NIHL and HAVS: Not diseases after all ?

Is it possible to argue, that for the purposes of part 45 of the Civil Procedure Rules 1998, noise induced hearing loss and hand arm vibration syndrome are not diseases, but rather fall to be considered bodily injuries attracting a lower success fee?

Section IV and section V of the relevant rules must be considered in a little detail:

“Scope and interpretation

45.20

(1) Subject to paragraph (2), this Section applies where –

(a) the dispute is between an employee and his employer arising from a bodily injury sustained by the employee in the course of his employment; and

(b) the claimant has entered into a funding arrangement of a type specified in rule 43.2(1)(k)(i).

(2) This Section does not apply –

(a) where the dispute –

(i) relates to a disease;

(ii) relates to an injury sustained before 1st October 2004; or

(iii) arises from a road traffic accident (as defined in rule 45.7(4)(a)); or

(iv) relates to an injury to which Section V of this Part applies; …”

Section V, headed “Fixed Recoverable Success Fees in Employer’s Liability Disease  Claims”, provides so far as relevant as follows:

“Scope and Interpretation

45.23

(1) Subject to paragraph (2), this Section applies where –

(a) the dispute is between an employee (or, if the employee is deceased, the employee’s estate or dependants) and his employer (or a person alleged to be liable for the employer’s alleged breach of statutory or common law duties of care); and

(b) the dispute relates to a disease with which the employee is diagnosed that is alleged to have been contracted as a consequence of the employer’s alleged breach of statutory or common law duties of care in the course of the employee’s employment; and

(c) the claimant has entered into a funding arrangement of a type specified in rule 43.2(1)(k)(i).

(2) This Section does not apply where –

(a) the claimant sent a letter of claim to the defendant containing a summary of the facts on which the claim is based and main allegations of fault before 1st October 2005; or

(b) rule 45.20(2)(b) applies.

(3) For the purposes of this Section –

(a) rule 45.15(6) applies;

(b) ‘employee’ has the meaning given to it by section 2(1) of the Employers’ Liability (Compulsory Insurance) Act 1969;

(c) ‘Type A claim’ means a claim relating to a disease or physical injury alleged to have been caused by exposure to asbestos;

(d) ‘Type B claim’ means a claim relating to –

(i) a psychiatric injury alleged to have been caused by work-related psychological stress;

(ii) a work-related upper limb disorder which is alleged to have been caused by physical stress or strain, excluding hand/arm vibration injuries; and

(e) ‘Type C claim’ means a claim relating to a disease not falling within either type A or type B.

(The Table annexed to the Costs Practice Direction contains a non-exclusive list of diseases within Type A and Type B).”

Section IV of CPR 45 was introduced by the Civil Procedure (Amendment No 2) Rules 2004 (SI 2004/2072), which came into force on 1 October 2004. Section V was introduced by the Civil Procedure (Amendment No 3) Rules (SI 2005/2292), which came into force a year later, on 1 October 2005. Thebackground to these provisions was explained by Dyson LJ in Lamont v. Burton [2007] EWCA Civ 429, [2007] 1 WLR 2814, at [6]:

“Although Sections II to V of CPR Pt 45 were recommended by the Civil Procedure Rule Committee and they subsequently received parliamentary approval, their genesis lies in a series of negotiations which were conducted under the auspices of the Civil Justice Council.  The parties to the negotiations were some liability insurers who promoted the interests of defendants, and a combination of claimants’ solicitors (represented by Association of Personal Injury Lawyers and the Motor Accident Solicitors Society) and legal expenses insurers who promoted the interests of claimants. The figures in Sections II to V were the product of those negotiations.”

There is no definition of what constitutes a disease in section V. There have been three attempts to formulate a definition, in the case-law to date. There is a definition of what constitutes a disease in the relevant Protocol at paragraph 2.2. This says:

This protocol covers disease claims which are likely to be complex and frequently not suitable for fast-track procedures even though they may fall within fast track limits. Disease for the purpose of this protocol primarily covers any illness physical or psychological, any disorder, ailment, affliction, complaint, malady, or derangement other than a physical or psychological injury solely caused by an accident or other similar single event.

