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Failure to provide litigation services in run up to introduction of LASPO leads to claimant recovering no costs

Choudhury (suing by his Litigation Friend) v Markerstudy Limited
District Judge Wildsmith,
In the County Court at York
12 January 2017

An attempt to sign a Claimant to a CCFA that provided for a success fee in the days ahead of the implementation of LASPO failed and as a result the Claimant was unable to recover any costs. Following a detailed assessment, the Judge held that litigation services had not been provided prior to 1 April 2013 and accordingly the CCFA was unenforceable

Will Mackenzie who represented the Defendants looks at the judgment, which saw the Claimant fall foul of Section 44(6) of the Legal Aid Sentencing and Punishment of Offenders Act 2012. No costs were payable by virtue of a breach of the indemnity principle. The judgment is likely to be of direct application to a large number of pre-LASPO claims, where attempts were made to sign claimants to CCFAs; both for solicitors and counsel.

Background

In the lead up to the implementation of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”), huge efforts were made by Claimant law firms to ensure that their clients were signed up, pre-LASPO to an agreement that meant that they would be free to recover additional liabilities in the shape of a 100% success fee and the cost of ATE insurance policies.

In those cases where Claimant lawyers were instructed in the days leading up to the implementation of LASPO (the 31st of March 2013), time was tight to complete the relevant paperwork, which inevitably meant that the rules governing the transitional arrangements were often not properly followed and that deadlines were often missed.

Where Claimant Lawyers failed to follow the rules and the legislation, then that was likely to lead to fair challenges from Defendants, requiring Claimants to demonstrate that they had complied and that agreements were valid, as where Claimants were unable to demonstrate compliance, that could mean that a valid retainer was not in place and was not enforceable against the claimant and so no costs could be recoverable under the indemnity principle against the Defendant.

On 12th March 2013 the Claimant was involved in a road traffic accident when he was a passenger in a stationary vehicle at traffic lights when the Defendant collided with the rear of the Claimant’s vehicle. The Claimant sustained neck, shoulder and back pain.

The Claimant’s solicitors (Irwin Mitchell LLP) wrote to the Claimant to confirm that they were instructed by the Claimant’s insurer to act, on 15th March 2013. A claim was issued in July 2014 by the Claimant’s Litigation Friend. The Claimant accepted the sum of £1,150.00 in full and final settlement of his claim and the damages were approved at an Infant Approval Hearing which took place in January 2015.

A bill of costs was submitted, which was provisionally assessed, but the outcome of that provisional assessment was not accepted by the Defendant, leading to the Defendant requesting a detailed assessment of the Claimant's bill of costs, which was carried out by District Judge Wildsmith. Mr Steven Turner of Park Lane Plowden acted for the Defendant.

Defendant’s arguments

Date of CCFA and date of litigation services

The Claimant sought to rely on a CCFA entered into between Irwin Mitchell LLP and the insurer on 19th December 2011 and contended that the CCFA provides a valid pre-LASPO retainer which bound the Litigation Friend from a date prior to 1st April 2013. The Claimant submitted that legal work had commenced before 1st April 2013. The CCFA provided for a 12.5% success fee in the event that the case settled and a 100% success fee if the case was won after a trial.

The Defendant did not dispute that if the Litigation Friend was bound by the terms of the CCFA prior to 1st April 2013 and advocacy or litigation services had been provided prior to that date that there would be a valid retainer in place.

Was the Claimant bound by the terms of the CCFA prior to 1st April 2013?

The Claimant maintained that his insurer had instructed the solicitors under the terms of his insurance policy that provided BTE insurance. However, the claim in this matter was actually brought by the Claimant’s Litigation Friend and the Litigation Friend was not insured under the policy. The solicitors first wrote to the Litigation Friend on 15th March 2013. Their letter made it clear that the Litigation Friend would not be bound by the terms and conditions of the CCFA unless and until they signed and returned the Terms of Business, which stated:

…Our “General terms of Business and the Collective Conditional Fee Agreement include legal obligations which will bind you (and us) if you sign and return the General Terms of Business to us…[emphasis added].

The Litigation Friend did not become bound by the terms of the CCFA until she signed and returned the Terms of Business which she did not do until 1st April 2013.

In the circumstances, the Defendant argued that the Litigation Friend had actually entered into a post-LASPO, CFA and as such, the CFA was unenforceable as it did not provide for a 25% maximum limit of the success fee recoverable (as it was obliged to under Section 5 of the Conditional Fee Agreements Order 2013).

