Conditional Fee Agreement- Free representation? no not quite

I have had a lot of people ask me about Conditional Fee Agreements aka No Win No Fee and they seem to have this view that they represented “FREE” representation. They do not, what a CFA represents is what it says, No Win No Fee.
If i took a case on no win no fee, then would i expect to be paid if i won? hell yes.

The problem seems to come from the fact that some people arent used to dealing with solicitors, i was with my dad once many years ago when he went to see his solicitor and i recall his lawyer saying ” to be able to start work we will need £1000 on account of costs” and i asked my dad why he had to pay before he had the service, well that is how most law firms who are privately funded work. You pay money into their client account, they do the work and charge against your account. That is not how a CFA works.
With a CFA, you effectively take away the client paying the money in to the client account and the billing as you go along, but that doesnt mean that there is no bill accruing just that its not being funded as the case progresses. There is still a bill to pay, there has to be, if there was no bill, ie i was in agreement that im going to work for free for a year on a case, then there would be nothing to recover from the opponent.

I confess i do not like costs at all, the costs practice directions are boring, but to put it bluntly the indemnity principle means  that the winning party cannot recover more costs from the losing party than he himself would be liable to pay his own solicitors, so to put it short if i was working for free for a client but was planning on charging the opponent then i couldnt recover my fee from the opponent because the indemnity principle says the opponent has nothing to pay. I hope that makes sense.

So there has to be a bill accruing but you just dont have to pay it til the end of the case. Does that make sense? i hope so, but what you do have to pay  is disbursements, such as court fees, and such as barristers fees if necessary.

Also, there is the success-fee, which is payable. The success fee is set normally at 100% of the basic costs if the matter progresses to trial.

Most people complain about the charging of a success fee, but heres the problem, imagine you work at Tesco or ASDA, and your boss says to you, ill pay you if you can stack all the shelves perfectly for the next year, but if you dont then i wont. Would you work under them terms? my guess is no, yet i am expected to work with no income for nearly a year ( yes fast track trials normally take 30 weeks to get to trial)  with the risk of not even getting paid at all. If the success-fee is removed then i am risking working for nothing with no incentive!! It must be remembered that the firm i work for is a business afterall, but we do not work for the banks,DCAs , we represent the consumers only despite the fact that we have had offers to work for the DCAs . We have to make a profit from somewhere, i personally have kinds who need clothing, feeding etc, and i have to earn my living at the end of the day like everyone else.

Personally i am always happy to look at no win no fee to help people get the right representation with the right funding methods. However, there are an ever increasing number of people who are being mis-advised on certain internet arenas that no win no fee means you will get everything for free.

I found a copy of the law society CFA on the internet and thought it would be a good idea to post it here so that people can actually see what a CFA looks like. This CFA is for personal injury but they are in the main the same

I am not an expert on CFAs, but if you have any questions about them i will try and answer as honestly as i can

What You Need to Know About a CFA

 

Definitions of words used in this document and the accompanying CFA are explained at the end of this document.

What do I pay if I win?

 

If you win your claim, you pay our basic charges, our disbursements and a success fee. The amount of these is not based on or limited by the damages. You can claim from your opponent part or all of our basic charges, our disbursements, a success fee and insurance premium.

It may be that your opponent makes a Part 36 offer or payment which you reject on our advice and your claim for damages goes ahead to trial where you recover damages that are less than that offer or payment. Refer to the “Paying Us” section in the CFA document to establish costs we will be seeking for the work done after we received notice of the offer or payment.

If you receive interim damages, we may require you to pay our disbursements at that point as well as a reasonable amount for our future disbursements.

If you receive provisional damages, we are entitled to payment of our basic charges, our disbursements and success fee at that point.

If you win overall but on the way lose an interim hearing, you may be required to pay your opponent’s charges of that hearing.

If on the way to winning or losing you are awarded any costs, by agreement or court order, then we are entitled to payment of those costs, together with a success fee on those charges if you win overall.

What do I pay if I lose?

