Kerry Underwood

SIGNATURE REQUIREMENTS RE CFAS DBAS AND CONTINGENCY FEE AGREEMENTS

with 13 comments


Here I consider which, if any, of the following types of agreement require signature, and if so, whether an electronic signature is valid:

  1.  Conditional Fee Agreements
  2. Damages-Based Agreements.
  3. Contingency Fee Agreements.

 

SUMMARY

  •  Conditional Fee Agreements – no signature required.
  •  Damages-Based Agreements – no signature generally required.
  •  Contingency Fee Agreements – physical signature required in all cases; electronic signature not valid.

 

Conditional Fee Agreements

There is no statutory or secondary legislation that requires conditional fee agreements to be signed and consequently the law relating to electronic signatures is of no relevance as there is no requirement for any signature in the first place.

 Section 58 of the Courts and Legal Services Act 1990, as amended, which governs conditional fee agreements, provides at Section 58(3), as follows:

 “(3)        The following conditions are applicable to every conditional fee agreement –

 (a)          it must be in writing;
 (b)          it must not relate to proceedings which cannot be the subject of an enforceable conditional fee agreement; and
 (c)           it must comply with such requirements (if any) as may be prescribed by the Lord Chancellor.”

 This is part of a lengthy and detailed part of the Act where Parliament has gone to great lengths to set out what is required, permitted and prohibited in respect of conditional fee agreements and has done so by primary legislation. It pointedly does not state a requirement for the agreement to be signed.

 My view is reinforced by the fact that, as we will see later, in relation to non-contentious business agreements, the term used to refer to contingency fee agreements in section 57 of the Solicitors Act 1974, Parliament has set out a clear requirement that contingency fee agreements must be signed.  In my view it is clear that Parliament has differentiated between conditional and contingency fee agreements and I am satisfied beyond doubt that a conditional fee agreement does not need to be signed for it to be valid and enforceable.

 The Conditional Fee Agreements Order 2013 does not require a conditional fee agreement to be signed.

 As there is no requirement for a conditional fee agreement to be signed at all, the issue of the validity of an electronic signature does not apply.

 Nevertheless from an evidential point of view, that is to prove that the client did indeed enter in to, and agree to, the conditional fee agreement, my clear advice is that it should always be physically signed by both parties.

 

Damages-Based Agreements

 Damages-based agreements are creatures of statute, specifically Section 45 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which amends Section 58AA of the Courts and Legal Services Act 1990.

 Section 58AA(4)(a) states that the agreement “must be in writing”.  There is no requirement for a signature in what is a lengthy section running to 10 subsections.

 Again this is in marked contrast to Section 57(3) of the Solicitors Act 1974 which requires that a non-contentious business agreement, which includes contingency fee agreements, “shall be in writing and signed…..”

 Thus I am satisfied that there is no statutory requirement for a damages-based agreement to be signed.

 The secondary legislation governing damages-based agreement is The Damages-Based Agreements Regulations 2013.

 Regulation 3 deals with “Requirements of an agreement in respect of all damages-based agreements” and there is no requirement that a damages-based agreement be signed.

 Regulation 5 imposes significant extra regulatory requirements in relation to employment damages-based agreements, but again there is no requirement for signature.

 Regulation 6 does require signature in one, limited, circumstance:

 “6.          In an employment matter, any amendment to a damages-based agreement to cover additional causes of action must be in writing and signed by the client and the representative”.

 Thus Parliament has specifically required signature, by both parties, in this one instance.

 It follows that signature is NOT required in any other circumstance in a damages-based agreement.  The Explanatory Notes, not part of the Regulations, reinforces this view as they state:

 “These Regulations apply to all DBAs, including those which relate to employment matters, entered into or signed (my italics) on or after the date on which they come into force”.

 Thus the Explanatory Notes, by the use of the word “or” envisage an unsigned DBA.  The Notes also say “Regulation 6 specifies that additional causes of action can be added to the agreement by written and signed amendment”, again making the point that these requirements apply only in that circumstance.

 As there is no requirement for a damages-based agreement to be signed at all, the issue of the validity of an electronic signature does not apply.

 Nevertheless from an evidential point of view, that is to prove that the client did indeed enter into, and agree to, the damages-based agreement, my clear advice is that it should always be physically signed by both parties.

 

Contingency Fee Agreements

 Contingency fee agreements covering non-contentious work are specifically excluded from the provisions of The Damages-Based Agreements Regulations 2013 by Regulation 1(4) of those Regulations:

 “(4)        Subject to paragraph (6), these Regulations shall not apply to any damages-based agreement to which Section 57 of the Solicitors Act 1974 (non-contentious business agreements between solicitor and client) applies”.

