There is a lot of talk about Damages Based Agreements, especially after the government shunted thousands of innocent whiplash victims into the small claims court. The recent case of Peter Otto is a reminder that these agreements remain unlawful in some cases. In this case a DBA was wrongfully used in family proceedings.
Such proceedings are excluded from the scope of DBAs by s58 A (1) Courts and Legal Services Act. The case concerned a disputed consent order. Mr Otto entered into an agreement with his client that he would not charge her if he did not recover and would receive 15% of any award. She recovered just under £770k. He subsequently tried to enforce the agreement. He recently found himself before the Solicitors Disciplinary Tribunal. The tribunal accepts that he genuinely believed that he could work on this basis but ought to have known what he could and couldn’t do.
The client did not lose any money. Mr Otto was fined £10k with £29k costs.
This is a salutary reminder that there are limits on what can be covered under a DBA.
The case is reported in Legal Futures at –
Interestingly, the client would not otherwise have been able to afford the cost of pursuing an action that was ultimately successful. This begs the question whether the excluded categories of work need to be revised. Although even the USA, the country that we all associate with contingency fees, does not permit such an agreement –
“in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof..”
One can understand the sociological reasons for this. It is unlikely there that this rule will change at any time in the near future.