 

If you lose, you pay your opponent’s charges and disbursements. You may be able to take out an insurance policy against this risk. If you lose, you do not pay our charges but we may require you to pay our disbursements.

Ending this agreement

 

If you end this agreement before you win or lose, you pay our basic charges and disbursements. If you go on to win, you also pay a success fee.

We may end this agreement before you win or lose.

Basic charges

 

These are for work done from now until this agreement ends. These are subject to review.

 

 

 

 

How we calculate our basic charges

 

These are calculated for each hour engaged on your matter. Routine letters and telephone calls will be charged as units of one tenth of an hour. Other letters and telephone calls will be charged on a time basis. The hourly rates are:

Grade of Fee Earner

Hourly Rate

1

Solicitors with over 8 years experience after qualification

2

Solicitors with over four years’ experienceafter qualification

3

Other solicitors and legal executives andother staff of equivalent experience

4

Trainee solicitors and other staff of equivalent Experience

We review the hourly rate on [review date] and we will notify you of any change in the rate in writing.

Road Traffic Accidents

 

[If your claim is settled before proceedings are issued, for less than £10,000, our basic costs will be £800; plus 20% of the damages agreed up to £5,000; and 15% of the damages agreed between £5,000 and £10,000.] [If you live in London, these costs will be increased by 12.5%].

These costs are fixed by the Civil Procedure Rules.

Success fee

 

The success fee percentage set out in the agreement reflects the following:

(a) the fact that if you lose, we will not earn anything;

(b) our assessment of the risks of your case;

(c) any other appropriate matters;

(d) the fact that if you win we will not be paid our basic charges until the end of the

claim;

(e) our arrangements with you about paying disbursements.

Value added tax (VAT)

We add VAT, at the rate (now [………]%) that applies when the work is done, to the total of the basic charges and success fee.

The Insurance Policy

 

In all the circumstances and on the information currently available to us, we believe, that a contract of insurance with [……………..] is appropriate to cover your opponent’s charges and disbursements in case you lose.

This is because

You do not have an existing or satisfactory insurance that would cover the costs of

making this claim. The policy we recommend will pay:

 

(a) the costs of the other party in the event that the claim fails, to a maximum of £X;

(b) all your disbursements if your claim fails.

(c) [add other key features where necessary such as, our costs and the other

side’s costs (without deduction from your damages) if you fail to beat an (Part

36) Offer to Settle your claim, which you rejected following our advice].

or:

[We cannot identify a policy which meets your needs but our recommended policy is the closest that we can discover within the products that we have searched. It does not meet your needs in the following respects:

(a) it has an excess of £Z

(b) the maximum cover is £ZZ]

or:

 

[We cannot obtain an insurance policy at this stage but we shall continue to look for one and if we are successful in our search then we shall advise you at that stage of the benefits of the policy and purchasing it]

 

[NB. The italicised reasons in set out are examples only. Your solicitor must consider your individual circumstances and set out the reasons that apply].

 

Law Society Conditions

 

The Law Society Conditions below are part of this agreement. Any amendments or additions to them will apply to you. You should read the conditions carefully and ask us about anything you find unclear.

Our responsibilities

 

We must:

  • always act in your best interests, subject to our duty to the court;
  • explain to you the risks and benefits of taking legal action;
  • give you our best advice about whether to accept any offer of settlement;
  • give you the best information possible about the likely costs of your claim for damages.

 

Your responsibilities

You must:

  • give us instructions that allow us to do our work properly;
  • not ask us to work in an improper or unreasonable way;
  • not deliberately mislead us;
  • co-operate with us;
  • go to any medical or expert examination or court hearing.

 

Dealing with costs if you win

  • You are liable to pay all our basic charges, our disbursements and success fee.
  • Normally, you can claim part or all of our basic charges, our disbursements success fee and insurance premium from your opponent.
  • If we and your opponent cannot agree the amount, the court will decide how much you can recover. If the amount agreed or allowed by the court does not cover all our basic charges and our disbursements, then you pay the difference.
  • You will not be entitled to recover from your opponent the part of the success fee that relates to the cost to us of postponing receipt of our charges and our disbursements. This remains payable by you.
  • You agree that after winning, the reasons for setting the success fee at the amount stated may be disclosed:

(i)  to the court and any other person required by the court;

(ii) to your opponent in order to gain his or her agreement to pay the success        fee.

