Appeal judges have ruled that solicitors cannot recover their costs where conditional fee agreements (CFAs) fail to comply with the cancellation of contracts regulations, with a potential impact on a significant number of cases.
The court dismissed an appeal by Susan Cox against a decision that her CFA was unenforceable on the grounds that it had been entered into during a visit to her home and no notice had been given of her right to cancel.
Lords Justices Longmore, Underhill and Sharp ruled that the CFA had been “made” for the purposes of the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2008.
The Court of Appeal’s full judgment in Cox v Woodlands Manor Care Home (2015) is yet to be published.
According a report on Lawtel, a solicitor visited Ms Cox at home because her injuries made that more convenient. The claim was settled for £100,000 and costs were awarded on the standard basis.
The care home argued that Ms Cox was not liable to pay her solicitors since the CFA was unenforceable under the 2008 regulations – the CFA was a contract for the supply of services, Ms Cox was a consumer and the solicitor a trader. It was admitted that no notice of her right to cancel had been served.
A costs judge held that the CFA had not been “made” when it was signed because there was no intention to create legal relations until the position with the claimant’s legal expenses insurer had been confirmed. But Judge Denyer QC allowed an appeal against this, holding that the fact the CFA might have ceased to operate if the insurer agreed that the solicitors could act, did not prevent it being legally effective when signed.
Upholding this ruling, the Court of Appeal said that even if the obligations were not immediate, the agreement was made when signed.
That was correct as a matter of law and also consistent with the policy behind the regulations, which was to protect consumers in their homes from pressure that operated at the moment of decision.
Paul Wainwright, head of technical costs at BLM, which acted for the care home, said the result of the ruling was that the claimant’s bill of costs was assessed at nil and BLM was awarded its costs throughout the process, including the appeals.
He said the ruling confirmed that the 2008 regulations applied to cases funded by CFAs and that solicitors satisfied the description of ‘trader’ and their clients ‘consumers’ under the regulations.
“As such, the decision will apply to all CFAs entered into between solicitors and their client’s between 1 October 2008 and 13 June 2014 [when a new version of the regulations came in].
“It is possible that a significant number of contracts made in the home do not comply with the 2008 regulations. This would include CFAs, as in this case, and credit hire agreements.
“If defendants correctly identify a failure to comply with the regulations, this decision demonstrates that such failure will be fatal to the recovery of the claimant’s costs.”