UNIT 4 - Funding of Legal Services Flashcards
A solicitor agrees to act for a client on a ‘no win, no fee’ conditional fee agreement with a success fee of 25%.
Which of the following describes the costs position?
A) If the client wins, the solicitor’s fee will be calculated at 25% of the damages received.
B) If the client wins, the opponent will pay the success fee.
C) If the client wins, the client will pay nothing in respect of their own costs.
D) If the client loses, the client will have to pay disbursements.
E) If the client loses, the solicitor’s fee will be calculated at their usual charging rate.
CORRECT ANSWER D - 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 junior solicitor is approached by a wealthy individual in relation to a personal injury claim. The solicitor’s assessment of the case is that there is a good chance of obtaining substantial damages. The solicitor tells the prospective client that the firm has a strict policy of not acting on the basis of contingency fees. Nevertheless, the prospective client requests that the case be dealt with under a damages-based agreement (DBA).
Which of the following best explains whether the solicitor should agree or refuse to act under a DBA?
A) Refuse, because that is the firm’s policy.
B) Refuse, because the client can afford to pay privately for the solicitor’s costs.
C) Agree, because the client has the right to decide how their legal costs are funded.
D) Agree, because to do so is in the client’s best interests.
E) Agree, because the risk to the firm is low.
CORRECT ANSWER A - It is for the client to decide how their costs are funded, but that does not impose an obligation on the part of a firm to act for a client on a particular basis. Therefore
a firm may refuse to act under a DBA as a matter of policy. A junior solicitor should adhere to the firm’s policy even if the risk to the firm in an individual case is low. If it is in the client’s best interests to have a DBA the client should be referred to another firm.
A solicitor agrees to carry out a conveyancing transaction for a client at a fixed fee of £500 plus VAT and disbursements. A month into the transaction, it becomes clear that the solicitor will have to undertake much more work than was originally envisaged.
Which of the following best describes what the solicitor can do?
A) Tell the client that the solicitor can no longer act for the client.
B) Start charging the client on the basis of the solicitor’s hourly charging rate.
C) Ask the client to agree to an increase in the solicitor’s fees.
D) Write to the client providing the best possible information on the revised overall costs.
E) Carry out no further work on the transaction pending the client agreeing to an increase in fees.
CORRECT ANSWER C - A fixed fee cannot be changed at a later date if it transpires that the case is more expensive than originally thought (save with the client’s agreement). Although it is not a step to be undertaken lightly, all that the solicitor can do is to ask the client to agree to an increase. If the client refuses, the solicitor must complete the work for the fee agreed.
A solicitor is instructed by a client in a claim for damages. The client is in receipt of universal credit 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 will be asked to make a monthly contribution towards their legal fees.
B) The client is entitled to free legal representation.
C) The client may have to repay some of their legal fees.
D) The solicitor can choose to charge for the work done at any hourly rate.
E) The solicitor can insist that the client pay money on account of costs.
CORRECT ANSWER C - 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 B therefore is wrong). The client’s means are not such as would require them to make a contribution towards their legal fees (option A is wrong). The solicitor will be remunerated at set levels (option D 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.
A solicitor is instructed by a client who is the defendant in possession proceedings. If the claimant succeeds in the case the client will be evicted and become homeless. However, the solicitor is confident that the client has a good defence and would win the case. The client has no capital and is in receipt of universal credit.
Is the client likely to be eligible for legal aid in respect of the proceedings?
A) No, because civil legal aid is only available to claimants.
B) No, because the case falls outside the scope of legal aid.
C) No, because a reasonable privately paying client would not be prepared to proceed with the case.
D) Yes, because a client in receipt of universal credit automatically qualifies for legal aid.
E) Yes, because the client satisfies both the means and the merits test.
CORRECT ANSWER E - 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 B 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 D 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 stealing from their employer. 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 will be granted if the client’s annual adjusted income is £10,000.
D) Legal aid will be granted because the client has no capital.
E) Legal aid is unlikely to be granted unless a conviction for stealing from an employer would result in serious damage to the client’s reputation.
CORRECT ANSWER C - 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 E 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 privately paying client test is relevant for civil legal aid (option B is therefore wrong).
TRUE OR FALSE: Conditional Fee Agreements are sometimes called ‘no-win, no-fee’ agreements by non-lawyers because litigation clients who have Conditional Fee Agreements with their solicitors never have to pay any fees to those solicitors unless the litigation is won.
FALSE - Conditional Fee Agreements are quite often described as ‘no-win, no fee’ agreements by non-lawyers and in the media, but this is rather misleading.
It could be the case that no fee is payable to the solicitor unless the client succeeds, but equally the agreement could merely specify a lower fee. This also leaves aside the client’s ongoing liability for disbursements.
A final point to note is that what counts as ‘success’ for the purpose of a given Conditional Fee Agreement can vary depending on the particular circumstances of the matter, and might not correspond with what a layperson would consider to be a ‘win’.
TRUE OR FALSE: A Conditional Fee Agreement can be made purely orally, for example in a telephone conversation with the client.
FALSE - One of the requirements of a valid Conditional Fee Agreement is that it is made in writing.