  • If the court carries out an assessment and reduces the success fee because the percentage agreed was unreasonable in view of what we knew or should have known when it was agreed, then the amount reduced ceases to be payable unless the court is satisfied that it should continue to be payable.
  • If we agree with your opponent that the success fee is to be paid at a lower percentage than is set out in this agreement, then the success fee percentage will be reduced accordingly unless the court is satisfied that the full amount is payable.
  • It may happen that your opponent makes an offer of one amount that includes payment of our basic charges and a success fee. If so, unless we consent, you agree not to tell us to accept the offer if it includes payment of the success fee at a lower rate than is set out in this agreement.
  • If your opponent is receiving Community Legal Service funding, we are unlikely to get any money from him or her. So if this happens, you have to pay us our basic charges, disbursements and success fee.

As with the costs in general, you remain ultimately responsible for paying our success fee.

You agree to pay into a designated account any cheque received by you or by us from your opponent and made payable to you. Out of the money, you agree to let us take the balance of the basic charges; success fee; insurance premium; our remaining disbursements; and VAT.

You take the rest.

We are allowed to keep any interest your opponent pays on the charges.

If your opponent fails to pay

 

If your opponent does not pay any damages or charges owed to you, we have the right to take recovery action in your name to enforce a judgment, order or agreement. The charges of this action become part of the basic charges.

Payment for advocacy

 

The cost of advocacy and any other work by us, or by any solicitor agent on our behalf forms part of our basic charges. We shall discuss with you the identity of any barrister instructed, and the arrangements made for payment.

Barristers who have a conditional fee agreement with us

 

If you win, you are normally entitled to recover their fee and success fee from your opponent. The barrister’s success fee is shown in the separate conditional fee agreement we make with the barrister. We will discuss the barrister’s success fee with you before we instruct him or her. If you lose, you pay the barrister nothing.

Barristers who do not have a conditional fee agreement with us

 

If you win, then you will normally be entitled to recover all or part of their fee from your opponent. If you lose, then you must pay their fee.

What happens when this agreement ends before your claim for damages ends?

 

(a)          Paying us if you end this agreement

 

You can end the agreement at any time. We then have the right to decide whether you must:

  • pay our basic charges and our disbursements including barristers’ fees but not the success fee when we ask for them; or
  • pay our basic charges, and our disbursements including barristers’ fees and success fees if you go on to win your claim for damages.

 

(b) Paying us if we end this agreement

(i) We can end this agreement if you do not keep to your responsibilities. We then have the right to decide whether you must:

  • pay our basic charges and our disbursements including barristers’ fees but not the success fee when we ask for them; or
  • pay our basic charges and our disbursements including barristers’ fees and success fees if you go on to win your claim for damages.

(ii) We can end this agreement if we believe you are unlikely to win. If this happens, you will only have to pay our disbursements. These will include barristers’ fees if the

barrister does not have a conditional fee agreement with us.

(iii) We can end this agreement if you reject our opinion about making a settlement with your opponent. You must then:

  • pay the basic charges and our disbursements, including barristers’ fees;
  • pay the success fee if you go on to win your claim for damages.

If you ask us to get a second opinion from a specialist solicitor outside our firm, we will do so. You pay the cost of a second opinion.

(iv) We can end this agreement if you do not pay your insurance premium when asked to do so.

 

(c) Death

 

This agreement automatically ends if you die before your claim for damages is concluded. We will be entitled to recover our basic charges up to the date of your death from your estate.

If your personal representatives wish to continue your claim for damages, we may offer them a new conditional fee agreement, as long as they agree to pay the success fee on our basic charges from the beginning of the agreement with you.

 

What happens after this agreement ends

After this agreement ends, we may apply to have our name removed from the record of any court proceedings in which we are acting unless you have another form of funding and ask us to work for you.

