A solicitor should always advise a client on the different types of funding options available to them, even if they are not an option for funding litigation that is offered by that firm. This obligation arises from the Solicitors’ Code of Conduct 2007. A failure to do so may result in the solicitor being disallowed their costs, however, as to whether the information provided was reasonable to allow a client to make a decision will be considered on a case by case basis.

There are a number of types of ways of funding litigation:

  • Privately
  • Before the Event insurance
  • Trade Union/other organisation funding
  • Conditional Fee Agreement
  • Damages-Based Agreement
  • After the Event insurance
  • Third party funding

The obligation on solicitors to advise in respect of the different ways of funding litigation applies to commercial entities as well as individuals.

The two cases below detail the different approaches that can be taken by the Court when considering whether or not to disallow a solicitor’s costs for failing to advise correctly in respect of funding.

McDaniel & Co (a Firm) -v- Clarke [2014] EWHC 3826 (QB)

Ms Clarke instructed McDaniel & Co in April 2010 to pursue a personal injury claim on her behalf following an accident in June 2007. Ms Clarke entered into a Conditional Fee Agreement (“CFA”) with McDaniel & Co in May 2010. Ms Clarke was dissatisfied with the progress that was being made by McDaniel & Co and transferred her instructions to another firm of solicitors. Ms Clarke’s case was subsequently settled for the sum of £40,000 plus costs.

Ms Clarke disputed McDaniel & Co’s fees and said they had failed to comply with Rule 2.03(d)(ii) of the Solicitors’ Code of Conduct 2007 as they had not advised her of alternative means of funding. Ms Clarke was a member of a trade union. The trade union had confirmed that had they been approached prior to the claim being issued, and had the prospects of success been at least 60%, Ms Clarke would have been entitled to legal representation and would not have been required to pay any costs herself. 

McDaniel & Co admitted they failed to advise Ms Clarke properly in respect of the CFA and alternative means of funding.  The Court found that McDaniel & Co had breached the Solicitors’ Code of Conduct for failing to enquire as to whether Ms Clarke was a member of a trade union and had therefore failed to make enquiries in respect of trade union funding.  Furthermore, they found it was more probable than not that Ms Clarke would have taken the trade union funding and therefore, her liability under the CFA ought not to have been incurred.

It was held that McDaniel & Co’s costs were unreasonable and should be assessed at nil. McDaniel & Co appealed; however, the decision of the lower Court was upheld.

AMH v The Scout Association, [2015] SCCO, Case No: HQ13X05225

The Claimant brought a case against the Defendant claiming damages for childhood sexual abuse. From March 2012, the Claimant’s case was funded by way of legal aid. In March 2013, the Claimant discontinued with the legal aid funding and continued with the claim pursuant to a Conditional Fee Agreement dated 26 March 2013 which was supported by an After the Event (“ATE”) insurance policy. 

In February 2013, the Claimant’s solicitor had briefly considered whether it was in the Claimant’s best interests to continue with the legal aid; whether the Legal Services Commission would provide sufficient funding to proceed to trial and whether he would remain eligible for legal aid if he obtained employed or whether the Claimant should sign up to a CFA prior to the new costs regime taking effect on 1 April 2013. The Claimant’s solicitor also had a brief conversation with the Claimant and according to the Claimant’s solicitor’s attendance note, the Claimant agreed to change his funding.

It was the Defendant’s case that the advice provided to the Claimant was inadequate and incomplete as the Claimant’s solicitor failed to set out the various pros and cons of the funding options including matters such as capped success fees and qualified one-way costs shifting that applies to personal injury claims. The Defendant stated that the funding choice made by the Claimant was “…demonstrably unreasonable.” 

Master Leonard had to consider whether, having regard to all the circumstances of the case, it was reasonable for the Claimant to discontinue with the legal aid funding and enter into a CFA and ATE insurance policy. 

Master Leonard agreed with the Defendant that the Claimant’s solicitor should have set out in written correspondence the pros and cons of the funding arrangement and that the advice provided was not as detailed and complete as it should have been. However, one of the crucial aspects in this case was that the CFA that was being entered into with the Claimant was a CFA Lite which means the Claimant would not have lost any of his damages in order to meet any unpaid costs of his own or the Defendant’s. 

It was Master Leonard’s decision that the decision to discharge the public funding and sign up to the CFA and ATE insurance was reasonable in this particular case taking into account the various circumstances of this matter. Master Leonard said it did not follow that a funding choice would be unreasonable if it was not made on the best available information.

About the author

Jennifer Rhind Solicitor

Jennifer is a solicitor in the commercial litigation department and deals with and assists on a wide range of disputes including professional negligence claims, defamation/harassment claims, contract and shareholder disputes and costs.