Corsi v Progressive Financial Services – Unenforceable CFA is Unenforceable
Claimant solicitors who thought that the challenges to the enforceability of CFAs were a thing of the past need to pay heed to a decision made in 2011 in the Nottingham County Court.
Permission to appeal the judgement in the matter of Corsi v Progressive Financial Services Ltd t/a Welcome Financial Services unrep. (17/06/2011) Nottingham CC DJ Hale has been refused.
Corsi concerned a challenge to the validity of a CFA. Whilst such challenges are commonplace in relation to CFAs entered into prior to the revocation of the Conditional Fee Agreements Regulations 2000 on 1 November 2005, they arise very rarely in relation to CFAs entered into following that date. This case should therefore grab the attention of anyone who thought that these arguments were consigned to the history books.
Ms Corsi instructed a Claims Management Company (‘the CMC’) to pursue a claim arising out of the an agreement between her and the Defendant. The CMC subsequently instructed Counsel on Ms Corsi’s behalf pursuant to a CFA.
The CFA appears to have been in a standard one-page form. The clause of the Agreement that provoked the challenge was that relating to the success fee, which provided:
- If the matter progressed to trial, a success fee of 100% would be payable; and
- If the matter concluded between 14 and 21 days before a fixed trial date, a success fee of 75% would be payable;
Crucially, the CFA made no reference to the success fee that would be payable if the matter concluded less than 14 or more than 21 days before a trial.
It was the Defendant’s position that the CFA fell afoul of ss.51(1) and 58(4)(b) of the Courts and Legal Services Act 1990 (‘the Act’) which require a CFA that provides for a success fee to state the level of the success fee.
The Claimant’s Counsel accepted that the drafting of the CFA was unsatisfactory and that the same was defective as a result of the potential ambiguity which could arise from the omissions. However, the Claimant’s Counsel argued that there was no material departure from s.58 of the Act and, as such, the CFA was not unenforceable per se. The effect of the omission, the Claimant’s Counsel argued, should be that base costs should be allowed with either a 75% success fee or no success fee in addition.
Having “listened patiently” to the submissions of the Claimant’s Counsel, the Court held that:
- The conditions under s.58(4) of the Act are strict.
- Even if the requirements under s.58(4) of the Act were not strict, there was no scope to construe the same in the manner advocated by the Claimant’s Counsel.
- The Act requires clients to be informed of the percentage increase payable in all cases. Its purpose is to safeguard the interests of the client and ensure the administration of justice.
- The questions of whether the CFA is comprehensible, complete and compliant have to be addressed based on the document as signed.
- There is a wealth of case law which confirms that failure to comply with s.58 of the Act (or Regulations made thereunder) renders a CFA unenforceable.
- The CFA in this matter was therefore unenforceable and no costs were recoverable by the Claimant.
The jurisprudence that entering into a CFA which does not comply with s.58 of the Act will result in no costs being recovered is established. The wording of s.58 of the Act is perfectly clear and the requirement to provide the information referred to is mandatory. The original judgement – and the subsequent refusal of permission to appeal against that judgement – can only be correct.
Perhaps the most surprising element of this case is the fact that the Claimant believed the appeal had a “real prospect of success.”
All practitioners who have entered into CFAs which provide for a success fee need to pay close attention to whether the same are enforceable under s.58 of the Act with this judgement in mind. Challenges to the enforceability of CFAs are not yet dead and buried.