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Bowen & 10 Others v Bridgend County Borough Council, Supreme Court Costs Office, 25 March 2004

12 May 2004
The issues

Costs – Conditional Fee Agreement – Success Fee – Availability Of Legal Aid – Failure To Comply With Conditional Fee Agreements Regulations 2000 – Before The Event Insurance

The facts

Some 260 cases in respect of claims for housing disrepair were brought. Terms of settlement had been agreed in 50 – 3 other cases had gone to Trial unsuccessfully – there were approximately 210 cases still pending. 11 cases were to be treated as informal test cases to help the parties resolve some of the remaining cases. All of the test cases were funded by way of CFA agreement claiming 100% success fee supported by an after the event insurance policy issued by Fastrack Indemnity Limited. The CFA’s were signed by the Claimants between August and October 2001. The average period of delay from that date to the date of the letter before clam was just over 44 weeks. The period from the letter before claim to settlement was on average 28 weeks. The settlement terms included financial compensation varying between £750.00 to £3,000.00 – on average £1631.00. In addition services and repairs were to be done or agreed to be done plus reasonable costs. The total of the costs claimed varied between £6607.00 and £9479.00, the average being £8012.00. That sum included success fee, insurance premium and VAT. The amount of base costs averaged £4066.00. All of these cases were fought and concluded before the pre action protocol for housing disrepair claims was published in September 2003. 6 issues arose: –

1. The enforceability of the CFAs.
2. The effect in these cases of the availability of Legal Aid.
3. The amount of success fee on profit costs.
4. Questions of proportionality.
5. The recoverability of the fees paid to fast track litigation services limited for the housing reports, video evidence and risk assessment reports and;
6. Fees paid for surveyor’s reports.

The decision

1. Non compliance with the CFA Regulations

The Claimant’s solicitors failed to comply with CFA Regulation 4(2)(d) – requirement to consider other methods of financing the costs. That failure had had a materially adverse effect on the protection afforded to the Claimants. The Claimant’s solicitors had also failed to comply with their obligations placed on them by Regulation 3(1)(b) – requirement to specify the fee deferment element in the success fee and Regulation 4 (2)(c) – whether solicitor considered client had existing insurance. However, given the financial resources of the Claimant neither failure had had a materially adverse effect.

However, the failure to comply with Regulation 4(2)(d) and 4(2)(c) had had a materially adverse effect on the proper administration of justice. Solicitors had steered the Claimants into litigation which had caused them and the Defendant to incur unnecessary and unreasonable expense. Accordingly the CFA’s were unenforceable and the Defendants maximum liability for costs was in respect of paid disbursements and any costs of assessment allowed.

2. Availability of Legal Aid

Costs claimed in respect of ATE insurance would be disallowed. No reasonable Claimant, properly advised, would have chosen this method of funding his litigation in preference to legal aid funding. The authority of Sarwar v Alam [2002] applied to these cases by analogy.

3. Quantum of Success Fee

Had the CFAs been enforceable the percentage increase payable by the Defendants would have been allowed at 25%. At the time these agreements were made it would have been reasonable for the solicitors to assume that the appropriate success fee would exceed the 20% benchmark allowed for RTA claims. No proper risk assessment had been done but the maximum 100% figure had been claimed and could not reasonably be justified. The Defendants had argued for a 5% figure applying by anology the ruling made in Halloran v Delaney. The Defendant argued that the Court had said that a success fee should be awarded on the basis that it would be unreasonable to agree more than a two-step success fee in which the first step was 5%. However the Claims Direct test cases had explained that there was no requirement to agree a two-step success fee in any case which was not the simplest. Judicial notice would be taken of the statistics set out in the Fenn and Rickman report indicating that an appropriate single step success fee for all RTA cases would be 14.25%. There was no statistical or other information available indicating whether housing disrepair cases were more or less risky than RTA cases. It was agreed that they were more risky. Accordingly the reasonable sum to specify by way of the risk element of a single step success fee would exceed the maximum figure suggested for RTA cases in Callory v Gray where the figure was 20%. Therefore 25% would have been allowed

4. Proportionality

In housing disrepair cases which settle before allocation, claims for base costs excluding VAT exceeding £4000.00 were plainly disproportionate. This was in the context of other matters in these cases academic however.

5. Fees Paid to Fastrack Litigation Services Ltd

The fees for a housing report and video evidence and for risk assessment report were disallowed on the basis that the Claimants had never agreed to pay such fees. Clients had never expressly or impliently authorised the solicitors to incur the fees.

6. Surveyor’s Reports

Although it was not necessary to obtain surveyors’ reports early it was not unreasonable to do so. The reasonable sum allowed in respect of each would be £250.00 plus VAT.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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