We have the right to preserve our lien unless another solicitor working for you undertakes to pay us what we are owed including a success fee if you win.

 

Explanation of words used

(a) Advocacy

Appearing for you at court hearings.

(b) Basic charges

Our charges for the legal work we do on your claim for damages.

(c) Claim

Your demand for damages for personal injury whether or not court proceedings are issued.

(d) Counterclaim

A claim that your opponent makes against you in response to your claim.

(e) Damages

Money that you win whether by a court decision or settlement.

(f) Our disbursements

Payment we make on your behalf such as:

  • court fees;
  • experts’ fees;
  • accident report fees;
  • travelling expenses.

(g) Interim damages

Money that a court says your opponent must pay or your opponent agrees to pay while waiting for a settlement or the court’s final decision.

(h) Interim hearing

A court hearing that is not final.

(i) Lien

Our right to keep all papers, documents, money or other property held on your behalf until all money due to us is paid. A lien may be applied after this agreement ends.

(j) Lose

The court has dismissed your claim or you have stopped it on our advice.

(k) Part 36 offers or payments

 

An offer to settle your claim made in accordance with Part 36 of the Civil Procedure Rules.

(l) Provisional damages

Money that a court says your opponent must pay or your opponent agrees to pay, on the basis that you will be able to go back to court at a future date for further damages if:

  • you develop a serious disease; or
  • your condition deteriorates;

in a way that has been proved or admitted to be linked to your personal injury claim.

(m) Success fee

The percentage of basic charges that we add to your bill if you win your claim for damages and that we will seek to recover from your opponent.

(n) Trial

The final contested hearing or the contested hearing of any issue to be tried separately and a reference to a claim concluding at trial includes a claim settled after the trial has commenced or a judgment.

(o) Win

Your claim for damages is finally decided in your favour, whether by a court decision or an agreement to pay you damages or in any way that you derive benefit from pursuing the claim.

‘Finally’ means that your opponent:

  • is not allowed to appeal against the court decision; or
  • has not appealed in time; or
  • has lost any appeal.
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Jones v Link Financail Limited

I often keep my finger on the pulse of High Court cases involving Link Financial Limited , especially after our victory against them in Harrison.

I came across a case today called Jones v Link. It was a very pleasing case indeed, as it torpedoes these debt purchasers who try to argue that they merely purchased the debt as an assignee and therefore the Consumer Credit Act does not apply to them.

Cabot were prime at doing this, as were Arrow Global, however the High Court has now ruled that the Assignee is the Creditor for litigation, therefore this “were not the creditor” argument is no more (unless there is a further Appeal of course in Jones)

So debt purchase companies, you do have to comply with the Consumer Credit Act, if a debtor makes a statutory request for a copy of the agreement under s78 CCA for example, and the agreement is live and not been terminated, then you cannot say you arent the creditor. And believe me, if you do on a case im involved with, ill slap a copy on Jones on the table quicker than you can say im not the creditor.

The case can be found here http://www.bailii.org/ew/cases/EWHC/QB/2012/2402.html

cold calling – you have got to love their enthusiasm

Ive been recently bombarded by the cold calling brigade. So much so that i registered with the TPS to try and stop them from calling, but alas the odd one or two seem to still get through.

Anyway, i had a call yesterday from a really amusing buffoon who really should have done his home work first before ringing me.

The call went something like this

Him: Hi can i speak to ****** please?

Me: Speaking!!

Him: Hello there im calling because we note you have had credit in the last 6 years.

Me: Yes?? And?

Him: Well its not widley known but 98% of all credit agreements are unenforceable because of a piece of little known legislation.

Me: oooh really, do tell me more please

Him: MAny lenders failed to comply with the consumer credit act because for example the apr was wrong and therefore you can have the debt written off because the credit agreement can never be enforced, even the Court cannot enforce the agreement.

Me: oooh really??? that sounds interesting.

Him: well if you……….

