Kerry Underwood

DEFENDANTS AND DISCOUNTED CONDITIONAL FEE AGREEMENTS

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How does a solicitor try and secure the balance of costs due from a successful client in a No Win Lower Fee Agreement where the client is the defendant, and thus is not receiving damages from which the balance due can be deducted?

Options include obtaining a personal guarantee and the client lodging money in client account etc., and although they work, it may be that the client will be reluctant to agree, or unable to make such payment, or has no personal funds to attack in the event of a personal guarantee being called upon etc.

However, in a case where there are Fixed Recoverable Costs there is a potential answer.

The whole point of fixed costs is that you are able to state with accuracy what the costs will be on any given eventuality.

By always having the balance due on success as being the fixed costs recoverable from the other side, or less, you can at least shift the effective liability for the balance of the full fee from your own client to the other party.

Effectively, this gives you two bites at the cherry, as if either the other party, or your client, is able to satisfy the balance of the costs due to you, then you are okay.

In an appropriate case you could apply for security for costs against the claimant.

Let us say you were dealing with the matter on a discounted fee arrangement, whereby the discounted fee is 50%.

Thus let us say that it is a Band 4 claim for £100,000.00 and you are in Stage 3 which is up to and including the Case Management Conference.

Recoverability at that point would be £25,000.00.

Thus you charge your client £50,000.00, discounted to £25,000.00, which sum you charge your client upfront as the discounted fee payable in any event, probably by reference to the stages as you move through them.

The Claimant then discontinues at that stage and has a liability to your client of £25,000.00, which of course exactly matches the balance of the full fee, because we have designed it that way.

If the Claimant pays up, then well and good and if the Claimant does not pay up then you are left in the same position as you would be now.

I appreciate that you already have the ability to enforce costs against the losing Claimant, but the structure of this means that if they do pay, then you have no need to claim anything further from your client.

It is also a very easy way to price up any given matter – you simply double the fixed costs figure and then discount it by 50% in the event of defeat.

Curiously, the costs payable on a between the parties basis by a losing Claimant are more certain in advance than the costs payable by a losing Defendant.

The reason for this is that the costs paid by a losing Claimant are calculated by reference to the amount claimed, whereas the costs of a successful Claimant are calculated by reference to the amount awarded by the court, or the settlement sum.

Thus a Claimant claims £100,000.00 and loses. The costs are calculated by reference to £100,000.00.

The Claimant claims £100,000.00 but settles for £50,000.00. The costs are settled by reference to a figure of £50,000.00.

Thus as soon as a Claim Form is issued the figure on which the losing Claimant’s costs will be based is certain whereas the figure on which a successful Claimant’s costs will be based is not certain.

The same principle could be utilised in commercial work by opting into the Commercial Court Pilot on claims valued at between £100,000 and £250,000.

Because of the lack of certainty in cases not a subject to Fixed Recoverable Costs, it is harder to achieve the same result.

However, if the amount not covered by the fees paid as the case goes along, under the discounted Conditional Fee Agreement, is kept roughly at the recovery that you would expect on an open standard basis on assessment from the other side, on success, then a similar result is achieved, and in any event the risk is minimised, even if not eliminated.

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Written by kerryunderwood

July 19, 2018 at 11:23 am

Posted in Uncategorized

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