A case which sheds light on when litigation services are deemed to have commenced and the impact this has on retainers
At the end of March 2013, many clients were signed up by Claimant solicitor practices in order that they be able to fund their claim via pre-LASPO arrangements. Most significantly allowing for the recovery of additional liabilities.
In Choudhury v Markerstudy the claim was funded by way of a collective conditional fee agreement attracting additional liabilities. The CCFA was entered into in 2011 and with instructions received and work undertaken mid-March the Claimant sought to recover a 12.5% success fee.
Judge Wildsmith found that while work had been undertaken pre April 2013 the work did not amount to litigation services. As no litigation services were undertaken pre April 2013 the retainer with the client was unenforceable and as such the Claimant’s costs were assessed at nil.
LASPO Section 44.6 gives us the circumstance when additional liabilities can be claimed:
The amendment made by subsection (4) does not prevent a costs order including provision in relation to a success fee payable by a person (“P”) under a conditional fee agreement entered into before the day on which that subsection comes into force (“the commencement day”) if—
(a)the agreement was entered into specifically for the purposes of the provision to P of advocacy or litigation services in connection with the matter that is the subject of the proceedings in which the costs order is made, or
(b)advocacy or litigation services were provided to P under the agreement in connection with that matter before the commencement day.
The decision ultimately came down to one simple question; were litigation services provided to the Claimant before the 1st April 2013?
The circumstance in this case were as follows. The Claimant solicitors made a phone call to the Claimant (actually the Claimant’s litigation friend but that has no relevance for our purposes) in March 2013. This was followed up with a letter to the Claimant which amounts to the initial client care information, specifically containing the retainer/funding arrangement in place.
Judge Wildsmith highlights a particular paragraph in the letter:
‘We take the risk of getting paid nothing if Rohan’s claim is unsuccessful. Our general terms of business set out the main points of the collective conditional fee agreement which reflects the general terms of business in the collective conditional fee agreements include legal obligations which will bind you and us if you sign and return the general terms of business to us. It is therefore important to read them carefully and if you have any questions that you raise them with us before signing and returning the terms of business’.
The document was returned signed and dated the 1st April 2013.
With the telephone call and the letter relating to the establishment of the contractual relationship between the firm and the client, it was found that the pre April 2013 work did not amount to litigation services. With litigation services i.e. the actual investigation of the matter not commencing until the 4th April (after the signed retainer had been returned) the escape in LASPO 44.6 could not apply. Furthermore as the retainer with the client was unenforceable the costs were assessed at nil in accordance with the indemnity principle.
It is true that many clients were signed up in the run up to LASPO in order that they could benefit from the funding arrangements available under the pre LASPO regime. The case highlights that retainers in such cases (and additional liabilities based on those retainers) will only be valid and recoverable if substantive work took place prior to the 1st April 2013. It would be worth revisiting any files which were signed up in the pre LASPO rush to ensure that substantive work took place. If it did not, the enforceability of any retainer with the client should be carefully considered.