Kerry Underwood

PRE ISSUE MODEL CONTINGENCY FEE AGREEMENT AND GUIDANCE

with 11 comments


CONTINGENCY FEE AGREEMENT FOR USE PRE-ISSUE WITH BRIDGING AGREEMENT AND CONDITIONAL FEE AGREEMENT – UNDERWOODS MODEL

Contingency Fee Agreement: Pre-Issue of Proceedings

This agreement is a legally binding contract between you and [firm]

Agreement Date

We, the solicitors [firm]

You, the client [name]

What is covered by this agreement

Work prior to the issue of any proceedings in relation to your potential High Court/County Court claims for [give details].

What is not covered by this agreement

Issuing proceedings and any work following the issue of proceedings.

Paying us

If you win the case (which means that an agreement is reached that money is paid to you by anyone) you pay us [  ]% of the money we recover. This figure includes VAT at the standard rate, currently [20]%. You also pay us disbursements.

If you lose the case you do not pay us anything, except disbursements.

Disbursements are payments we make on your behalf to others involved in the case. We will notify you of disbursements incurred as we go along.

If you end the agreement before the case is won or lost, you are liable to pay our costs at the rate of £[rate] including VAT per hour for a partner with letters and telephone calls charged at £[rate] each unless they last for 10 minutes or longer in which case they will be charged at the appropriate proportion of the hourly rate. All of these figures include VAT at the standard rate of [20]%.

£[rate] including VAT per hour for a solicitor

£[rate] including VAT per hour for a Trainee or equivalent

For what happens if we end the agreement before the case is won or lost, please refer to paragraph 5.

1.         Our responsibilities

We must always act in your best interests in pursuing your claim for damages and obtaining for you the best possible results, subject to our duty to the court; we must explain to you the risks and benefits of taking legal action; we must give you our best advice about whether to accept any offer of settlement.

2.         Your responsibilities

–            you must give us clear instructions which allow us to do our work properly;

–            you must not ask us to work in an improper or unreasonable way;

–            you must not deliberately mislead us;

–            you must co-operate with us when asked;

–            you must go to the court hearing when asked;

–            you must pay for disbursements as the case goes on.

3.         What happens if you win?

If you win (which means that an agreement is reached that any money is paid to you by anyone), you pay us our share of any money and our share of the value of any non-cash benefits plus any disbursements. You agree that we may receive the money your opponent has to pay. If your opponent refuses to accept our receipt, you will pay the cheque you receive into a joint bank account in your name and ours. Out of the money you agree to let us take our share of the money and our share of the value of the non-cash benefits plus any outstanding disbursements. You take the rest.

In addition, if the court orders costs against your opponent, you pay us those costs for the work we have done for you at £[rate] per hour, with letters and telephone calls charged at £[rate] each, unless they last for 10 minutes or longer in which case they will be charged at the appropriate proportion of the hourly rate. All these figures include VAT at the standard rate of [20]%.

If your opponent fails to pay any damages owed to you, we have the right to take recovery action in your name to enforce a judgment, order or agreement, including the right to apply to the Secretary of State. The costs of this action are payable by you to us in addition to [  ]% of the money.

4.         What happens if you lose?

If you lose, you do not have to pay us anything, except our disbursements.

5.         What happens if the agreement ends before the case itself ends?

You can end the agreement at any time. You are then liable to pay us our costs incurred up to the date you end the agreement calculated at the hourly rate, set out above under ‘Paying us’.

We can end the agreement if you do not keep to your responsibilities in paragraph 2. You are then liable to pay us our costs incurred up to the date the agreement ends calculated at the hourly rate.

We can end the agreement if we believe that you are unlikely to win and you disagree with us. You do not have to pay us anything.

We can end the agreement if you reject our opinion about making a settlement with your opponent. You are then liable to pay us our costs incurred up to the date the agreement ends calculated on the hourly rate (unless your damages are 20% more than the offer we advised you to accept in which case you do not have to pay us anything).

6.         What happens after the agreement ends?

We have the right to preserve a lien over any property of yours in our possession unless any money owed to us under this agreement is paid in full. This means we can keep your papers until you pay us in full.

7.         Costs

If we agree with you to issue court proceedings in this matter, then this contingency fee agreement shall be void ab initio, that is, from the beginning, and a conditional fee agreement made between the parties to this agreement and signed and dated by the parties on the same date as this agreement shall be deemed always to have been in place.

This agreement is a Non-Contentious Business Agreement within the meaning of section 57 of the Solicitors Act 1974.

Signed for the solicitors                                                          Signed by the client

[name and address]                                                                 [name and address]

 

Bridging Agreement

This agreement is a legally binding contract between [client name] and [firm]. We hereby agree as follows:

Whereas the parties have entered into a contingency fee agreement of even date which is annexed to this agreement and marked A and whereas the parties have entered into a conditional fee agreement of even date annexed to this agreement and marked B.

