Blog - Tuesday 3 February 2015

Are your CFAs enforceable? Lessons from Cox v Woodlands Manor

In Cox v Woodlands Manor Care Home Ltd (2015) (unreported) the Court of Appeal has concluded that a CFA entered into with a client in her home was subject to the Cancellation of Contracts made in a Consumer's Home or Place of Work etc. Regulations 2008 (“the 2008 Regulations”) even though the continuing operation of the CFA was subject to a BTE insurer refusing to agree her solicitors’ appointment. 

Summary

  1. Solicitors’ retainers, if entered into in the circumstances prescribed by Reg. 5 of the 2008 Regulations, are subject to the 2008 Regulations.
  2. If a notice setting out a client’s right to cancel is not provided, the retainer is unenforceable ab initio.
  3. The fact that a CFA may cease to operate at a later stage because of a supervening event does not mean that the parties lacked the intention to create legal relations at the time the CFA was signed.
  4. A CFA is “made” for the purposes of the 2008 Regulations when it is signed.

Facts

The Appellant suffered injuries whilst at work. She sought damages from her employer. The Appellant had the benefit of BTE legal expenses insurance. Upon being introduced to Wards Solicitors, who were not on the BTE insurer’s panel of solicitors, the Appellant was advised that the BTE insurer may require her to use a panel firm until the claim was issued.

Due to the Appellant’s injuries, a solicitor from Wards then met with her in her home. During this meeting a CFA was signed. Wards did not give the Appellant the relevant notice of her right to cancel the CFA during the ‘cooling off period’ as required by the 2008 Regulations.

There appears to have been some form of an agreement between the Appellant and Wards that, if the BTE insurer agreed to her instructing Wards (rather than a panel firm) the CFA would cease to operate.

Wards began to work on the case. They sent a pre-action protocol letter and attended upon a witness.

The BTE insurer subsequently confirmed it would not authorise the instruction of Wards. The matter therefore continued under the CFA.

First instance judgment

At first instance the Costs Judge held that the fact the continuing operation of the CFA was contingent on a decision being made by the BTE insurer meant that there had been no intention to create legal relations at the point the CFA was signed.

Because of this, the CFA had not been “made” in the Appellant’s home and, thus, the 2008 Regulations did not apply.

First Appeal

The High Court concluded that the fact the CFA may have ceased to operate at a later date did not prevent it being legally effective when signed. Accordingly, the CFA  was “made” in the Appellant’s home which meant that the 2008 Regulations applied and the CFA was unenforceable. The indemnity principle therefore prevented any recovery of costs being made from the Respondent.

Second Appeal

The Court of Appeal considered that, although there was a possibility that the CFA would not take effect until the BTE position was clarified, it was more likely on the facts that the CFA would terminate if the BTE insurer confirmed that it was content for Wards to act.

The fact that the obligations under the CFA were not immediate was not relevant. The CFA was “made” when it was signed. This conclusion was considered to be both correct as a matter of law and in keeping with the purpose of the 2008 Regulations, which was to protect consumers from pressurised sales tactics in their homes. If it was held that contracts were not made when they were signed, this aim would be very difficult to achieve.

In the circumstances, the CFA was unenforceable ab initio.

Analysis

Cox is one of a handful of cases in which Courts have taken a hard line on compliance with the 2008 Regulations. 

Compliance with the 2008 Regulations is strict. The fact that a client may have given no indication at any stage of a desire to terminate the retainer is irrelevant. If the necessary notices have not been given, the retainer will be unenforceable and no costs will be recoverable.

Although the 2008 Regulations have now been superseded by The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, there are likely to be many legacy cases in which compliance issues may arise.

Just Costs has an experienced team of technical costs specialists who are able to advise on issues regarding the enforceability of retainers. If any issues exist, we can provide advice on any steps that can be taken to remedy the defects, prepare any necessary application and provide an advocate to attend any resulting hearing.

 

By Alex Bagnall, Associate and Costs Advocate