One of the incipient developments of the next 12 months, must surely be a “mis-selling” scandal in respect of conditional fee agreements for low value personal injury claims, with solicitor-own client success fees, to clients who have the benefit of Before the Event (BTE) insurance.
In the halcyon days, prior to the 1st April 2013, there was little doubt that the combination of a CFA Lite, coupled with After the Event (ATE) insurance, was an excellent funding option for many clients, particularly in the field of low value personal injury litigation.
Under such an arrangement, the client never had to pay a fee to his solicitors out of his damages, and the additional liabilities of the success fee, and the ATE premium, would be recovered from the paying party.
Although solicitors would (or should have) at the start of their retainer, advised the client of his funding options, they could fairly explain that the client would be no worse off by electing not to use his BTE insurance, and in some ways better off, given the immediacy with which the solicitor could start to work on the case, and the fact that the client had retained the solicitor of his choice.
But with the abolition of recoverability of additional liabilities, since the implementation of LASPO 2012, on the 1st April 2013, the landscape has changed fundamentally. A solicitor who does not advise his client on the benefits of BTE insurance, and who goes on to levy a success fee, paid for now by the client out of his general damages and past special damages, is at real risk of an action for damages for professional negligence.
The Solicitors Code of Conduct in chapter one is very clear on the indicative behaviours which are required of a solicitor, to achieve the appropriate outcomes.
It provides that the following are indicative behaviours:
explaining any limitations or conditions on what you can do for the client, for example, because of the way the client’s matter is funded;
discussing whether the potential outcomes of the client’s matter are likely to justify the expense or risk involved, including any risk of having to pay someone else’s legal fees;
clearly explaining your fees and if and when they are likely to change;
warning about any other payments for which the client may be responsible;
discussing how the client will pay, including whether public funding may be available, whether the client has insurance that might cover the fees, and whether the fees may be paid by someone else such as a trade union;
where you are acting for a client under a fee arrangement governed by statute, such as a conditional fee agreement, giving the client all relevant information relating to that arrangement;
providing the information in a clear and accessible form which is appropriate to the needs and circumstances of the client
These provisions have a long history in the former Solicitors Practice Rules and the Codes made under those Rules. A descendant on the distaff side was the former Conditional Fee Agreements Regulations 2000 which largely replicated those provisions, in particular in regulation 4. They are apt to include within their scope, an investigative duty on the part of a solicitor to establish what the clients funding options are.
The leading case of Myatt and Others.v.National Coal Board  EWCA Civ 554 which considered the degree of inquiry a solicitor should make into establishing a client’s funding options had this to say about the factors that a solicitor should bear in mind when making enquiries:
72 First, the nature of the client. If the client is evidently intelligent and has a real knowledge and understanding of insurance matters, it may be reasonable for the solicitor to ask him not only (i) whether he has credit cards, motor insurance or household insurance or is a member of a trade union, (ii) whether he has legal expenses insurance, but also (iii) the ultimate question of whether the legal expenses policy covers the proposed claim and, if so, whether it does so to a sufficient extent. Litigants such as the Myatt claimants and Ms Garrett plainly do not fall into this category: few litigants will. If the solicitor does ask such questions, he will have to form a view as to whether the client’s answers to the questions can reasonably be relied upon.
73 Secondly, the circumstances in which the solicitor is instructed may be relevant to the nature of the inquiries that it is reasonable to expect the solicitor to undertake in order to establish the BTE position. A good example of the application of this factor is to be found in Pratt v Bull, which was one of the five cases that was heard together with Hollins v Russell  1 WLR 2487. In that case, the 80-year-old claimant was injured in a road accident. A solicitor visited her while she was in hospital and a CFA was made. At the assessment of her costs, it was argued on behalf of the defendant that the possibility of legal expenses insurance under her home insurance policy had not been fully explored. The court said, at para 138, that there were limits to what can reasonably be expected of the interchange between solicitor and client in such circumstances: “It would be ridiculous to expect a solicitor dealing with a seriously ill old woman in hospital to delay making a CFA while her home insurance policy was found and checked.” It was sufficient that the solicitor had discussed it with her and formed a view on the funding options.
74 Thirdly, the nature of the claim may be relevant. If the claim is one in respect of which it is unlikely that standard insurance policies would provide legal expenses cover, this may be a further reason why it may be reasonable for the solicitor to take fewer steps to ascertain the position than might otherwise be the case.
75 Fourthly, the cost of the ATE premium may be a relevant factor. This is the point made at para 50 of Sarwar v Alam  1 WLR 125. In our judgment, it is as relevant to a question of breach of regulation 4(2)(c) as to a question of the reasonableness of the premium for the purposes of an assessment of costs pursuant to CPR r 44.4.
76 Fifthly, if the claim has been referred to solicitors who are on a panel, it may be relevant that the referring body has already investigated the question of the availability of BTE. Whether it is reasonable to rely on any conclusion already reached will be a matter on which the panel solicitor must exercise his own judgment.
77 It follows from the calibrated approach that we have suggested at paras 72—76 above that we do not consider that it is possible to give rigid guidance as to the questions a solicitor should ask in every case. In particular, in our judgment a solicitor is not required in every case to ask the client who says that he has a home, credit card or motor insurance or is a member of a trade union to send him the policy or trade union membership document (the first of the three approaches suggested by Mr McCue: see para 56 above). In some circumstances, it is reasonable for the solicitor to ask the further question whether the insurance covers legal expenses and to rely on the answer given by the client without further ado. In yet other cases, it is even reasonable to ask the client to answer what we have called the ultimate question.
The duty is also apt to include giving a client advice, on the best means to fund his case. It is not sufficient for the solicitor to set out his options expressionlessly: the duty can include “sending a client down the road”, if that is in his best interests, rather than retaining a client and certainly charging the client a success fee that had he utilised his BTE insurance he would not have had to pay.
Solicitors firms who do not comply with these duties will find themselves the subject matter of a complaint when they deduct a success fee from a client’s damages on the basis that they did not establish a client’s funding options or did not offer objective disinterested advice on what the client’s best course of action was.