Following in the wake of Lord Justice Jackson’s comments in Pankhurst v White [2010] EWCA Civ 1445 concerning “grotesque” funding arrangements, legal expenses insurer DAS has decided this represents a good opportunity to attack Jackson’s costs proposals.

Kathryn Mortimer, head of legal services at DAS, said in a widely reported Press Release:

“Deduction of legal costs from damages is at the centre of the reforms proposed by Lord Jackson. In fact, had his reforms already been in place, the solicitors in this case could have charged their client up to a quarter of his damages, at least 10 times the amount that was due under the funding arrangement that Lord Jackson has described as ‘grotesque’”

This misses the point entirely. The terms of the CFA entered into by the solicitors in Pankhurst did not put them at risk in relation to recovery of their base costs. In truth, this was not a CFA as recognised by common sense or, hopefully, the law. It was “grotesque” for the solicitors to enter into this type of agreement in these circumstances. It would be equally “grotesque” to enter into this type of agreement if the Jackson reforms happen.

Jackson LJ’s criticism of the funding arrangement was of solicitors seeking a success fee when there was “no risk”. The criticism would be the same whether the success fee is being paid by the defendant as costs or by the client out of damages.

Ms Mortimer said: “the catastrophically injured client was able to obtain access to justice under existing CFA arrangements, which will be fundamentally undermined by Jackson’s proposed reforms”.

Quite how this made it into a DAS press release is a mystery, although perhaps revealing. Despite CFAs being lawful since 1990 and between the parties recovery of success fees being allowed since 2000, it appears that a senior figure in the anti-Jackson campaign still does not understand what a CFA is for or how they operate.

Lesson One: CFAs for beginners

Where a client instructs his lawyer on an ordinary private retainer, the client carries the full risks of the litigation. Regardless of whether the client wins or loses his case, he is still liable to pay his lawyer’s fees in full.

A Conditional Fee Agreement (CFA) is designed to pass the litigation risk, in full or in part, to the lawyer. If the client is unsuccessful the lawyer either receives nothing (a no win no fee agreement) or receives a reduced fee compared to what the lawyer would otherwise have received (a discounted fee agreement).

In exchange for accepting some, or all, of the litigation risk, the lawyer can charge a success fee. The success fee will, in theory, allow the lawyer to recover in successful cases a sufficient “uplift” to compensate them for the lost or reduced fees in the cases that fail.

However, the fundamental point of a CFA is that there is a “condition” that has yet to be satisfied. Entering into a CFA when the only condition has already been satisfied, or is guaranteed to be satisfied, is absurd. It is the equivalent on betting on a horse to win, when the race has already been run and the horse come in first. In the Pankhurst case, the claimant had judgment on liability before the CFA was entered into. Unlike the terms of some CFAs, it appears the solicitors were not at risk in relation to Part 36 offers.

If the client lost on a Part 36 offer at a quantum trial, as indeed he did, the client would still be liable to pay his solicitors’ normal fees.

If the client won on a Part 36 offer at a quantum trial, the client would be liable to pay his solicitors’ normal fees plus a success fee.

In both situations, the solicitors would recover their normal fees (out of his damages if necessary). This is the same as how an ordinary private retainer works. There was no transfer of risk from the client to the lawyer. The client had all the risk.

Any success fee chargeable by the solicitors was pure windfall. There was “no risk” to compensate them for.

(The matter would have been quite different if the solicitors had been at risk in relation to Part 36 offers.)

How then, did the funding arrangement enable the catastrophically injured client to “obtain access to justice”? How will the Jackson proposals, if implemented, “fundamentally undermine” a client’s ability to obtain access to justice in this situation?

The client already had a “won” case at the time the CFA was entered into. The nature of the CFA meant he was going to have to pay his solicitors’ normal fees regardless of whether he beat any Part 36 offer at a quantum trial. At best, the agreement was one that allowed for postponement of payment of fees until he recovered his damages. This did not require a CFA. In fact, the CFA did contain a “postponement” charge that, on the facts of the case, amounted to £35,810.

