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The recent decision in Corsi v Progressive Financial Services (which you can read a bit more about here) serves as a lesson that legitimate challenges to the enforceability of post-CFA Regulation CFAs can be - and are being - raised. Many who thought that their CFAs were incapable of being challenged may have to think again. There are a number of statutory and common law requirements that must be complied with in order to ensure that a ‘modern’ CFA is enforceable. This post will give a brief overview of those requirements.
A CFA is defined by s.58(2)(a) of the Courts and Legal Services Act 1990 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.”
A CFA may or may not provide for a success fee. There are a number of statutory requirements which must be complied with in relation to all CFAs and some requirements which must be complied with only where the CFA provides for a success fee.
s.58(1) of the Courts and Legal Services Act 1990 provides:
A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement; but (subject to subsection (5)) any other conditional fee agreement shall be unenforceable.
The first set of conditions referred to in s.58(1) are to be found in s.58(3) which provides:
(3)The following conditions are applicable to every conditional fee agreement—
(a)it must be in writing;
(b)it must not relate to proceedings which cannot be the subject of an enforceable conditional fee agreement; and
(c)it must comply with such requirements (if any) as may be prescribed by the Lord Chancellor.
Taking each of these requirements in turn:
When it is established that a solicitor is representing a client, there arises a rebuttable presumption that the client is liable to pay for the work done by the solicitor (see, for example, Adams v London Improved Motor Coach Builders  1 KB 495). It is not normally necessary for a retainer to be evidenced in writing in order for the same to be enforceable. However, it is clear that one cannot have an 'implied' CFA.
s.58A of the Courts and Legal Services Act 1990 provides:
(1)The proceedings which cannot be the subject of an enforceable conditional fee agreement are—
(a)criminal proceedings, apart from proceedings under section 82 of the Environmental Protection Act 1990; and
(2)In subsection (1) “family proceedings” means proceedings under any one or more of the following—
(a)the Matrimonial Causes Act 1973;
(b)the Adoption Act 1976;
(c)the Domestic Proceedings and Magistrates’ Courts Act 1978;
(d)Part III of the Matrimonial and Family Proceedings Act 1984;
(e)Parts I, II and IV of the Children Act 1989;
(f)Part IV of the Family Law Act 1996; and
(g)the inherent jurisdiction of the High Court in relation to children.
At the time of writing there are no such requirements.
The second set of conditions referred to in s.58(1) are to be found in s.58(4) which provides:
The following further conditions are applicable to a conditional fee agreement which provides for a success fee—
(a)it must relate to proceedings of a description specified by order made by the Lord Chancellor;
(b)it must state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased; and
(c)that percentage must not exceed the percentage specified in relation to the description of proceedings to which the agreement relates by order made by the Lord Chancellor.
The only proceedings which can be the subject of a CFA that may not attract a success fee are Magistrates’ Court proceedings brought pursuant to s.82 of the Environmental Protection Act 1990 to abate a statutory nuisance (Art. 3 of the Conditional Fee Agreements Order 2000).
This requirement is self-explanatory, and is the requirement which was not complied with in Corsi.
The success fee must not exceed 100% (Art. 4 of the Conditional Fee Agreements Order 2000).If the success fee does exceed 100%, the CFA will be unenforceable.
By way of example, in Jones v Caradon Catnic Ltd a CCFA which provided for a success fee of 120% was held to be unenforceable and the successful Claimant was unable to recover any of his solicitors’ costs from the Defendant.
If the CFA provides for a ‘bonus payment’ in the event of a successful outcome in addition to a success fee and the total of the bonus payment and the success fee exceeds 100%, the CFA will be unenforceable. In Oyston v Royal Bank of Scotland plc, a CFA which provided for a 100% success fee plus a bonus of £50,000 was held to be unenforceable.
If a CFA is entered into on or after 1 October 2008, the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008 may apply.
Reg. 5 of the CCCHPW Regulations provides:
These Regulations apply to a contract, including a consumer credit agreement, between a consumer and a trader which is for the supply of goods or services to the consumer by a trader and which is made—
(a)during a visit by the trader to the consumer’s home or place of work, or to the home of another individual;
(b)during an excursion organised by the trader away from his business premises; or
(c)after an offer made by the consumer during such a visit or excursion.
As such, if a CFA is entered into in any of the circumstances outlined above, reg. 7 of the CCCHPW Regulations must be complied with. These Regulations can be found here. Their key provisions insofar as solicitors are concerned are that clients must be given written, dated, legible notice, incorporated into the CFA that:
And this information must be:
The form and manner in which notice of cancellation must be delivered must also be detailed in the CFA.
Reg 7(6) of the CCCHPW Regulations provides that:
A contract to which these Regulations apply shall not be enforceable against the consumer unless the trader has given the consumer a notice of the right to cancel and the information required in accordance with this regulation.
If the CCCHPW Regulations apply and are not complied with, the CFA will be unenforceable.
CFAs are subject to the same common law requirements as any contract. In order for a CFA to be enforceable, the requirements which we learnt about all those years ago at university must be met.
Of particular importance to practitioners will probably be the requirement for capacity to contract. CFAs with minors, Protected Parties or clients who were intoxicated at the time of entering into the same will not be enforceable.