Wigg & Co - unenforceable CFAs

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An authority on the contention that Solicitors who support an unsuccessful impecunious Claimant under a Conditional Fee Agreement may be personally liable for the Defendant's costs as maintainers of the litigation is still awaited.

Reasons for holding Claimant's Conditional Fee Agreement to be unenforceable see Decision of Costs Judge Master Rogers in the case of Woods -v- Chaleff and Others SCCO Reference PRO108754, 0108755.

Section 58 of the Court's and Legal Services Act 1990 referred to together with Conditional Fee Agreements Regulations 1995.

Reference was also made to wording of Conditional Fee Agreements Regulations 2000 although it was the 1995 Regulations which applied in this case.

It was considered whether Rule 3 (9) of the CPR might provide an escape route for the Claimant but this was restricted to sanctions imposed by any "Rule, Practice Direction or Court Order", and did not extend, nor indeed could it extend, to a Statutory Instrument.

It was also held that Conditional Fee Agreement between Solicitors and Counsel could not be considered independently of the Regulations and the agreement as between Solicitors and Counsel was also unenforceable.

The Costs Judge held that at the time that Counsel's Conditional Fee Agreement was entered into it was not permissible to enter into such an agreement at Common Law.

See also Nicola Bowen -v- Bridgend County Borough Council", and 10 other cases against the Defendant on 25th March 2004, SCCO reference 0309853 concerning Consent Orders made in housing disrepair cases, which were treated as informal test cases. All these cases were funded by way of a CFA agreement claiming a 100% success fee, supported by an after event insurance policy, issued by "Fast Track Indemnity Limited". The 6 points which were common to all cases
(i) The enforceability of the CFA's,
(ii) The effect in these cases of Legal Aid,
(iii) The amount of success fee on profit costs,
(iv) Questions of proportionality,
(v) The recoverability of the fees paid to "Fast Track Litigation Services Limited" for the housing reports, video evidence, and risk assessment reports and, lastly,
(vi) The fees paid for surveyors reports, also the recoverability of VAT on invoices issued by the company or firm variously described as "Street Legal UK", the figure for "Street Legal UK" and "Street Legal UK Limited".

CFAs - Champerty  and maintenance

Benain (UK) Ltd v Davies Middleton & Davies Ltd TCC NLJ 23 April 2004. There was no requirement in S58 of the 1990 Act or in the Conditional Fee Agreements Regulations 2000 (S12000 No 692) that prohibits the determination of the amount of uplift subject to its maximum of 100% by reference to the amount recovered. Equally there is no expression exclusion from the scope of S58 of a CFA whereby the lawyer would recover some part of his client's winnings. The requisite conditions remain satisfied even if the percentage uplift was calculated by reference to the amounts recovered provided only that it did not exceed 100%.

Liability of Litigation Funder

See Pinco v Phillips ChD 16 September 2003. A clear distinction was to be drawn between disinterested, in the sense of commercially disinterested, funders on the one hand and those interest stood to be advanced by a successful outcome of the litigation on the other and a funder who had interest in the outcome may be ordered to pay costs of the action.

Liability of Litigation Funder

See Arkin v Borchard Lands Ltd, Zim Israel Navigation Co Ltd & Others and Managers and Processors of Claims (Part 20 Defendants) (2002) EWHC 2844 (COMM). A professional funding company entered into a funding agreement with the Claimant whereby it funded the employment of expert witnesses. The funder relied upon a decision of the Court of Appeal in Hamilton v Al Fayed (2) 2003) 3 All ER 641 and R (Factortane Ltd) v Transport Secretary (No 8) (2003) QB381 which they maintained clarified the main principles relevant to the exercise of the Court's discretion to make a costs order against a non-party funder. The objective of providing access to the Courts to impecunious Claimants has now been given much greater weight than previously relative to other countervailing aspect of public policy. It would seem that those who are supported by funders who are impecunious have a very distinct advantage. Those who may sue are on a hiding to nothing - they get no costs if they win and they pay the other party's costs if they lose.

Litigation Funding

The judgment of Mr Justice Colman leaves the impecunious Claimant and his professional funder with the luxury of having no exposure to the Defendant's costs, see Arkin v Borchard Lands No 2) (2003) WHC 2844 (COMM) (23/LLP4). In this case the success Defendants brought an action against Managers and Processors of Claims Ltd (MPC) under S59 of the Supreme Court Act 1981 seeking recovery of their costs. Under S51 the Courts discretion may be exercised to award costs. MPC were the professional insurers of the Claimant. Neither the Claimant nor MPC took out after the event (ATE) insurance which would have provided for all costs to be paid including those of the Defendant. The Claimant's Counsel and solicitors had signed a separate agreement with the Claimant to work on a conditional fee basis. This CFA allowed them a 100% uplift on their costs if they succeeded on the Claimant's behalf. The MPC/Claimant agreement provided for MPC to receive 25% of damages up to £5m and 23% of damages in excess of £5m. The Defendants have been given leave to appeal to the Court of Appeal and a decision is awaited. Having regard to this decision made it will be interesting to see whether attempts will be made to obtain costs order against ATE Insurers whose policies frequently ensure that they retain some control over litigation proceedings. If actual control/interference is established then it is likely that the agreement will be held to be illegal regardless of the needs of access to justice.

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