There is a fundamental difference between Conditional Fee Agreements on the one hand, and Contingency Fee Agreements and Damages-based Agreements (DBAs) on the other hand, in that with Conditional Fee Agreements the charge is still related to the amount of work done, whereas with Contingency Fee Agreements and DBAs that is not the case.
Personal representatives can enter into a new DBA on the same terms as the previous one as the fee is not dependent upon the amount of work done.
Let me put that in practical terms.
You do 30 hours work before the client dies. The personal representative enters into a DBA with you and you do just 5 hours work and then settle the matter.
The solicitor receives the same fee whether she or he has done 30 hours work or 35 hours work or 5 hours work or whatever, which would not be the case with a Conditional Fee Agreement.
I prefer a new DBA as the personal representative enters into it in that capacity and knowing what they were doing, rather than feeling that they must take over the old agreement, and potentially saying that they were under pressure at the time as the person had died etc.
That leaves open the question of what a solicitor can do if the personal representative refuses to enter into a new DBA, or refuses to adopt the old one.
Conditional Fee Agreements have a death clause, allowing the solicitor to charge for work done up to the time of death, at the hourly rate in the Conditional Fee Agreement, if the personal representative declines to enter into a new Conditional Fee Agreement on the same terms, or to adopt the old one.
The courts have upheld that agreement, provided that the original client, that is the one who died, entered into the agreement in full knowledge of that clause and of its effect, that is gave informed consent, just as with any other part of the agreement.
DBAs are much less flexible than Conditional Fee Agreements, and before any charge can be made to the client there has to be actual recovery of money, and even preserving property for a client under a DBA does not count as recovering money, and no charge can be made.
In contrast, a win under a Conditional Fee Agreement can be anything that the parties decide; in particular Conditional Fee Agreements can be used by defendants where a win may be limiting the damages paid out to a certain sum.
The point is that a Conditional Fee Agreement is not necessarily predicated on the recovery of damages, whereas a DBA is.
The authority for that is Tonstate Group Ltd and others v Wojakovski and others, and I dealt with this in two pieces in Kerry On Costs…And So Much More…Damages-based agreements: No payment unless recovery. Cannot be used by defendants (pages 23 and 24 of Issue 12), and Damages-based agreements and solicitors’ liens and section 73 (page 8 to 10 of Issue 18).
The Zuberi v Lexlaw litigation revolved around whether the DBA there was unlawful as it contained a clause forcing the client to pay on an hourly rate basis if they ended the agreement without good cause, and the argument was that that was unlawful as it created a possibility of the client having to pay when no damages have been recovered, in breach of the Regulations.
The court rejected that submission, but did it by a curious route, stating that that part of the DBA was not in fact part of the agreement but rather collateral to it.
By parity of reasoning, a death clause in a DBA should be treated in the same way.
I dealt with this at great length in my piece: DBAs, Lexlaw and Court of Appeal – still don’t bother agreements (pages 7 to 15 of Issue 3 of Kerry On Costs…And So Much More…).
I have previously not had a death clause in my model DBAs because I was concerned that it would fall foul of the rule that there must be recovery of damages, and potentially invalidate the whole retainer, even if the client lived and succeeded in the action.
Following Zuberi, I no longer see that as the case. Having said that, I have no confidence that a court would enforce a charging clause against the estate of a person who had entered into a DBA and died.
The reason for that is that, as stated above, with a DBA there must be recovery of damages and clearly if the client dies before there has been any recovery, that object has not been achieved, and that is through no fault of the client, and therefore is different from the situation in Zuberi v Lexlaw.
The counterargument is that the solicitor has, through no fault of their own, been deprived of the opportunity to earn a fee because the personal representative, standing in the shoes of the deceased, has declined to pursue the matter.
My advice is that solicitors should include the death clause in DBAs, but should work on the basis that if the personal representative declines to enter into a new DBA, then they may not get their fees.
There is a further option, but it would probably only be worthwhile in substantial cases, and that is to get your client to appoint you as executors for the purposes of pursuing litigation, or indeed generally.
As executors, you have power to make the decision to enter into a new DBA, effectively with yourselves.
That is not as strange as it seems, as that is what happens when solicitor executors conduct the probate, that is as executors they instruct their own firm to deal with the probate.
You can have separate executors for separate aspects of a matter; for example literary executors are quite common, that is people who have a knowledge of publishing and writing, dealing with just that aspect. I have been the executor for a firm of solicitors just in relation to dealing with the legal practice if the principal died.
The good news is that, in my experience, personal representatives faced with adopting or entering into a No-Win No-Fee Agreement with no downside to them, and the significant upside of a win and therefore money coming into the estate, generally cooperates.
DRAFT DEATH CLAUSES
Set out below are examples of death clauses for various agreements.
Conditional Fee Agreements
“Death
If you die before your claim is concluded then your personal representatives can continue to pursue your claim.
We may offer them a Conditional Fee Agreement on the same terms as this one.
If your personal representatives or your dependants were to decide not to instruct us to continue to pursue claims arising from your death for the benefit of your estate and/or your dependants, your estate would then be liable for our basic charges, disbursements and VAT up to the date of your death, even though you had not at that stage won your claim. We would then have the right to elect whether to ask for payment of those or, if they were to decide to instruct other legal representatives to pursue their claims, to wait until the conclusion of their claims and then seek payment of our full legal charges.”
Damages-Based Agreements
“Death
If you die before your claim is concluded then your personal representatives can continue to pursue your claim.
We may offer them a Damages-Based Agreement on the same terms as this one.
If your personal representatives or your dependants were to decide not to instruct us to continue to pursue claims arising from your death for the benefit of your estate and/or your dependants, your estate would then be liable for our basic charges, disbursements and VAT up to the date of your death, even though you had not at that stage won your claim. We would then have the right to elect whether to ask for payment of those or, if they were to decide to instruct other legal representatives to pursue their claims, to wait until the conclusion of their claims and then seek payment of our full legal charges.”
Contingency Fee Agreements Under Section 57 Of The Solicitors Act 1974
“Death
If you die before your claim is concluded then your personal representatives can continue to pursue your claim.
We may offer them a Contingency Fee Agreements under section 57 of the Solicitors Act 1974 on the same terms as this one.
If your personal representatives or your dependants were to decide not to instruct us to continue to pursue claims arising from your death for the benefit of your estate and/or your dependants, your estate would then be liable for our basic charges, disbursements and VAT up to the date of your death, even though you had not at that stage won your claim. We would then have the right to elect whether to ask for payment of those or, if they were to decide to instruct other legal representatives to pursue their claims, to wait until the conclusion of their claims and then seek payment of our full legal charges.”
