Unenforceable CFA for Clinical Negligence Claim results in huge costs saving of over £1.3 million

Clyde & Co represented two NHS Trusts (instructions from NHS Resolution) at a preliminary hearing in the detailed assessment process in the Senior Courts Costs Office.

The judgement can be found here

We made a successful argument on a point of principle, that the Claimant’s Conditional Fee Agreement (CFA) was unenforceable after the Claimant failed to comply with the old contract regulations “The Cancellation of Contracts Made in a Consumer’s Home or Place of Work etc. Regulations 2008 (“The Regs”). The regulations still bite for contracts that were concluded prior to 13 June 2014. As a result of the unenforceable CFA the Claimant will only be awarded the ATE premium and very limited disbursements after costs were claimed at just under £1.4 million.

Background 

The Claimant is a protected party who made a clinical negligence claim (via his wife and litigation friend) for serious personal injury. 

Following an agreed settlement the court approved a substantial damages package including periodical payments. The Claimant subsequently sought total costs at almost £1.4 million and detailed assessment was eventually commenced. 

We contended on behalf of the two NHS Trusts that the CFA agreement between the Claimant and his solicitors was unenforceable.

The disputed issues

As the CFA agreement was made at the home of the Claimant and his wife/ litigation friend “The Regs” applied and we contended that the CFA agreement alongside the Notice of the Right to Cancel were defective for multiple reasons. 

The notice of cancellation was a standard pro forma notice with no case specific wording included. The Regs state “traders shall be required to give written notice of their right of cancellation within the period laid down in Article 5, together with the name and address of a person against whom that right may be exercised. Such notice shall be dated and shall state particulars enabling the contract to be identified.” The identity of the parties should be noted, and the traders should pre complete parts of the notice. The notice should also be provided no later than the time the contract is concluded.   

We referred to the case of Allpropertyclaims Ltd v Tang [2015] EWHC 2198 (QB) which shows the strict approach taken in this regard. Here the contract was unenforceable where the cancellation notice was not left with the defendants, despite being completed correctly and the defendants being fully aware of the right to cancel.  

We raised the point that the CFA was also dated incorrectly as the written date was 18 September 2012 although it was entered into on 26 September 2012 which was the date the solicitor entered the Claimant’s home and had the CFA agreement signed by his wife/ litigation friend. The Claimant’s solicitors stated that this was because the file was initially opened on 18 September when instructions were taken from the litigation friend by telephone and a large amount of work was carried out to open the file.

They stated that, in the alternative, the Claimant had later affirmed the CFA agreement to rectify any issues. However, we argued that there was no evidence she had independent legal advice before affirming and we quoted W v Veolia Environmental Services (UK) Plc [2011] EWHC 2020 (QB) where it was held that affirmation was not possible for an unenforceable contract. 

The Claimant also argued that recovery of costs was alternatively possible under quantum meruit. However, quantum meruit does not apply where it would undermine the policy of the statute which renders the contract unenforceable. We argued that it would render the regulations in question toothless if this were to be allowed as there would be no sanction for the claimant. 

When it came to disbursements, we referred to Hollins v Russell [2007] 1 WLR 2487 where the CFA was unenforceable and disbursements would only be recoverable where they were:

1. paid directly by the client;
2. paid out of proceeds of a loan for which C is liable; or
3. client has a direct contractual liability for them which does not depend on the CFA. 

Therefore any disbursements paid by the solicitor directly would not be payable by the Defendants if the CFA agreement was found to be unenforceable.  

Outcome of the hearing

It was held that the CFA was unenforceable. The Defendants were successful on all points raised. 
There were material defects in the notice as read in conjunction with the CFA agreement. The date was problematic on the CFA as it should have been dated the day it was signed, and the 7 days for cancellation of the CFA expired by the time the agreement was even signed. The notice of cancellation didn’t include a date at all when it should have been dated. 

There was no reference or code included to identify the contract which was a mandatory requirement and therefore a material omission. The failure to confirm to the Claimant/ litigation friend that the notice would be deemed served as soon as it was posted was another material omission. It was noted that it would not have been ineffective purely for the fact the notice was not included with the CFA as that was not seen as a material omission.   

It was held that in order for the litigation friend to provide valid affirmation she would have had to know the contract was unenforceable in the first place and there was no evidence that she knew this. The litigation friend was not made aware of what effect signing the affirmation could potentially have, regarding all the extra money the Claimant could have to pay from his damages. This would have potentially been thousands of pounds, had the affirmation changed the CFA agreement from unenforceable to enforceable. The quantum meruit argument was also rejected.

In relation to disbursements, the court found the ATE premium to be recoverable as agreed between the parties and the claimant would be limited to any disbursements which the claimant had personally paid. The court stated that there was no evidence that any other disbursements were paid by the claimant. Aside from this the claimant will not recover any of the further costs claimed at almost £1.4 million.

Discussion

It is important to bear in mind scenarios where old regulations and statutes do still apply and can be used to an advantage. Here the relevant regulations have been revoked and replaced with the new Consumer Contract (Information, Cancellation and Additional Charges) Regulations, for contracts concluded on or after 13 June 2014. However, there are still a number of longstanding catastrophic injury claims where the CFA will have been entered into when the old regulations were still in place and so they would still bite. 

It is important to think outside the box when making costs arguments and to always look at whether an argument can be made regarding enforceability of a CFA agreement. Technical arguments such as these can lead to the greatest costs savings.