Fight over CFA struck down because of cancellation of contracts failure goes to appeal

Wainwright: significant number of CFAs probably do not comply

The effect of the cancellation of contracts regulations on conditional fee agreements (CFAs) is to be tested following a county court ruling that struck down the CFA.

There have long been fears about the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2008 – which provide for a cooling-off period – and the decision of a regional costs judge in Hurley v Maruki could potentially impact thousands of cases.

The claimant, represented by Liverpool firm Camps, sought to recover costs following the agreement of damages in a litigated rear-end shunt road traffic accident. Camps had attended the claimant in his home to take initial instructions.

BLM argued that the CFA did not comply with the 2008 regulations as it did not contain notice of the claimant’s rights to cancel the CFA. According to the regulations, this notice should have been contained within the document and set out in a mandatory format on a detachable slip, filled in where applicable by the trader.

Camps sought to rely on an exception in the regulations for contracts where the total payments to be made by the consumer is £35 or less, arguing that the claimant’s personal liability for costs was effectively nil as it was a CFA lite and so capped at the sums recovered from the defendant.

District Judge Moss, the newly appointed regional costs judge in Manchester County Court, ruled that because of the indemnity principle it remained the case – even with a CFA lite – that the client has a liability to pay the solicitor’s charges, even if they are then capped. Therefore the regulations applied and the failure to comply with them meant the whole retainer was unenforceable. The bill was assessed at nil and the defendant awarded the costs of the detailed assessment.

BLM associate Paul Wainwright said the decision will affect many cases nationally: “It is expected that a significant number of CFAs do not comply with the regulations, which were introduced with the purpose of protecting consumers from unscrupulous doorstep salesmen.”

Amanda Ashton, the director at Compass Costs acting for Camps, said she was very confident of successfully appealing over the £35 exception. “The exception is well known and had been accepted in practice during costs negotiation by claimants and defendants alike. Bearing in mind an earlier unreported decision in Cyran & Lavko v Churchill Insurance (Northampton County Court, 2 September 2011), in which Compass acted, we are very surprised at the outcome.”

Ms Ashton said there had also been an error in the process of disclosure to the court which would have shown that the claimant actually was provided with the cancellation notice as part of the solicitor’s standard information pack.

She said: “It is likely that a Ladd v Marshall application will be required so that everything relevant can be considered, but beyond and ignoring that we believe that an appeal can quite properly be pursued in any event. We will be inviting the defendant side to reconsider their own position at an early stage.”