Hurley v Maruki highlights the importance of complying with the Consumer Regulations

28 Jan 2013

When the Cancellation of Contracts made in a Consumer’s Home or Place of Work Regulations 2008 came into force on 1 October 2008 there was widespread concern among solicitors that a number of Conditional Fee Agreements could fall foul of these provisions, even though they were primarily aimed at protecting consumers against unscrupulous door to door salesmen. In brief, the Regulations provide that where a contract is entered into at a consumers home or place of work the consumer has 7 days to cancel that contract. In addition, the trader (the solicitor in the case of Conditional Fee Agreements) must provide the consumer with written notice of this right to cancel. If such notice is not given then not only is it potentially a criminal offence but the trader cannot enforce the contract against the consumer.

It was anticipated that some solicitors may continue to enter into Conditional Fee Agreements at a client’s home or place of work without giving the appropriate notice, therefore leaving them unable to enforce the Agreement. The result of this being that a Defendant, even one whom judgment has been obtained against, can potentially escape having to pay costs under the Conditional Fee Agreement under the indemnity principle (which provides that such Defendants are only liable to pay such costs as a Claimant is liable to pay to the solicitor).

Until recently such an issue had yet to be litigated upon. This issue did, however, arise in the case of Hurley v Maruki late last year. In that case a settlement had been reached in relation to damages arising out of a Road Traffic Accident and the Claimant’s solicitors, Camps, sought to recover costs under a Conditional Fee Agreement which had been entered into in the Claimant’s home.

Berrymans Lace Mawer, acting for the Defendant, sought to argue that Camps could not enforce the Conditional Fee Agreement as it did not contain the appropriate notice under the Regulations. In response, Camps sought to rely upon an exemption for contracts in which the total payable by the consumer is £35 or less as they argued that the Claimant’s personal liability for costs was in reality nil as it was a Conditional Fee Agreement Lite which limited any liability the Claimant may have in respect of costs to those sums recovered from the Defendant.

However District Judge Moss, regional costs judge at Manchester County Court, held that there was no difference in the indemnity principle under a Conditional Fee Agreement Lite and that essentially the Claimant still has a liability to pay the solicitor’s costs even if those costs are limited by a Conditional Fee Agreement Lite. It was therefore decided that the retainer was unenforceable and as such the Claimant’s Bill of Costs was assessed at nil.

This ruling highlights the practical importance for Claimant solicitors to ensure that any such Conditional Fee Agreements comply with these Regulations and that appropriate notice is given. Equally Defendant solicitors and insurers will need to be increasingly on the look out for any signs that such Regulations have not been complied with. It is understood that Camps have appealed against this ruling and the outcome of that appeal will obviously be keenly anticipated by both solicitors and insurers.