Kerry Underwood

WHEN YOUR CFA IS A DBA

with 11 comments


The personal injury market is clearly settling at 25% of damages plus recovered costs, which is hardly surprising given the very sharp reduction in recoverable costs.

 Lawyers need to beware of the trap whereby a CFA unwittingly becomes a DBA, with all that goes with it.

 You want to charge your client 25% in the event of a win and nothing if you lose. The CFA has that as the charging basis.

 That is in fact a DBA and you must give credit £ for £ for all money received from the other side AND the indemnity principle applies, limiting recovery from the losing party to a sum equal to 25% of damages.

 Defendants cannot challenge a non-recoverable success fee, but can ask for clarification of the retainer to check that they have a liability to pay.

 Claiming a sum that is not due is “a most serious disciplinary offence” – see

 Bailey v IBC Vehicles Ltd EWCA Civ 566 (27 March 1998)

 Post 1 April CFAs need drafting with considerable care.

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Written by kerryunderwood

March 18, 2013 at 2:25 pm

Posted in Uncategorized

11 Responses

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  1. I’m not sure how to avoid this trap !. My plan is to charge 100% SF subject to cap. (The cap not being part of the CFA , though). I assume this is alright ? Whilst I am on topic, I take it you can receive commission payments on behalf of client’s into your client account and then use the same to pay any unrecovered part of your WIP ?

    dominicmoss

    March 18, 2013 at 2:34 pm

  2. You got one drafted then!!?

    Sent from my iPad

    Neil Hudgell

    March 18, 2013 at 2:37 pm

    • haha – have 42 different types of agreement to draft. You will have yours soon!

      kerryunderwood

      March 18, 2013 at 2:45 pm

      • Are the law society supposed to be drafting one …. if so when? if not then are you making yours available Kerry?

        Adrian Wynne

        March 18, 2013 at 2:58 pm

      • I have 42 different CFAs and DBAs to draft.Contact me direct – 01442 430900 or kerry.underwood@lawabroad.co.uk re consultancy including draft clinet care letter and agreements.

        kerryunderwood

        March 18, 2013 at 3:08 pm

    • Provided that a Conditional Fee Agreement is not unlawful, that is that it covers one of the prescribed areas of law and the success fee does not exceed 100% etc, then it is only challengeable in the absence of a recoverable success fee by one’s own client under the Solicitors Act 1974. It is said that there was not a single Solicitors Act 1974 assessment in relation to Conditional Fee success fees in the pre-recoverability period from 1995 to 2000.

      Commission payments are illegal in relation to all personal injury matters – see section 56(2) and section 56(8) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, even if the commission is paid to the client.

      For these purposes a client is clearly a third party, the first being the payer and the second the solicitor. That is the whole point of section 56(8) and indeed of the legislation generally.

      All inducements in personal injury cases are illegal from midnight this Sunday 31 March 2013.

      Kerry

      kerryunderwood

      March 27, 2013 at 2:31 pm

  3. Underwood your a legend!

    Rizwan Zeb

    March 18, 2013 at 6:10 pm

  4. Hi Kerry,

    Hope you are as well as you can be.

    I wonder, do you happen to have a copy of a contingency fee agreement?

    I would be very grateful if you could get me a copy if you can easily lay your hands on one, don’t trouble if not

    Many thanks and see you soon

    John

    John Kilgallon

    Practice Director

    Senior Clerk

    7 Harrington Street Chambers Liverpool L2 9YH T: 0151 242 0700 F: 0151 236 2800 E: John.Kilgallon@7hs.co.uk http://www.7hs.co.uk

    ________________________________

    John Kilgallon

    March 21, 2013 at 4:02 pm

  5. Kerry, I came to your course at Gateshead 28/2/13 too. That and this blog have been lifesavers. You’ve done a better job than APIL singlehandedly.

    On DBA’s am I right in thinking that for CICA’s (a non costs bearing forum) drafting a DBA ought to be simpler and safer? I don’t get many, but was thinking of drafting my own.

    john Ibbotson

    March 27, 2013 at 1:41 pm

    • DBAs are subject to far more regulation than CFAs. Potential benefit is a higher fee than charging by the hour with a success fee. Disadvantages of indemnity principle and having to give pound for pound credit obviously do not apply in a non-costs bearing forum.

      Very high value commercial cases, even if costs-bearing may, depending upon the facts of the case, be suitable for DBAs.

      No problem with DBAs as a concept in CICA claims and they OUGHT to be simpler and safer, but they are not, due to the complexity of the Damages-Based Agreements Regulations 2013. For example Regulation 3(c) states that the DBA must specify “the reason for setting the amount of the payment at the level agreed, which, in an employment matter, shall include having regard to, where appropriate, whether the claim or proceedings is one of several similar claims or proceedings.”

      Arguably that requires risk assessment. The Conditional Fee Agreements Order 2013 contains no such requirement, although curiously the new CPR 46.9(4) reads:

      “(4) Where the court is considering a percentage increase on the application of the client, the court will have regard to all the relevant factors as they reasonably appeared to the solicitor or counsel when the conditional fee agreement was entered into or varied.”

      I suspect Rules Committee drafet this on the basis of Government’s statement of onerous consumer “protection” Regulations which they then decided not to introduce.

      Also looks as though good old-fashioned simple contingency fee agreements are still allowed for CICA claims, but I need to do more research on this.

      Thanks for your kind remarks. 🙂

      kerryunderwood

      March 27, 2013 at 3:54 pm


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