WS4 - Funding of Legal Services

Question 1

What should be true of a retainer agreement?

Answer 1

1. In writing
2. Contain all relevant terms
3. Signed by client

Question 2

According to the rules of professional conduct, how should a solicitor inform their client regarding their legal fees?

Answer 2

Must provide client with best possible information about how their matter will be priced

Clear and transparent advice, updating the client as the case progresses.

Question 3

Is excessive costs in breach of SRA principle?

Answer 3

Yes could be a breach of
1) Acting in clients best interests
2) Acting with integrity

Despite this, it is okay if they make some profit and client can challenge solicitors bill and reduce fees if they think it is too exessive

Question 4

Is a solicitor under an obligation to inform the client about potential funding options?

Answer 4

No. There is no obligation to offer alternative funding options or to agree to act for a client under any of them

However, solicitor should make client aware of funding options available, and if necessary direct client to take separate advice

Question 5

Can a fixed fee be altered at a later date?

Answer 5

No. Unless the client agrees that the work turned out to be more expensive than the solicitor first anticipated.

Question 6

Can you agree to a fixed fee without seeing the work you need to complete?

Answer 6

It is advisable to see what the work entails before you give a fixed fee estimate.

Usual solicitor duties apply
* Must undertake work in ordinary standard of care

Question 7

What are the two types of fee arrangements a solicitor can enter into?

Answer 7

1) Contentious
2) Non-contentious business agreements

Question 8

When may a solicitor enter into contentious business agreement?

Answer 8

For contentious work completed on behalf of the client.

They can be remunerated by reference to a gross sum, hourly rate or salary

Contentious agreement - Business done, whether as a solicitor or an advocate, in
or for the purposes of proceedings begun before a court or an arbitrator, not being business which falls within the definition of non-contentious business or common form probate business’

Question 9

What are the requirements for contentious business agreement to be enforceable?

Answer 9

• Agreement must state it is a contentious business agreement
• Agreement must be in writing
• Agreement must be signed by client
• Agreement must contain all the terms

Question 10

When a contentious business has been enforced, what are the limitations for the client?

Answer 10

Unable to apply to court for an assesment of costs unless agrement provides otherwise

NOTE. Court may set aside the agreement or reduce remuneration if unfair or unreasonable

Question 11

When a contentious business has been enforced, what are the limitations for the solicitor?

Answer 11

A contentious businessa agreement does not for itself give a solicitor a
* Cause of action against the client for their costs
* Cannot sue on an unpaid bill

Must seek permission from the court to do so. The court will assess whether the agreement is fair and reasonably and set it aside if not

Question 12

When is a non-contentious business agreement enforceable?

Answer 12

Must be
* in writing
* be signed by the client
* contain all the terms of the agreement (including whether disbursements and VAT are included in the agreed remuneration)

Non- contentious business is defined as ‘any business done as a solicitor
which is not contentious business’ (s 87 Solicitors Act 1974). This includes obvious examples such as conveyancing or commercial drafting work.

Question 13

Can the court set aside a non-contentious business agreement?

Answer 13

Where the relevant provisions have been complied with, the court will be unable to apply to have the bill assessed by the court.

Court may set aside agreement or reduce remuneration if the amount charged by solicitor is
* unfair
* unreasonable

Question 14

How is a solicitor paid in a conditional fee agreement?

Answer 14

If the claim is successful - solicitor will receive usual fee + success fee
If claim is unsuccessful - solicitor gets nothing

Question 15

What is the maximum amount of success fee under a conditional fee agreement?

Answer 15

No more than 100% of the normal fees charges

50% on personal injury cases

i.e. cant be more than double your fees.

Question 16

In what category of proceedings can conditional fee agreements not be used?

Answer 16

Family and criminal proceedings

Question 17

What must a solicitor inform a client of within the context of conditional fee agreements?

Answer 17

• If they lose, whilst they won’t have to pay their solicitor anything, they may be liable for the other side’s costs
  and any disbursements incurred by her solicitor - e.g. counsels fees, expert witness
• The reasoning behind their success fee and demonstrate how they arrived at that

Question 18

If the client wins the case in a conditional fee agreement, how do they pay their solicitors + success fee?

