Judgment of O’Brien v Shorrock & The MIB  EWHC 1630 (QB)
29th June, 2015
The High Court has recently handed down the judgment of O’Brien v Shorrock & The MIB  EWHC 1630 (QB) which, amongst other things, touches upon the issue of what information is required to be given in the Notice of Funding regarding the CFA date.
The decision hinged on what was to be construed as the ‘date of agreement’ for the purposes of the old Costs Practice Direction 19.4(2).
The Claimant’s Solicitors had entered into a CFA (i.e. the date the agreement was signed) with the Claimant’s litigation friend on 21 October 2009. However the CFA confirmed that the agreement retrospectively took effect from 6 November 2008 when the work on the claim had begun.
Notice of Funding was provided which stated the ‘date of the agreement’ was 6 November 2008 leading the Defendant to believe that that was the date the agreement had been entered into. The issue reared its head following the judge compelling the Claimant to disclose the CFA to the Defendant which revealed the date the CFA had been entered into was actually 21 October 2009.
The Defendant’s complaint in essence was that
“there was a serious failure to comply with the Practice Direction because the use of the 6th November 2008 as the date in the Notice of Funding allowed the claimant’s solicitors to claim the maximum possible success fee over the longest possible time without alerting the MIB to the possibility that they might make submissions that there should be a lower success fee (or none at all) for the first period when the CFA had retrospective effect. The fact that this was significant is shown by the fact that when they were able to advance those submissions they were successful to an extent and the claimant has not sought to challenge that outcome.”
Despite the sums involved, the length of the retrospective period, the Claimant’s reluctance to provide disclosure, and the lateness of an application for relief, relief was granted albeit with a sanction that the recoverable success fee over the retrospective period was halved from 40% to 20%.
Since the common usage of retrospective CFAs, often to cover the period between obtaining initial instructions and the agreement being signed, it is considered many firms may have naively fallen foul of CPD 19.4(2) by confirming the earlier ‘effective’ date (or defective date, if you will) in the Notice of Funding.
It is considered, given the relative ease of obtaining relief in O’Brien, in such cases where the retrospective period is negligible, relief ought to be a formality. The Court of Appeal’s comments in Denton refer:
“In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation.”