Conditional Fee Agreement Regulations 2000-2005

During this period there were specific conditional fee agreement regulations requiring information to be given to clients both orally and in writing as follows:

1. When the client would have to pay costs;
2. How those could be challenged by the client;
3. Whether the client had legal expenses insurance covering the risk or whether one should be taken out, including any interest the solicitor had in recommending a policy; and
4. Whether and what other methods of financing the case were available.

In the written Conditional Fee Agreement the above had to be covered again, a certificate included confirming the advice was given and the following further information provided:

1. The proceedings the agreement related to;
2. The circumstances in which the solicitor was entitled to be paid;
3. How the amount payable was determined and whether this was limited with reference to the client's damages;
4. The reasons for setting the percentage increase;
5. How much of the percentage increase related to a delay in payment;
6. That the reason for setting the success fee may have to be disclosed to the Court; and
7. That any reduction in the success fee by agreement or by the Court will apply to the client as well as the other side unless the Court orders otherwise.

The agreement had to be signed by both the client and the legal representative.  All of the requirements were designed to protect the client, however satellite litigation rapidly sprang up all over the place with Defendants doing everything they could to avoid having to pay.  This was exacerbated by the sudden rise in the amount they had to pay if they lost a case anyway, making the cost of the challenge a worthwhile risk to take on.  The issues had nothing to do with what was right or wrong, but involved lawyers trying to pick each others agreements apart to avoid their clients having to pay.

Solicitors were running scared and refusing to let the other side see their agreement unless they were able to show that there were reasonable grounds to believe the agreement may be defective.  Defendants were producing standard arguments over deficiencies and demanding to see the agreements as a result.

In 2003 the Court of Appeal issued a landmark judgment in Hollins v Russell, when it was decided that a departure form the regulations did not affect the validity or enforceability of the agreement unless the departure was both material and adversely affected the client or the administration of justice.  The difficulty was that what was a material and adverse affect was not defined and it was then argued that any error affecting the client's liability to pay was material and adverse.  The Court of Appeal also ruled that it should become normal practice to disclose the CFA with the bill of costs.

In 2004 a failure to specify how much of the percentage increase related to the delay in payment was held to make the agreement unenforceable Spencer v Wood.

In 2005 a solicitor who accepted the client's word that they did not have pre-existing legal expenses insurance without making their own investigation found they were entitled to be paid nothing in Samonini v London General Transport Services Limited despite the fact that the information from the client was actually right.  The same year in Hughes v Newham London Borough Council a failure to consider legal aid, which had been available to the clients, meant the solicitor was paid nothing.  The argument was rapidly being accepted that any breach was material as otherwise no breach was material.

In 2006 a solicitor, in Oyston v Royal Bank of Scotland, who had sought to rectify an invalid CFA, where the success fee amounted to more than 100%, found they were unable to recover any costs as the rectification could not make an otherwise invalid agreement valid.  In Garrett v Halton Borough Council solicitors who were on a panel which referred work to them but required them to take out the panel policy of legal expenses insurance also found that unless they had fully explained this condition of membership of the panel their CFA's were all invalid.  The case also decided that any breach of the regulations meant the agreement was not enforceable and the solicitors were not entitled to be paid.

Challenges to CFA's entered into before November 2005 continue to arise, but as time passes this is much less frequent and the law is much more settled.  However, the costs on the cases that still remain are much higher, because the cases have been going on for so long, so the issues are likely to continue for at least a few more years.

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