It is further hereby agreed that in the event of proceedings being issued by [give details] against any of the parties mentioned in these two agreements as potential defendants to any action then the contingency fee agreement shall be deemed to be void ab initio, that is, from the beginning, and the conditional fee agreement shall be deemed to have always been in place.

In consideration for [give details – client] entering into this agreement [firm] shall pay the sum of 1p the receipt of which is hereby acknowledged by [give details – client].

This agreement is a Non-Contentious Business Agreement within the meaning of section 57 of the Solicitors Act 1974

Signed for the solicitors                                                          Signed by the client

[name and address]                                                                 [name and address]

NOTES FOR SOLICITORS

 THE PRE-ISSUE CONTINGENCY FEE AGREEMENT

 Pre-issue work in all matters is classed as non-contentious business within the meaning of Section 57 of the Solicitors Act 1974.

  1. Contingency fee agreements have always been allowed in non-contentious work.  Pre-issue work is classed as non-contentious and therefore can be carried out under a contingency fee agreement.
  2. However once the case is issued then that pre-issue work retrospectively becomes contentious and thus the contingency fee agreed is of no effect.  The solution is to enter in to a conditional fee agreement and a contingency fee agreement from Day One.
  3. The agreement with the client will be that the contingency fee agreement operates until proceedings are issued at which point it drops away and the conditional fee agreement is deemed to have been in place from the beginning.  This is achieved by a bridging agreement.
  4. Absent contractual agreement with the other side there is no right to costs pre-issue and therefore it does not matter that the conditional fee agreement is not in place.  Costs are only payable by agreement; if they are agreed then there is no problem and if they are not agreed then proceedings will need to be issued at which point the conditional fee agreement comes in to force with effect from the beginning of the case.
  5. The potential problem is that fees on an hourly basis, even with a success fee, may be significantly less than the contingency fee would have been.  That will depend upon a combination of the settlement figure and the contingency fee percentage on the one hand and the time spent and the hourly rate on the other hand.
  6. Thus where there is a contingency fee agreement you should have a high hourly rate in the conditional fee agreement.
  7. Solicitor and own client rates can and should be very much higher than the rates that you are likely to recover on a between the parties basis.
  8. This is for two reasons:

(i)        to maximize the alternative “take” to the contingency fee; and

(ii)       to maximize the indemnity costs received if, as a claimant, you match or beat your own Part 36 offer.

Such agreements cannot be used in employment work.

Apart from employment cases, such agreements are specifically excluded from the provisions of The Damages-Based Agreements Regulations 2013 by Regulation 1(4) of those same 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.”

The paragraph (6) exception reads:

“(6) Where these Regulations relate to an employment matter, they apply to all damages-based agreements signed on or after the date of which these Regulations come into force.”

As the Explanatory Note to The Damages-Based Agreements Regulations states:

“…section 58AA(9) of the [Courts and Legal Services] Act provides that, where section 57 of the Solicitors Act 1974 (c.47) applies to a DBA (other than one relating to an employment matter) it is not unenforceable only because it does not satisfy the conditions in section 58AA (4), under which these Regulations are made. Accordingly article 1(4) [sic – should read Regulation 1(4) – articles apply to Orders not Regulations] excludes those DBAs to which sections 57 of the Solicitors Act 1974 applies from the scope of these Regulations.”

Section 57 of the Solicitors Act 1974 has itself been amended by section 98 of the Courts and Legal Services Act 1990 and sections 117 and 221 of, and schedule 16 to, the Legal Services Act 2007, and now reads:

57 Non–contentious business agreements

(1)    Whether or not any order is in force under section 56, a solicitor and his client may, before or after or in the course of the transaction of any non–contentious business by the solicitor, make an agreement as to his remuneration in respect of that business.

(2)    The agreement may provide for the remuneration of the solicitor by a gross sum or by reference to an hourly rate, or by a commission or percentage, or by a salary, or otherwise, and it may be made on the terms that the amount of the remuneration stipulated for shall or shall not include all or any disbursements made by the solicitor in respect of searches, plans, travelling, taxes, fees or other matters.

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

(4)    Subject to subsections (5) and (7), the agreement may be sued and recovered on or set aside in the like manner and on the like grounds as an agreement not relating to the remuneration of a solicitor.

(5)    If on any assessment of costs the agreement is relied on by the solicitor and objected to by the client as unfair or unreasonable, the costs officer may enquire into the facts and certify them to the court, and if from that certificate it appears just to the court that the agreement should be set aside, or the amount payable under it reduced, the court may so order and may give such consequential directions as it thinks fit.

(6)    (6)Subsection (7) applies where the agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

(7)    If, on the assessment of any costs, the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into—

(a)    the number of hours worked by the solicitor; and

(b)   whether the number of hours worked by him was excessive.”

It will be seen that section 57(2) specifically sanctions remuneration by way of a percentage.

There is no statutory cap on the percentage that may be charged to a client under a pre-issue contingency fee agreement but solicitors have a duty not to exploit clients and a duty to conduct themselves in a way that does not bring the profession into disrepute. Charging an unfairly high percentage risks putting a solicitor in breach of these duties.

