3. Money laundering and proceeds of crime Flashcards
A solicitor agrees to act for a client on a ‘no win, no fee’ conditional fee agreement with a success fee of 20%.
Which of the following describes the costs position?
A-If the client loses, the client will have to pay disbursements.
B-If the client loses, the solicitor’s fee will be calculated at 20% of their usual charging rate.
C-If the client wins, the client will pay nothing in respect of their own costs.
D-If the client wins, the solicitor’s fee will be calculated at 20% of the damages received.
E-If the client wins, the opponent will pay the success fee.
Option A is correct. This is a ‘no win, no fee’ CFA, so if the client loses they will not have to pay anything in fees, but will still be liable for disbursements (and the opponent’s costs). In a CFA the success fee is calculated as a percentage of the usual charging rate, not a percentage of the damages received. If the client wins they will have to pay the success fee as it cannot be recovered from the opponent.
A solicitor is instructed by a client in a claim for damages. The client is in receipt of income support and has capital of £1,000. The solicitor is confident that the case has a good chance of success and satisfies the merits test. The client submits an application for legal aid in the form of Legal Representation.
Which of the following describes the costs position if the application is successful?
A-The client may have to repay some of their legal fees.
B-The solicitor can choose to charge for the work done at any hourly rate.
C-The client will be asked to make a monthly contribution towards their legal fees.
D-The client is entitled to free legal representation.
E-The solicitor can insist that the client pay money on account of costs.
Option A is correct. If the client is awarded damages in the case, the effect of the statutory charge is that the client may have to repay some of their legal fees. Therefore, the representation is not free (option D therefore is wrong). The client’s means are not such as would require them to make a contribution towards their legal fees (option C is wrong). The solicitor will be remunerated at set levels (option B is wrong). Finally, option E is wrong as the solicitor must look to the Legal Aid Agency for payment of their fees and so the solicitor cannot ask the client to pay money on account.
Application for legal aid
Legal aid will only be granted if the client is able to demonstrate that both
the merits of the case and their own financial means are such as to justify public funding. The
client will therefore have to satisfy two tests.
The interests of justice test
-Client must demonstrate that it is in the interests of justice for them to receive public funding to cover the cost of their legal representation.
Means test
-Clients who are under 18 or who receive one of a number of welfare benefits (primarily universal credit, but also ongoing entitlement to income support, income- based jobseeker’s
allowance, guaranteed state pension credit, income- based employment and support allowance) are entitled to criminal legal aid without needing to satisfy the means test. All other clients will need to submit full details of their financial circumstances.
A solicitor is instructed by a client who is the defendant in possession proceedings. The client has no capital and is in receipt of universal credit. The solicitor is confident that the client has a good defence and would win the case. However, if the claimant succeeds in the case the client will be evicted and become homeless.
Is the client likely to be eligible for legal aid in respect of the proceedings?
A-Yes, because a client in receipt of universal credit automatically qualifies for legal aid.
B-Yes, because the client satisfies both the means and the merits test.
C-No, because a reasonable privately paying client would not be prepared to proceed with the case.
D-No, because civil legal aid is only available to claimants.
E-No, because the case falls outside the scope of legal aid.
Option B is correct . Legal aid is available to both claimants and defendants; accordingly, option A is wrong. A case in which the client is faced with homelessness is within the scope of legal aid; option E is wrong. The ‘reasonable privately paying client’ test would be satisfied given the threat of homelessness and the client has a good chance of success; option C therefore is wrong. Option A is wrong, as a client in receipt of universal credit does not automatically qualify for legal aid – they must still satisfy the merits test and the capital element of the means test. On these facts the client satisfies both the merits test (as above) and means tests (the client is in receipt of universal credit and has capital of less than £8,000).
A solicitor is instructed by a client who is the defendant in criminal proceedings. The client is charged with causing grievous bodily harm. The case will be dealt with by way of a crown court trial. The client has no capital and is not in receipt of any welfare benefits.
Which of the following best describes the position with regard to the client’s eligibility for legal aid in respect of the trial?
A-Legal aid will not be granted if the risk of the client receiving a custodial sentence is low.
B-Legal aid will only be granted if a reasonable privately paying client would proceed with the case.
C-Legal aid is unlikely to be granted unless a conviction would result in serious damage to the client’s reputation.
D-Legal aid will be granted because the client has no capital.
E-Legal aid will be granted if the client’s annual adjusted income is £5,000.
Option E is correct. To be eligible for criminal legal aid the client must satisfy both the interests of justice test and the means test. In a crown court trial the interests of justice test is automatically satisfied, so option C is wrong. The client has no capital, but their income is relevant for the means test (option D is wrong). An adjusted income figure below the limit of £12,475 satisfies the means test and therefore legal aid will be granted. The reasonable private paying client test is relevant for civil legal aid (option B is therefore wrong).