However this is not a definition which has been adopted in the more recent case-law. The reasons are largely twofold. The first is that the definition is expressly limited to the “the purpose of this protocol”. It is directed at pre-litigation conduct, and shoe horning a class of case, into a particular mode of pre-litigation behaviour, rather than acting as a comprehensive definition for the discrete purposes of the rules relating to costs. Secondly there is a respectable line of authority pointing out that Practice Directions (and the Protocol is not even a Practice Direction) cannot be used to interpret Rules. They are at best a weak aid to interpretation: to use a Practice Direction for such a purpose is really to put the cart before the horse.

The case of Patterson.v.Ministry of Defence [2012[ EWHC 2767, in essence, involved consideration as to whether trench foot could be regarded as a disease or an injury. It is useful to consider this case in some detail, as it represents the only decision of a High Court judge to date on this topic.

Against that background one considers the following points made by the Learned Judge at paragraph 14 of his judgment:

I draw attention at this stage to a number of points:

(1) Section IV applies where the dispute arises “from a bodily injury”. It constitutes the basic or default rule applicable to success fees in employers’ liability claims.

(2) Claims falling within Section V which would otherwise fall within Section IV are expressly excluded from Section V. The exclusion applies not only to cases where the dispute “relates to a disease”, but also where the dispute “relates to an injury to which Section V of this Part applies”. (These latter words were not in the original version of Section IV which came into force at a time when Section V did not yet exist, but were added later). The provisions contemplate, therefore, that as a matter of language the terms “disease” and “injury” are not mutually exclusive. At least some injuries can also be regarded as diseases, and therefore fall within Section V. However, because of the express exclusion of disputes relating to diseases and to injuries to which Section V applies, Sections IV and V are mutually exclusive.

(3) Certain injuries which would not be regarded as constituting a disease as a matter of ordinary language expressly fall to be treated as within Section V. For example, CPR 45.23(3) refers to “a disease or physical injury alleged to have been caused by exposure to asbestos”, from which it is apparent that a physical injury caused by such exposure need not amount to a disease (at least as that term is ordinarily used) in order to fall within Section V. Similarly, some (but not all) psychiatric injuries and upper limb disorders expressly fall within Type B, even though they would not be regarded as diseases as a matter of ordinary language.

(4) However, as appears from CPR 45.23(1)(b), in order to fall within Section V the dispute in question must still relate to a disease. It follows that, at least to some extent, the term “disease” appears to have a more extensive meaning in Section V than its meaning in every day language. In particular, it must include those injuries not ordinarily regarded as constituting diseases which are expressly referred to in the definitions of Type A and Type B claims.

(5) When there is a dispute whether Section IV or V applies, the question is whether the condition in question qualifies as a disease (including one of the specific categories of injury expressly included in Section V). If it does, Section V applies and it does not matter whether the disease also constitutes or results from a “bodily injury”.

(6) However, although some terms used in the Rule are defined, and some specific examples are given of claims falling within Section V, there is no definition of “disease”.

The Learned Judge then considered at paragraph 18 how, he could approach the issue of defining what a disease was:

The following principles of interpretation are clear:

(1)The task of the court is to ascertain the intention of the legislator expressed in the language under consideration. This is an objective exercise.

(2)The relevant provisions must be read as a whole, and in context.

(3)Words should be given their ordinary meaning unless a contrary intention appears.

(4)It is legitimate, where practicable, to assess the likely practical consequences of adopting each of the opposing constructions, not only for the parties in the individual case but for the law generally. If one construction is likely to produce absurdity or inconvenience, that may be a factor telling against that construction

(5)The same word, or phrase, in the same enactment, should be given the same meaning unless the contrary intention appears.

He also directed himself that the following points could be said to constitute the statutory purpose for a purposive interpretation:

What then are the “basic objectives” of CPR 45, Sections IV and V? It was not in dispute that they are essentially as follows:

(1) to promote certainty and, in particular, to avoid arguments about the level of the success fee (see the citations from Lamont v. Burton [2007] 1 WLR 2814 set out at [11] and [12] above);

(2)to recognise that, in general, certain types of employers’ liability cases carry a greater risk of failing on liability and should therefore be rewarded with a higher success fee on settlement than would be awarded under the Section IV regime

(3) to recognise that, in general, certain types of employers’ liability cases involve more investigation (and thus carry a greater financial risk) than others, and to reward solicitors and counsel for undertaking that greater financial risk, albeit that no distinction is drawn between Sections IV and V when it comes to cases that conclude at trial (where a success fee of 100% is payable); and

(4)to recognise that even within Section V, certain types of “disease” claim are more difficult than others, and should therefore attract a higher reward for those who undertake them.