In personal injury cases Parliament has fixed the maximum percentage to be taken by way of a success fee, or under a damages-based agreement, at 25%, including VAT, of a restricted pool which I have named the Allowed Damages Pool ( see – https://kerryunderwood.wordpress.com/2013/03/07/conditional-fee-agreements-damages-based-agreements-and-contingency-fees/). In addition there is the issue of the now unrecoverable After-the-Event insurance premium. Pre-issue there is no risk of adverse costs; post issue there is. My advice is that in a pre-issue contingency fee agreement in relation to personal injury matters the percentage charged to the client, including VAT, should be 25%.

In employment matters Parliament has fixed the maximum at 35% including VAT and in potential employment Tribunal matters a damages-based agreement must  be used. In non employment Tribunal employment matters I advise that the contingency fee be 35% including VAT.

Parliament has fixed the maximum percentage under all other damages-based agreements, that is all except personal injury and employment tribunal matters, at 50% including VAT.

There is no such restriction in relation to the success fee element of a conditional fee agreement outside the field of personal injury.

Thus I am satisfied that in non-employment and personal injury civil work under a pre-issue contingency fee agreement a figure of up to 50% including VAT is not unreasonable. Whether it is commercially viable in the marketplace is another matter. Traditionally my firm has worked on one-third but given the massive increase in risk caused by the Mitchell decision (see my blog) we have increased this to 40% including VAT. It is true that the Mitchell risk only arises once proceedings are issued but the figures for all types have to be fixed to enable law firms to run at a profit.

I am satisfied that these figures are fair and reasonable and are certainly ones with which clients are happy.

The agreement must be in writing and must be signed by the client (section 57(3) Solicitors Act 1974).

The protection and value to the client is that they pay nothing in the event of failure to obtain damages.

 The client is guaranteed a fixed percentage of anything recovered.

 For example if the contingency fee is 25% then the fixed percentage of damages to the client is 75% and if it is a 30% contingency fee then it is 70% and so on.

Please use this agreement as you wish free of charge, but please respect my copyright by keeping the copyright symbol on each page of each agreement, and please keep the name “Underwoods Model” in the title.

THE BRIDGING AGREEMENT

This is a standard agreement for any type of civil litigation, but must not be used in any employment case as the Courts and Legal Services Act 1990 requires the use of a Damages-Based Agreement in employment cases conducted on a contingency fee basis.

The bridging agreement contains consideration of one penny as a contract without consideration has to be under seal to be enforceable.

It is arguable that the consideration is the agreement to enter in to both agreements, but there is no point in taking the risk.

 Please use this agreement as you wish free of charge, but please respect my copyright by keeping the copyright symbol on each page of each agreement, and please keep the name “Underwoods Model” in the title.

 

THE CONDITIONAL FEE AGREEMENT

 This is the usual Conditional Fee Agreement that you utilize for the type of work covered by the Contingency Fee Agreement.

Contingency Fee Agreement – CICA Claims – Underwoods Model

This agreement is a legally binding contract between you and [firm]

Agreement Date [date]

We, the legal representative: [firm]

You, the client: [name]

What is covered by this agreement?

Your claim for compensation from the Criminal Injuries Compensation Authority (the ‘Authority’) regarding personal injury and/or loss suffered [give details].

What is not covered by this agreement?

Any action you wish us to take in relation to a re-opening or review of the Authority’s decision and any appeal against a decision made by the Authority on review.

 Paying us

If you are awarded compensation from the Authority you pay us 35% of that compensation. This figure includes VAT at the current rate of 20%. Thus we charge you 29.166% plus VAT of 5.833% of the total. It also includes disbursements. Thus you never pay us more than 35% if you win.

If you lose the case you do not pay us anything.

If you end the agreement before the Authority makes a decision with regard to whether or not to award you compensation, you are liable to pay our costs at the rate of [£   ] per hour with letters and telephone calls charged at [£   ] each unless they last for 6 minutes or longer in which case they will be charged at the appropriate proportion of the hourly rate. All of these figures include VAT at the current rate of 20%.

For what happens if we end the agreement before the Authority makes a decision with regard to whether or not to award you compensation, please refer to paragraph 5.

 1.         Our responsibilities

We must always act in your best interests in pursuing your claim for compensation and obtaining for you the best possible results, subject to our duty to the Authority.

 2.         Your responsibilities

–       you must give us clear instructions which allow us to do our work properly;

–      you must not ask us to work in an improper or unreasonable way;

–       you must not deliberately mislead us;

–      you must co-operate with us when asked;

–      you must attend an expert for examination when asked;

3.         What happens if you win?

If the Authority awards you compensation you pay us 35% of any compensation including any disbursements. You agree that we may receive the compensation the Authority pays to you. If the Authority refuses to accept our receipt, you will pay the cheque you receive into a joint bank account in your name and ours. Out of the money you agree to let us take 35% of the damages including disbursements. You take the rest.

Thus you will always recover at least 65% of the sum awarded.

