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advising on litigation funding options in the post-Jackson era

17 May 2013

The potential professional indemnity implications of the Jackson reforms are significant. Litigation solicitors face a seemingly impossible task as they will be looking to win sufficient work and take advantage of the new regime on contingency fees, while ensuring that they stay on the right side of the Code of Conduct (the Code) in the advice they are giving to new clients about funding options.

The key parts of the Code in this context are contained in the “you and your client” section. The following outcomes are ones that must be achieved, i.e. under the Code, if you are a litigation solicitor, you must ensure that:

  •  you treat your clients fairly
  • you provide services to your clients in a manner which protects their interests in their matter, subject to the proper administration of justice
  • you only enter into fee agreements with your clients that are legal and which you consider are suitable for the client’s needs and take account of the client’s best interests
  • clients are in a position to make informed decisions about the services they need, how their matter will be handled and the options available to them
  • clients receive the best possible information, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of their matter
  • clients are informed of their right to challenge or complain about your bill and the circumstances in which they may be liable to pay interest on an unpaid bill

A major area of concern surrounds whether it will be in the client’s “best interests” to take on his or her case using a damages based agreement (DBA) – where the contingency fee is calculated against the compensation recovered – as against a conditional fee agreement (CFA) (where the success fee is levied against the solicitor’s costs that are on the clock.)

The amount of the recovered compensation – and the speed with which a settlement has been reached – can affect the client’s position quite dramatically.

How can it be in any client’s “best interests” to enter into a DBA when the client could end up retaining as little as half of the damages he or she otherwise would, by using a CFA format? If solicitors adhere to the letter of the Code on this, any such conflicts of interest must always be resolved in the client’s favour.

Regrettably, at this point, it is not too hard to envisage sections of the Code being recited as part of a letter of claim in prospective professional liability cases against solicitors.

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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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