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Two Recent CFA Cases: Effect of a Failure to Serve a Notice of Funding and Powers of the Ombudsman

There have been two recent decisions concerning Conditional Fee Agreements which should be of interest to any practitioner practising in any area of the law where such funding arrangements are prevalent.


The first is Harrision & Anor v Black Horse (20/12/13, Sen Cts Office per Maser Gordon-Saker), where the strict application of the Mitchell judgment was applied to a case where relief was sought by a CFA-funded party for its failure to serve a Notice of Funding. Whilst previously such a common default was excused by courts on the basis that the strict sanction for this failure (the irrecoverability of any additional liabilities, namely: uplift and ATE premium) was disproportionate to the nature of the default, now it seems that such parties cannot expect such lenience.


The second is a case which was widely reported in various newspapers last week: Layard Horsfall Ltd v Legal Ombudsman [2013] EWHC 4137 (QB) per Phillips J. Here a former CFA-funded client of a Law Firm was required to pay the firm’s base costs of £5,000 including VAT for a discontinued court case. The client complained to the Legal Ombudsman who held it was reasonable for him to pay a reduced amount of £1,500 plus VAT. The Law Firm applied for judicial review of this decision, arguing that the client’s complaint was not within the jurisdiction of the Ombudsman, which was limited by the Legal Ombudsman Scheme Rules r.2.8 to complaints about the standard of service provided by a solicitor to a client and not issues about whether fees were contractually due.


The Court disagreed and held that it would be an artificial and unworkable distinction if the Ombudsman could consider the quality and levels of services but not issues of wrongful charging or overcharging. Section 137(2) of the Legal Services Act 2007 provided that the Ombudsman could direct that the fees to which a respondent was entitled were limited to a specified amount. That would be a difficult provision to apply if the ombudsman could not consider what was the correct contractual starting point before making such a determination.



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