 Section 57(3) of the Solicitors Act 1974 provides:

 (3)          The agreement shall be in writing and signed by the person to be bound by it or his agent in that behalf”.

 That is a clumsily worded provision as clearly in any contract both parties are to be bound, otherwise it is not a contract.

 In the context of the Solicitors Act 1974 generally it is clear that this is a requirement that the client signs the non-contentious business agreement but my clear advice is that both parties, that is client and solicitor, should sign the contract.

 Thus we have established that a contingency fee agreement does need to be signed.

 The question then arises as to whether an electronic signature suffices.  Electronic signatures are governed by the Electronic Communications Act 2000.

 Section 7 of the 2000 Act states:

 7  Electronic signatures and related certificates

 (1)     In any legal proceedings—

 (a)       an electronic signature incorporated into or logically associated with a particular electronic communication or particular electronic data, and

 (b)       the certification by any person of such a signature,

shall each be admissible in evidence in relation to any question as to the authenticity of the communication or data or as to the integrity of the communication or data.

 (2)       For the purposes of this section an electronic signature is so much of anything in electronic form as—

(a)       is incorporated into or otherwise logically associated with any electronic communication or electronic data; and

(b)       purports to be so incorporated or associated for the purpose of being used in establishing the authenticity of the communication or data, the integrity of the communication or data, or both.

 (3)       For the purposes of this section an electronic signature incorporated into or associated with a particular electronic communication or particular electronic data is certified by any person if that person (whether before or after the making of the communication) has made a statement confirming that—

 (a)     the signature,

 (b)     a means of producing, communicating or verifying the signature, or

 (c)     a procedure applied to the signature.”

 This has the effect of making all electronic signatures admissible in legal proceedings, but that does not of itself overturn any statutory requirement for a traditional signature; that is dealt with by Section 8.

 Section 8 allows for modification of any enactment or subordinate legislation by way of statutory instrument to allow for an electronic signature where the original legislation requires a conventional signature (Section 8(2)(c)).

 No such statutory instrument has been laid in relation to Section 57(3) Solicitors Act 1974 and thus an electronic signature is not valid on a contingency fee agreement and any such agreement lacking the client’s physical signature is void.

 However my view is that if a client prints off an electronically communicated contingency fee agreement and signs the printed copy and scans in that printed copy and emails it to the solicitor, then there is compliance with Section 57(3) and the contingency fee agreement is valid.

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Written by kerryunderwood

November 11, 2013 at 1:03 pm

Posted in Uncategorized

13 Responses

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  1. This reminded me to ask what the position is in relation to CFA’s which were not signed at my office. I’ve received a challenge from some costs draftsmen that a CFA was invalid as it didn’t contain the relevant notice under the Distance Selling Regulations.

    Has this point been tested in court? If so, what was the outcome?

    Michael Loveridge

    November 11, 2013 at 1:19 pm

    • This is complicated, to put it mildly, and I understand that there is a case proceeding to the Court of Appeal. I can let you have a full and detailed written advice for £750 plus VAT. Please contact me on 01442 430900 or kerry.underwood@lawabroad.co.uk if you want any further information.

      Kerry

      kerryunderwood

      November 11, 2013 at 6:43 pm

  2. EDWARD LEWIS NO LONGER WORKS AT THIS FIRM

    Wendy Lane

    November 11, 2013 at 1:24 pm

    • Is, in your opinion, a conditional fee agreement that requires the client to pay his solicitors a percentage of any damages awarded, as is now the common case with personal injury claims, in fact a contingency fee agreement?

      Malcolm Roberts

      November 11, 2013 at 2:51 pm

      • Provided it is properly drafted – then no, it is not. Parliament has clearly differentiated between Damages-Based Agreements and Conditional Fee Agreements and it is Parliament, not solicitors, which has imposed a damages-based cap on the success fee in conditional fee cases. Thus Parliament has envisaged, indeed made mandatory, a damages-based charge in conditional fee agreements in personal injury work.

        A contingency fee agreement with bridging agreement can be used in personal injury work, but the contingency fee will only be for pre-issue work and where the case is never issued, as a contingency fee agreement can not be used for contentious work and once a case becomes issued, then retrospectively the pre-issue works is deemed to be contentious, thus justifying recovery of costs for that work.

        The answer is simultaneous contingency and conditional fee agreements with a bridging agreement.

        Kerry

        kerryunderwood

        November 11, 2013 at 2:59 pm

      • That’s a shame, as my business is providing a CFA signing service to solicitors I hoped that I’d spotted an angle there. On a second point, if I may, under Section 8, if a scanned signature is acceptable, would you also say that a physical signature on an electronic document obtained in person on a tablet computer would be admissible?