If the Authority fails to pay any compensation to you we have the right to take recovery action in your name to enforce a judgment, order or agreement. The costs of this action are payable by you to us in addition to 35% of the damages.

 4.         What happens if you lose?

If you lose you do not have to pay us anything.

5.         What happens when the agreement ends before the case itself ends?

You can end the agreement at any time. You are then liable to pay us our costs incurred up to the date you end the agreement calculated at the hourly rate.

We can end the agreement if you do not keep to your responsibilities in condition 2. You are then liable to pay us our costs incurred up to the date the agreement ends calculated at the hourly rate.

We can end the agreement if we believe that you are unlikely to obtain compensation from the Authority and you disagree with us. You do not have to pay us anything.

We can end the agreement if you reject our opinion about accepting compensation from the Authority. You are then liable to pay us our costs incurred up to the date the agreement ends calculated at the hourly rate.

If you reject our opinion about accepting the figure proposed by the Authority then under the terms of this agreement that is deemed to be you behaving unreasonably.  However if you recover an award of at least 20% more than the figure that we advised you to accept then this agreement deems your behaviour to have been reasonable in that regard and you will not have to pay us anything.

6.         What happens after the agreement ends?

After the agreement ends we will inform the Authority that we are no longer acting as your representative. We have the right to preserve our lien over any property of yours in our possession unless any money owed to us under this agreement is paid in full.

7.         Non-Contentious Business Agreement

This is a non-contentious business agreement within the meaning of section 57 of the Solicitors Act 1974 and is thus excluded from the provisions of The Damages-Based Agreements Regulations 2013 by virtue of Regulation 1(4) of those Regulations.

Signed for the legal representative:

[name]

Signed by the client:

[name]

© Kerry Underwood 2013

Notes for Solicitors

Criminal Injuries’ Compensation Authority claims can be dealt with by way of a contingency fee agreement, rather than a Damages-Based Agreement, as such work is non-contentious within the meaning of section 57 of the Solicitors Act 1974.

Such agreements are specifically excluded from the provisions of The Damages-Based Agreements Regulations 2013 by Regulation 1(4) of those same 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.”

The paragraph (6) exception reads:

“(6) Where these Regulations relate to an employment matter, they apply to all damages-based agreements signed on or after the date of which these Regulations come into force.”

and thus has no application to CICA claims.

As the Explanatory Note to The Damages-Based Agreements Regulations states:

“…section 58AA(9) of the [Courts and Legal Services] Act provides that, where section 57 of the Solicitors Act 1974 (c.47) applies to a DBA (other than one relating to an employment matter) it is not unenforceable only because it does not satisfy the conditions in section 58AA (4), under which these Regulations are made. Accordingly article 1(4) [sic – should read Regulation 1(4) – articles apply to Orders not Regulations] excludes those DBAs to which sections 57 of the Solicitors Act 1974 applies from the scope of these Regulations.”

Section 57 of the Solicitors Act 1974 has itself been amended by section 98 of the Courts and Legal Services Act 1990 and sections 117 and 221 of, and schedule 16 to, the Legal Services Act 2007, and now reads:

57 Non–contentious business agreements

(1) Whether or not any order is in force under section 56, a solicitor and his client may, before or after or in the course of the transaction of any non–contentious business by the solicitor, make an agreement as to his remuneration in respect of that business.

(2) The agreement may provide for the remuneration of the solicitor by a gross sum or by reference to an hourly rate, or by a commission or percentage, or by a salary, or otherwise, and it may be made on the terms that the amount of the remuneration stipulated for shall or shall not include all or any disbursements made by the solicitor in respect of searches, plans, travelling, taxes, fees or other matters.

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

(4) Subject to subsections (5) and (7), the agreement may be sued and recovered on or set aside in the like manner and on the like grounds as an agreement not relating to the remuneration of a solicitor.

(5) If on any assessment of costs the agreement is relied on by the solicitor and objected to by the client as unfair or unreasonable, the costs officer may enquire into the facts and certify them to the court, and if from that certificate it appears just to the court that the agreement should be set aside, or the amount payable under it reduced, the court may so order and may give such consequential directions as it thinks fit.

(6) Subsection (7) applies where the agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

(7) If, on the assessment of any costs, the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into—

(a) the number of hours worked by the solicitor; and

(b) whether the number of hours worked by him was excessive.”Whether or not any order is in force under section 56, a solicitor and his client may, before or after or in the course of the transaction of any non–contentious business by the solicitor, make an agreement as to his remuneration in respect of that business.

It will be seen that section 57(2) specifically sanctions remuneration by way of a percentage.

I have set the contingency fee at 35% including VAT and disbursements. There is no statutory cap on this figure, but I have borrowed it from the maximum permitted by Parliament in employment cases, which are analogous in the sense that there is no recovery of costs from anyone but the client.

Thus I am satisfied that it is a fair and reasonable fee and it is certainly one with which clients are happy.

The agreement must be in writing and must be signed by the client (section 57(3) Solicitors Act 1974).