Answer 18

This is deducted from their damages.

The client would be responsible for any shortfall if the damages is less

Question 19

What is after the event insurance?

Answer 19

• Insurance taken out after the event
• Through which disbursments are paid and can be used to also cover the risk of having to pay other side costs
• Can also be used to pay your own solicitors legal fees

A solicitor who recommends or arranges ATE for a client will be carrying out insurance distribution activities. The solicitor must take account of the restrictions imposed by the Financial Services and Markets Act 2000

Question 20

What type of fee agreement is after the event insurance often associated with, and why?

Answer 20

Conditional fee agreements, because it protects you from the risk of having to pay your own disbursements and the other side’s legal costs if you lose.

Question 21

Who cannot enter into a CFA?

Answer 21

Expert witness, because an expert’s evidence must be impartial and therefore should not be capable of being influenced by the outcome of the case.

Question 22

What factors should a solicitor consider before entering into a CFA?

Answer 22

• Chances of the client succeeding on liability
• The likely amount of damages
• Legnth of time it will take for the case to reach trial
• Number of hours the solicitor is likely to spend on the case

Question 23

What is a damaged-based agreement?

Answer 23

Solicitor only receives payment for their services if
1) The client is successful in their claim
2) This is linked to the level of compensation and damages obtained

Question 24

What does a fees does a solicitor get if the client wins a claim?

Answer 24

• Opponent pays clients costs
• Client pays percentage of damages (contingency fee) to own solicitor
• The court will assess proportionality if necessary

Question 25

What is a contingency fee?

Answer 25

Solicitor fee is an agreed percentage of the compensation received = contingency fee

Question 26

What is the cap amount a solicitor can agree in a damages based agreement?

Answer 26

1. 25% in personal injury
2. 50% in other cases

^ above includes vat, counsels fees but not any other disbursement

Question 27

What does the damages based agreement cap not apply to?

Answer 27

Appeals.

Question 28

What is the interplay between the solicitor’s % recovery in a damages based agreement and the costs paid by the losing side?

Answer 28

The percentage of the damages is worked out and any costs paid to the solicitor by the losing side are subtracted from the damages % for a net figure payable,

E.g. 10% of £500k award and £10k in costs already paid, means the solicitor receives £40k net.

Question 29

What fees does a solicitor get if a client loses the claim?

Answer 29

• Client does not pay own solicitors legal fees
• But may be liable for own solicitors disbursements, opponents costs
• After-event insurance may be taken to cover those

Question 30

What seven things must a damages based agreement specify?

Answer 30

1. The proceedings to which the agreement relates
2. Circumstances in which costs and expenses are payable
3. Reason for setting payment at that particular level
4. Expected disbursements
5. The definition of success
6. What happens in the event of adverse costs
7. How parties can terminate the agreement

Question 31

What is before the event insurance?

Answer 31

Insurance which covers solicitors legal fees.

Question 32

What should a solicitor do regarding before and after the event insurance?

Answer 32

Solicitor at the start should:

1) Check if the client covered by before-the-event insurance
2) If yes, is the level sufficient
3) If no, consider the after-event insurance to cover disbursement and opponent’s costs
4) Is it available and / or affordable

Question 33

What does after event insurance not protect a client from?

Answer 33

Does not protect client from liability for opponents costs in the event of a losing case

Question 34

What should a solicitor do before recommending a conditional fee arrangement or a damages based agreement, and why?

Answer 34

Ascertain whether the client can afford to pay privately (i.e. just pay his fees) as this may be more cost-effective for a client who can afford it

Question 35

What is third party funding?

Answer 35

• A third party (usually a commercial funder) agrees to fund the litigation.
• Will usually take a case where there is a good chance of success - at least 60%
• Funding agreement is entered into
• Need to comply with rules of DBA’s (% recovered) and therefore are unenforceable if they don’t comply - supreme court ruling

Question 36

How are costs awarded via third party funding?

Answer 36

Discretion of the court

Question 37

What should a solicitor acting for a client under third party funding have regard to?

Answer 37

• Professional conduct and minimise the influence the funder has over the conduct of teh case which will reduce the risk of a conflict of interest arising.
• Wary of breaching client confidentiality
• Owes duties to legal aid as well