A Bar Council intervention in a Court of Appeal case has today resulted in a long-awaited and highly satisfactory clarification of the law regulating Damages Based Agreements that will be welcomed by barristers and solicitors alike.
In 2013 sweeping reforms to the funding arrangements for civil litigation were implemented following an extensive consultation by Sir Rupert Jackson. The use of Damages Based Agreements (sometimes referred to as ‘contingency’ agreements) was to be permitted in all civil litigation as part of Sir Rupert’s overall package of reforms. The aim of a Damages Based Agreement is to enable a client seeking legal representation to obtain that representation on the basis that the legal representative shares the risks of litigation in return for a share of the proceeds.
Until today, damages based agreements were not able to be widely or safely used because of uncertainty about the terms and effect of the implementing regulations - the Damages Based Agreement Regulations 2013.
The Bar Council has been seeking reform and clarity since 2013. In particular it has been a cause of great uncertainty as to whether a legal representative is able to charge any fees or expenses in the event that a damages based agreement is terminated early. Questions as to whether a damages based agreement can provide any charge other than the DBA Payment (the contingent fee) have also frustratingly been left unanswered.
The first opportunity for the Court of Appeal to consider these issues arose in the case of Zuberi v Lexlaw Ltd  EWCA Civ 16. Judgement was handed down today.
The Bar Council, represented by Nicholas Bacon QC, Alan Tunkel and Greg Cox intervened in the appeal with the permission of the Court of Appeal. The judgment establishes:
- That the purpose of the legislation was to widen the available forms of funding available to consumers of legal services to include arrangements under which the legal representative can share in the recoveries made.
- That the inclusion of termination provisions is not a breach of the regulations.
- Accordingly, the risk that an agreement would be found to be unenforceable because a termination clause has been included (with the attendant ‘all or nothing’ consequences) has been removed.
- The majority view (Lewison LJ and Coulson LJ with Newey LJ dissenting on this point) held that the ambit of the Damages Based Agreements Regulations extends only to the part of the agreement which provides for the DBA Payment. This now paves the way for various types of hybrid agreements.
More generally, litigants and legal representatives can, we believe, be significantly reassured that Courts will now approach interpretation questions in a way which seeks to give effect to the purpose of DBAs (widening access to justice) and not in a way which undermines their use (or as the Court put it, in a way which is ‘commercial suicide’ for the legal representative).
Nicholas Bacon QC commented on behalf of the Bar Council team: “We are grateful to the Court of Appeal for hearing the Bar Council’s submissions and for providing much needed clarity in this area. The uncertainty surrounding the meaning and effect of regulation 4 of the DBA Regulations has resulted in a longstanding impediment to the use of DBAs in the legal market. A significant piece of unfinished business from the Jackson reforms has been to ensure that DBAs work and are an effective means of funding cases. I am delighted that the Court of Appeal has stepped in to grease the wheels of the legislation and removed so much of the uncertainty over their operation. DBAs can now be an effective alternative for funding cases.”
The Bar Council’s Remuneration Committee expects to publish further guidance on DBAs for use by the profession shortly.