Consider the options

The case of McDaniel & Co v Clarke (2014) clearly establishes the requirement for full enquiries to be made into funding at an early stage, if not costs may be assessed at nil.

Background

The claimant instructed McDaniel & Co to pursue a claim for personal injury, entering into a CFA. Due to a lack of progress she elected to instruct a second firm of solicitors to pursue her claim who negotiated a settlement of £40,000 plus costs. McDaniel & Co considered the claim a “success” under the terms of the CFA and presented the claimant with a bill for £56,000.

Cost dispute

The claimant contested the solicitors’ bill on a number of grounds, notably that McDaniel & Co had failed to comply with rule 2.03(1) of the Solicitors’ Code of Conduct 2007 which establishes the need to “discuss with the client how the client will pay, in particular…whether the client’s own costs are covered by insurance or may be paid by someone else, such as an employer or trade union…”

The claimant asserted she was not informed of alternative means of funding available nor was she informed of the likely ability to instruct a solicitor through her trade union, GMB. At cost stage GMB confirmed the claimant would have been entitled to free legal representation and indemnity against the other side’s legal costs.

McDaniel & Co accepted that they had failed to adequately advise of alternative methods of funding yet argued this should result in a reduction of the bill of costs by only a small amount.

The matter proceeded to detailed assessment before Master Gordon-Saker. It was found that if the claimant had been advised of free legal cover available through GMB she would have taken advantage of it rather than render herself liable to pay costs under a CFA. Accordingly the costs were found to be unreasonable and were assessed at nil.

Appeal

McDaniel & Co appealed the detailed assessment stating insufficient evidence was available to support the conclusions made, plus the assessment should have been based on the loss of chance to take up GMB’s offer of free legal representation.

Mr Justice Hickinbottom held it was reasonable for the costs to be assessed at nil. The loss of chance submission was rejected; the facts were adequately clear for the court to conclude, on the balance of probabilities, that with appropriate advice the claimant would have instructed a solicitor through GMB and therefore avoid a cost liability by signing a CFA.

Keoghs Comment

The matter concerned a cost dispute between a solicitor and their former client. It is questionable what impact McDaniel & Co v Clarke will have on inter parties costs however it does demonstrate the importance of complying with the Solicitor’s Code of Conduct, particularly concerning advice on funding arrangements. A plethora of alternative funding provisions are available (home insurance, trade union membership and motor insurance amongst others) - failure to consider all options fully may, as in this matter, have severe ramifications as to the recoverability of costs.