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Pearce v Somerset County Council, Yeovil County Court, 23 April 2006

12 May 2006
The issues

Cost – Conditional Fee Agreement – CFA – Alternative funding available – Conditional Fee Agreement Regulations 2000 Regulation 4.

The facts

The Claimant tripped on the pavement on 9th March 2002 and broke her right arm. The claim settled with an agreement that the Defendant pay the Claimant damages and costs.

The Claimant went to see solicitors on 12th April 2002, a month after the accident. She went to the firm used because they had acted for her before and because she had worked there on a temporary basis on a number of occasions over the years. A Conditional Fee Agreement was entered into on the 13th July 2003, sixteen months after the accident. At the time of the accident the Claimant had household insurance with Pearl Assurance Plc which provided for legal costs and expenses. The Defendant / paying party argued that it should not be liable for costs to the date which the Conditional Fee Agreement was entered into and that it should not be liable for costs under the CFA because of the availability of alternative means of funding.

The decision

1. There was no client care letter and nothing on file to suggest that the Claimant had been advised about her own costs liability or her potential liability for the Defendant’s costs if the matter were to proceed.

2. There was no compliance with the solicitors costs information and Client Care Code 1999. The Court was not satisfied that there was any contractual obligation on the Claimant to pay her solicitors costs in the period up to the date of the CFA and therefore applying the indemnity principle those costs were disallowed.

3. Pearl Assurance Policy offered legal costs and expenses in respect to the death or personal injury of the insured person from any cause other than an accident involving a motor vehicle. The limit of liability was up to £25,000.00. The policy required that the Claimant should instruct the solicitor who was instructed to provide the insurers immediately with his views on the prospect of success and a costs estimate, his charging rate, and to keep the insurers fully advised. In particular, the policy holder had to notify the insurer as soon as possible and within 180 days in any event of any matter which could result in a claim being made under the policy. There was nothing on the solicitors file to indicate that the subject of the funding of the litigation or costs generally arose at all until 22nd May 2003, 14 months after the accident, when she met with her solicitors who apparently raised the issue of whether or not her household insurance might cover the claim. She replied on the 27th May to the effect that there was such a policy but that it was time limited in terms of making a claim under it. Alternative funding was therefore available from the date of the accident until the 5th September 2002, during which time the solicitors had plenty of time to have investigated the position as to costing and to pursue a claim under the policy. As it was, there had been no alternative other than to enter into a CFA because it was too late to rely on the policy.

4. Regulation 4(2)(c) in Regulations obliges a legal representative before entering into a Conditional Fee Agreement to consider whether the client’s risk of incurring liability for costs was insured against under an existing contract of insurance.

5. That obligation arose at all times before entering into the CFA, not merely at the time the CFA was entered in to. There was a continuing obligation under the Regulation and also under the Solicitor’s Code. This also the effect of the Judgment in Sarwar v Alam.

6. There was therefore a breach of Regulation 4(2)(c).

7. The breach had a materially adverse effect on the client, in that there was no protection in respect of the Defendant’s costs if the case were lost under the CFA; that if an interim hearing were lost the basic charges and disbursements and success fee remained payable; the Claimant had to pay a premium of £939.96 for potentially less cover than she already had under her household policy. Because the breach was material the CFA was therefore unenforceable.

8. Because of the solicitors failure to comply with the Regulations they were not entitled to look to the Claimant for payment of the costs and she in turn could not look to the Defendant. The Claimant’s costs would therefore be assessed at nil and the Claimant would pay the costs of the assessment.


For further information contact Alan Bates at: alanbates@veitchpenny.co.uk

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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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