Following trial, a court orders a defendant to pay damages to a claimant for breaching a goods contract. The claimant and his solicitors entered into a written conditional fee agreement, with a success fee of 60%, for the conduct of the litigation. The solicitor has charged the claimant £50,000 using the firm’s standard charge-out rates (‘the firm’s base costs’) and a further £30,000 representing the success fee. The claimant also took out after-the-event insurance, paying a premium of £15,000.
Which of the following best describes what costs the claimant can recover from the defendant?
A-The firm’s base costs, the success fee, and the insurance premium.
B-The firm’s base costs and the insurance premium.
C-The firm’s base costs and the success fee.
D-The success fee and the insurance premium.
E-The firm’s base costs.
Option E is correct.
A success fee under a conditional fee agreement (CFA) is generally irrecoverable from the losing party. Any premium paid for an after-the-event (ATE) insurance policy is likewise generally irrecoverable from the losing party. The claimant will have to fund these costs from his own resources.
As a result, the claimant will only be able to recover the firm’s base costs – the fees calculated by reference to the firm’s usual charge-out rates – from the defendant. The other options are therefore wrong.
(Please note that the winning party in civil litigation will in fact usually only be able to recover a proportion of the legal costs they have incurred. Full recovery of costs, even of the firm’s base costs, is the exception rather than the norm. You will learn more about the recovery of costs in civil litigation in the DR course/manual.)
A solicitor is about to have their first meeting with a client in relation to personal injury they suffered during a road traffic accident. The client has already told the solicitor that they cannot afford to pay the solicitor and the solicitor thinks they might be able to offer the client a conditional fee agreement (CFA). The solicitor is preparing the CFA in readiness for the meeting and knows that there are certain formal requirements that the CFA will need to comply with.
Which of these will be a formal requirement for the CFA?
A-That the case it relates to is a civil litigation matter that be sent to the client by e-mail.
B-That the case it relates to is a civil litigation matter that is not family proceedings.
C-That the case it relates to is a civil litigation matter and that it include the client’s address.
D-That the case it relates to is a civil litigation matter and that it be oral.
E-That the case it relates to is a civil litigation matter and that it be sent to the client by fax.
Option B is the correct answer. This is a formal requirements for conditional fee agreements (CFAs) pursuant to the Courts and Legal Services Act 1990 (the Act) at sections 58 and 58A.
Section 58A of the Act says that CFAs cannot be used for criminal proceedings or family proceedings.
Option A and E are wrong because there is no requirement under sections 58 or 58A of the Act, for the CFA to be sent to the client by e-mail or by fax.
Option C is wrong because there is no requirement under sections 58 or 58A of the Act for the CFA to include the client’s address.
Option D is wrong because section 58(3)(a) of the Act requires a CFA to be in writing
A solicitor is advising a client facing the prospect of being made homeless. The case falls within the overall scope of the civil legal aid scheme. The solicitor has advised that the prospects of success are low, being around 20%.The client has a little capital (around £1,000). The client has a gross monthly income of £2,400 and a monthly disposable income of £480 after deductions to reflect family circumstances and basic living expenses. The client has two children.
Is the client likely to qualify for civil legal aid, and why?
A-Yes, because he client satisfies the merits test and the means test.
B-No, because the client satisfies the merits test, but does not have 5 or more children to satisfy the means test.
C-No, because the client satisfies the merits test but not the means test.
D-No, because the client satisfies the means test but not the merits test.
E-Yes, because this is a homelessness case, the client will qualify automatically for civil legal aid.
Option D is correct. The prospects of success are low, at much less than 50%, meaning that the client is unlikely to satisfy the merits test. The client’s financial circumstances are such that they would be likely to satisfy the means test. They have capital below the limit of £8,000. The client’s gross monthly income is less than £2,657, this being the limit as the client has fewer than 5 children. The monthly disposable income is less than £733. The client needs to satisfy both the merits and means test to qualify for civil legal aid.
Option A is wrong because the client does not satisfy the merits test.
Option B and C are wrong because the client does not satisfy the merits test.
Option E is wrong because the merits and means tests still need to be satisfied.
A prospective client attends the office of a solicitor regarding a claim they intend to bring for breach of contract, seeking damages of £100,000. The prospective client is interested in funding the claim through a conditional fee agreement (CFA) or a damages-based agreement (DBA). The prospective client asks the solicitor if there is any cap on success fees payable under CFAs and contingency fees payable under DBAs.
