I'm interested in…

  • Strategy & Procedure
  • Catastrophic Injury
  • Professional Indemnity
  • Motor
  • Fraud
  • Disease
  • Liability
  • Commercial Insurance
  • Costs
  • Local Authority
  • Scotland

Late delivery leads to nil recovery

Costs between parties in litigation are awarded only where the indemnity principle is satisfied. Put simply, a paying party can only be ordered to pay costs which the receiving party themselves is liable to pay. Thus, where a court considers that a solicitor would not be able to enforce a retainer as against their client, this extinguishes the paying parties’ obligation to meet any costs that they might have been ordered to pay.

Will MacKenzie reports on a case in which he acted, where the claimant’s solicitors failure to properly execute a CFA in a successful claim led to them recovering no costs at all.

Background

Prior to 1 April 2013 for a CFA to be valid, a number of conditions must be met:

  • It must be in writing

  • It must not relate to family or criminal matters

  • If a success fee is applied then;

- It must state the percentage increase

- The success fee must not be greater than 100%

From 1st April 2013 LASPO significantly altered the position with respect to CFAs and additional liabilities generally. LASPO imposed additional requirements for a CFA. These are as follows:

For classes of cases as specified by the Lord Chancellor, the success fee payable from damages may not exceed a maximum limit. In personal injury cases, this limit for a success fee is 25% for first instance hearings.

Thus, as a result, LASPO amended Section 58 of the Courts and Legal Services Act 1990 (“CLSA”) to require the above conditions to be met in order to make a CFA enforceable.

These conditions are in addition to those parts of CLSA that remain in force, one of which is Section 3 which provides that a CFA must be in writing.

The facts

The claimant was a passenger in a motor vehicle which crashed into a tree. The defendant admitted negligence, but denied causation and the matter went to trial on 17th December 2014. At the trial judgment was entered for the claimant and damages were awarded in the sum of £916.50.

During the course of the trial it emerged that the claimant had instructed her solicitors by telephone whilst she was in Pakistan. The CFA was dated 31 March 2013 and was sent to the Claimant on this day, but was not signed by her until 21 April 2013.

As a result there was an issue in respect of the validity of the retainer and a further hearing was listed to deal with this issue.

What date was the CFA entered into and what were the consequences?

The District Judge held that a CFA had to be in writing and therefore the Claimant could not enter into the agreement orally. Further, it was held that the date of the CFA was the date it was signed. A Claimant could not be bound to an agreement she had not seen. It is a basic principle of contract law that acceptance of an offer has to be communicated to the offeror.

If the claimant’s solicitor wanted the claimant to be bound by that agreement before the changes made by LASPO, then the solicitors should have faxed or emailed the document to the claimant and asked her to look at it and sign it before 1 April 2014. They did not do so.

Accordingly, the District Judge found that the agreement breached the relevant regulations and was unenforceable as a result. She could not order payment of costs on the basis of this document. As there was no other retainer in place, no costs were payable by virtue of the fact that the indemnity principle had been breached.

The District Judge assessed the claimant’s costs at nil and awarded the defendant the costs of the assessment.

Comment

This case demonstrates the importance of checking that a retainer has been properly entered into. The claimant’s victory at first instance turned into nothing other than a pyrrhic victory as she failed to recover any costs and was ordered to pay the defendant’s costs of the detailed assessment.

There will have been widespread efforts to sign claimants to CFAs before the rules changed and we anticipate that a number of those agreements will have been improperly executed in the same way as the agreement was in this case.

Contact

For further information, please contact Will MacKenzie, Senior Costs Advisor on 020 7645 9507 or on william.mackenzie@dwf.co.uk

By William MacKenzie

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Top