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This was the issue before Master James in the Senior Court Costs Office in Dial Partners LLP & Anor v Eastern Airways International Ltd & Ors [2018] Lexis Citation 4. Master James concluded that the change from a Damages-Based Agreement (DBA) to a Conditional Fee Agreement (CFA) was not unreasonable and so costs were to be assessed in line with the terms of the CFA. In this case, the claimants had pursued a case under a DBA. The value of the claim was originally believed to be £2.25m but it transpired that the claim was worth significantly less than the pleaded amount. Shortly before trial the DBA was replaced with a CFA. The case settled by the claimant accepting a Part 36 offer which had been made by the defendants before the funding arrangement was changed. Had the DBA survived, the costs burden imposed on the defendants would have been £250,000. Under the CFA, that figure was over £523,000. The defendants argued that the decision to change the funding arrangement was unreasonable.
DBAs were legalised by section 45 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO 2012). A key feature of a DBA is that the solicitors’ (and, if they are instructed under the same DBA, Counsel’s) remuneration is calculated as a proportion of the amount of damages recovered. DBAs are relatively rare in practice. One of the (many) reasons for this is that, in a case in which quantum is difficult to ascertain at the point of instruction, a solicitor will be unable to determine whether they will be adequately remunerated under a DBA.
This decision appears to allow solicitors to embark upon litigation of unknown value on the basis of a DBA and to then change to a CFA if the terms of the DBA become unremunerative, regardless of how late in the day that is.
A further point of note is that the Master refused to expand the principle in Kellar v Williams [2004] UKPC 30 and related cases—which provides that, where a funding arrangement is changed after a liability to pay costs has crystallised, the paying party can disregard any such changes—to circumstances where a funding arrangement is changed after a Part 36 offer has been made by a defendant.
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