I have inserted a default hourly rate of £480 including VAT as that is now the standard rate for personal injury work.

The protection and value to the client is that they pay nothing in the event of failure to gain an award, which in CICA claims includes cases where the claim is merited but the award is less than £1,000, in which case the client gets nothing and the solicitor gets nothing.

 The client is guaranteed 65% of anything recovered.

 Section 7 of the Criminal Injuries Compensation Act 1995 is still in force:-

7 Inalienability of awards

(1) Every assignment (or, in Scotland, assignation) of, or charge on, an award and every agreement to assign or charge an award shall be void.

(2) On the bankruptcy of a person in whose favour an award is made (or, in Scotland, on the sequestration of such a person’s estate), the award shall not pass to any trustee or other person acting on behalf of his creditors.”

This section does not prevent a fee being charged to the client, but rather prevents a legal charge on the award and hence the inclusion in the same subsection of the prohibition on assignment of an award and indeed the prohibition in section 7(2) of an award passing to a trustee in bankruptcy or other person acting on behalf of creditors.

The way I read these provisions is that no one unconnected with the application can have the benefit of the award; that is it cannot be assigned or formally charged or traded. Some commentators have interpreted this as preventing legal fees from being charged on a contingency fee basis, by deduction from the award.

I do not see how a contingency fee in this regard is any different from the right to charge, say a fixed fee of £500, which would itself be protected by a solicitor’s lien.

It is hard to see any public policy consideration for such a restriction, as no costs are payable by the CICA, in contrast with many other statutory schemes. It is of course common for people to be professionally represented at CICA hearings.

Furthermore, there is no reference to CICA claims in the Courts and Legal Services Act 1990, and nor in the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

Section 58 of the Courts and Legal Services Act 1990, was amended by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and section 58(5) of the 1990 Act specifically states that if a Conditional Fee Agreement is an agreement to which section 57 of the Solicitors Act 1974 (non-contentious business agreement between solicitor and client) applies, subsection (1) shall not make it unenforceable.

Clearly CICA work is non-contentious and it is envisaged in section 58 of the Courts and Legal Services Act 1990 that a Conditional Fee Agreement that fails to comply with section 58 shall nevertheless not be unenforceable if section 57 of the Solicitors Act 1974 applies.

This is replicated in the Damages-Based Agreements Regulations 2013 made under the provisions of the Courts and Legal Services Act 1990 as amended.

The effect of those regulations is the same, except that employment matters are specifically covered by those regulations, even though they constitute non-contentious business under section 57 of the Solicitors Act 1974 – see regulation 1(4) and 1(6) of the Damages-Based Agreements Regulations 2013.

No mention there is made of CICA claims.

My view is there was never any intention to prevent solicitors from charging clients on a contingency fee basis in CICA claims.

Criminal injury claims originated from the Criminal Injuries Compensation Act 1963 and an examination of Hansard throws no light on this issue.

If all of that fails to convince you, then I rely on the doctrine of implied repeal – that LASPO 2012, in amending the Courts and Legal Services Act 1990, impliedly repealed section 7, as shown by the regulations made under LASPO in relation to DBAs, where specifically the only non-contentious work which may not be done under a straight contingency fee agreement in employment work.

 Please use this agreement as you wish free of charge, but please respect my copyright by keeping the copyright symbol on each page of each agreement, and please keep the name “Underwoods Model” in the title.

© Kerry Underwood 2013

Contingency Fee Agreement – MOTOR INSURERS’ BUREAU UNTRACED DRIVERS’ CLAIMS – Underwoods Model

This agreement is a legally binding contract between you and [firm]

Agreement Date [date]

We, the legal representative: [firm]

You, the client: [name]

What is covered by this agreement?

Your claim for an award from the MOTOR INSURERS’ BUREAU (the ‘BUREAU’) regarding personal injury and/or loss suffered [give details].

What is not covered by this agreement?

Any action you wish us to take in relation to an appeal against the Bureau’s decision.

 Paying us

If you are awarded money by the Bureau you pay us 25% of that compensation. This figure includes VAT at the current rate of 20%. Thus we charge you 20.83% plus VAT of 4.17% of the total [It does not include disbursements]. [It also includes disbursements]. Thus you never pay us more than 25% if you win [plus disbursements].

An award includes, without limitation, an interim award, a provisional award, a structural settlement award and a final award.

If you lose the case you do not pay us anything [except disbursements].

Costs and Disbursements recovered from the Motor Insurers’ Bureau

If the application is not successful we recover no costs or disbursements.

 Disbursements

If the claim is successful then the Bureau will pay disbursements incurred with their prior agreement and we will give credit to you for any disbursements recovered from the Bureau.

Costs

If the claim is successful then the MIB will pay costs as set out in this table.

Table
Amount of the award (1) Specified fee (2)
Not exceeding £150,000 15% of the amount of   the award subject to a minimum of £500 and a maximum of £3,000
Exceeding £150,000 2% of the amount of the   award

As the costs paid depends upon the amount of the award we will not know until the end of the case how much those costs will be.

