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