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Early termination of a DBA – is the Client liable to pay costs?

In, Lexlaw Ltd v Shaista Zuberi [2020] EWHC 1855 (Ch), his Honour Judge Parfitt (sitting as a judge of the High Court) confirmed that Damages Based Agreements (DBAs) in civil litigation may allow legal representatives to be fairly remunerated on early termination.

In the main action, the Defendant sought to terminate the DBA with her Solicitors (the Claimant) to avoid paying her percentage fees. The Defendant argued that the DBA was unenforceable under Section 58AA of the Courts and Legal Services Act 1990 because the obligation to pay costs and expenses in the event of an early termination was included in the DBA.

The High Court determined that the Defendant’s argument was an irrational interpretation of the statute and it contradicted the intention of Parliament in respect of DBAs. At paragraph 62, HHJ Parfitt stated

The suggested construction by the Defendant is inconsistent with the purpose of the legislation and the structure of the CLSA and the 2013 Regulations. It produces a result which, in context, would be irrational and without apparent justification.”

The judgment was welcomed by both litigants and legal representatives as the case precedent promotes access to justice, which was the initial intention of the DBA Regulations 2013. Additionally, the judgment provides some clarity on the issue as, to date, there had been no judicial clarity on whether a Client would be liable to pay costs on an early termination of a DBA.

However, permission to appeal has now been granted by the Court of Appeal…so, watch this space!

Contact A&M Bacon Limited for all your costing needs – 01733 350 880.

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