High Court ruling clears CFA firms

Lawyers in some 700 firms have been saved from possible professional extinction after the High Court ruled that their conditional fee agreements (CFA) do not breach regulations.

The hugely important decision by senior costs judge Master Hurst affects almost 250,000 cases and guarantees a windfall of at least £1bn to liability insurers.

Hurst said that any other decision would have had a "devastating effect" on the 700 claimant solicitors who would have been denied payment because their CFAs breached regulations.

Hurst found that CFAs arising out of claims handled by The Accident Group (TAG) are not invalid, despite the fact that it uses its agents Accident Investigation Line (AIL) to explain and agree funding arrangements with clients.

Hurst concluded: "There is nothing in the [CFA] legislation which prevents delegation of the [CFA] Regulation 4 task to a properly appointed agent. The essential question is one of quality, ie was there sufficient explanation given by, or on behalf of, the legal representative?"

This overrules an earlier decision in English v Clipson which found that a legal adviser rather than an agent was required to inform the client about matters such as the circumstances in which they were liable to pay the lawyers' fees and when they could seek assessment of the lawyers' fees and expenses. In justifying his decision in this case, Judge Wharton concluded: "The panel solicitor has no direct contact with the client before he signs up to the CFA."

Anthony Dennison, partner at Manchester law firm Rowe Cohen which acted for TAG, said: "I hope liability insurers, defendant solicitors and costs consultants will now adopt a more pragmatic approach by entering into realistic negotiations with claimant solicitors in respect of an estimated quarter of a million cases with outstanding legal fees and premiums."