He went onto deprecate dictionary definitions in this way:

I am reinforced in this view of the essential irrelevance of these dictionary definitions by Lord Clyde’s comments in Chief Adjudication Officer v. Faulds [2000] 1 WLR 1035 at 1051H, where the issue was the meaning of the word “accident” in social security legislation:

“The word ‘accident’ is not defined in the statute. It has no special or technical meaning but is to be understood in its ordinary sense. In such circumstances there seems to me to be nothing gained by resorting to dictionary definitions. Where a word is to be understood in its ordinary meaning it is preferable to confine one’s attention to the application of the statutory expression and avoid the temptation to elaborate upon it by introducing other words which may seem to be synonymous but which may simply lead in other cases to analysis not of the statutory words but of the gloss which has been added to them.”

Later in the judgment there are some very interesting paragraphs at 38 to 41. They deal with the notion of an extended definition of disease. Or a definition set by the expectations of the personal injury “industry”. He then went onto question, (albeit obiter dicta) whether noise induced hearing loss was a disease, without resolving the point:

The status of injuries of the nature described in CPR 45.23(3)(d) but which do not fall within the Type B definition because they do not satisfy the causation requirements of the definition was in dispute between the parties. Mr Williams for the claimant contends that such injuries, even though not falling within Type B, nevertheless fall and are generally understood to fall within Type C. He relies on this to support his submission that the term “disease” in CPR 45 is used to include conditions which would not normally be regarded as diseases even if such conditions are not within the specific definition of Type B claims. He refers also to other injuries not normally regarded as diseases and plainly not Type B claims (e.g. noise induced hearing loss) which, he says, have attracted success fees calculated in accordance with Section V, not Section IV, thus demonstrating that the term “disease” has been generally understood as having an expanded meaning. Mr James for the defendant, in contrast, contends that such injuries do not fall within Section V at all, and must be dealt with under Section IV.

I do not find it necessary to determine this issue, although there does appear to be some force in Mr Williams’ submission as to the way in which in practice some claims  not falling within Type B (for example, vibration white finger claims) are generally regarded as Type C Section V claims and not Section IV claims. Even if psychiatric injuries and upper limb disorders which do not satisfy the causation requirements of the Type B definition nevertheless constitute “diseases” within the meaning of CPR 45, these represent specific extensions of the ordinary meaning of the term “disease” and in my judgment do not demonstrate with sufficient clarity that the intention of the legislator was to apply an extended meaning of “disease” more generally. Similarly, even if  such claims as claims for noise induced hearing loss have in practice generally attracted the higher success fees applicable under Section V, I cannot regard that as a sure foundation on which to conclude that an extended meaning of the term “disease” was intended.

If that had been intended, it is surprising that there is no definition of “disease” in CPR 45. Nor is there any indication of the factors which would need to exist in order to qualify a condition not normally regarded as a disease in ordinary language for inclusion under Section V. However, these omissions are not surprising in view of the circumstances in which Sections IV and V came into being as a result of the negotiations described at [11] and [12] above. I do not know whether there was any attempt to produce an agreed definition of the term “disease”, but it is not in the least surprising that no such definition was in fact agreed by the competing interests involved. In my judgment, therefore, psychiatric injuries and upper limb disorders constitute specific exceptions and do not justify any more general wider meaning being given to the term “disease”.

There is in my judgment a further compelling reason why detailed consideration of the Type B definitions in CPR 45.23(3)(c) cannot determine the meaning of the term “disease” in CPR 45. This is that the term “disease” was included as an exclusion from Section IV when Section IV was first introduced in October 2004. At that time Section V did not yet exist, but the term “disease” in Section IV must nevertheless have had a meaning. It is not suggested that the coming into force of Section V one year later had the effect of changing the existing meaning of “disease” in Section IV and it is obvious that the term was intended to be used consistently in both Sections. Since the meaning of “disease” in Section IV cannot have been determined by the provisions of a Section V which did not yet exist, any justification for an extended meaning of “disease” in Section IV, and therefore in Section V, must be found elsewhere than in the detailed definitions of Type A and Type B claims in Section V. In the end Mr Williams accepted this, submitting that although the extended meaning of “disease” in Section IV for which he contends cannot come from the language of Section V, it is to be derived from the concepts contained in the Pre-Action Protocol.

Ultimately, after numerous paragraphs of extremely careful consideration and weighting of factors, he concludes that when construing disease, one must use the “natural and ordinary” meaning of the word.

