After acting for the Bar Council, Simpson Millar CEO, Greg Cox, and Partner Edward Stansfield were asked to comment in The Times about the recent Court of Appeal ruling on Damages Based Agreements (DBAs).
The Times article talks about a recent case between businesswoman Shaista Zuberi and London law firm Lexlaw. Zuberi worked with the law firm to bring a claim against a bank after alleging that she’d been mis sold financial products when she borrowed money.
The contract she signed with Lexlaw included a Damages Based Agreement, which is where a Lawyer agrees to take on a case in return for a share of the proceeds if they win the case. DBAs also mean that if the case is lost, the Lawyer will pay for a share of the damages too and so it’s a win-win for both Lawyers and clients alike.
But Lexlaw’s contract also included a clause about terminations, so even if Zuberi decided to end the retainer early, she would still be liable to pay for her solicitor’s fees.
After Lexlaw successfully won Zuberi’s claim against the bank, she tried to terminate the agreement before paying Lexlaw the £125,000 fee. She argued that the clause wasn’t enforceable under the 2013 Regulations.
The Impact of the Zuberi v Lexlaw Ruling
While there have been several attempts over the years to fix the flaws in the 2013 regulations, it wasn’t until the Zuberi v Lexlaw Ltd case came to Court that the Court were able to look into it.
The Court ruled that Lexlaw should be paid the £125,000 for their work. The ruling has been praised by Lawyers as a watershed moment for DBAs, and Simpson Millar were proud to play a part in this ruling.
Before now, many Lawyers have been reluctant to use DBAs because of the flaws in the regulations. But it’s hoped that this new ruling will give Lawyers and their clients the opportunity to get creative and come to a suitable arrangement together.
“Clears up the Flaws” in Regulations
CEO, Greg Cox, acted as part of the Bar Council team on the case alongside Partner, Ed Stanfield, and has expressed his appreciation for the Court ruling. He told The Times that the ruling “clears up the flaws” in the regulations and he hopes it will make Lawyers feel more confident about using DBAs.
Greg also believes that Lawyers will still make money from cases with DBAs, as “most clients actively prefer their legal team to have some skin in the game,” instead of charging for their work, whether they’re successful or not.
If you’re a subscriber of The Times, you can read the full article here.
The ruling has also raised questions about what this could mean for future “hybrid DBAs”, which will vary from case to case, as hybrid DBAs are not an ‘all or nothing’ agreement.
For example, there might be an agreement between the client and legal representative that the legal representative will be entitled to a share of the final sum, but they’re also allowed to charge a small amount during the case.
While the law is still unclear on hybrid DBAs, Greg believes they may still be permitted if they’re carefully drafted.
You can read more from CEO Greg and Partner Ed Stansfield about what this Court of Appeal ruling means for DBAs here.