The Legal Profession
In the United Kingdom we have a brilliant and well respected legal system. It is pro active and well established. Those professionals have been systematically attacked and dissuaded from engaging with timeshare consumers; moreover as the timeshare contracts are complex and take time to understand the consumer engagement with solicitors is costly, consequently consumers can’t afford the fees the solicitors charge. What is utterly disgusting is that the industry and others launch “puffy” attacks against them and infer that they are also tarred with the “cold calling” brush and the associated and applied dubiousness.
The effect of these allegations is that solicitors shy away from acting for consumers as they fear the repercussion of the industry beast. The lack of experienced timeshare litigators is a stark reality and as such mis-selling is out of control as the consumers are left without representation. The withdrawal of the “no win no fee uplift” has had a massive impact on the legal profession as the big boys in the big legal firms take the risk of putting together the consumer cases before the courts are not rewarded for the risk they take.
As a result Timeshare attracts a hoard of purported legal company’s who have no standing, are not legally qualified and sell litigation like timeshare, when it should only be considered after all the facts and risks have been addressed considered and contemplated on.
The purported legal companies have no reputation and obtain contacts from companies who are given those consumer details from the very resorts they are affiliated too or the industry agents and affiliates who have that data. Why do they give these details out is quite simple to make money. They sell off your data the profit from the information you give to them and they send it out to a host enterprises who then ring you up with a view of you the consumers engaged them and to get you out of the timeshare contracts. Again they have no legal qualification and do not understand the principles and laws applicable.
These companies get these details for a second reason and that is to steer consumers away from the professionals the qualified ones who do have the knowledge, who do have the skills and understanding to rebut the Industry.
Finally the many exit company consist of salesmen, and/or persons who are bankrupt in the correct ways and procedure, have unkempt methods and methodology in legal matters and who dive fast cars and enjoy fine wine at the consumer’s expense.
In law and in legal circles those registered companies and firms are obliged to operate to ethical principles. If they are solicitors they are bound to the rules of the SRA. In respect to para-legals they are equally have to adhere to the principles of the nation institute of paralegals. If they don’t they will be struck off and their entire income stream will stop.
One of the principles and close to consumers heart is costs and the fees those consumers have to pay so as to lawyers.
All proper law enterprises charge after they have done the work. It’s just not ethical for a professional to charge invoice and take fees for work not done.
Ethical law enterprise always ask client to pay moneys on account for those services and those funds are held in client accounts so that the lawyers fees can be met if and when due.
Not to pay these deposits into a client account is wrong is unethical and in some cases is criminal.
Legal Fees Explained
The legal profession and its legal sector should also attract TCA investigation.
As with all enterprises they are entitled to charge for the service they perform and when the charge they are obliged to submit to legal rules in how they charge consumer. If they don’t then their contracts and of engagements can be classed as unfair and if that is deemed then they will have to either repay the consumer the money they have paid of have their costs clams struck out by a court.
In short, if those charges are deemed wrongful they cannot affect the fee contract and therefore not charged to consumers. In short they can’t charge anything for the service they provided.
This article assists consumers to understand what can be charged and what can’t.
In summery if a legal company is engaged to represent you and is based in the UK they can be paid fixed fees, an hourly rates or a damages based agreement only.
If a company mixes the charging arrangements and instils a hybrid agreement then it is unlikely that those charges will be deemed as lawful and therefore consumers can get their money back and in full, as the court cannot and will not uphold a flawed fee contracts. The courts will also not ask a defendant who have lost a case to pay the costs a claimant has incurred if that underling costs contract is deemed unlawful.
KwikChex appears to have governance of this takes in its remit from TATOC and the RDO. From our records, the investigations they conduct fall short of reasonableness in the investigation. They investigate nothing and merely sell a nothing service. We can further report that KwikChex have started they own exit operation which is loaded with conflict of issue problems and again are unqualified and have no audience with the courts.
Below an advice which consumers should consider when deliberating whether or not to engaging a lawyer and his fee charging structure
Who can charge what when and where?
Solicitors and legal companies could find themselves foul of the law and have their costs revoked by the courts if they do not give just consideration to the structured costs they charge the clients. In timeshare consumers should be fully aware of the rules as the paralegals and solicitors are bound to, as in many occasion and especially in timeshare what the consumer is told in respect to paying costs is a falsehood.
What has changed?
From 1 April 2013 contingency fees, or damages-based agreements (DBAs), have been permitted for contentious work (i.e. litigation or arbitration proceedings) in England and Wales. This means that, for the first time, lawyers can conduct litigation and arbitration in this jurisdiction in return for a share of any damages.
