The possibility of making a retrospective Conditional Fee Agreement (CFA) has been considered in a number of cases, highlighting an issue of growing importance to practitioners who use this type of agreement. Although the case law is not as yet completely
The possibility of making a retrospective Conditional Fee Agreement (CFA) has been considered in a number of cases, highlighting an issue of growing importance to practitioners who use this type of agreement. Although the case law is not as yet completely clear on this point, a retrospective CFA covering a short period is unlikely to encounter any significant problems in principle, providing that certain information is properly conveyed to the client.
Forde -v- Birmingham City Council (2008 EWHC 90105 (Costs) is a recent case on this point that highlights the circumstances in which one can use a retrospective agreement to replace an earlier defective retainer and also shows the legitimacy of entering into a CFA after being instructed but relating back to the date of first instruction.
Previously to the Forde case, the general principle of a CFA having retrospective effect had been endorsed by the Judiciary (Holmes -v- Alfred McAlpine Homes (Yorkshire) Ltd (2006) EWHC 110 and King -v- Telegraph Group Ltd (2005) EWHC 90015 (Costs) as it was accepted that a client, in signing a retrospective CFA was ratifying what had gone before, i.e. the client's obligations under an original retainer as between solicitor and client had been waived in place of the new retrospective agreement. Prior to Forde, however, Master Hurst had held (in King) that on consideration of the success fee to be applicable to such a retrospective agreement, it would be against public policy to allow a success fee to be recovered for work done before the actual date of the CFA. Essentially base costs would be safe, but the success fee would only be claimable from the date of the agreement.
What Forde has done is to illicit further clarification on the point. A number of difficult complex issues arose in this case including a challenge in respect of adequate consideration, which I shall not detail here. Master Campbell held:
- The fact that the solicitors continued to act to represent the client amounted to consideration and that, so long as there is some consideration, the Courts are not concerned with its adequacy.
- A CFA can be retrospective.
- Where proceedings have been issued, a success fee will not be recoverable for the period until Notice of Funding has been given (following the reasoning given in King)
- If a case is settled pre-issue, a success fee would be recoverable retrospectively whether the opponent had been informed of the CFA or not. This was because the obligation to give notice of funding in respect of a CFA under the rules of Court only arises upon issue of the claim.
- In respect of the level of success fee to be allowed, the Court would have regard to the reasonable assessment of risk as at the date the retrospective agreement was signed, not as to the risk which may have existed at the retrospective earlier date.
Essentially it is perfectly acceptable to replace an existing private retainer with a CFA which has retrospective effect. A client who instructs solicitors is generally deemed to understand that they will be required to pay the firm a reasonable rate for work done (Adams -v- London Improved Motor Coachbuilder Ltd (1921) 1 KB 495); a position supported by the implied term in s.15 Supply of Goods and Services Act 1982. This is more so in the context of a professional client, which is something that the Court would be unlikely to find difficulty with, even if such a client had not been given a copy of a firm's standard terms of business. However, this is subject to one extremely important point, which is that the client is not given the impression or informed from the outset that the case is being run on a CFA basis.
For retrospectivity to work the CFA must replace an existing agreement, however if the client is offered an unwritten CFA at the outset then this agreement would breach s.58 of the Courts and Legal Services Act 1990, raising implications about what the client had been told about any existing liability prior to signing up to the retrospective agreement. Furthermore a retrospective CFA must always be expressed to be ‘retrospective' and not just backdated and be dated with the date of entry but state that it relates to an earlier date.
Turning back to success fees, it is worth pointing out (despite the decisions in King and Forde) that success fees are routinely recovered for periods of time before an opponent is made aware that the case is being funded under such an agreement, as can be seen in Cullen -v- Chopra (2007) EWHC 90093 (Costs). Furthermore where proceedings have been issued but the opponent only learns of the CFA after that date there is not necessarily a barrier to recover the success fee, as suggested in the case of Supperstone -v-Hurst (2008) EWHC 735 (Ch). So there are arguments to support the contention that success fees can be recovered for the duration of a retrospective CFA provided that Notice of Funding is provided in accordance with the rules of the Court. In respect of providing Notice, the only requirement is that the opponent is told that the case is being run on a CFA and its date, however in practice it is advisable to also provide details of the earlier date the agreement is expressed to run from in order to avoid a challenge regarding possible prejudice.
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