Accordingly the claimant has not demonstrated that the term “disease” in CPR 45 is used in other than its natural and ordinary meaning, save to the extent that the specific injuries included in the definitions of Type A and Type B claims must be regarded as constituting diseases for the purpose of the award of success fees. (As indicated at [39] above, I do not decide whether those injuries constitute diseases within Type C when not caused in the manner required by the Type A and Type B definitions; even if they do, that only means that the specific extension of the meaning of “disease” for the purpose of CPR 45 extends somewhat further than if they do not). Nor in my respectful view has the claimant succeeded in identifying with sufficient clarity and certainty the extended meaning of “disease” for which Mr Williams contends.

For the future he sets out this approach at paragraph 50:

Notwithstanding the objective of CPR 45 to provide a clear and certain test for the award of success fees, inevitably questions may arise as to whether particular conditions are to be characterised as “diseases”. When that occurs, and when the answer is not obvious, there is in my judgment no single test or definition which can be applied. In circumstances where the Rule itself provides no definition of “disease”, and where the dictionaries do not assist, it would not be practicable or sensible for the court to attempt to supply its own definition. Instead it will be necessary to apply the natural and ordinary meaning of the word, and in cases which are near the borderline to form a judgment by taking account of the various factors which point in one direction or the other. In the present case the relevant factors are those identified above and, taking them into account, I have no doubt that NFCI is not a disease.

The actual decision that trench foot is not a disease was made in these terms. It might be thought significant, that trauma was thought to weigh in favour of an injury, and weight was given to the medical evidence:

In view of Mr Williams’ realistic acknowledgment that as a matter of ordinary language NFCI would not be regarded as a disease, the conclusions reached so far are sufficient to dismiss this appeal. Even without that acknowledgment, however, I regard the defendant’s submissions set out at [17(6)] above as compelling.

Thus NFCI is not caused or contributed to by any virus, bacteria, noxious agent or parasite. It is simply a case where blood fails to reach the cells in the nerves, skin and muscle of the claimant’s feet as result of exposure to weather or environmental conditions. Although it involves no trauma in the sense of the direct application of force to the body, the mechanism is essentially the same as occurs in a case of trauma such as when a tourniquet is applied to a limb or a victim is stabbed.  The result is damage or injury to the body parts affected, but this cannot be regarded as a “disease”. I accept the defendant’s submission that if NCFI is a “disease”, so too are such conditions as chilblains, hypothermia, frostbite, sunstroke, sunburn and heat blisters which are no more than the result of exposure to weather conditions, and that this would be stretching the meaning of “disease” to surprising lengths which cannot have been intended. I accept also that it is significant that nowhere in Dr Roberts’ detailed report on NFCI is there any suggestion that it constitutes a disease. While none of these factors is determinative by itself, together they amount to a compelling
and in my judgment correct case that NFCI is not a “disease”.

I accept that there are factors pointing in the opposite direction, in particular that NFCI develops typically over a period of time as distinct from exposure on a single occasion, that it involves no trauma and that it is a condition to which individuals of Black African or Black Caribbean origin are particularly susceptible. Moreover, it has some features in common, so far as the conduct of litigation is concerned, with claims which do relate to diseases, although I regard that as a less significant matter and certainly not sufficient on its own to characterise NFCI as a disease.

Hunter’s Diseases of Occupations states at page 467:

It is becoming increasingly apparent that the damage to the cochlea caused by excessive noise is the result of cellular injury from reactive oxygen species (ROS). ROS are ions or small molecules that include oxygen ions, free radicals…and peroxides…and are produced in the mitochondria. They are a natural product of oxygen metabolism and have an important role in cell signalling. They may, however, be produced in excess in response to stress and are then capable of causing serious damage to cell structures…

At page 471 the authors note:

Ageing is associated with a progressive loss of auditory function, a condition which has been described in the past as “presbyacusis”. It is recognized that most of the impairment arises as a result of progressive cochlear dysfunction with loss of hair cells from the organ or Cortis, affecting the higher frequencies first, but advancing through the cochlea to affect eventually the whole frequency range to some extent….Age related hearing loss takes a progressively accelerating course with time. Thus, the contribution of occupational noise-induced hearing loss to the total sensori-neural hearing loss decreases with age, and by the age of 80 it would make virtually no difference what the noise had been.