A prospective client attends the office of a solicitor regarding a claim they intend to bring for breach of contract, seeking damages of £100,000. The prospective client is interested in funding the claim through a conditional fee agreement (CFA) or a damages-based agreement (DBA). The prospective client asks the solicitor if there is any cap on success fees payable under CFAs and contingency fees payable under DBAs.
Which of the following best describes what the solicitor should advise?
C-
The solicitor should advise that the success fee is limited to 100% of the usual hourly rate in CFAs and the contingency fee cannot exceed 50% of the awarded damages in DBAs.
Answer C is correct. The success fee is limited to 100% of the usual hourly rate in CFAs and the contingency fee cannot exceed 50% of the awarded damages in DBAs.
Answer A is wrong. Whilst the answer is correct insofar as contingency fees in DBAs being limited to no more than 50% of the awarded damages, the other part of the answer regarding success fees in CFAs is wrong. CFA success fees are based on solicitor’s hourly rates, not the amount of damages awarded to the client.
Answer B is wrong. Whilst the answer is correct insofar as contingency fees in DBAs being limited to no more than 50% of the awarded damages, the other part of the answer regarding success fees in CFAs is wrong. Success fees in CFAs are limited to 100% of the usual hourly rate, not 50%.
Answer D is wrong. There are limits on success fees in CFAs and contingency fees in DBAs.
Answer E is wrong. Both parts of this answer are wrong. There is a limit on success fees in CFAs. The limit on contingency fees in DBAs is 50% of the awarded damages, not 25%.
A solicitor is representing a client in an immigration case which falls within the overall scope of the civil legal aid scheme. The client earns a gross monthly income of £2,525, has capital of £6,000 and a monthly disposable income of £523 after deductions for basic living expenses and the client’s family circumstances. The solicitor advised the client that the client has a strong case with high prospects of success in the proceedings.
Is the client likely to be eligible for legal aid in respect of the proceedings?
A-Yes, because the client satisfies both the merits test and the means test.
B-Yes, because the client satisfies the merits test and therefore the means test does not need to be considered.
C-Yes, because the client satisfies the means test and therefore the merits test does not need to be covered.
D-No, because the client does not satisfy the means test and therefore the merits test does not need to be considered.
E-No, because the client satisfies the means test but does not satisfy the merits test.
Answer D is correct. The capital limit for civil legal aid is £3,000 in immigration cases. The client has capital of more than £3,000 so they do not qualify for legal aid and there is no need to consider the client’s income position or the merits test.
Answer A is wrong. The client is likely to satisfy the relevant merits test, however they do not satisfy the means test. The capital limit for civil legal aid is £3,000 in immigration cases. The client has capital of more than £3,000 so they do not qualify for legal aid and there is no need to consider the client’s income position.
Answer B is wrong. Where a case falls within the scope of the civil legal aid scheme, it is necessary to demonstrate that the client is eligible based on the merits of the case and the client’s financial circumstances. A client will only qualify for legal aid if their capital and income does not exceed certain limits and if they also satisfy the relevant merits test.
Answer C is wrong. The client does not satisfy the means test. The client has capital of more than £3,000 so they do not qualify for legal aid and there is no need to consider the client’s income position or the merits test.
Answer E is wrong. Whilst the client is likely to satisfy the merits test, they do not satisfy the means test. The client has capital of more than £3,000 so they do not qualify for legal aid and there is no need to consider the client’s income position or the merits test.
A Claimant has been successful in a breach of contract claim heard in the High Court. Both the Claimant and the Defendant had instructed solicitors to conduct the litigation. Neither party had any type of fee agreement in place.
Which of the following best describes the parties’ positions in respect of their solicitors’ fees?
A-The Defendant lost and so will not have to pay their solicitors’ fees.
B-The Defendant lost and so must pay 100% of the Claimant’s solicitors’ fees.
C-If the Defendant is ordered to pay the Claimant’s costs, they can set off the amount paid against their own solicitors’ fees.
D-The Claimant won and so is no longer responsible for their solicitors’ fees.
E-If the Claimant is not awarded 100% of their solicitors’ fees by the court, they must pay the remainder.
Option E is correct. Although a successful party may have a costs award made in their favour, this usually covers less than the full amount of costs incurred. In that case, the successful party must pay the remaining costs themselves.
Option A is wrong. The Defendant did not have a fee agreement in place which stated that they would not pay their solicitors’ fees if they lost the case. As such, they are responsible for paying their solicitors’ fees.
Option C is wrong. If the Defendant is ordered to pay the Claimant’s costs, they must pay that amount on top of the full amount owed in respect of their own legal costs.
