No right to cancel, no right to costs

30 Jan 2015
Susan Louise Cox v Woodlands Manor Care Home Ltd
Recent Court of Appeal judgment addresses the applicability and effect of the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulation 2008 (“the 2008 Regulations”)

A Court of Appeal judgment handed down this week could impact thousands of costs cases, as it reveals that not all conditional fee agreements (CFAs) are complying with the 2008 Regulations introduced to protect consumers.

The Regulations

The Regulations apply to agreements incepted after 1 October 2008 for credit, goods or services which are made in a consumer's home or place of work during a visit by the contracting trader, unless excluded by Regulation 6 of the Regulations. Regulation 6 provides a list of exceptions for contracts which are not subject to these Regulations. Retainers such as that in this claim were not excepted within that list.

Regulation 7 requires that the trader gives the consumer a written notice of his right to cancel the contract within a specified seven day cancellation period. This notice should be contained within the document and set out in a mandatory format on a detachable slip, filled in where applicable by the trader. These 2008 Regulations have since been amended following the introduction of the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (‘the 2013 Regulations’) on 13 June 2014. However, the 2008 Regulations will still apply to CFA's and other contracts incepted between 1 October 2008 and 13 June 2014.

The facts of this case

The claimant brought a claim resulting from an employers’ liability incident. The claimant suffered serious injuries, such that a personal attendance in her home was necessary to provide initial instructions to her solicitor. Proceedings were issued and ultimately the claimant recovered £100,000 in damages, plus an entitlement to standard basis costs. The defendant was Woodlands Manor Care Home Ltd, who were insured by Ecclesiastical Insurance Group, who in turn instructed BLM LLP to deal with the costs proceedings.

Detailed assessment proceedings were commenced and the claimant solicitors served their bill of costs. Upon consideration of the claimant’s CFA, it became apparent that her solicitor had failed to attach a notice of cancellation as required by the 2008 Regulations. BLM LLP prepared points of dispute contesting the recoverability of the claimant’s costs on the basis that the CFA did not comply with the 2008 Regulations and therefore the contract was unenforceable between the claimant and her solicitor. Applying the indemnity principle, BLM LLP maintained the costs recoverable against their client must be assessed at nil.

At the first detailed assessment, the claimant and her solicitor submitted witness evidence stating that their intention was for the CFA only to come into effect once the relevant funding enquiries had been completed. Annexed to the claimant’s solicitor’s witness statement was a letter sent to the claimant stating that the funding enquiries were complete and that she would “continue” to act under the terms of the CFA. Her solicitor confirmed that use of the word “continue” was unfortunate and out of context. District Judge Britten accepted the claimant’s evidence and held that the CFA between the claimant and her solicitor did not come into effect until the claimant’s solicitor had completed funding enquiries relating to potential legal expenses insurance. As such, the 2008 Regulations did not apply.

BLM LLP appealed this decision and the first appeal was heard in December 2013 by HHJ Denyer QC. HHJ Denyer QC granted the appeal and held that the District Judge below had erred to find that the CFA came into effect at any date other than the date that it had been signed.

The claimant appealed to the Court of Appeal and was initially denied permission to appeal by Rt. Hon. Sir Stanley Burton, but after an oral hearing Lord Justice McCombe granted the claimant permission.

The matter was subsequently heard in the Court of Appeal by Lord Justice Longmore, Lord Justice Underhill and Lady Justice Sharp on 27 January 2015.

The claimant’s appeal was dismissed with the Lord/Lady Justices upholding the decision of HHJ Denyer Q.C. below. The CFA was held to have been entered into on the date that it was signed in the claimant’s home. Therefore the contract between the claimant and her solicitor was deemed unenforceable due to failure to adhere to the 2008 Regulations. As such, the bill of costs was assessed at nil and BLM LLP were awarded their detailed assessment costs throughout the process, including those relating to the two appeals.

A copy of the approved judgment is awaited.

How significant is this decision?

This Court of Appeal decision held that costs are irrecoverable where a CFA does not comply with the 2008 Regulations. Within the judgment, the Court of Appeal confirmed that the 2008 Regulations apply to cases funded by CFAs between solicitors and their clients. The judgment confirms that solicitors satisfy the description of “trader” and their client’s would be classed as “consumers”, under the terms of the 2008 Regulations. As such, the decision will apply to all CFAs entered into between solicitors and their client’s between 1 October 2008 and 13 June 2014.

It is possible that a significant number of contracts made in the home do not comply with the 2008 Regulations. This would include CFAs, as in this case, and credit hire agreements. The Court of Appeal acknowledged the regret of the decision contained within HHJ Denyer QC’s judgment, but such was the unsympathetic and strict application of the 2008 Regulations, a decision in the alternative was not possible.

If defendants correctly identify a failure to comply with the 2008 Regulations, this decision demonstrates that such failure will be fatal to the recovery of the claimant’s costs.

BLM costs draftsperson Andrew Coyne under the supervision of Paul Wainwright acted for the defendant throughout the costs proceedings.

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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