A client wants to transfer a claim to New Solicitors
What is the Common Practice?
When a client is unsatisfied with the work undertaken by their solicitor in a personal injury claim they may want to transfer their claim to a new solicitor. Usually the solicitors (‘previous solicitors’) will transfer the file and wait until the end of the case so that their costs are preserved when acting for their former client under a Conditional Fee Agreement (CFA) otherwise known as ‘No, Win, No Fee.’
The ‘new solicitors’ will ensure that the work done by the previous solicitors will be recovered from the losing party at the conclusion of the case.
This has been the routine procedure for many firms handling new claims transferred from previous personal injury solicitors where the client had the benefit of a CFA.
But there are implications? Many solicitors may be unaware whether the ‘cost cap’ is applicable on the date of the termination of the the CFA and therefore whether to elect to ‘stick’ or ‘twist’ under conditional fee personal injury claims.
What is Stick or Twist?
This new terminology has been used in this leading decision on the subject in the case “Sellers v Simkins.” The focus was whether costs are capped when a client ends a CFA before winning their case. This ruling has substantial implications for clients, their previous and new solicitors, especially when a CFA is terminated mid-proceedings.
To understand this case it is important to know o that:
- Law Society standard terms and conditions were used:
- No success fee was payable:
- The overall cap on the client’s liability for costs payable was worded as follows;
‘We will limit the total amount of charges, success fees, expenses and disbursements (inclusive of VAT) payable by you (net of any contribution to your costs paid by your opponent) to a maximum of 0% of the damages you receive.’
1. For Clients Who Want to Transfer to New Solicitors: If a client terminates a CFA before winning their case, they might lose the protection of a costs cap. This means they could owe more to their previous solicitors than what they might recover from the other party or a set percentage of damages.
2. For Previous Solicitors: Solicitors whose CFAs are terminated must decide when to claim their costs. They can choose to claim immediately (“stick”) or wait until the case concludes (“twist”). This decision depends on the CFA’s terms and the risk of the claim’s success.
3. For New Solicitors: New solicitors taking over a case must consider the overall cost implications and advise their clients about the potential liability for uncapped costs from their previous solicitors. They should get a full costs statement from the previous solicitors to avoid surprises.
Background of Sellers v Simkins.
Helen Sellers was involved in a serious road traffic accident in 2014 and hired a solicitor under a CFA. Losing confidence in them, she terminated the agreement in 2021 and hired new solicitors. Her pervious solicitor then indicated they would charge for his services, even though they hadn’t yet billed her. The claim was settled globally by the new solicitors, including costs. The previous solicitors sought to include their bill.
The court had to decide if the previous solicitor’s costs were capped at what was recovered from the defendant or at the figure presented in the cost schedule.
It was determined that the costs cap applies only when a client wins their case, not when they are liable under other circumstances, like terminating the CFA early.
Therefore, the previous solicitor’s decision to claim costs immediately after termination meant the cap did not apply. Their costs was not limited to inter-parties costs.
The court followed the case of Higgins v Evans which found that the previous solicitor had the option of billing the client immediately upon transfer of the case to new solicitors of its basic charges (‘stick’) or agreeing instead postpone their fees and any success fee if the case is won, (‘twist’).
That the court was of the view that this stick or twist element on the interpretation of the CFA would only make sense if interpreted as saying that an overall cap on costs operates if the clients wins, not if the client is liable for those costs in other circumstances.
While Higgins involved a client who died during the retainer (known as the death clause) with the previous solicitors (so there was no ‘win’) the court saw no reason to distinguish the cases in principle. It was clear from Higgins that the principle applied to all early termination provisions of a CFA.
The judge concluded,
‘It seems to me that there is a distinction between the situation where the solicitor is entitled to payment before the claim had been concluded (when the overall cap would make no sense) and the situation where the solicitor waits to see the outcome. In the latter case, the overall cap would make sense.’
Thus the overall cap on costs only applies if the case wins at court or upon settlement, (the twist) there is no cap when a CFA is terminated early relying upon Higgins (the stick).
‘In my judgment the overall cap does not apply where the solicitor elects to claim their charges before the conclusion of the claim (for the reasons stated in Higgins), but it does apply where the solicitor elects to await the outcome of the claim.’
On the facts, despite the previous solicitors had not served a bill of costs before the settlement of the claim, the court held that previous solicitors had made it very clear they wanted to stick and not twist.
The previous solicitors gained no advantage from a win as there was no success fee, the cost cap did not apply to the previous solicitors bill.
This decision underlines the importance of understanding the terms of a CFA and the consequences of terminating it before a case is won. It emphasises the need for clear communication and consideration of cost implications at every stage of legal proceedings.
Previous Solicitors: Should make it clear to the client and the new solicitors that they intend to stick or twist in relation to their costs.
New Solicitors: Must be certain of the previous solicitors intentions to ensure the client is fully informed of the cost implications under a CFA where the previous solicitors want to stick. Advise the client accordingly, with the possible cost implications.
The Client: Should ensure that they speak to both previous and new solicitors to ensure they know what the potential cost implications are when they want to terminate their CFA with their previous solicitors.
Upon Settlement by New Solicitors: It would be very dangerous to settle any claim for costs without first obtaining full details of costs from the previous solicitors. Certainly do not settle costs on a global basis without full instructions and how the spoils are to be divided.
Limiting Client’s Choice: This decision, if our interpretation is correct, will have far reaching implications where previous solicitors intend to stick and require their charges to be paid up front. By virtue of a CFA many clients will be unable to afford to instruct a solicitor in a personal injury claim and if they are no longer satisfied with their work may make it very difficult to pay their previous solicitors if they do not wish to twist. Their new solicitors will be reluctant to pay for the previous solicitor bill in order to obtain the client’s file.
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