The terms of this CFA were to the effect that the client was privately funding the claim from his future damages. The solicitors would be entitled to their full normal fees for simply acting for the client, regardless of the outcome, but receive a potential 100% increase on those fees to compensate them for… Well, nothing.

If the anti-Jackson camp can explain how this CFA benefited the client in terms of access to justice, please let us know. Otherwise, the charge of “grotesque” will have to stand.

Oh, and Happy New Year.

Lord Justice Jackson, giving the leading judgment in the case of Pankhurst v White [2010] EWCA Civ 1445, described the claimant’s solicitors’ funding arrangement as “grotesque”.

What generated this fury, aside from the fact that there was a success fee claimed and the claimant had the benefit of ATE obviously?

The claimant’s solicitors had entered into a conditional fee agreement (CFA) some two months after obtaining judgment on liability with a 100% success fee if the action went to trial. “Success” was defined as any recovery of damages. The claim related to a catastrophic injury case where there could be no question of damages being assessed at zero once primary liability was resolved. Therefore, even if the claimant lost at a quantum trial on a defendant’s Part 36 offer, as indeed he did, the solicitors would still be entitled to their base costs in relation to the quantum trial. This would come out of the claimant’s damages.

As Jackson LJ observed:

“In the circumstances of this case there was no risk whatsoever that the claimant’s solicitors would not be paid their base costs in full. Yet the solicitors were charging a ‘success fee’ on top of their base costs for running a non-existent risk. This makes a mockery of what is said to be the justification of the present conditional fee agreement regime.”

This case represents a perfect example of how to kill a golden goose. This is why claimant lawyers’ pleas that the Jackson proposals will hinder access to justice are likely to fall on deaf ears.

This case has an interesting twist. It appears that the MIB, who were defending the claim, agreed “with the benefit of legal advice” to pay a 35% success fee to the claimant. What strange legal advice the MIB appear to have received.

A while ago I commented on the British Chiropractic Association (BCA) dropping their libel action against science writer Simon Singh where the BCA had sued Dr Singh over a newspaper article in which he alleged that the organisation promoted “bogus treatments”.

I fear that my comments on alternative treatments may have opened a whole can of worms and have given every lawyer in the country carte blanche to comment on the efficacy of such treatments.

Richard Barr, a consultant with Scott-Moncrieff Harbour and Sinclair, in Solicitors Journal, wrote:

“When your baby dies, don’t sue me” warned the angry obstetrician when my wife (as she then wasn’t) refused his advice to stay in hospital because her as yet unborn son was stubbornly in the breach position. The obstetrician said there was no hope of turning him and he insisted she should have a Caesarean. She on the other hand really wanted to have a home birth; the problem was solved when her midwife administered a homeopathic remedy. Within hours the baby turned and was born naturally. Last year the baby achieved first class honours at Oxford Brookes University.

Oxford Brookes University! That shows the dangers of dabbling in alternative remedies.

Mrs Barr subsequently decided to train as a homeopath on the basis that although: “on the face of it, it makes no sense at all but I have seen it work so many times that I am convinced that homeopathic remedies work” and expressed the view that there was something about homeopathy that was far more effective than placebo. Richard Barr agrees.

Now, the way that science discovers whether a particular form of treatment works, or works better than placebo, is by undertaking thorough blind trials. If the treatment is shown to outperform the placebo then this suggests that it is effective. When this has been attempted with homeopathy, it has failed to produce any such clear result (see The end of homeopathy?). So how has Mrs Barr been able to identify a set of statistically relevant outcomes that have eluded science?

On the subject of “how does it work”, Richard Barr explains: “It should be remembered that homeopathy is not just a matter of dishing out pills. The key seems to be in the time spent analysing the individual and coming to the indicated treatment for that person. Homeopaths … take a huge amount of time to find out about their patients as opposed to the seven minutes or so that are allocated to the average GP appointment”. Barr has almost certainly hit the nail on the head here but appears to have missed, or at least isn’t prepared to publically spell-out, what conclusion this leads to. To the extent to which homeopathy does, questionably, work, it is not because the extra time spent with the patient is more likely to lead to the “correct” pill being prescribed. There is nothing in homeopath pills that could work. It is the very act of spending time a significant amount of time with the patient, sympathetically discussing their problems, that produces the positive results that homeopathy and other alternative treatments sometimes seem to produce. This is the powerful, and much under-valued, placebo effect.