Is noise induced hearing loss a disease, or an injury inflicted by invasive sound energy? There is a respectable argument that it is an injury and not a disease, based on the matters discussed above.  Historically, deafness has always been treated as a disease, and it remains the norm today, that it is regarded as a disease by personal injury lawyers. The Civil Justice Council in 2005 plainly thought deafness was included as a disease (see their Press Release).

The position might be thought to be even stronger, in relation to hand arm vibration syndrome, given that type B claims, in the rules expressly exclude what are termed hand-arm vibration injuries and this is again, an example of a condition caused by the traumatic application of external vibration.

Even after Jackson and all the years since its introduction, part 45 continues to throw up problems of construction and definition and will for some years to come.

Avoiding Qualified One Way Costs Shifting: costs against solicitors

In many ways, the Jackson reforms, represent a return to the halcyon days of the 1990s, when success fees and ATE premiums were not recoverable inter partes, “Friends” appeared to be on endless loop and Mr Blair invited us all to join him in celebrating Cool Britannia.

Nowhere is the similarity, so marked, as in the introduction a fortnight ago, of the system of Qualified One Way Costs Shifting (QUOCS), a system of costs protection for claimants in personal injury actions, expressly based on the similar provisions which applied to claimants in receipt of public funding under the Legal Aid Act 1988 or latterly the Access to Justice Act 1999.

What is often forgotten, is that the “shield” created by these provisions, in turn sparked satellite litigation against the solicitors who represented unsuccessful claimants, alleging that for reasons x, y and z, those solicitors should pay the wasted costs of the action personally: the solicitors and their indemnity insurers, representing the only deep pocket a successful defendant could hope to get its costs back from.

It can readily be anticipated, that the introduction of costs shifting again, will spark a similar wave of litigation, against claimants’s solicitors both under the familiar wasted costs jurisdiction and the non-party costs jurisdiction.

An interesting recent case on non-party costs, illustrates the point. The conjoined appeals of Flatman.v.Germany and Weddall.v.Barchester Health Care [2013] EWCA Civ 278 concerned applications for disclosure, for the purposes of non-party costs orders against solicitors. As Leveson LJ noted:

2. The facts underline the potential for profit by solicitors against the limited downside risk and although the costs regime will change with the coming into force of Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, for certain types of litigation, the issues with which this appeal grapples will still arise. Indeed, in one sense, they may become more acute if Defendant‟s insurers can undermine the principle of qualified one way costs shifting (which will limit recovery of costs by insurers in failed personal injury actions) by pursuing the solicitors acting for the claimant who fails.

The appeals are particularly interesting, as they deal with the vexed issue, as to whether a solicitor who extends credit to a client, to fund disbursements, or even bears the cost of the disbursements himself, is “funding the litigation” and thus committing maintenance or champerty: circumstances, which might justify making a non-party costs order against the solicitor.

The Court of Appeal stated:

35. With that policy in mind, it is necessary to turn to the legislation. Section 58 of the Courts and Legal Services Act 1990 (as amended) makes CFAs lawful. A conditional fee agreement is defined by s. 58 (2)(a) as “an agreement with a person providing advocacy or litigation services which provides for his fees and expenses or any part of them to be payable only in specified circumstances”. The term „expenses‟ is not defined by the Act and at the core of this appeal has been its true meaning. Mr Carpenter for the solicitors, supported by Mr Holland Q.C. for the Law Society, argues that as a matter of ordinary language and on authority the word “expenses” includes own side‟s disbursements; Mr Brown for the insurers argues that, as a matter of principle and established use, a disbursement is to be distinguished from a solicitor‟s expense, which has important and practical implications in areas such as VAT.

36. The line between the practical effect of these different approaches is fine. Mr Brown argues that because disbursements are not included within the permissible category of costs, they cannot be made the subject of payment by the client conditional on success. That is not to say that the solicitor must insist on prepayment of disbursements by the client; the agreement, however, must require the client to remain responsible for them (whether or not the solicitor goes to the trouble and expense of pursuing repayment if the client, having lost his action, is impecunious). Mr Carpenter and Mr Holland argue that as a matter of ordinary language, once the solicitor has paid the cost of a disbursement (such as a court fee or a medical report) it becomes an expense and can be subject to a prior agreement that it will not have to be reimbursed (as opposed to a subsequent decision that it is not worth pursuing). This distinction can be remarkably fine: if photocopying of the court bundle is done in house, it is a cost to the solicitor; if it is sent out to a copying firm, it is a disbursement.