Provision of Advocacy or litigation services prior to 1st April 2013

The Defendant also argued that the CCFA would be unenforceable in any event pursuant to the transitional provisions set out at Section 44(6)(b) of LASPO and/or Article 6 of the Conditional Fee Regulations 2013 as both provisions provide for a requirement that any success fee under the CCFA must be capped at 25% unless: “…advocacy or litigation services were provided to [the Litigation Friend] under the agreement in connection with those proceedings before [1st April 2013]…

The Claimant’s formal Bill of Costs recorded just one undated routine telephone call to the Claimant prior to 1st April 2013. A letter was sent out thereafter which said 'We write following our telephone conversation in which we confirmed you wanted us to act on your behalf in claiming compensation’, and thereafter went on to go through the detail of what would be involved in the claim.  

It was the Defendant’s submission that it was likely that the conversation related to funding matters and did not entail the provision of any advocacy or litigation services. The documents schedule to the Bill of Costs confirmed that initial steps on the file were not considered until 4th April 2013. It was submitted by the Defendant that this was the date that ought to be taken as the first date on which litigation services were provided. That being the position, the post LASPO restrictions on success fees would apply to the Claimant’s retainer which was unenforceable by virtue of its failure to set a 25% maximum limit on the success fee. 

Claimant’s arguments

The Claimant submitted that as the CCFA between the insurer and his solicitors was dated 19th December 2011, it was clearly a CCFA entered into before 1st April 2013 and the telephone call and correspondence with the Claimant pre 1st April 2013 were items of work that fell within the definition of legal services pursuant to s.199 of the CLSA[1]. In the circumstances he argued, the arrangement was a clear “Pre Commencement Funding Arrangement” within the meaning of CPR Part 48.2[2] and as such, the success fee was recoverable.



[1]s.199 CLSA - “litigation services” means "any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or contemplated proceedings, to provide;…”

[2] CPR Part 48.2 states: (1) A pre-commencement funding arrangement is—

(a) in relation to proceedings other than insolvency-related proceedings, publication and privacy proceedings or a mesothelioma claim –

(i) a funding arrangement as defined by rule 43.2(1)(k)(i) where –

(aa) the agreement was entered into before 1 April 2013 specifically for the purposes of the provision to the person by whom the success fee is payable of advocacy or litigation services in relation to the matter that is the subject of the proceedings in which the costs order is to be made; or

(bb) the agreement was entered into before 1 April 2013 and advocacy or litigation services were provided to that person under the agreement in connection with that matter before 1 April 2013;

Judgment

DJ Wildsmith, sitting in York County Court found that no litigation services were provided to the Litigation Friend or the Claimant in the period between the accident occurring, on 12th March 2013 and 31st March 2013. The undated telephone call that had been charged to the file during that period was linked to the letter on 15 March that outlined the nature of the funding arrangement.

As the agreement was signed on 1st April 2013 and claimed a 12.5%/100% success fee, it fell afoul of the relevant provisions and was unenforceable. As the agreement was unenforceable against the Claimant, it was inevitable that the agreement was unenforceable against the Defendant.

In the circumstances, DJ Wildmsith made the following Order:

  1. The Claimant’s Bill be assessed at nil.

  2. The Claimant is to pay the Defendant’s costs in the sum of £3,000.00 plus any VAT payable.

  3. Permission to appeal refused. 

Comment

Pre 1 April 2013 solicitors and counsel were all in a rush to enter into CFAs and of CCFAs to ensure that a success fee was recoverable. According to the judgment of District Judge Wildsmith unless substantive work was done to progress the claim, claimants and counsel are likely to be found to have fallen foul of the relevant regulations and lose entitlement to recover their entire claim for costs.

Counsel for the Claimant in this case indicated to the DJ that in his view there were likely to be plenty of other cases to which this decision would also apply (whilst it will not necessarily be binding upon those cases).

Whilst there are no precise parameters to guide clients as to which cases to look out for, the following guidelines may assist in identifying those cases where there might be a need to investigate the nature of the funding arrangement further:

  • The accident occurred very close to the cut-off date of 31 March 2013 (in this case that date was 12 March)

  • Little or no correspondence or telephone calls were made in the period before 31 March 2013

  • The Claimant solicitors have suggested that they are acting on a CCFA that provides for a success fee of more than 25% in personal injury claims

Contact

For further information about this case, to discuss the issue generally, or to request a copy of the judgment, please contact Will Mackenzie, Senior Managing Costs Advisor, on 0207 645 9507 or by email william.mackenzie@dwf.law

By Will MacKenzie

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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.

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