Client must pay Damages Based Agreement fees even after terminating DBA early
Updated: Jun 26, 2021
Law firms working on DBA’s known as damages based agreements are entitled to be paid a fee even when the client has terminated their retainer early, the High Court has ruled.
A London based law firm Lexlaw Solicitors decided to bring the claim against an ex client (Shaista Zuberi) due to her not paying her DBA fees. The law firm sought £125,000, saying that Z had needed the DBA because she couldn’t afford to pay the law firm to pursue the banks over an alleged mis-selling product.
Z terminated her retainer with the law firm in May 2015 and had then accepted a settlement from the banks in July 2015. The law firm then issued its bill which was the subject of this Court ruling in Lexlaw Ltd v Zuberi.
The law firm has welcomed clarity on the issue of DBA’s and suggests that more law firms will feel confident about offering them in the future.
The agreement had a clause between the two parties which stated that the client was able to terminate it at any point, but they would then be liable to pay the costs and expenses incurred up to that point in time, which is not unusual in such agreements.
Z argued that the intention of parliament when making the DBA regulations in 2013 was to protect claimants from having to make any payment to law firms other than those allowed by the regulations, and that the clause was contrary to that intention. The law firm said the regulations were only about applying a light regulatory touch and legislating only for when the damages of a dispute were to be shared between law firm and client.
In finding for the law firm, His Honour Judge Parfitt said that Z had not explained why the legislators would have wanted to not allow recovery of fees and costs for work done.
His Honour Judge Parfitt said:
'It is an obvious consequence of preventing representatives getting their time costs on a client termination that those representatives would be reluctant to enter into damages based agreements and that would be contrary to the purpose of making such agreements lawful so as to facilitate access to justice.’
Judge Parfitt added:
This would have had the effect of creating even less choice for claimants wanting to bring civil litigation claims. Allowing the law firm to recover its fees and costs, would not stop clients having the right to change law firms in the future.
Lexlaw partner Karim Oualnan said: ‘I hope this will go some way in putting DBAs back on the agenda as a means of promoting and furthering individual access to justice.’ He added that DBAs regulations should now be reformed, as recommended by the Civil Justice Council.