TRUE OR FALSE: If a client funds litigation using a Conditional Fee Agreement, if that client loses at trial they will not have to pay anything in respect of its winning opponent’s costs.
FALSE - The purpose and function of a Conditional Fee Agreement is to address a client’s liability for their own solicitor’s fees. The fees and costs incurred by an opponent are outside this scope.
If a client wished to be protected against a litigation opponent recovering their fees and costs, this would typically involve the client obtaining an After-The-Event insurance policy (or relying upon a pre-existing Before-The-Event insurance policy, if such a policy happened to provide relevant cover).
TRUE OR FALSE: The ‘success fee’ percentage, as specified in a Conditional Fee Agreement, could be different for each one of a solicitor’s clients with such an agreement in place.
TRUE - The ‘success fee’ percentage for a Conditional Fee Agreement should be based on a risk assessment of the client’s matter. The greater the risk, the more the likelihood of the solicitor not receiving some or all of his or her fees, and so (generally speaking) the higher the percentage.
Note, of course, that this percentage, the amount of uplift on the solicitor’s fees, cannot exceed 100% of the solicitor’s normal charges.
TRUE OR FALSE: In cases that do not involve personal injury, employment or appeals, the percentage of damages recoverable by a solicitor from their client under a Damages Based Agreement is capped 50% of the client’s damages.
TRUE - Under a Damages Based Agreement a solicitor cannot recover their fees (inclusive of VAT and counsel’s fees) representing more than 50% of the client’s damages.
The cap in personal injury cases is set at 25% (in respect of certain types of damages relevant to personal injury).
The cap in employment cases is set at 35%.
The caps do not apply in respect of appeal cases.
TRUE OR FALSE: Once agreed with a client, the level of a fixed fee for providing legal services cannot be changed at a later date without the client’s agreement, even if the solicitor eventually does more work than they originally anticipated.
TRUE - Once a fixed fee is agreed, a solicitor cannot unilaterally change it, even if the work becomes more involved or difficult than anticipated. For this reason, when agreeing a fixed fee it is vital for a solicitor to obtain all relevant information in order to make a proper assessment of the probable amount of work required, and a corresponding reasonable level of remuneration in respect of it.
TRUE OR FALSE: Whilst civil Legal Aid is today only available in limited circumstances, it is theoretically available in relation to any type of civil proceedings, even in the absence of exceptional circumstances.
FALSE - Legal Aid is not available for large areas of civil legal work, which are said to be outside its scope. With limited exceptions, this unavailability affects areas including negligence claims for personal injury, divorce, family disputes about children and matters arising from the carrying on of a business.
The reference to ‘exceptional circumstances’ here is to an exception that allows Legal Aid to be granted where human rights are at stake, even if the matter falls outside the normal scope of civil Legal Aid. The statement is phrased to suggest that the scope of civil Legal Aid is unlimited even without this exception, which is therefore false.
TRUE OR FALSE: Anyone attending at the police station is entitled to free legal advice irrespective of their means.
TRUE - This applies whether a person attends the police station voluntarily or under arrest. The solicitor attending will receive a single fixed fee in respect of this work.
A solicitor is retained by a client who is making a claim in commercial dispute. The solicitor has a valid Conditional Fee Agreement with the client, having previously estimated the client’s chance of success in the case to be 90%. The client asks the solicitor about the possibility of paying a premium to take out an After-the-Event insurance policy in relation to the commercial dispute.
Which of the following best describes an aspect of After-the-Event insurance (‘ATE’) in the above situation?
A. If the client takes out ATE it will cover the client’s own solicitor’s fees for conducting the commercial dispute.
B. ATE cannot be taken out as the client already has a Conditional Fee Agreement in place.
C. If the client succeeds in the commercial dispute, they will not be able to recover the cost of any ATE premium from their opponent.
D. ATE is unlikely to be available as the client’s chance of success in the commercial dispute is too low.
E. ATE cannot be taken out as the client is the one bringing the claim in the commercial dispute.
CORRECT ANSWER C - The client will bear the cost of taking out ATE, as the premium for such insurance is not recoverable from the opponent.
Option A is not the best answer. Although it is possible for ATE to be taken out by a client to cover their own solicitor’s fees, it is more common for such insurance to relate to the fees of the opponent. In addition, the facts state that there is already a Conditional Fee Agreement in place in respect of the commercial dispute, so ATE arranged as described would duplicate some of the protection already in place (whilst potentially still leaving the client exposed to their opponent’s costs in the event that the commercial dispute is not concluded in the client’s favour). Overall, whilst Option A is not completely impossible, it is unlikely on the facts and not the best answer.
Option B is wrong. ATE is commonly taken out in conjunction with Conditional Fee Agreements. The two typically address different potential liabilities of the client (broadly speaking: liability for opponent’s costs and liability for own costs respectively).
Option D is wrong. Whilst it is never guaranteed that ATE will be available from any given commercial provider, insurers typically look for a chance of success of 60% or more. On the facts the solicitor has assessed the chance of success at 90%, which is actually extremely good.
Option E is wrong. ATE is available for both bringing and defending a case.