[The 25% of any award payable by you to us is in addition to those costs recovered from the MIB and our total charge to you is those recoverable costs and disbursements plus 25% of damages.]

[We will deduct from the 25% of damages payable by you any costs recovered from the Bureau, meaning that you only pay us the balance.]

If you end the agreement before the Bureau makes a decision with regard to whether or not to make an award to you, you are liable to pay our costs at the rate of [£   ] per hour with letters and telephone calls charged at [£   ] each unless they last for 6 minutes or longer in which case they will be charged at the appropriate proportion of the hourly rate. All of these figures include VAT at the current rate of 20%.

Disbursements

 Payments we make on your behalf such as:

  •  experts’ fees;
  • accident report fees;
  • travelling expenses.
  • medical record fees

For what happens if we end the agreement before the Bureau makes a decision with regard to whether or not to make an award to you, please refer to paragraph 5.

 1.         Our responsibilities

We must always act in your best interests in pursuing your claim for an award and obtaining for you the best possible results, subject to our duty to the Bureau.

 2.         Your responsibilities

–       you must give us clear instructions which allow us to do our work properly;

–       you must not ask us to work in an improper or unreasonable way;

–       you must not deliberately mislead us;

–       you must co-operate with us when asked;

–       you must attend an expert for examination when asked;

 3.         What happens if you win?

If the Bureau makes an award you pay us 25% of any award including any disbursements. You agree that we may receive the award that the Bureau pays to you. If the Bureau refuses to accept our receipt, you will pay the cheque you receive into a joint bank account in your name and ours. Out of the money you agree to let us take 25% of the damages including disbursements. You take the rest.

Thus you will always recover at least 75% of the sum awarded. [Less disbursements].

If the Bureau fails to make an award to you we have the right to take recovery action in your name to enforce a judgment, order or agreement. The costs of this action are payable by you to us in addition to 25% of the damages.

 4.         What happens if you lose?

If you lose you do not have to pay us anything. [Except disbursements].

5.         What happens when the agreement ends before the case itself ends?

You can end the agreement at any time. You are then liable to pay us our costs incurred up to the date you end the agreement calculated at the hourly rate, together with disbursements.

We can end the agreement if you do not keep to your responsibilities in condition 2. You are then liable to pay us our costs incurred up to the date the agreement ends calculated at the hourly rate, together with disbursements.

We can end the agreement if we believe that you are unlikely to obtain an award from the Bureau and you disagree with us. You do not have to pay us anything. [Except disbursements].

We can end the agreement if you reject our opinion about accepting an award from the Bureau. You are then liable to pay us our costs incurred up to the date the agreement ends calculated at the hourly rate, together with disbursements.

If you reject our opinion about accepting the figure proposed by the Bureau then under the terms of this agreement that is deemed to be you behaving unreasonably.  However if you recover an award of at least 20% more than the figure that we advised you to accept then this agreement deems your behaviour to have been reasonable in that regard and you will not have to pay us anything, except disbursements.

 6.         What happens after the agreement ends?

After the agreement ends we will inform the Bureau that we are no longer acting as your representative. We have the right to preserve our lien over any property of yours in our possession unless any money owed to us under this agreement is paid in full.

7.         Non-Contentious Business Agreement

This is a non-contentious business agreement within the meaning of section 57 of the Solicitors Act 1974 and is thus excluded from the provisions of The Damages-Based Agreements Regulations 2013 by virtue of Regulation 1(4) of those Regulations.

Signed for the legal   representative:[name]

Signed by the client:

[name]

Notes for Solicitors

Motor Insurers’ Bureau Untraced Drivers’ claims can be dealt with by way of a contingency fee agreement, rather than a Damages-Based Agreement, as such work is non-contentious within the meaning of section 57 of the Solicitors Act 1974.

Motor Insurers Bureau claims are an oddity in that they are non-contentious business, but there is recoverability of costs to a limited extent, essentially a contingency fee of 15% of damages, plus VAT, but payable in addition to damages.

One option is to accept the fee payable under the MIB scheme, in which case no agreement beyond an ordinary client care letter, setting out the terms of business, is necessary, although it should be remembered that the solicitor is still taking the risk of not getting paid in the event of no award being made; thus it is still a no win – no fee arrangement and the solicitor is entitled to an extra fee for taking that risk and for removing that risk from the applicant.

A second option is to have a contingency fee agreement.  There is no statutory cap on the percentage that may be charged to the client, although obviously the Solicitors Code of Conduct 2011 applies to such agreements.  I have inserted a contingency fee of 25% including VAT.  This is on the basis that in other areas of personal injury work, where costs are recoverable, Parliament has prescribed that as the maximum success fee in conditional fee agreements and the maximum percentage in Damages-Based Agreements.

Thus, in line with other types of personal injury claim conducted on a no – win no fee basis, the fee is recoverable costs plus a sum limited to 25% of damages by way of unrecovered solicitor and own client costs.

A third option is to charge the client 25% of damages including VAT, but giving credit to the client for costs recovered from the MIB.  This is for all intents and purposes a Damages-Based Agreement, but without all of the regulation.

