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The Manchester Law Society's Monthly Magazine - Issue 69 June 2000

Conditional Fee Agreements - hot topics and complicated

There are conflicting views as to whether conditional fee agreements are really justified when clients can buy after the event insurance which covers their own solicitors costs and there are few non personal injury cases being conducted under CFAs because of the risky nature of this kind of litigation. Probably the fully protected client will be better off under a CFA backed by insurance. Lawyers and clients will be entering an uncertain world when Judges assess the actual level of fees and premiums to be recovered which will produce satellite litigation.

The solicitors who I have spoken to are currently either not keen to enter into them or are rationing the numbers of agreements which they take on after consultation with their Partners taking account of the commercial reality that they need a permanent and regular income from ordinary fee paying clients to be able to cover their overheads and to run a modern practice. The amount of time that will be dedicated to conditional fee agreements in any one month is therefore likely to be calculated and managed as a proportion of fee earning time to meet overheads. Will the enemy of Justice "delay" be a feature of CFAs and are Conditional Fee Agreements time bombs for negligence actions?

Although an opponent should be notified of the existence of a CFA where a case is supported by a CFA which attracts a success fee the level of success fee need not be revealed to the opponent until final costs are to be determined. There is no requirement to inform the opponent where the CFA attracts no success fee (paragraph 18 - the Government's conclusions to the consultation exercise). The opponent should be notified where insurance is taken out by the litigant to cover the risk of legal costs but notification need only be limited to the basic fact.

Where a party has not been notified and the opposing party has been prejudiced by the failure to notify, the court on detailed assessment, has the discretion to disallow recovery of all or part of the success fee and all or part of any insurance premium. CFAs do not alter the liability for costs but they do affect the quantum of those costs and this knowledge may well influence tactics and the way in which a case progresses. Only that element of the success fee which represents the risk the Lawyer is taking of not being paid and/or having to pay disbursements himself if the case is lost should be recoverable. Other elements such as the cost of forgoing payments on account should not be recoverable and when filing a schedule of points in dispute the losing party should request a copy of the reasons why the solicitor acting under the CFA sets a success fee at a particular level claimed. If the percentage increase is disallowed on the assessment on the grounds of unreasonableness that amount ceases to be payable under the CFA unless the court decides otherwise. It should be noted that if reasons for the level of the success fee have not been set out contemporaneously (as required by Regulations S12000 No.692) and cannot be produced to the court the court should have a discretion to disallow recovery of the success fee.

The success fee will only be recoverable at detailed assessment and where summary assessment takes place in the course of proceedings the assessment of any success fee element will be postponed until detailed assessment when any adjustment for the success fee element of the interim costs will be made. A success fee is recoverable in a pre-action settlement and it is likely that the procedure will fall under CPR Part 8.

Paying Parties can challenge insurance premiums and the litigants choice of insurance cover The onus will lie on the losing party to demonstrate by way of evidence to the court that the choice of cover was wholly unreasonable and generated excessive costs.

A chart has been published by "Litigation Funding" showing the main conditional fee after the event products including companies which include own solicitors costs but the chart may have limited shelf life as this is a fast moving area. Insurance Companies are planning reforms to their products once there is a clearer picture of the way Access to Justice reforms will work in practice.

Victor Webb
Wigg & Co (Costs Drafting) Limited
Tunbridge Well

Tel: 01892 525182
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Wigg & Co. deal with all costing requirements nationally and may be contacted as above.

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