Jones v Wrexham Borough Council

A conditional fee agreement qualifies as a “CFA Lite” where, apart from the permitted defaults in regulation 3A(5), the arrangement removes the client’s personal exposure to own-side fees, expenses and disbursements except to the extent recovered from another source. The court must construe the whole solicitor-client arrangement, including a signed client-care letter and contemplated insurance, as at the date of agreement.

Recovery “otherwise” under regulation 3A(1) includes recovery under an insurance policy. Where these requirements are met, regulations 2, 3 and 4 of the Conditional Fee Agreements Regulations 2000 are disapplied.

A child was injured and her mother pursued a personal injury claim under a conditional fee agreement supported by after-the-event insurance. Following the claim, the defendant council challenged the agreement’s enforceability when costs were sought.

A district judge held that the agreement, client-care letter and insurance together constituted a “CFA Lite” within regulation 3A of the Conditional Fee Agreements Regulations 2000. His Honour Judge Holman allowed the council’s appeal. He held that the client-care letter could not override the formal agreement and that insurance did not constitute recovery “otherwise”. He consequently applied regulation 4 and held the agreement unenforceable because the solicitors had failed to disclose an interest in recommending the insurer.

The central issue was whether the complete solicitor-client arrangement satisfied regulation 3A, thereby disapplying regulation 4.

1. Appeal allowed unanimously. The conditional fee agreement was a “CFA Lite” within regulation 3A of the Conditional Fee Agreements Regulations 2000. Regulation 4 therefore did not apply.

2. Regulation 3A(1) asks whether the solicitor-client arrangement removes the client’s personal liability for own-side fees and expenses, except in the circumstances permitted by regulation 3A(5). The expression “fees and expenses” includes own-side disbursements. Recovery “otherwise” is sufficiently broad to include payment under an insurance policy: per Waller and Hughes LJJ, Longmore LJ agreeing.

3. The arrangement must be construed as a whole. The court may consider the formal agreement, a signed client-care letter explaining its effect, and the insurance contemplated by them. Section 58 of the Courts and Legal Services Act 1990 requires a written and signed agreement but does not require every term to appear in one document. The construction is objective and focuses on the solicitor-client relationship from the perspective of an ordinary lay client.

4. Compliance is assessed when the agreement is entered into. A possibility that insurance might later be avoided or prove insufficient does not prevent qualification where valid and apparently sufficient cover exists at that time. Here the letter assured the client that unrecovered own-side costs would be waived or met through recovery from the defendant or insurance.

5. Contractual termination provisions did not take the arrangement outside regulation 3A. Requests for improper work, deliberate misleading and similar defaults amounted to failures to co-operate within regulation 3A(5). Waller LJ considered that the client-care letter also protected a client who reasonably rejected settlement advice. Hughes LJ reached the same result on the narrower ground that the agreement gave the solicitors control of settlement, so disagreement constituted non-co-operation for the purposes of regulation 3A(5).

6. Obiter, regulations 4(2)(c), (d) and (e) would apply cumulatively even where insurance already existed. The solicitors’ dependence on panel referrals created an indirect financial interest in recommending the panel provider’s insurance. Had regulation 4 applied, the failure to disclose that interest under regulation 4(2)(e)(ii) would have made the agreement unenforceable.

1. Court of Appeal (Civil Division): Allowed the claimant’s appeal and held that the agreement was a qualifying “CFA Lite” under regulation 3A of the Conditional Fee Agreements Regulations 2000.
2. Manchester County Court, His Honour Judge Holman: Allowed the defendant’s appeal from the district judge. He held that the agreement was outside regulation 3A and was unenforceable for non-compliance with regulation 4(2)(e)(ii).
3. Manchester County Court, District Judge Fairclough: Held that the client-care letter and insurance could be considered with the formal agreement, and that the resulting arrangement fell within regulation 3A.