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SECTION 20 |
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20.1 |
Compliance with Conditional Fee Agreement and Collective Conditional Fee Agreement Regulations |
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| (a) |
The indemnity principle provides that a successful party cannot recover from an
unsuccessful party more by way of costs than the successful party is liable to pay to his or her
legal representatives (see Section 2.6). However the Access to Justice Act 1999 provides that a
conditional fee agreement can now be made whereby the fees and expenses of the successful
party's legal representatives will be payable even though the indemnity principle would
otherwise prevent it.
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| (b) |
Until their revocation (see below) the Regulations which governed conditional fee
agreements were the Conditional Fee Agreements Regulations 2000, the Access to Justice
(Membership Organisations) Regulations 2000 and the Collective Conditional Fee Agreements
Regulations 2000. With effect from 1 November 2005 the Access to Justice (Membership
Organisations) Regulations 2000 are replaced by new Regulations and the Conditional Fee
Agreements Regulations 2000 and the Collective Conditional Fee Agreements Regulations 2000
have been replaced by the Solicitors Practice (Client Care) Amendment Rules 2005 and a new
Law Society's Model CFA Agreement (for use in personal injury and clinical negligence cases).
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| (c) |
A conditional fee agreement is unenforceable unless it satisfies all the conditions
imposed by Section 58 of the Courts and Legal Services Act 1990Acts (as amended by the Access to
Justice Act 1999) and the Regulations made under it (where the CFA or CCFA was entered into
before 1 November 2005).
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| (d) |
However the court will not declare a conditional fee agreement unenforceable
unless the failure to satisfy those conditions has a materially adverse effect on the protection of
the interests of the client or the proper administration of justice.
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| (e) |
If the court rules that a conditional fee agreement is unenforceable, the client
under that agreement will not be liable to pay any fees or disbursements under it. Similarly,
because of the indemnity principle, he will not be able to recover any of those fees and
disbursements from any other litigant. However, the client may be able to recover any
disbursements which he has already paid.
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20.2 |
Documents to accompany the bill |
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Where a party seeks the detailed assessment of an additional liability the details which he must give
together with the bill and notice of commencement are as follows:
| (a) |
In the case of a conditional fee agreement with a success fee:
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| (i) |
a statement showing the amount of costs which have been summarily assessed or
agreed and the percentage increase which has been claimed in respect of those costs;
and
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| (ii) |
a statement of the reasons for the percentage increase (where the CFA or CCFA was
entered into before 1 November 2005).
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| (b) |
If the additional liability is an after the event insurance premium a copy of the
insurance certificate showing whether the policy covers:
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| (i) |
the receiving party's own costs;
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| (ii) |
his opponent's costs; or
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| (iii) |
his own costs and his opponent's costs; and
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| (iv) |
the maximum extent of that cover and the amount of the premium paid or payable.
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| (c) |
If the receiving party claims an additional amount under Section 30 of the Access
to Justice Act 1999 (Membership Organisations) a statement setting out the basis upon which the
receiving party's liability for the additional amount is calculated.
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20.3 |
Factors to be Taken into Account During Assessment |
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| (a) |
A party may not recover as an additional liability
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| (i) |
any proportion of a success fee which is to compensate the legal representative for
the fact that he will have to wait to be paid his fees and expenses; or
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| (ii) |
any amount (when the agreement is made with a membership organisation) which
exceeds the likely cost of taking out after the event insurance to cover another
party's costs; or
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| (iii) |
any additional liability during a period in which he (or she) failed to provide to
the other party the information required by the court or by the Rules and Practice
Directions about the funding arrangements or the reasons for setting the level of a
success fee.
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| (b) |
Where a success fee is irrecoverable for the reasons given in (a)(iii) above, the
court may consider granting relief from the sanctions. CPR 3.9 sets out the circumstances in
which the court may grant relief.
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| (c) |
The court will consider the amount of any additional liability separately from the
base costs and a success fee will not be reduced simply because, when added to the base costs, it
appears to be disproportionate.
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| (d) |
In deciding whether the base costs are reasonable the court will consider the
factors set out in CPR 44.5.
