Defendant insurers’ legal challenge fails to torpedo collective CFAs

The case, Thornley v. Lang [2003] EWCA Civ 1484, concerned a challenge by Churchill Insurance after a district judge in Newcastle County Court awarded the claimant solicitors a success fee in accordance with the terms of the collective conditional fee arrangement (CCFA) with the GMB union. The original claim concerned a rear-end shunt road traffic accident.

“Had the appeal been successful, it would have effectively meant that all CCFAs were in breach of the indemnity principle and would have prevented the recovery of any costs at all in successful cases,” commented Tom Brennan, regional secretary for the GMB North. “It would have produced an absurd situation whereby we would have complied with all the relevant legislation yet find our position unenforceable.”

Philip Davison, a partner at Browell Smith & Co, the claimant firm in the action, explained that under the Access to Justice Act 1999, unions can either take out a block insurance policy with a commercial insurer or they can self-insure (ie run their own conditional fees and charge a ‘notional’ insurance premium to represent the sum it would have paid to insure against the defendant costs under a normal CCFA). Most unions have pursued claims on the basis of a block CCFA with their lawyers.

“Why would solicitors take on CCFAs on a ‘no win, no fee’ basis if they couldn’t charge a success fee,” said Davison. “That’s the whole principle of ‘no win’ – you take a risk and you get an award.”
According to Davison, the appeal judges appreciated that if they allowed the appeal, it would have “wiped out” the GMB’s entitlement to any of the costs of the action, event though the claim was successful. “This would have led to a quite ludicrous situation whereby any union which funded a successful claim for one of its members on a ‘no win, no fee’ basis would still have to pay all the costs and expenses,” he said. “This would have left most unions facing legal costs running to millions of pounds.”