CFA Retainer mistakes are a costly business and whilst “Retainers” is a topic as old as time, we all know, retainers are the basis for successful costs recovery; whether that be on an inter partes basis or solicitor/own client basis.

However - rules change, qualification routes change, and SCCO guidance on rates change. Firms merge, rebrand,  and, sadly, some close and their claims transfer elsewhere. Success fees were once recoverable inter parties, and now they are not and then there is the case law that pops up every now and again, with on heck of a clout! Retainers may be long in the tooth but CFA Retainer Mistakes are as easy to make now, as they were when they were introduced.

Three CFA Retainer Mistakes - Likely to Cost You

So, what are three of the key retainer “details” that could cost you the most?

• Party/claim details
• Hourly Rates
• Deductions

These are common issues, that you will be live to already, but have you ever thought about them this way:

1) CFA Retainer Mistakes - Party/Claim Details

Question 1: Do you name your opponents in a CFA? If yes, then why?

Our view: You don’t need to name your opponent. Doing so could actually potentially, and inadvertently, limit you to not being able to recover your costs at all if your CFA names the wrong Defendant and you end up pursuing, and succeeding against, another unnamed Defendant.

Keep your CFA detailed enough to clearly identify the claim to which it relates, but not so limiting that it appears It is against only one party for fear of that party not being the ultimate person responsible for damages and costs. vague

Question 2: Are your CFA’s set to wording that refers to an agreement “in respect of your PI claim”?

Our view: If your claim is a PI claim, but ends up being on behalf of a protected party you need to ensure that your “party” wording detail is clear and that it says that it is “x person (litigation friend)” on behalf of “x person (protected party)”. Alternatively, if it is a claim that is on behalf of an estate, or includes a claim that is on behalf of an estate, you need to make it clear that that is what the claim relates to “a claim for PI in respect of “X”” and/or “a claim on behalf of the estate”.

Failure to make the position clear, and suggesting it relates to a PI claim alone, could be a render your CFA to become invalid and your costs may be irrecoverable.

2) CFA Retainer Mistakes - Hourly Rates

Question 1: Does your retainer refer to descriptions of fee earners, or fee earner by name?

Our view: Do you set out Grade A,B C etc or name them based on Partner, Solicitor with 8 years PQE etc? Or do you name the fee earners when detailing the rates you intend to charge?

The latter (fee earner named instead of fee earner type/description) could cost you on a costs recovery, in the event of that fee earner moving up a Grade by virtue of experience or if another handler/s takes over conduct of the claim, even if the new handler simply seeks the same hourly rate as their predecessor.

If the CFA names people by name and you have a handler who wants to seek an increased hourly rate part way through a claim due to a promotion or increase in PQE bracket experience,  then you should ensure that your CFA makes provision for updated hourly rates to be advised in the lifetime of the claim if you want any update letter (when a fee earner attains an increased level of experience) to go unchallenged.

Also, if the CFA names people by name and a new handler isn’t named in there, your first hurdle to overcome is to ensure your CFA allows provision for other, unnamed handlers to undertaken work. Next, if a new handler does work on the CFA (who isn’t named in there), they need to be providing the client with an update as to what they charge.

Question 2: Do the rates in your CFA match your standard terms of business/letter of engagement sent around the same time and do they cover the same costs?

Our View: If you have conflicting information/conflicting rates, the client will always get the benefit and only ever be expected to pay the lower or the two costs on a solicitor/own client basis. This in turn means the paying party (on an inter party paying basis) also gets the same benefit, by virtue of the Indemnity Principle. So ensure all client care/retainer documents match, and your agreement is considered as a whole.

3) CFA Retainer Mistakes - Deductions from Damages (post April 2013 agreements)

Question 1:  Is your success fee set out and supported?

Our view:  We all know that a post LASPO CFA (post April 2013) needs to cap any success fee to 25%, but did you know this is not a fixed success fee? It is a cap on any deduction from damages relating to the success fee agreed. The success fee itself can vary. Some solicitors have been known to assume that detailing the fact that the success fee is capped at 25% is enough. But is it?

If seeking to recover a success fee from your client, one must set out the level of the success fee, as well as the level of deduction, in the CFA and normally also calculate the risks of the claim and then calculate the success fee attributable to that risk assessment at the time of entering into the CFA. It is imperative that you evidence this and communicate it to the client. Informed consent is critical.

However, some firms have been known to simply include a set success fee as standard. This is questionable, and was an issue tried in the case of Herbert-v-H-H-Law Ltd where it was determined, by the Court of Appeal, that the way that success fee is traditionally calculated is by reference to a percentage uplift derived from the risks of the individual case, so if a solicitor proposes to charge a success fee, on a different basis, it is incumbent upon the solicitor to explain why the success fee is calculated in that way, and to be clear that risk plays no part in the calculation. The solicitor must also ensure that the client is in no doubt that the success is not recoverable from the opponent to litigation as part of the costs, and must be paid by the client from her own resources. If a client is told these things, then informed consent to the success fee can be argued to have been given and the solicitor may rely on the application of the presumptions in rule 46.9 CPR.

Absent an appropriate risk assessment, you may fall fowl of having your success fee reduced. Absent Informed consent, you may have your success fee determined at nil/not be allowed to take a deduction at all.

Question 2: Are you seeking to recover the shortfall on costs from your client? Does your CFA allow for this and is it capped?

Our view: This is a complex area of law but one that again comes down to the question of informed consent. Not all CFA’s provide for a recovery of any shortfall in costs to be deducted from the client’s damages (in addition to the success fee), but this could well be something that is about to change given the wider implementation of Fixed Recoverable Costs (FRC). The broadening of FRC is set to limit solicitors and tighten purse strings further. If you want to recover more than FRC in such qualifying cases, though you can’t do that on an inter parties basis, you may be able to recover further sums from your client IF your CFA makes provision for you to do so.  This deduction is not capped by statute the same as the success fee is, but it does need to be explained to your client from the outset and detailed within the CFA. Failure to do so would mean that such costs are not properly payable by a client and would likely be challenge don a solicitor/own client assessment.

For more information on CFAs and in particular CFA Retainer Mistakes, contact Charlene Turner here.

Further reading on CFA Retainer Mistakes...

Is you CFA for for purpose? - https://paramountlegalcosts.co.uk/is-your-retainer-fit-for-purpose/

Navigating the Indemnity Principle: Protecting Your Hourly Rates - https://paramountlegalcosts.co.uk/navigating-the-indemnity-principle-protecting-your-hourly-rates/

Does your retainer limit your recovery (more than you intended)? - https://paramountlegalcosts.co.uk/does-your-retainer-limit-your-recovery/