Of course, I suppose one should not be surprised that lawyers are as susceptible as non-lawyers to alternative therapies and superstitious beliefs. I would confidently predict that a number of readers of the Legal Costs Blog believe, at least to a certain extent, in astrology. I would be equally confident that a high proportion of these readers are Capricorns. Capricorns are well known for their irrational belief in a connection between star signs and personality traits.

Having said all of this, I am seriously considering hiring Paul the “psychic” octopus to advise me on the level of success fees that costs judges are likely to allow in public liability tripping claims.

For yet more on the power of the placebo effect, watch this:

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The following account subsequently formed the basis for an employers liability claim supported by a conditional fee agreement.  With a fixed 25% success fee obviously.

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I think we can all agree that the revocation of the Conditional Fee Agreement Regulations 2000 was a sad day for the legal costs world.

Regrettably, the Jackson Costs Review did not recommend that these Regulations should be restored. The proposal to end recoverability of additional liabilities has much to commend it but the attractions of the Regulations for a paying party do not need to be spelt out.

I’ve been mulling over a suitable mechanism for trying to restore the CFA Regulations 2000 and I think I’ve found a possible answer.

The new government has set up a new website and Deputy Prime Minister Nick Clegg says: “ Your Freedom website issues a ‘call to arms’ against pointless regulation and unnecessary bureaucracy. He wants to know how you would like to see the government balance the rights of the citizen with the laws of the state”. The website invites members of the public to suggest unnecessary rules and regulations that should be repealed.

This website has already produced a number of ideas in relation to CFAs (click link).

Now, this website is really designed to reduce unnecessary rules and regulations but I think I have found a way around this. I have therefore proposed that the Conditional Fee Agreements (Revocation) Regulations 2005 should themselves be revoked. This would presumably reinstate the CFA Regulations 2000. And all in the name of reducing regulations.

If enough defendants and insurers support this proposal we can produce an overwhelming momentum. Make the dream a reality. Vote here.
 

In the course of writing a forthcoming Update: Costs for the Solicitors Journal, concerning naming the wrong defendant in a CFA, I was considering the case of Law v Liverpool City Council [2005] EWHC 90020 (Costs) which deals with this issue. Although unreported, this case usually has the date of judgment being recorded as 10 May 2005 (including on Bailii and in the Senior Court Costs Office’s case summary No 23 of 2007). This is hardly surprising as that is the date that appears on the approved judgment itself.

However, the judgment itself, in turn, refers to the case of Brierley v Prescott [2006] EWHC 90062 (Costs). Having appeared for the defendant in that matter I can confidently state that the date of that decision was 2006. So how did His Honour Judge Stewart QC manage to comment on a 2006 case in 2005?

I’m sure there’s a hilarious joke about time travel to be made there.

I’ll let you know if I come up with anything.

Oh, no. Wait…

How about:

On the back of this decision, the judge was elevated to a Lord. A Time Lord.

No? Oh, well. Please yourselves. 
 

The classified section of the freebie Metro newspaper usually has a section called “Spiritual”. A typical entry reads:

“International renowned spiritual healer, clairvoyant & adviser. I can give advice on family matters, loved ones, depression, courts cases, anti social behaviour, stress, exams, career, etc. One minute walk from Plaistow station.”

Actually, the one minute walk from Plaistow station part may not be typical.

This particular advert was headed “Pay After Positive Results”.

My interest was obviously caught by the “no win no fee” help with court cases.

This might suggest a spiritualist very confident in his abilities. Of course, if his clients’ court cases were determined solely by the toss of a coin he would be successful in 50% of cases. If he received a cut of any damages this could be a very lucrative little earner. Even if the success rate of his clients is less than 50%, those who win will presumably put success down to the “assistance” he has given (why else would you go to a spiritualist for help with a court case?) and happily pay his fees.

Now, if it is possible to influence the outcome of court cases through a spiritualist, and ignoring English witchcraft laws, what do the laws of champerty and maintenance have to say on the matter? This requires further investigation.