant. Furthermore, it is important to note that this case was specifically distinguished in the case of Law.

The less is more approach is advocated in respect of case specific detail, however, in relation to your CFA's standard terms it is important to ensure that all the necessary information is provided. For instance, by adequately defining a 'lose' and a 'win' and incorporating the various different possible outcomes, e.g. including provision for pre-action applications 11 and recovery of the costs of the negotiation of your costs12.

1 Regulation 4(2)(e)(ii) of the Conditional Fee Agreement Regulations 2000.

2 Hollins v. Russell [2003] EWCA Civ 718 – a departure from the Regulations will not necessarily affect the validity or enforceability of the CFA unless it is considered to be material and adversely affect the Client and/or administration of justice.

3 Garrett v. Halton Borough Council [2006] EWCA Civ 1017 certainly provides a sobering example.

4 The Conditional Fee Agreements (Miscellaneous Amendments) Regulations 2003.

5 Namely Regulations 2,3 and 4.

6 Conditional Fee Agreements (Revocation) Regulations 2005

7 CFA's entered prior to 1st November 2005 are still at risk, so consideration must still be given to the Regulations.

8 See Section 58A of the Courts and Legal Services Act 1990

9 It is important to note that, due to the circumstances of the claim, there was still found to be a valid retainer to claim the costs incurred in pursuing the Second Defendant, just not under the CFA which meant that success fee could be recovered on the costs of the Second Defendant.

10 Arkin v. Borchard Lines Ltd (Costs Judgment) [2001] NLJR 970 is commonly quoted as authority for the proposition that an agreement made after the conclusion of the proceedings to vary a CFA relating to those proceedings would be unenforceable as contrary to public policy.

11 Roche v. Newbury Homes Limited [2009] EW Misc 3 (EWCC) (10 February 2009)

12 Crane v. Canons Leisure Centre [2007] EWCA Civ 1352