Option D is wrong. Even though the Claimant won and may have a costs award made in their favour, they are still responsible for their own solicitors’ fees. Some of those fees may be ordered to be paid by the Defendant, but that does not remove the Claimant’s responsibility.
Option B is wrong. There is no immediate obligation on a losing party to pay 100% of the successful party’s costs. The court will determine whether the successful party is entitled to their costs. The amount to be paid by the losing party, including the successful party’s solicitors’ fees, will either be agreed between the parties or assessed by the court. This amount will often be less than the total costs incurred by the successful party.
A new client asks a solicitor for advice on funding a breach of contract claim. The client asks about the effect of using a conditional fee agreement. In particular, the client wants to know how the solicitor’s fees would be paid, if their claim is successful.
Which of the following would be the best advice for the solicitor to give to the client?
A-The client would pay the solicitor’s standard charges together with a success fee of up to 100% of those standard charges. The client may recover some of the standard charges and the success fee from their opponent.
B-The client would pay the solicitor’s standard charges together with a success fee of up to 100% of those standard charges. The client may recover some of the standard charges from their opponent, but the success fee is not recoverable.
C-The client would pay the solicitor’s standard charges together with an agreed percentage of any damages recovered.
D-The client would pay the solicitor’s standard charges together with a success fee that cannot exceed 25% of the damages recovered.
E-The client would pay the solicitor’s standard charges together with a success fee of up to 50% of those standard charges. The client may recover some of the standard charges from their opponent, but the success fee is not recoverable.
Option B is correct. Under a conditional fee agreement, the success fee can be up to 100% of the solicitor’s standard charges (although note that in personal injury cases, it cannot exceed 25% of the general damages recovered). Some of the standard charges may be recoverable from an unsuccessful opponent, if the client has a costs order made in their favour, but the success fee is not recoverable.
Option A is wrong. Although the first sentence is correct, the second is not. The success fee under a CFA is not recoverable from an unsuccessful opponent.
Option C is wrong. This conflates CFAs with damages based agreements. Under a CFA the client will pay the solicitor’s standard charges (plus an uplift on those charges). However, it is under a DBA that the solicitors will receive an agreed percentage of any damages recovered.
Option D is wrong. This is a breach of contract claim. The cap on the success fee at 25% of damages applies to personal injury cases.
Option E is wrong. The success fee under a CFA can be up to 100% of the solicitor’s standard charges, not 50%.
A solicitor enters into a ‘no win no fee’ conditional fee agreement with a client. The agreement includes a success fee of 30%. The solicitor’s usual charging rate is £300 per hour. The client wins the case and is awarded damages of £60,000. The client is also awarded 80% of their legal costs. The solicitor’s final bill, before calculating the success fee, is £20,000. The client will deduct sums due by them to their solicitors from their damages.
What sum will the client retain after making the deduction?
A-£60,000
B-£48,000
C-£56,000
D-£54,000
E-£50,000
Option E is correct. The client will pay the success fee and 20% of the solicitor’s bill. The success fee is £6,000 (30% of £20,000) and 20% of the solicitor’s bill is £4,000. This comes to a total of £10,000. The success fee under a conditional fee agreement is not recoverable from an unsuccessful opponent, even where the successful party has been awarded their costs. In addition, the unsuccessful opponent will only pay 80% of the client’s costs, leaving the client to pay the remaining 20%.
Option A is wrong. The client owes £10,000 to their solicitors and we are told that this will be deducted from their damages. They will not, therefore, retain the entire £60,000.
Option B is wrong. £48,000 reflects 80% of the £60,000 damages. The 80% proportion is to be applied to the client’s costs, not to the damages award.
Option C is wrong. For this answer, £4,000 has been deducted from the £60,000 damages. This reflects 20% of the client’s solicitor’s fees. Although the client will have to pay this, it is not all that they will have to pay. They will also have to pay the success fee.
Option D is wrong. For this answer, £6,000 has been deducted from the £60,000 damages. This reflects the success fee of £6,000 (30% of £20,000). Although the client will have to pay this, it is not all that they will have to pay. They will also have to pay 20% of the solicitor’s bill.
Conditional Fee Agreement (also known as no win no fee), but to clarify (with regards to disbursements and the opponents costs)
If the client does not win, they will not have to pay their own solicitor’s fees, but they may still have to pay:
- Disbursements (such as counsel’s fees, and fees for expert witnesses), and
- Their opponent’s costs if these are awarded by the court.
Conditional Fee Agreement success fee maximum
The success fee can be up to a maximum of:
- 100% of the solicitor’s normal charges (also said to be usual hourly rate); or
- In a personal injury matter, 25% of the general damages awarded, whichever is lower.
The success fee is unrecoverable from the opponent