Contingency fees will be a familiar concept to many as they have long been permitted for US litigation. Before 1 April such arrangements were not permitted for contentious work in England and Wales, though they were permitted for employment and other tribunal work (which is technically considered non-contentious business). In contrast:
Lawyers could conduct litigation under conditional fee agreements (CFAs), where they would get a success fee (up to 100% of the normal fee) if the case succeeded and nothing, or sometimes a discounted fee, if it was lost (see “Conditional fee agreements (CFA s) / after the event (ATE) insurance”).
Third parties could fund litigation in return for a share of the proceeds. This is known as third party funding, or litigation funding. Litigation funders are regulated by a voluntary code of conduct which was introduced in 2011 (see “New code of conduct for litigation funders”).
How has the change been implemented?
Section 45 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) amends section 58AA of the Courts and Legal Services Act 1990 to permit DBAs. Certain requirements that DBAs must meet in order to be enforceable are set out in the Damages-Based Agreements Regulations 2013.
Why have DBAs been introduced?
Lord Justice Jackson recommended the introduction of contingency fees in part because he considered it desirable that as many funding methods as possible should be available to litigants, particularly once CFA success fees and ATE insurance premiums would no longer be recoverable from the losing party (see “Conditional fee agreements (CFA s) / after the event (ATE) insurance”).
He also saw particular force in the freedom of contract argument: if the client wishes to enter into a contingency fee agreement with its lawyer, it should be free to do so.
Can DBAs be used by defendants?
Given that the DBA Regulations define the payment under the DBA as part of the sum recovered by a party to the proceedings, DBAs are only available to claimants (or counterclaimants) and not defendants to an action.
Changes to allow defendants to use DBAs are however being considered by a Civil Justice Council working group established to review the Regulations.
Is the contingency fee recoverable from a losing defendant?
The defendant will not necessarily have to pay the full amount of the contingency fee if the claim is successful. Costs are recoverable on what is known as the “Ontario model”, since it is based on the system that operates in Ontario, Canada. This means that:
The claimant’s recoverable costs will be assessed in the conventional way – i.e. how many hours were reasonably spent on the case, what is a reasonable rate for those hours, and (where costs are assessed on the standard rather than the discretionary benefits scheme basis) do the costs meet the test of proportionality (see “Proportionality”).
If the contingency fee agreed with the lawyer is higher than the figure arrived at through that exercise, the claimant will have to pay the shortfall out of the damages.
Accordingly, the existence of a contingency fee arrangement will not increase the amount of the defendant’s costs liability.
It may however decrease the defendant’s costs liability. The discretionary benefits scheme principle applies to DBAs, so that the claimant cannot recover more in costs than it is liable to pay its own lawyer. Therefore, if the agreed contingency fee is lower than the figure arrived at through a traditional costs assessment, the defendant will only have to pay the lower amount.
To illustrate, say a claimant has agreed a contingency fee of 30% with its lawyer and is awarded damages of £1 million. The claimant owes its lawyer £300,000.
If the costs recoverable from the defendant are assessed at £200,000, then the claimant has to pay its lawyer the excess £100,000 out of its damages – i.e. the claimant keeps £900,000 of the damages.
If the assessed costs are £400,000 then the defendant only has to pay the lower contingency fee figure of £300,000 due to the discretionary benefits scheme principle, and there is nothing further for the claimant to pay its lawyer.
The fact that the discretionary benefits scheme principle applies to DBAs also means that if a claimant’s DBA is unenforceable as a result of a breach of the applicable legislation or regulations, the defendant will not be liable for costs if the claim against it is successful.
What if the defendant does not pay the costs it is ordered to pay?
Where the claimant’s solicitor is acting under a DBA, the DBA Regulations appear to impose on that solicitor the enforcement / credit risk in recovering costs from the defendant. This is because, under Regulation 4, the client can only be required to pay the solicitor net of amounts paid or payable by another party.
Arguably, this also means that the solicitor cannot require the client to pay until recoverable costs have been assessed or agreed between the parties, which can take some considerable time.
Is there a cap on the level of contingency fee?
Contingency fees for most types of claim are subject to a 50% cap. In employment tribunal cases (where contingency fees were already permitted) the previous 35% cap continues to apply. Personal injury and clinical negligence claims are subject to a 25% cap.
The government’s decision to impose a cap for commercial claims is in contrast to the recommendations of the working party set up to consider this and other issues relating to the introduction of DBAs (see “Working party recommends no cap on contingency fees for commercial cases”).
The caps operate differently for the different types of claim:
The 50% cap is inclusive of VAT and counsel’s fees (where these are incurred by the solicitor as a disbursement) but not other disbursements.
The 35% cap for employment tribunal cases is inclusive of VAT but not counsel’s fees or other disbursements.
