Stick Or Twist | The Effect Of A Costs Cap Upon Termination Of A CFA

On 4th November 2014, the Claimant, Ms Helen Sellers, was seriously injured in a road traffic accident. She subsequently, on 21st May 2015, entered into a conditional fee agreement (CFA) with the Defendant, Mr Steven Simpkins, under which he would act as her solicitor to pursue a claim against the driver responsible for her injuries.

In March 2021, Ms Sellers terminated Mr Simpkins’ retainer and instructed new solicitors from the firm Fieldfisher to take over her case. The claim was ultimately settled in a joint settlement meeting held on 11th August 2021 on a full and final basis inclusive of legal costs.

Following settlement of the underlying personal injury claim, on 10th November 2022, Mr Simpkins delivered a final statute bill to Ms Sellers seeking recovery of £496,983.96, his estimated costs over the course of acting for her.

On 9th December 2022, Ms Sellers, through her litigation friend Mr Paul Sellers, commenced court proceedings challenging Mr Simpkins’ bill under Section 70 of the Solicitors Act 1974.

Key Events

• 4 November 2014 – Claimant injured in road accident
• 21 May 2015 – CFA entered into with Defendant
• March 2021 – Claimant terminates CFA
• 26 March 2021 – Defendant indicates he will seek costs under CFA
• 11 August 2021 – Underlying claim settles inclusive of costs
• 10 November 2022 – Defendant delivers bill of costs for £496,983.96
• 9 December 2022 – Claimant commences s.70 proceedings

Key Issues

The issues in dispute were:

1. Whether the termination of the conditional fee agreement by the Claimant limited the entitlement of the Defendant to charge costs in excess of the amount of costs recovered from the Defendant in the underlying proceedings.
2. If so, whether the Defendant’s entitlement was limited to the amount shown in respect of his costs in the schedule of costs produced at the joint settlement meeting.

Claimant’s Position

On behalf of the Claimant it was argued that:

• The ‘overall cap’ provision in the Conditional Fee Agreement (CFA) limited the Defendant to costs recovered from the opponent even after termination

  • The CFA contained a provision limiting the maximum costs payable by the Claimant to those recovered from the opponent
  • This made it a type of “CFA Lite”, capping liability to recovered costs even if the case was won
  • The Claimant argued that unlike other termination clauses in the CFA, this overall cap still applied if the solicitor elected to await the outcome post-termination rather than seek immediate payment

• The Defendant’s emails following termination did not indicate that he was seeking immediate payment such as to trigger the payment clause in the CFA.

  • Specifically, the Defendant had emailed,

“I shall proceed on the basis that formal termination of our retainer occurred today.
…
“There is real risk my firm faces concerning the costs it has incurred. It is therefore entirely reasonable that now my firm is no longer instructed and risks apparent, the issue of costs owed to the firm must be resolved prior to the file transfer.”

• • The Claimant argued this was not sufficient to trigger the first bullet point in clause (a). There had to be a demand for payment which, in the context of a solicitor, would have to be a bill which complied with s.69 Solicitors Act 1974.
  • Therefore, the provisions applicable on a win still bound the Defendant after termination

• If the cap applied post-termination, costs recoverable were limited to £354,496.51

  • This was the sum shown for Defendant’s estimated costs in the schedule produced at settlement
  • As there was no separate costs agreement with the opponent, the Claimant said this figure in the schedule applied

Defendant’s Position

On behalf of the Defendant it was argued that:

• The ‘overall cap’ provision did not apply upon termination before conclusion of the underlying claim

  • The CFA contained a cap limiting maximum recoverable costs to those paid by the opponent if the case was won
  • However, per Higgins, caps do not apply where the CFA terminates pre-conclusion
  • Here, since the Claimant terminated the retainer before the claim concluded, the cap did not limit recoverable costs

• Alternatively, even if the cap could apply post-termination, no ascertainable sum was recovered from the opponent for costs

  • For the cap to bind the Defendant, the Claimant had to show an identifiable sum was paid by the opponent for costs
  • Since settlement was not broken down but rather a global sum inclusive of costs, there was no identifiable figure
  • Therefore, with no ascertainable figure paid for costs, the cap could not be applied.

Decision

Senior Costs Judge Gordon-Saker held that the overall costs cap ceased to apply once the Conditional Fee Agreement (CFA) was terminated prior to the conclusion of the underlying claim:

“It seems to me that there is a distinction between the situation where the solicitor is entitled to payment before the claim had been concluded (when the overall cap would make no sense) and the situation where the solicitor waits to see the outcome. In the latter case, the overall cap would make sense.” [25]

“I do not read the judgment in Higgins as being inconsistent with that. Saini J. draws the same distinction in respect of “the relevant clauses concerning the end of the CFA before the end of a claim for damages” because “the proper construction of their interaction with the overall cap is plainly that the cap only operates if the client wins” [para 62].” [26]

“The Defendant’s argument is that the overall cap cannot apply where the client terminates the agreement before the case is won.” [27]

“Putting that latter argument to one side for the moment, if the solicitor elects to wait for the outcome of the case and the claim succeeds, while the agreement has been terminated before the case is won, there is no difficulty with applying the overall cap.” [28]

“In my judgment the overall cap does not apply where the solicitor elects to claim their charges before the conclusion of the claim (for the reasons stated in Higgins), but it does apply where the solicitor elects to await the outcome of the claim.” [29]

However, that was not the end of it. He went on to find that contrary to the Claimant’s assertion, the Defendant’s emails were sufficient to trigger the payment clause in the CFA headed “(a) Paying us if you end this agreement”

“Ms Bedford submits that this was not sufficient to trigger the first bullet point in clause (a). There had to be a demand for payment which, in the context of a solicitor, would have to be a bill which complied with s.69 Solicitors Act 1974.”

“I think that ignores the factual matrix. There was no advantage to elect to await the outcome of the case, or in Ms Bedford’s words to “twist”, because no success fee would be payable in the event of a win.It seems to me that while the Defendant did not “ask” for payment until he delivered a bill, in March 2021 he had exercised his right to decide that the Claimant must pay his basic charges, expenses etc without waiting for the conclusion of the claim. Effectively, he had said “I’ll stick”.” [36]

“Had a success fee been payable under the agreement, in view of the emails, the Defendant would have had no prospect of arguing that he had exercised his election to await the outcome.” [37]

“Following Higgins, the overall cap did not apply because the Defendant had elected to claim his basic charges before the case was won.” [38]

Therefore, the overall costs cap did not restrict the Defendant’s entitlement to costs.