37. The significance of this narrow question of statutory construction goes back to the test identified in Tolstoy-Miloslavsky because it is argued that the solicitors could not be acting „outside the role of a solicitor‟ (so as to bring themselves within the third category identified by Rose LJ) if they were doing no more than the legislation which set up CFAs rendered lawful and not caught by the laws of maintenance or champerty.

38. Mr Brown took the court to different examples of the use of the terms „expenses‟ and „disbursements‟ but it seems to me that the phrase “fees and expenses” must be construed in the context of the legislation in which it appears. On the face of it, once it is conceded (as seems to me is inevitable) that the solicitor does not have to be in funds before incurring costs (such as the obtaining of a medical report), that cost has been borne by the solicitor (at least for the time being) and becomes an expense of providing advocacy or litigation services. To put it another way (which may be more relevant to the precise question which has to be answered), the cost may have to be the subject of an account to the client as a disbursement but the credit afforded to the client in respect of that cost is part of the service provided by the solicitor to his client.

This in turn led to the conclusion:

 47. In those circumstances, contrary to the submissions of Mr Brown, I agree with the issue of principle advanced by the Law Society (and Mr Carpenter) that payment of disbursements, without more, does not incur any potential liability to an adverse costs order. That, however, is not an end of this appeal because the issue in fact decided by Judge Maloney and Eady J was not to order costs but, rather, to order disclosure ofinformation prior to the insurers considering whether to apply for an order of costs. That is a different question and requires separate consideration.

After dealing with the disclosure obligations, Leveson LJ then went on helpfully to set out a meaningless exercise that insurance companies could fruitlessly follow under the new regime. Meaningless, because a claimant who has the benefit of QUOCS, so that an order for costs cannot be enforced against them will simply not bother to reply.

54. I appreciate that what has emerged in Weddall would not normally become known to a successful opponent in the absence of some sort of disclosure. I equally recognise that insurers will not wish to go to the expense of a costs assessment and enforcement exercise against an impecunious litigant simply in the hope that some detail will emerge which might alert them to the prospect that costs might be recovered against the solicitor. It is, however, a comparatively straightforward matter to deal with. The Law Society makes it clear that if solicitors have agreed to indemnify their client (as is entirely lawful: see Sibthorpe), the solicitors could not then seek to deny the existence of that indemnity or prevent their client from relying upon it. For my part, without seeking disclosure of documents, I see no reason why a successful insurer should not obtain an order for costs in principle against the claimant, together with an interim payment on account and invite the claimant to reveal the extent to which the litigation had been supported by any third party and to provide any reason why the costs order should not be enforced. I appreciate that it will not assist in many cases: examples such as Weddall, however, stand a prospect of being exposed thereby permitting the insurer to decide what, if any, further steps need to be taken.

NB: The “Rachel” haircut: due to return too?

No-win-no-fee: Enforceable retainers after 1st April 2013

The Legal Aid, Sentencing and Punishment of Offenders Act 2012 which amends theCourts and Legal Services Act 1990, and the Conditional Fee Agreements Order2013 and the Damages Based Agreements Regulations 2013 have established a fresh set of statutory criteria for “no win-no fee” funding arrangements, which must be satisfied by after 1st April 2013. The purpose of this post is to consider what those criteria are, and how they might be met.

Choosing the funding arrangement

Considerations as to how a firm structures its funding arrangements with clients, will flow from the fundamental considerations of the business. A firm must consider what its overheads are, and what an acceptable level of profit is. It must make these considerations, not in a vacuum, but informed by what its competitors in the marketplace are doing.

It must consider how many cases, it is likely to take on, how much these will cost and what the delay will be, between inception of the retainer and the end of the case. Then and only then, can it sensibly approach the issue of structuring its retainers: because the starting point must be, to choose a structure which fits its cases, rather than seeking to shoehorn its cases into an agreement.

Solicitor/own client charging v the CFA Lite model

This in turn will lead to the single most important decision, that the firm has to make, which is whether to maintain a rigid distinction between compensation and costs, permitting it to market itself as a firm which secures “100%” of damages for its clients, or whether in addition to those costs which might be secured from a paying party, it will seek to make a solicitor/own client charge, usually from the pot marked “clients damages”.

If a firm decides that it will limit itself to those costs that can be recovered from the paying party, then it will be drawn inexorably to the “CFA Lite” model of Conditional Fee Agreement: which will usually contain a clause, waiving the right of the solicitor to recover fees (and possibly disbursements) in excess of those recovered from the other side.

