Published April 3, 2014 by Cost Lawyer
In January this year the Legal Ombudsman published a Report in which concerns were raised over the increased number of complaints it had received relating to Conditional Fee Agreements. It cited a number of examples, ranging from a case where the solicitor, who had withdrawn from a case in which the Claimant went on to represent himself and won, thereafter claimed payment of their fees totalling £24,000; to another claim where the solicitor withdrew from the case saying that new information had changed their view of the likelihood of success (when in fact the information had been known from the start) and claimed payment of the other side’s resulting costs in the sum of £6000. CFA scrutiny
Whilst the Ombudsman recognises that such Agreements provide an opportunity for many people to pursue a claim when they otherwise would not have the funds to do so. It is alleged that some solicitors are failing to provide an acceptable level of service and, in some cases, are not properly explaining the terms and conditions of these Agreements to their clients – including (in light of the new rules changes preventing recovery of success fees from the losing party) to what extent the success fee is recoverable from the client as part of the damages awarded. Worse, reports the Ombudsman, is the fact that some solicitors are deliberately attempting to exploit loopholes which exist in those contracts.
The Ombudsman cites two main areas of concern: firstly, structural weaknesses in the Agreements themselves which allow the transfer of risk to the client; and, secondly, unclear terms and conditions which have not been properly explained. CFA scrutiny
The Ombudsman goes on to ask what pressures are solicitors under that they actively pursue cases which have very little prospect of success, only to later try and exploit a loophole in the agreement in order to recover their costs from the client when they refuse to continue acting? It suggests that these pressures are (in part at least) due to the increasingly aggressive state of the litigation market and the necessary risks of the litigation itself.
In respect of the terms and conditions, the Report highlights the widely used phrase “no win, no fee” and questions whether or not this phrase should continue to be used in light of the fact that, whilst leading the client to believe that they will not have to pay anything unless they win, there are in fact certain circumstances in the event of a loss that they will be responsible for payment of some or all of the costs incurred. The Report goes on to highlight the need for solicitors to fully explain the circumstances in which a loss will still result in a cost to the client and also the costs for which they will be liable in the event of a win. This is especially important given the recent changes in the rules relating to Conditional Fee Agreements and the recovery of success fees and ATE insurance premiums.
The Report proposes greater uniformity of standards across the profession and suggests that one possible method of achieving this would be enshrining standardisation of care in some form of regulatory code of conduct.
Not surprisingly, there has been some backlash to the comments outlined in the report from conscientious members of the profession but the advice is clear: provide clear and easily understood terms and conditions which are properly explained to the client at the outset, whilst clearly identifying any areas of risk in the case before deciding whether it is advisable to proceed.
So yet more hoops to jump through….and people think Solicitors have an easy life!!