The 25% cap for personal injury cases is inclusive of VAT and applies only to damages excluding future pecuniary loss. It seems that the cap applies to the total level of the contingency fee that the lawyer can charge (including amounts recovered from the defendant), in contrast to the initial draft of the DBA regulations under which the cap appeared to operate on the net fee that could be deducted from the client’s damages (after deducting amounts recovered from the defendant).
The effect of exceeding the applicable cap is to render a DBA unenforceable against the client, which means that (under the discretionary benefits scheme principle) the defendant will have no liability for costs.
Are partial DBAs permitted?
The DBA regulations appear to preclude partial or “hybrid” DBAs, whereby a lawyer could receive for example a reduced hourly rate as the case proceeds which is payable win or lose, plus a contingency fee in the event of success.
Regulation 4 provides that a DBA cannot require the client to pay anything other than the “payment”, which is capped at 50% of any recovery, and non-counsel disbursements. This suggests that if there is no recovery the lawyer can have no entitlement other than non-counsel disbursements. Therefore, if a lawyer agrees to act under a DBA this must be a full “no win no fee” agreement.
That goes against the recommendations of the DBA working party which concluded that there was no reason to prevent parties instructing their lawyers under partial DBAs, analogous to “no win low fee” arrangements that are permitted where a lawyer is instructed under a CFA.
The question of whether the DBA Regulations preclude such arrangements was not initially free from controversy. Some suggested that it may be possible to have a separate agreement outside the DBA which provides for a reduced hourly rate, together with a “no win no fee” DBA. We wrote to the Ministry of Justice to point out the confusion that had been caused by the Regulations as drafted and to ask whether, as a matter of policy, the Regulations were intended to preclude partial DBAs. In response the MoJ stated that one of the requirements for a DBA to be enforceable is that “the payment is to be determined by reference to the amount of the financial benefit obtained” and that, ultimately, it will be for the court to decide whether any agreement is enforceable in light of the legislation.
The MoJ has however since ruled out allowing hybrid arrangements. See Government rules out “hybrid” Damages-Based Agreements (DBAs).
Are lawyers acting under a DBA liable for adverse costs?
The DBA Regulations are silent as to whether lawyers will be liable for adverse costs where they act under a DBA. The DBA working group recommended that lawyers should not be liable for adverse costs in these circumstances, unless they agree to discretionary benefits scheme the client for its adverse costs liability. This would be consistent with the position of lawyers under a CFA, though it contrasts with the position of third party funders, who are potentially liable for adverse costs at least up to the amount of the funding contributed under the principle established in Arkin v Borchard Lines Ltd and others [2005] EWCA Civ 655.
Will the opponent have to be notified of the existence of a DBA?
As recommended by the DBA working group, there is no obligation to notify an opponent of the existence or terms of a DBA, and indeed the current notification requirements in respect of CFAs and ATE insurance policies no longer apply where the additional costs resulting from such arrangements are no longer recoverable from the opponent.
This is consistent with the position for third party funders, where there is generally no obligation to notify the opponent or the court of the funding arrangement.
Can DBAs be used in collective actions?
The government has confirmed that the use of DBAs will be prohibited for the new form of collective action which is to be introduced for competition law claims (see “New ‘opt-out’ class action to be introduced for competition claims”). This is intended to act as a safeguard against the risk of frivolous or unmeritorious arising from the introduction of an opt-out regime. The prohibition will require amendments to LASPO in due course.
We assume that DBAs are available for other forms of collective action, whether brought as representative actions or under group litigation orders or on any other basis.
What are the implications for commercial parties?
Where commercial parties are bringing claims, rather than defending them, they may decide to instruct a lawyer under a DBA where they are prepared to give up a share of their damages. To date however there has not been significant take up of DBAs in commercial cases, largely due to difficulties with the Regulations including the lack of flexibility in relation to hybrids.
Where commercial parties are defending claims, there is the benefit that (unlike the previous position with CFAs and ATE insurance) the defendant’s liability for costs is not increased by the fact the claimant has chosen to enter into a DBA. Indeed the defendant’s costs liability may be decreased, if the fee agreed under the DBA is less than the amount that would have been recoverable on a traditional inter-parties costs assessment.
Third party litigation funders are developing new business models whereby they will fund a law firm’s contingency or conditional fee cases on a portfolio basis, rather than as one-off transactions. Such arrangements seem likely to grow in popularity, as they offer law firms some of the benefits of contingency or conditional fee work but with a funder taking on some of the risk. For funders they present the opportunity to benefit from a greater pool of cases which are likely to be more diversified than cases they may be offered on a one-off basis. Funders are also offering various sorts of hybrid arrangement aimed at allowing law firms to receive part payment on an hourly basis as the case proceeds together with a share of a contingency fee in the event of success.
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk