Court of Appeal Clamps Down on CFA Challenges

Article by Rosemary Gare and Iain Newton

First published June 2003

In its judgment in six separate appeals handed†down on 22 May 20031 the Court of Appeal†sought to stem the tide of satellite litigation†arising out of Conditional Fee Agreements†("CFAs"), which many have perceived as†threatening the viability of such a funding†regime for civil litigation. Brooke LJ referred in†the judgment to an existing state of "trench†warfare" between solicitors representing†claimants and defendants' insurers. The court†appears to ascribe much of the blame for the†current situation to challenges to CFAs founded†upon minor technical breaches of the†regulations. Accordingly, it has now sought to†curtail the scope for such challenges in future.

Enforceability of CFAs

The technical challenges to CFAs have†generally been founded upon s58 Courts and†Legal Services Act 1990.Subsection 1 states:†"a [CFA ] which satisfies all of the conditions†applicable to it by virtue of this section shall†not be unenforceable by reason only of it†being a [CFA ];but Ö any other [CFA ] shall be†unenforceable". Paying parties have relied†upon this wording to contend that any breach†of any one condition rendered the entire CFA†unenforceable.

The court has now rejected such a strict†interpretation of the statute and has†preferred a more purposive approach, finding†that "in general, conditions are sufficiently†met where there has been substantial†compliance with, or in other words no†material departure from, what is required".†To assess such sufficiency, the court has†directed that costs judges should ask†themselves the following question:

"Has the particular departure from a†regulation Ö either on its own, or in†conjunction with any other such†departure in this case, had a materially†adverse effect either upon the protection†afforded to the client or upon the proper†administration of justice?"

If the answer is yes, the conditions have not†been met and the CFA is unenforceable. If the†answer is no, the departure is immaterial and†the conditions are satisfied.

The court seems to have sought to diminish†the possibility of the battleground for†satellite litigation shifting from technical†challenges to issues of client protection and†the administration of justice, by indicating†that it is most unlikely that any minor†shortcoming in a CFA, or the procedures†leading up to it, would amount to a material†breach of the requirements. The court has†given a very clear indication that...