How enforceable is your pre 1 April 2013 CFA?
No doubt there was a significant amount of solicitors who rushed to sign their Client’s to CFA/CCFA before the implementation of LASPO in April 2013. The main reason for the rush was to protect the Client’s ability to recover additional liabilities from the losing party at the end of the litigation. But was there any risk to this strategy?
A recent County Court judgment in the case of Choudhury (by his litigation friend) v Markerstudy (12th January 2017) provides paying parties with an opportunity to dispute the enforceability of any CFA/CCFA entered into just before or after 1 April 2013 if it can be proven that litigation services were not provided prior to 1 April 2013. This of course raises grave concerns to receiving parties.
The case of Choudhury (by his litigation friend) v Markerstudy (12th January 2017) came before DJ Wildsmith at York County Court by way of an appeal against the decision reached on the question of the enforceability of the CCFA during the provisional assessment.
The Claimant was acting on behalf of a child represented by a litigation friend following an accident on 12 March 2013 during which the child sustained some injury. The main action was resolved in the sum of £1,050. The approval hearing took place in January 2015.
The Claimant’s solicitor had entered into a CCFA with the Claimant's insurer dated 19 December 2011. Following the Claimant's accident on 12 March 2013 she received indemnity under the CCFA but did not become bound by the terms of the CCFA until the terms of business were returned on1 April 2013.
The Defendant raised an issue as to whether the CCFA was enforceable as, it considered that the terms of the document did not comply with LASPO that came into force on 1 April 2013. The Defendant argued that the Claimant's CCFA was drawn under the old regime and was no longer recognised under the regime post 1 April 2013 which made the CCFA unenforceable.
In return the Claimant relied on the Section 44.6 of LASPO 2012 which states:
(6)The amendment made by subsection (4) does not prevent a costs order including provision in relation to a success fee payable by a person (“P”) under a conditional fee agreement entered into before the day on which that subsection comes into force (“the commencement day”) if—
(a) the agreement was entered into specifically for the purposes of the provision to P of advocacy or litigation services in connection with the matter that is the subject of the proceedings in which the costs order is made, or
(b) advocacy or litigation services were provided to P under the agreement in connection with that matter before the commencement day.
In simple words the provision above allows recovery of the success fee under a CFA/ CCFA entered into on or after 1 April 2013 as long as advocacy or litigation services were provided to the Client prior to 1 April 2013. The Claimant argued that they had provided legal services to their Client before the CCFA was entered into and prior to 1 April 2013.
The Claimant's CCFA was found to be unenforceable
DJ Wildsmith examined the work undertaken by the Claimant before 1 April 2013 and decided that, although the definition of “litigation services” was wide, a routine telephone call and two letters sent to the Client in respect of client care could not establish that litigation services had been provided to the Client. In addition DJ Wildsmith noted that the work solely related to funding and would have been a matter for a challenge in any event.
In the circumstances it was found that the agreement entered into on 1 April 2013 fell foul of the provisions of LASPO 2012 and therefore the CCFA was unenforceable. This of course meant that the Claimant’s costs were assessed at nil.
The decision above was only made at a County Court level which means that it is not binding. This being said this is an important decision which should not be lightly dismissed as it could be persuasive in other cases. I personally believe that the issue of enforceability of the pre- LASPO 2012 CFA/CCFA is an important one and it is only a matter of time until we see a case on this particular issue being decided at the Court of Appeal.