Disbursements

  The MIB pays disbursements if they have been incurred with the prior agreement of the MIB but counsel’s fees will not be paid unless the applicant is a minor or a person under a disability.

Appeals (oral hearings)

 Oral hearings are extremely rare in MIB cases and this agreement does not cover such oral hearings.

An appeal is before an arbitrator who may order costs to follow the event.  For these reasons it is considered that a contingency fee agreement is not suitable for an appeal, and that a conditional fee agreement is more appropriate.

The Law

 Non-contentious business agreements are specifically excluded from the provisions of The Damages-Based Agreements Regulations 2013 by Regulation 1(4) of those same 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.”

The paragraph (6) exception reads:

“(6) Where these Regulations relate to an employment matter, they apply to all damages-based agreements signed on or after the date of which these Regulations come into force.”

and thus has no application to Motor Insurers’ Bureau claims.

As the Explanatory Note to The Damages-Based Agreements Regulations states:

“…section 58AA(9) of the [Courts and Legal Services] Act provides that, where section 57 of the Solicitors Act 1974 (c.47) applies to a DBA (other than one relating to an employment matter) it is not unenforceable only because it does not satisfy the conditions in section 58AA (4), under which these Regulations are made. Accordingly article 1(4) [sic – should read Regulation 1(4) – articles apply to Orders not Regulations] excludes those DBAs to which sections 57 of the Solicitors Act 1974 applies from the scope of these Regulations.”

Section 57 of the Solicitors Act 1974 has itself been amended by section 98 of the Courts and Legal Services Act 1990 and sections 117 and 221 of, and schedule 16 to, the Legal Services Act 2007, and now reads:

57 Non–contentious business agreements

(1)   Whether or not any order is in force under section 56, a solicitor and his client may, before or after or in the course of the transaction of any non–contentious business by the solicitor, make an agreement as to his remuneration in respect of that business.

(2)   The agreement may provide for the remuneration of the solicitor by a gross sum or by reference to an hourly rate, or by a commission or percentage, or by a salary, or otherwise, and it may be made on the terms that the amount of the remuneration stipulated for shall or shall not include all or any disbursements made by the solicitor in respect of searches, plans, travelling, taxes, fees or other matters.

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

(4)   Subject to subsections (5) and (7), the agreement may be sued and recovered on or set aside in the like manner and on the like grounds as an agreement not relating to the remuneration of a solicitor.

(5)   If on any assessment of costs the agreement is relied on by the solicitor and objected to by the client as unfair or unreasonable, the costs officer may enquire into the facts and certify them to the court, and if from that certificate it appears just to the court that the agreement should be set aside, or the amount payable under it reduced, the court may so order and may give such consequential directions as it thinks fit.

(6)   (6)Subsection (7) applies where the agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

(7)   If, on the assessment of any costs, the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into—

(a)    the number of hours worked by the solicitor; and

(b)   whether the number of hours worked by him was excessive.”

It will be seen that section 57(2) specifically sanctions remuneration by way of a percentage.

I have set the contingency fee at 25% including VAT and disbursements. There is no statutory cap on this figure, but I have borrowed it from the maximum permitted by Parliament in personal injury cases, which are analogous in the sense that there is still an element of recovery of costs in Motor Insurers’ Bureau claims.

Thus I am satisfied that it is a fair and reasonable fee and it is certainly one with which clients are happy.

The agreement must be in writing and must be signed by the client (section 57(3) Solicitors Act 1974).

The protection and value to the client is that they pay nothing in the event of failure to gain an award.

 The client is guaranteed 75% of anything recovered.

Please use this agreement as you wish free of charge, but please respect my copyright by keeping the copyright symbol on each page of each agreement, and please keep the name “Underwoods Model” in the title.

© Kerry Underwood 2013

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Written by kerryunderwood

January 16, 2014 at 12:51 pm

Posted in Uncategorized

11 Responses

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  1. What’s the difference between your pre-issue model contingency fee agreement and a DBA?

    Robin Torr

    January 16, 2014 at 1:11 pm

    • Where do |I start? Massive difference. DBA Regs do not apply .Ontario regs do not apply. Indemnity principle does not bite .Damages caps do not apply. Restricted Allowed Damages Pool does not apply. Can have post-issue Conditional Fee Agreement. Suggest you read my other blogs on the subject very carefully.

      Kerry

      kerryunderwood

      January 16, 2014 at 3:05 pm

  2. Let’s hope no one uses one with the square brackets intact lol

    Root

    January 16, 2014 at 2:33 pm

  3. Kerry,

    Very interesting, as ever. I’m going to re-read this more slowly tonight.

    Two quick, mainly unrelated, points:
    1 When are you next doing a round of CLT costs/funding/PI courses?
    2 When will the postponed Owls V QPR game be re-scheduled?

