Firms acting on housing disrepair cases must advise their clients to consider pursuing claims through legal aid rather than conditional fee agreements (CFAs), and will have to settle for a 25% success fee if they do proceed on a no-win, no-fee basis, a leading costs judge has ruled.

Deciding on costs in Bowen (and ten others) v Bridgend County Council, Master O'Hare applied 'by analogy' the 2001 ruling in Sarwar v Alam, a motor-accident case where it was decided that clients should use alternative funding such as legal expenses insurance if it was available.

Master O'Hare said Liverpool firm PD Associates (PDA), which acted for all 11 of the claimants in Bowen, had materially breached the CFA Regulations 2000 by failing to give adequate advice about seeking public funding.

Reasonable claimants would have opted for legal aid if they were properly advised, he said.

A second breach occurred when PDA told clients they were bound to take out an after-the-event insurance policy without discussing other insurance options.

The firm's CFA - which provided for a 100% success fee - was therefore unenforceable.

The master restricted costs to 1,000 for each case; PDA had claimed an average of 8,012.

Using simple road-traffic accident claims as a yardstick for deciding success fees, he estimated that disrepair cases run on enforceable CFAs were more risky and demanded a higher uplift of 25%, although he admitted that there was little statistical information to guide him.

The master also criticised PDA for working under CFAs, which in some cases had not been signed by the clients themselves, but gave the firm extended time to appeal.

PDA partner Paul Davis said: 'Master O'Hare stipulated that these were not to be test cases and dealt with the cases on the merits, although very little information in relation to the availability of legal aid and the provision of the service was put before him at the actual hearing.'

He added that the defendants were also ordered to pay the costs of and incidental to the detailed assessment in all 11 cases.

He said: 'The matter is therefore only part heard and has been re-listed for a two day hearing on 17 and 18 May 2004.

'It is understood that the master left open the point that any back-up retainer may be prayed in aid so that costs may still be payable.'

Cardiff firm Dolmans acted for the council.

Partner Simon Evans said increased availability of CFAs had caused an 'explosion' of disrepair cases.

'This judgment - subject to any successful appeal - will save social landlords millions of pounds in legal costs and should also have the effect of preventing the furtherance of a number of claims and the influx of new claims.'

Paula Rohan