        Malcolm Roberts

        November 11, 2013 at 3:34 pm

  3. Well as no signature is required in relation to a Conditional Fee Agreement, and with one rare exception, no signature is required for a Damages-Based Agreement, that leaves Contingency Fee Agreements, where an old-fashioned signature is required for the reasons set out in my blog.

    I think it would be unwise to assume that a signature on a tablet computer would represent the document being “in writing and signed by” the person to be bound by it, or his agent, as required by Section 57(3)(3) of the Solicitors Act, especially as the provisions of the Electronic Communications Act 2000 have not been invoked.

    In relation to Conditional Fee Agreements and Damages-Based Agreements, yes, such a signature would be admissible in evidence to show that the client had genuinely entered in to the agreement.

    Kerry

    kerryunderwood

    November 11, 2013 at 3:43 pm

  4. Hmmm so if a condition fee agreement was printed and not written that then would voided the agreement
    Am I correct to this point

    John fairhurst

    April 19, 2016 at 11:12 am

    • No, you are not. It simply means that an oral agreement is not a valid Conditional Fee Agreement.

      kerryunderwood

      April 19, 2016 at 12:05 pm

  5. Regulation 1(6) of the DBA Regs 2013 states “Where these Regulations relate to an employment matter, they apply to all damages-based agreements signed on or after the date on which these Regulations come into force” If, in an employment matter, the DBA is then not signed, can it be argued that these regulations do not apply?

    Lauren

    October 11, 2016 at 1:33 pm

    • Lauren

      Damages-based agreements are creatures of statute, specifically Section 45 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which amends Section 58AA of the Courts and Legal Services Act 1990.

      Section 58AA(4)(a) states that the agreement “must be in writing”. There is no requirement for a signature in what is a lengthy section running to 10 subsections.

      Again this is in marked contrast to Section 57(3) of the Solicitors Act 1974 which requires that a non-contentious business agreement, which includes contingency fee agreements, “shall be in writing and signed…..”

      Thus I am satisfied that there is no statutory requirement for a damages-based agreement to be signed.

      The secondary legislation governing damages-based agreement is The Damages-Based Agreements Regulations 2013.

      Regulation 3 deals with “Requirements of an agreement in respect of all damages-based agreements” and there is no requirement that a damages-based agreement be signed.

      Regulation 5 imposes significant extra regulatory requirements in relation to employment damages-based agreements, but again there is no requirement for signature.

      Regulation 6 does require signature in one, limited, circumstance:

      “6. In an employment matter, any amendment to a damages-based agreement to cover additional causes of action must be in writing and signed by the client and the representative”.

      Thus Parliament has specifically required signature, by both parties, in this one instance.

      It follows that signature is NOT required in any other circumstance in a damages-based agreement. The Explanatory Notes, not part of the Regulations, reinforces this view as they state:

      “These Regulations apply to all DBAs, including those which relate to employment matters, entered into or signed (my italics) on or after the date on which they come into force”.

      Thus the Explanatory Notes, by the use of the word “or” envisage an unsigned DBA. The Notes also say “Regulation 6 specifies that additional causes of action can be added to the agreement by written and signed amendment”, again making the point that these requirements apply only in that circumstance.

      I note your point concerning regulation 1(6), and that is not happily worded given the Act and Regulations that I have set out above.

      As a matter of interpretation my view is that a court would read that as part of the heading – that is Citation, Commencement, Interpretation and Application, which is the heading for Regulation 1 and thus would interpret it as relating to the date, rather than being a requirement for a signature.

      Note that any successful argument that the regulations do not apply would, in my view, void the retainer completely and thus the solicitor acting under the Damages-Based Agreements Regulations would not be able to recover anything from the client as it is illegal to act in a Contingency Fee Agreement for a client in an employment matter, other than a formal Damages-Based Agreement under the Damages-Based Agreements Regulations 2013.

      That has been the case since 2010 when the Damages-Based Agreements Regulations 2010 came into force for employment matters.

      In all non-employment work a Section 57 Solicitors Act 1974 Contingency Fee Agreement can continue to be used – see Regulation 1(4).

      Kerry

      kerryunderwood

      October 12, 2016 at 12:43 pm

      • Thanks Kerry. I have a Client who has agreed the DBA in writing but not signed it (due to not being able to get into office) so, in the event of an argument, I hope to be able to rely on the above! Thanks again.

        Lauren

        October 13, 2016 at 11:30 am

  6. Pleasure!

    kerryunderwood

    October 19, 2016 at 1:48 pm


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