Solicitors’ decision to terminate CFA had no just cause, judge rules

The decision of a claimant’s solicitors to terminate their retainer had no just cause, a district judge has ruled.

As a result, the claimant’s costs were assessed at nil and the claimant was ordered to pay the defendant’s costs of the detailed assessment proceedings.

According to a briefing from DWF, which acted for the defendant in the unnamed case, the claimant brought a personal injury claim following a road traffic accident under a pre-LASPO conditional fee agreement (CFA). The defendant made two offers: an offer of £15,000 for damages and a Calderbank offer of £25,000 inclusive of costs.

In March 2017, the claimant’s solicitors terminated the CFA and the claimant proceeded as a litigant in person. The claim settled in July 2017 when the claimant accepted a part 36 offer of £25,000 out of time.

The claimant’s solicitors then came back on record to seek recovery of more than £34,000.

On detailed assessment, the defendant questioned the claimant’s solicitors about the termination, which they replied was due to the claimant rejecting their advice to make a counter-offer of £35,000 including costs, contrary to the terms of the CFA.

DWF said: “The defendant queried the advice provided to the claimant when terminating the CFA. It appeared that the solicitors had attempted to exert undue influence on the claimant to settle the claim at an undervaluation given the eventual settlement at £25,000 for damages alone.

“They had then terminated the CFA, only to go back on record to recover their costs while at the same time excluding the additional costs that the claimant may have been entitled to as a litigant in person.”

The claimant contended that the liability for costs stemmed from the termination and the terms of the CFA governing it, and that, based on the correspondence, the CFA was properly and lawfully terminated.

The solicitors’ letter to the claimant had provided three options: to accept the solicitors’ advice to make an all-inclusive costs offer, to choose to instruct another firm of solicitors or to continue to instruct the current solicitors on a private basis and provide payment on account of costs.

This was despite the CFA providing that the claimant could ask for a second opinion on the offer from a specialist solicitor at another firm, an option the defendant argued that the solicitors should have offered.

Relying on Master Haworth’s decision in Murray and Anor v Richard Slade and Company Ltd [2021] EWHC B3 (Costs), which disallowed a claim for costs because the CFA was terminated without good reason or on reasonable notice, the defendant argued for the same, meaning that, by operation of the indemnity principle, the defendant was not liable to pay costs.

The claimant’s solicitors maintained that they were entitled to recover disbursements. However, the defendant argued that where the CFA was found to be unenforceable and where the client had not personally paid for disbursements, disbursements were not recoverable inter partes in line with Hollins v Russell [2003] EWCA Civ 718.

DWF reported that District Judge Iyer in Manchester County Court agreed with the defendant and assessed the bill at nil, awarding £28,000 for the costs of the detailed assessment as well.

An additional takeaway from the ruling was that “it is still possible for the court to find that retainers are unenforceable inter partes, based on solicitor-own client assessment principles”, the firm pointed out.

Andrew Lyons of Ropewalk Chambers was instructed by DWF to act on behalf of the defendant.

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Post details

Post type
Costs News
Published date
15 Sep 2021

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