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| (e) |
When considering the amount of an additional liability the court will have regard
to the facts and circumstances as they reasonably appeared when the agreement was made (or
varied).
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| (f) |
Factors to be taken into account in deciding whether a success fee is reasonable
include:
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| (i) |
the risk that fees or expenses might not become payable;
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| (ii) |
the legal representative's liability to fund disbursements;
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| (iii) |
what other methods of funding the costs were available.
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| (g) |
In costs only proceedings (see Section 21) the court will have regard to the time
when and the extent to which the claim had been settled without the need to commence
proceedings.
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| (h) |
Factors to be taken into account in deciding whether an after the event insurance
premium is reasonable include:
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| (i) |
how its cost compares with the likely cost of funding the case with a conditional
fee agreement with a success fee and supporting insurance (if it is not already so
funded);
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| (ii) |
the level and extent of the insurance cover provided;
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| (iii) |
the availability of pre-existing insurance cover;
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| (iv) |
whether any part of the premium would be rebated in the event of early settlement;
(v) the
amount
of
commission payable to the receiving party or his legal representatives
or agents.
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| (i) |
The additional amount recoverable in respect of the membership organisation
must not exceed the likely cost of the premium of an insurance policy against the risk of
incurring a liability to pay the costs of other parties to the proceedings.
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20.4 |
Fixed Success Fees |
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CPR Part 45 provides for fixed success fees in certain road traffic accident disputes and certain
Employers Liability claims.
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20.5 |
Disputes Between Legal Representatives and their Clients |
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(a) The
following
notes
in this section apply only to cases in which the relevant CFA or
CCFA was entered into before 1 November 2005. The Regulations which continue to govern such
agreements (see above) provide that, in certain circumstances, if a success fee allowed on
assessment is lower than the contractual success fee, the disallowed amount ceases to be payable
under the agreement unless the court is satisfied that it should continue to be so payable. CPR
44.16 and CPD Section 20 set out the procedure, summarised below, by which a ruling can be
obtained as to whether the disallowed amount should continue to be payable by the client.
| (b) |
If the points of dispute served by the paying party challenge a success fee claimed
in respect of counsel's fees, the solicitor must so inform counsel within three days and counsel
must reply within ten days or be taken to accept the reduction (unless the court otherwise orders).
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| (c) |
If points of dispute served by the paying party challenge the success fee of the
solicitor or counsel, the solicitor must write to the client within three days giving a clear written
explanation of the dispute and the effect it will have if it is upheld in whole or in part. The
letter must also explain the client's right to attend any subsequent hearing at court when the
matter is raised and should invite the client to inform the solicitors whether or not the client
wishes to attend any subsequent hearings.
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| (d) |
When requesting a hearing date (see Section 8.1) the solicitor must certify:
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| (i) |
the existence of any dispute as to the success fee,
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| (ii) |
the intention (if it be the case) to apply for any disallowed amount to continue to be
payable by the client,
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| (iii) |
that he has given a written explanation to the client, and
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| (iv) |
whether the client wishes to attend any subsequent hearing.
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| (e) |
On receipt of notice from the court of the date for an assessment hearing, the
solicitor must, within the next seven days, give written notice to the client and, if appropriate, to
counsel, stating the date, time and place of the hearing.
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| (f) |
At the hearing attended by the paying party the receiving party, the solicitor and
counsel may attend or may be separately represented and may make oral or written submissions.
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| (g) |
If a success fee payable by the paying party is assessed at a figure lower than the
contractually agreed figure and the legal representative still wishes to recover the contractually
agreed figure he may apply for an order that the disallowed amount should continue to be
payable by his client and the court may adjourn the hearing to enable the client to be notified of
the order sought and, if necessary to be separately represented (CPR 44.16). The order sought
does not affect the paying party and, therefore, the paying party need not attend the adjourned
hearing.
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| (h) |
The court may decide the issue, whether the disallowed amount should continue
to be payable, without an adjournment if the receiving party and all relevant legal representatives
consent to the court doing so, and if the receiving party (or if corporate, an officer thereof) is
present in court and if the court is satisfied that the issue can be fairly decided without an
adjournment. In any other case the court will give directions and fix the date for the hearing of
the application.
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