Nearly Legal

Forde v Birmingham City Council [2008] EWHC 90105 (Costs)

In brief, where a firm had asked a client to sign a second CFA for a disrepair claim, at a time when it appeared that the first CFA might be found unenforceable, and the second CFA provided for a success fee where the first one didn’t:

a) was the second CFA unenforceable because it concerns matters contained in the first CFA?

b) was the second CFA unenforceable because it is retrospective?

c) what period is covered by the second CFA?

d) is the success fee retrospective?

e) when a second CFA is signed at a time when a firm offer is on the table, what is the appropriate success fee?

f) Does the first CFA continue to be valid if the second is unenforceable.

Also in brief, the answers are as follows:

a) No

b) No

c) The period from the signing of the first CFA (depending on the second CFA’s terms

d) Where the first CFA did not provide for a success fee, no. The success fee would only apply from the date service of a second N251.  But if the second CFA had been signed pre-issue of claim:

That leaves open the question of what would have happened had CFA II been signed before issue and had the litigation been settled without proceedings. Section 19.2 Costs Practice Direction states at (3) that there is no requirement in the PD for the provision of information about funding arrangements before the commencement of proceedings. No one suggested that the pre-action protocol required this to be done in the present case.  It follows that a curious situation would have arisen  had McGrath settled the case after  signing CFA II  but before  issue because the time for serving Form N251 would not have been reached. It would seem that in those circumstances a retrospective success fee would have been recoverable, but because, in the event, proceedings were issued  and no notice  under CPR 44.15 was given, McGrath’s claim for a success fee has been lost.  

e) In this case, the second CFA had provided a sliding scale of success fee: 50% if the claim concludes before the issue of proceedings, 75% before commencement of trial and 100% if concluded at trial. Birmingham had argued that the certainty of success at the time of signing was such that the appropriate level was nil. The Court was persuaded that the claim was relatively free of risk at the time of CFA 2. Using the Begum baseline of a 15% success fee for near certainty, the Court said:

Using the ready reckoner, I consider that a fair assessment of the risks if the claim had concluded before the issue of proceedings, were that there was a 90% chance of winning, giving a success fee of 10%.    I am not persuaded that a significantly higher sum is warranted just because proceedings were issued. Having failed to settle during the protocol period, limited grounds might be advanced for saying that the Council must have considered that the prospects of a successful defence were much higher than 43%, (a 57% chance of winning would reflect a 75% success fee under the ready reckoner). In my judgment, however, the likelihood of  Miss Forde losing would still have been slim. Left to me, I would assess prospects of winning up to trial at 83% giving a success fee of 20%.  Had the matter actually concluded at trial, the position would have been different as McGrath could then have argued with justification that the Council had  clearly considered it would win, so the success fee should be 100% reflecting 50/50 prospects of success.   

f) The first CFA cannot continue as a ‘fall back’ for the second. CFA 1 did not survive the signing of the second.

The case also contains significant discussion on Regulation 4 Conditional Fee Agreement Regulations (2000), applicable to CFAs signed before October 2005, on advice to clients on alternative funding and specifically public funding. The details are specific to the facts, but worth a look for re-examining any CFAs of that vintage. See paras 144-155, amongst others.