At that point, i stopped him, and said that i didnt believe he was telling me the truth, among other things he was claiming 98% of all agreements were bad? that means if that is true nearly every lawyer who drafted bank contracts must be incompetent.

To my shock, he told me to speak to a lawyer, at that point i couldnt stop myself, i blurted out that i was the fee earner who was responsible for the landmark ruling in the case of Harrison v Link Financial Limited and that i had probably forgotten more about consumer credit law than his firm would ever know.

I pointed out his contention on APR was wrong, APR was a term required by Schedule 1 Consumer Credit Agreements Regulations 1983 (SI1983/1553) and that interest was the driver for unenforceability not APR. I also pointed out that the Court of Appeal confirmed this point in Wilson v First County Trust.

I pointed out that furthermore, the provisions of s127(3)-(5) Consumer Credit Act 1974 did not any longer apply to agreements signed after 6th April 2007.

It was soo funny listening to the guy cough and splutter when i told him what i did for a living. You could almost hear him wanting to cry.

So for any claims management companies wanting to contact me about a potential claim for unenforceability, a word of advice, dont bother.

Hire purchase agreements and s90-92 Consumer Credit Act 1974

Over the past few months i have dealt with a number of hire purchase cases whereby the creditor has taken possession of protected goods upon a debtor breaching the terms of the agreement regulated by the Consumer Credit Act 1974.

Protected goods are goods that more than one third of the repayments due under the agreement have been paid. Where the debtor has paid more than the one third of the total repayments before repossession the creditor would need an order of the Court to be entitled to repossess the goods. It is worth visiting the relevant sections of the Consumer Credit Act

90 Retaking of protected hire-purchase etc. goods.

(1)At any time when—
(a)the debtor is in breach of a regulated hire-purchase or a regulated conditional sale agreement relating to goods, and
(b)the debtor has paid to the creditor one-third or more of the total price of the goods, and
(c)the property in the goods remains in the creditor,
the creditor is not entitled to recover possession of the goods from the debtor except on an order of the court.
(2)Where under a hire-purchase or conditional sale agreement the creditor is required to carry out any installation and the agreement specifies, as part of the total price, the amount to be paid in respect of the installation (the “installation charge ”) the reference in subsection (1)(b) to one-third of the total price shall be construed as a reference to the aggregate of the installation charge and one-third of the remainder of the total price.
(3)In a case where—
(a)subsection (1)(a) is satisfied, but not subsection (1)(b), and
(b)subsection (1)(b) was satisfied on a previous occasion in relation to an earlier agreement, being a regulated hire-purchase or regulated conditional sale agreement, between the same parties, and relating to any of the goods comprised in the later agreement (whether or not other goods were also included),
subsection (1) shall apply to the later agreement with the omission of paragraph (b).
(4)If the later agreement is a modifying agreement, subsection (3) shall apply with the substitution, for the second reference to the later agreement, of a reference to the modifying agreement.
(5)Subsection (1) shall not apply, or shall cease to apply, to an agreement if the debtor has terminated, or terminates, the agreement.
(6)Where subsection (1) applies to an agreement at the death of the debtor, it shall continue to apply (in relation to the possessor of the goods) until the grant of probate or administration, or (in Scotland) confirmation (on which the personal representative would fall to be treated as the debtor).
(7)Goods falling within this section are in this Act referred to as “protected goods ”.

91 Consequences of breach of s. 90.

If goods are recovered by the creditor in contravention of section 90—

(a)the regulated agreement, if not previous terminated, shall terminate, and
(b)the debtor shall be released from all liability under the agreement, and shall be entitled to recover from the creditor all sums paid by the debtor under the agreement.

92 Recovery of possession of goods or land.

(1)Except under an order of the court, the creditor or owner shall not be entitled to enter any premises to take possession of goods subject to a regulated hire-purchase agreement, regulated conditional sale agreement or regulated consumer hire agreement.
(2)At any time when the debtor is in breach of a regulated conditional sale agreement relating to land, the creditor is entitled to recover possession of the land from the debtor, or any person claiming under him, on an order of the court only.
(3)An entry in contravention of subsection (1) or (2) is actionable as a breach of statutory duty.

