no win, no fee

Anyone dealing with disrepair claims will be well aware of claims management companies and their habit of cold-calling tenants for business.

The tenants’ claims are ultimately referred to firms of solicitors who enter into a conditional fee agreement with them: generally, the landlord only pays the solicitor its legal costs if the claim is successful.

If it is not, usually the tenant does not have any liability for costs because these would be covered by an insurance policy. The solicitor also claims a success fee of up to an extra 100% of the costs claimed.

Registered social landlords who have to deal with disrepair claims will no doubt be familiar with tenants’ solicitors putting forward claims for legal costs in excess of £8000 – sometimes as much as £15,000 – for cases probably settled before trial.

A senior costs judge in the case of Bowen (and 10 others) v Bridgend council, in May, gave guidance that firms acting on housing disrepair cases are under an obligation to advise their clients to consider pursuing claims through Legal Aid rather than conditional fee agreements. In fact there are very few solicitors that now have franchises authorised to provide Legal Aid to tenants – in Liverpool for instance there is only one. But while the judge acknowledged the problem of a “Legal Aid desert”, he insisted most tenants would want to know the y could choose Legal Aid despite this.

So if solicitors do not inform tenant clients that this route is open to them, they will only be allowed to claim the 25% success fee if they proceed on a no-win, no-fee basis.

PD Associates, a Liverpool firm of solicitors, acted for all 11 tenants in the Bowen case and arranged a conditional fee agreement providing for a 100% success fee.

Proper advice
The judge felt a reasonable tenant would have opted for Legal Aid had they been properly advised, but said there was no evidence PD Associates, or its agents, had let the clients know they could opt for that. The solicitor had also breached regulations because the tenants were advised to take out an after-event policy without a discussion of other insurance options.

In light of this, the judge found the conditional fee agreements were unenforceable and the solicitors were not entitled to their costs, save for limited disbursements.

Firms acting on disrepair cases are obliged to advise their clients to consider Legal Aid rather than no-win, no-fee agreements

The judge also gave some consideration to the level of success fee that would have been claimed had the conditional fee agreements proved enforceable. He indicated there was little guidance about appropriate amounts for this in a housing disrepair case.

But he believed PD Associates had carried out no real risk assessment; it had simply claimed the maximum 100%, which he thought was unreasonable. A success fee of 25% would have been acceptable, he said.

As the conditional fee agreements were found to be unenforceable, he restricted costs to be incurred by tenants to less than £1000 for each case in respect of disbursements such as surveyor’s fees.

Insurance is generally taken out by the tenant to cover legal expenses if the claim does fail, and this is funded by way of a loan. In the Bowen cases the costs of the insurance premiums ranged from £700 to £834. The judge ruled such costs would only have been reasonable if the agreement been enforceable – in which case the council would then have had to pay them.

The first hearing took place in March 2004 and was adjourned to 17 May 2004. At the later hearing, the court took into account the recoverability of court fees, cost of disbursements such as surveyors fees to be awarded, and the costs of the assessment hearing. The average costs sought in each case were £8012 and the judge reduced those to £293.75 to cover suveyor’s fees. The bank that provided the loans to the tenants to fund the litigation made an application to join itself into the action as an interested party, but this was dismissed.

The tenants’ solicitors have appealed against the awards made – and the hearing is likely to take place before the end of the year. This case has been of interest to all housing solicitors and a number of costs cases throughout the country have been stayed pending the outcome of this appeal.

If upheld the judgment could save social landlords huge amounts of money in legal costs and this, together with the pre-action protocol on disrepair that was introduced in December 2003 to establish a clear framework for participants involved in such claims should hopefully minimise the number of new ones.