This piece appears on pages 30-31 in Issue 4 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.
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Generally, the cost of preparing funding agreements is an overhead of the business and can neither be recovered from the other side, nor from your client.
That is an entirely separate issue from legal work in connection with the case being done before the Conditional Fee Agreement is entered into, and that problem can usually be solved by making the Conditional Fee Agreement retrospective to the point where the work started.
I appreciate that there is a certain logical problem with that, in the sense that the client will then be charged for work done before the agreement was drafted and explained to the client, but the courts have always been happy with that rather pragmatic approach.
The courts dislike backdating, but have had no problem with retrospection.
Consequently, billing for pre-Conditional Fee Agreement work on the actual case can be achieved by making the Conditional Fee Agreement retrospective.
That does not deal with the issue of the costs of drafting the Conditional Fee Agreement; you are not able to recover those.
Drafting it should take a professional secretary no more than 30 minutes if you are using my precedent; treble that if you are a lawyer pretending that you can type.
It is simply a question of inserting the name and address of the client and the relevant details about the cause of action, and that is it, assuming you work on a standard percentage uplift and cap the total of the costs charged to the client, and not just the success fee, as you are now required to do in any event by the decision in
Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB)
Consequently, if you adopt the Underwoods Method, then the drafting of the Funding Agreements should take very little time indeed.
In my firm this is all done by the secretarial team in Wellington in South Africa.
The secretarial team has all of the information from the standard file opening sheet and so deals with the Client Care Letter, any Appointment Letter, the Costs, Next Steps and Timetable Schedule, and the Conditional Fee Agreement.
My colleagues in South Africa, who do this all of the time, both for my firm and other law firms, say that a realistic time for this work is 30 minutes.
To put this in context, the people here have said that they could easily do 10 in a day, and our charge for offshoring secretarial work works out £50 a day, and obviously we are making a profit on that, and so the actual cost to you need be no more than £5 per set of Funding Agreements.
The detailed explanation, so that the client is held to have given informed consent, is a different matter.
In
Vilvarajah v West London Law Ltd [2017] EWHC B23 (Costs)
the judge said:
“I would expect to see a letter from the Defendant [solicitors] to the Claimant in advance of the meeting on 7th January 2013 explaining the options clearly. I would expect that letter or a subsequent letter, still in advance of the meeting, to enclose a draft of the proposed conditional fee agreement and to explain its terms so that the Claimant would have an opportunity to consider it before the meeting and think about whether there was anything which required explanation. I would expect the solicitor to be able to produce an attendance note of the meeting at which the agreement was signed recording precisely what explanation she gave of it to the Claimant. I would then expect to see a letter sent to the Claimant after the agreement was signed enclosing a copy of the agreement and explaining the key points.”
That is as clear as it gets, and any idea of not explaining the Conditional Fee Agreement personally, and of course now that can be done by Zoom or Microsoft Teams, and relying on a written explanation or an agent, runs the very real risk of the agreement being held to be void due to a lack of informed consent.
The Court of Appeal decision in
Herbert v HH Law Limited [2019] EWCA Civ 527,
upheld a lower court decision to reduce the success fee, due to the lack of informed consent, but in
Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB)
the court disallowed all costs on the basis that as there was no informed consent, there was no valid retainer.
In Vilvarajah, which effectively the High Court and Court of Appeal followed in Herbert v HH Law and Belsner v Cam Legal Services Limited respectively, the court went on to say that even though there had been a 30-minute appointment with a verbal explanation, this was insufficient in the absence of any prior or subsequent communication with the client.
Each case will depend upon its own facts, and a fairly simple personal injury case where all costs charged to the client are capped at say 25%, and where the solicitors are funding the disbursements, and where Qualified One Way Costs Shifting applies, may well be capable of being dealt with in around one hour of face to face personal explanation to the client.
However, in a heavy case, whether that be commercial law or any other type of work, where there are issues of After-the-Event insurance, heavy disbursements, including experts etc., and who pays them, I would expect the whole consideration of the issue of funding, and the explanation, and genuinely satisfying yourself that the client has given informed consent, and dealing with any client concerns, to take at least four hours.
