'Unenforceable' CFAs escalate costs chaos

The 700-plus law firms on The Accident Group (TAG) panel have been thrown into disarray by a county court decision earlier this month which ruled that the conditional fee agreements (CFAs) used under the scheme are unenforceable and the insurance premium unrecoverable.

The ruling comes amid a flurry of more technical challenges to claimant solicitors' CFAs as well as preliminary results of a Law Society survey which indicates little appetite for fixed fees.

The Gazette's sister publication, Litigation Funding, has discovered that tens and maybe even hundreds of thousands of CFAs could be invalidated as a result of English v Clipston, which is to be appealed and could be fast-tracked to the Court of Appeal.

The case has serious implications for other claims management companies which operate a similar model to TAG.

TAG clients are visited at home by an employee of its associated company, Accident Investigations, to explain the CFA among other things, ostensibly fulfilling the role of the 'legal representative' who gives the client information and advice required by the CFA Regulations 2000.

District Judge Wharton in Peterborough County Court decided this person was not an agent of the solicitor, and did not constitute a 'legal representative'.

He said: 'The duties of the legal representative are simply non-delegable beyond, in the case of the panel solicitor, members of his firm.' He added that the solicitor's indemnity insurers 'may be entitled to avoid policy liability' in claims arising from the employee's advice.

Judge Wharton further ruled that the claimant's solicitors - Barnsley firm Mills Kemp & Brown - could not avoid their responsibilities under the regulations to advise their client about the suitability of TAG insurance simply because the client had already signed up to it.

He pointed out that this provided a conflict of interest for solicitors tied into the TAG scheme.

Mills Kemp & Brown partner David Wilson said: 'I think TAG won't exist if this judgment is upheld.'

TAG has instructed Manchester firm Rowe Cohen to take over the appeal.

A statement expressed disappointment over the decision, noting that the point has already been argued unsuccessfully elsewhere.

It said the appeal would concentrate on authorities over the agency issue which the judge had not considered.

Manchester firm Tranters Freeclaim has already gathered a dozen claims against TAG panel firms on behalf of clients who have suffered deductions from their compensation, such as where the premium has not been recovered.

It is understood that Senior Costs Judge Peter Hurst has a similar TAG case to English - called Little - awaiting directions next month.

The English appeal could be stayed while this case catches up.

In other cases reported by Litigation Funding, a district judge in Middlesbrough upheld a challenge which could invalidate CFAs based on the Society's pre-July 2000 model, while in Macclesfield, famed claimant firm Amelans has come off the wrong side of a ruling which said CFAs have to be explained in writing separately rather than just in the body of the CFA, and that solicitors have to make it clear when they do not have an interest in the insurance policy, rather than just when they do.

The Society said other decisions on the old model CFA had gone in its favour, and that it is considering whether to consolidate the cases for an authoritative ruling.

There has been no challenge to the current model CFA.

Amelans has appealed the Macclesfield case.

Of the 576 replies to the Society's fixed fees survey which have been received so far, 76% are against the idea.

The objections most frequently cited were that cases were too variable and that fixed costs would not provide adequate remuneration.

Those in favour said certainty was the main benefit.

A Society spokeswoman said: 'The views expressed by respondents to the survey show the scale of the task that the Civil Justice Council has set itself in trying to devise a scheme of fixed costs by consensus.

It highlights the need to avoid a solution which is worse than the problem that it is intended to solve.' The council's predictable costs working group hopes to report late this year or in early 2003.

Neil Rose