The above is pretty clear yes? so why do creditors get themselves caught out? well the difficulty Mr Creditor seems to have is, in the cases ive dealt with, they have tried to argue that the debtor returned the keys, thus consented to the repossession and therefore the one third rule et al is irrelevant.

However, while a debtor can indeed consent to enforcement under the act, when it comes to repossession of protected goods the consent must be “informed consent” and in the cases which i have dealt with, the consent was clearly not informed consent.

The Court of Appeal case of Chartered Trust v Pritcher makes it very clear that recovery of protected goods must be by informed consent. So what does this mean? In Pritcher, the debtor had not been made fully aware of his statutory rights before the vehicle was repossessed. Such as the right to keep the goods after more than one third of the repayments had been made and seek a time order from the Court. This right was not explained to Mr Pritcher and therefore his consent was not informed consent. While the Pritcher case was relevant to the Hire Purchase Act, the editors of Goode agreed that the case would apply to the provisions of s90  Consumer Credit Act .

Given the amount of defective Default notices that we see, there is no doubt that some lenders will face a real difficulty if they repo protected goods after one third of the repayments have been made without securing informed consent of the debtor. It is my view that a materially bad default which does not provide the debtor with statutory information required by the Consumer Credit Act could invalidate any consent that the debtor may have given, if he did so not fully aware of his rights.
I have already dealt with such a case where the client was entitled to a refund of all monies paid under the agreement because informed consent was not achieved.

Watsons Solicitors new website

Our new website is now live. Over the next few weeks we will be adding more information, resources etc to the site and hopefully will be able to start adding some of the more interesting judgments which we have secured for our clients.

The new site can be found at http://www.watsonssolicitors.co.uk

Id welcome any feedback or comments about the new site, providing they are constructive of course

MBNA told show must go on……..but gave up anyway

A follow up to my post last month on here.

MBNA were defeated on an application for summary judgment by my client who was represented by arguably one of the leading barristers in consumer law – Paul Brant of Oriel Chambers.

Well after the hearing, MBNA filed notice of discontinuance. The sceptic in me says they didnt want the issue about interest to come out at trial as it would be horrendously damaging but of course that is just my thoughts.

Anyway, im going to point out the interest issue here, so such is life 🙂

The client had a Bank of Scotland Credit card which was opened in 1994.

The terms of the original card provided that interest was simple interest. The terms did not provide an unfettered right to introduce new terms when the creditor felt like it.

The terms only provided a very narrow right to vary interest rates, but not the manner which interest was charged.

However, MBNA took over the card in around 2006, like they did with millions of others from the Bank of Scotland. So, MBNA without further thought it seems slapped new terms on the table and bound our client to them………or atleast they thought they did.

We disagreed. We pleaded that the Claimant was not entitled to compound interest and MBNA in their reply admitted that we were right bout the original terms of agreement, but it seemed MBNA were arguing they could vary the terms relying on their right to vary the RATE of interest.

We referred to Goode the leading authority on CCA work.

Paragraph 35.1 Goode Consumer Credit: Law and Practice refers when it is stated “Many variation clauses are drawn in very general terms, but the creditor should not assume that that these confer on him an unlimited power to alter the contract terms. A variation clause will, like the rest of the contract, be construed contra preferendem, and in the absence of clear language the court is unlikely to treat the clause as empowering the creditor to modify the contract in some fundamental manner outside the reasonable contemplation of the parties.’

Our view is that it is entirely correct, that the Creditor could not twist a clause to suit itself. Furthermore, the issue on compound interest has been to the Court of Appeal already in the matter of Armstrong v American Express. And in that case Amex had to reduce the balance from a compounded rate to a simple rate as their terms did not allow for compounded interest.

In our clients case, MBNA had been charging compounded interest over 6 years, so arguably there was a huge refund due our client which would of extinguished the debt in any event, that is certainly my own opinion.

Anyway, we will never know who was right and who was wrong…………