If a firm decides, that it cannot afford or simply does not wish to, limit its fees in this way, then a retainer can be structured which permits the solicitor to make a solicitor/own client charge. In the context of a Conditional Fee Agreement, this can either be by way of enhanced hourly rates, agreed with the client, but which are unlikely to be recoverable from the paying party, or by way of a success fee, a specified uplift on the solicitors basic fees, which will, absent certain narrow categories of case, certainly not be recoverable from the other side. It is important to note, that a client may well have an interest in disputing the solicitors bill, and it can be of the utmost importance to consider what might then be capable of being challenged on a solicitor/own client basis. Agreed hourly rates are not capable of dispute: the time spent on the case certainly is. The percentage level of the success fee, is not capable of dispute, given the repeal many years ago, of the Conditional Fee Agreements Regulations 2000: the quantum of the basic charges used to calculate the success fee certainly will be capable of dispute.

The alternative funding agreement contemplated by the Courts and Legal Services Act 1990, is the Damages Based Agreement. This is not as is commonly, and wrongly thought, a contingency fee agreement in the purest sense of that phrase. Rather it provides that a client agrees to pay a solicitor (or a barrister, or a claims management company) a specified percentage of the damages recovered in the claim. But a client who also recovers costs from a paying party, is entitled to offset and deduct those costs, from the payment. This can mean in certain circumstances, the client retains all his damages, and in others that he loses up to 25% of them.

The statutory requirements

The statutory scheme, for purposes of consumer protection and the administration of justice, imposes certain formalities on the making of such agreements. The most onerous formality requirements relate to agreements which impose success fees on clients: where Parliament seeks to control or limit such fees by a system of “caps”.

It is also important to note that the scheme contemplates these formalities applying on agreement-by-agreement basis. It is entirely possible, that a client might first make a damages based agreement with a claims management company, a conditional fee agreement with a firm of solicitors, sack that firm, and then make a further conditional fee agreement with a second firm of solicitors. Each such agreement, logically, would carry its own cap, though some commentators are of the view that this was not what Parliament intended.

Turning to consider he first and fundamental point to note is that all such agreements must be made in writing, though they need not be signed.

If a conditional fee agreement provides for a success fee, and note that a success fee, in this context means a specified percentage uplift of the basic charges, then the agreement must satisfy a number of additional requirements, set out by the Conditional Fee Agreements Order 2013.

The first is that the percentage uplift on the basic charges cannot be more than 100%. The second is that agreements which relate to proceedings at first instance, must further contain an express cap, or maximum limit, on the success fee, by reference to the damages recovered. That cap is further specified to include for the purposes of calculation, general damages for pain suffering and loss of amenity and pecuniary loss, other than future pecuniary loss, net of sums paid to the Compensation Recovery Unit and cannot exceed 25% of such sums.

Thirdly, if the agreement is apt to include not just first instance proceedings, but an appeal, then although it is permissible to increase the limit of the capped success fee to 100% of the relevant damages, there must still be a cap on the success fee. In no circumstances, is it permissible to exhaust the damages with the success fee, and then seek any residual liability from the client’s own resources.

A similar scheme is adopted in relation to Damages Based Agreements, but with one important further requirements to specify within the agreement, the claim to which the agreement relates, the circumstances in which the payment obligations are triggered and the reasons for electing on the percentage payment.

This must be no more than 25% of the general damages for pain suffering and loss of amenity, pecuniary loss other than future pecuniary loss net of sums paid to the Compensation Recovery Unit. The Damages Based Agreement cannot impose on the client an obligation to pay more than this sum, together with expenses paid by the representative, less any costs recovered. This can lead to the consequence, that if the client terminates the agreement prematurely, the only sum which will be payable at that point, will be the expenses.

Common mistakes

So what mistakes might arise? Few solicitors will fail to put something in writing. But does the agreement accurately reflect the deal struck with the client or will the client have scope to complain that what he signed, was not what he was told?

Does the agreement specify a success fee? If so, how is this calculated? Is it limited to no more than 100% of the basic charges? Does the agreement cover first instance proceedings and proceedings at appeal? If so, does it contain the requisite caps? All of these are points which careful drafting should address, in order to ensure that if no-win-no-fee litigation, is embarked upon, retainer problems do not arise, months or years after the case began.