A government bid to give the key element of the Jackson reforms retrospective effect was today branded “patently unfair” by costs experts and likely to encourage defendants to start stringing out cases.
The Legal Aid, Sentencing and Punishment of Offenders Bill currently states clearly that success fees will still be recoverable on conditional fee agreements (CFAs) that are entered into before the reforms come into force.
However, this is subject to an amendment laid by justice minister Lord McNally, which will be debated in the bill’s House of Lords report stage this week. Though not entirely clear, this appears to say that where a costs order is made after the reforms go live, the success fee will not be recoverable, even if the CFA was signed before the provisions come into force.
Iain Stark, chairman of the Association of Costs Lawyers, said: “Putting aside the rights and wrongs of the Jackson reforms, it is patently unfair to retrospectively change the terms of the agreement between solicitor and client. Depending on the terms of the CFA, solicitors may suddenly find themselves unable to claim their budgeted success fee from either the other side or their own client. Barristers would be similarly affected.”
Mr Stark said the amendment, if passed, would put solicitors taking on new clients in a dilemma over whether to take the risk that the case will conclude before April 2013, the date when the reforms are currently expected to come in. They will also have to advise clients accordingly.
He added: “The amendment is a licence for paying parties that want to avoid paying success fees to start stringing cases out so that the costs o
rder is made after the commencement date.
“Retrospective legislation is rarely a good idea and it is hard to see any justification for this change. Success fees should cease being recoverable for agreements entered into after the commencement date – that is the simple, logical and fair approach.”
Simon Gibbs, a partner at defendant costs practice Gibbs Wyatt Stone, said the amendment would cause significant practical problems, asking: “Why would any defendant settle a claim between now and April 2013?”
He said that existing clients – who as a double whammy would not be subject to the Jackson 25% success fee cap – “would have been denied any opportunity to make an informed decision to try to negotiate the level of success fee with the solicitors or find solicitors who would charge a lower success fee – a central element of Jackson’s vision”.
Solicitors who have CFA Lites would be unable to recover any success fee, he added, while practitioners will need to consider the impact on their advice: “If a solicitor gives this information to a client when entering in a CFA at any point since this amendment was proposed – apparently 7 March 2012 – and this amendment is then implemented, it would almost inevitably make any such advice negligent and almost certainly prevent the solicitor recovering the success fee from the client.”
However, others have suggested that the woolly drafting of the amendment masks that it is actually aimed more narrowly at catching collective CFAs signed before April 2013.
UPDATE 13 March: A Ministry of Justice statement has clarified the situation: “We are committed to reforming the ‘no win no fee’ system so that legal costs for reasonable compensation claims will be more proportionate, and avoidable claims will be deterred from going to court. This amendment brings collective conditional fee agreements in line with our planned reforms to conditional fee agreements. This means that success fees will not be recoverable in either type of case from April 2013 onwards.”