    John Ibbotson

    January 16, 2014 at 2:33 pm

    • Thank-you. First things first – don’t know when Sheffield Wednesday v QPR game will now be. Remarkably I have never been to Hillsborough – one of only 3 grounds in top two divisions I have not been to – so was all geared up for Saturday 25th. No doubt it will now be a Tuesday night.

      Jackson – One Year On for CLT in April : 2: Cardiff, 4: London , 8: Manchester 9:Leeds
      10: Newcastle 16: Birmingham

      Kerry

      kerryunderwood

      January 16, 2014 at 3:20 pm

  4. Dear Kerry

    Good CFA as always.

    Can I just check that this model CFA could be used for instance in Housing Disrepair cases even those that may have an element of personal injury. If so would we be entitled to deduct up to 50% of damages recovered as our success fee?

    Regards

    Ged Adamson

    Ged Adamson

    January 16, 2014 at 3:36 pm

    • Ged

      Thank-you. Yes. The restriction in personal injury cases applies only in DBAs – 25% – and the success fee element of the conditional fee agreement – also 25%. However for the reasons set out in the blog my view is that the correct deduction in a pre-issue contingency fee agreement in a personal injury matter is 25% as at that stage there is no adverse costs risk.

      Kerry

      kerryunderwood

      January 16, 2014 at 3:45 pm

      • Kerry

        Thanks. So in essence you are saying that I can use the pre issue contingency fee agreement above for Housing Disrepair matters, but can only recover 25% success fee if there is personal injury involved, but up to 50% without? Is that correct? sorry to be a little pedantic, but we may need to use this shortly.

        Thanks again

        Ged Adamson

        Ged Adamson

        January 16, 2014 at 3:52 pm

    • Ged

      Sorry for the long delay in getting back to you. In relation to a pre-issue Contingency Fee Agreement there is no maximum charge to the client in terms of a percentage of damages. Neither is there in relation to personal injury or indeed any other area except employment in a potential Employment Tribunal claim.

      You are confusing pre-issue Contingency Fee Agreements with Damages-Based Agreements. They are very different things. The reason why there is a maximum in potential Employment Tribunal cases is that any form of contingency charge in a potential Employment Tribunal matter must be by way of a Damages-Based Agreement and not a pre-issue Contingency Fee Agreement.

      This is the effect of Regulation 1(4) of the Damages-Based Agreements Regulations 2013 which reads:-

      “(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.”

      Thus the starting point is that pre-issue Contingency Fee Agreements remain lawful, and essentially unregulated save by the Solicitors Code of Conduct and, as stated above, there is no capped percentage of damages in relation to how much you can charge to the client.

      However Regulation 1(6) reads:-

      “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.”

      These Regulations came into force on 1 April 2013 but in fact replaced and revoked the Damages-Based Agreements Regulations 2010 which had the same rule in relation to Employment Tribunal matters, and indeed those older Regulations only applied to Employment Tribunal matters.

      Thus the situation is as follows:-

      In relation to a pre-issue Contingency Fee Agreement there is no cap on the sum that can be charged to the client, whether by reference to damages or otherwise.

      However in potential Employment Tribunal proceedings a pre-issue Contingency Fee Agreement cannot be used, but rather a Damages-Based Agreement must be used and there is then a cap of 35% of the client’s damages, such sum to include VAT but not counsel’s fee.

      If in fact a Damages-Based Agreement is used, and I advise that such an agreement is not used, in any other matter then the following caps apply:-

      • in personal injury work – 25% including VAT and counsel’s fees;

      • in all other work 50% including VAT and counsel’s fees.

      Please note that the charge under a pre-issue Contingency Fee Agreement or a Damages-Based Agreement is not a success fee. This is because it includes payment for the work done as well as for taking the risk and thus it is a hybrid of normal costs and a risk based fee.

      Contrast this with Conditional Fee Agreements where there is, and has always been, two fees, that is the ordinary basic costs of doing the work and an extra fee for taking the risk of not being paid.

      In relation to personal injury Conditional Fee Agreements there is indeed a cap of 25% of damages in relation to the success fee alone and that includes VAT but does not include counsel’s ordinary fees. As to whether it includes counsel’s success fee is a moot point. The Regulations are unclear but giving them a purposive construction then the maximum to be charged to the client by way of any success fee, counsels or solicitors, in a personal injury matter is 25%.

      This does not limit the solicitor to charging only 25% overall; it is just the success fee that is limited to that sum, not, for example, unrecovered solicitor and own client costs.

      In non-personal injury work where there is a Conditional Fee Agreement there is no damages-based cap on the amount to be charged to the client.

      All Conditional Fee Agreements have, and always have had, a cap on the success fee in that it can be no more than a sum equal to 100% of the base costs.

      These are matters of considerable complexity and you may consider taking advice on the nature and form of the various agreements and I can help on that.

      Kerry

      kerryunderwood

      July 23, 2014 at 12:34 pm

  5. […] Kerry Underwood considers the Pre-Issue model contingency fee agreements  https://kerryunderwood.wordpress.com/2014/01/16/pre-issue-model-contingency-fee-agreement-and-guidanc… […]


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