SOLICITOR’S FEES NOT RECOVERABLE AFTER THEY HAD TERMINATED THE CONDITIONAL FEE AGREEMENT: HIGH COURT DECISION

In  Toms (t/a Goldbergs Solicitors) v Brannan [2020] EWHC 2866 (QB) Mr Justice Griffiths dismissed a solicitor’s appeal against a decision that he was not able to recover costs from a client after a conditional fee agreement had been terminated.

THE CASE

The claimant is a firm of solicitors. It entered into a conditional fee agreement with the defendant to bring an action. The action did not proceed. The claimant (that is the solicitors) ended the agreement because they could not get instructions to issue.   They brought proceedings for the sums due. That action failed at trial.  The claimant appealed on the grounds that the trial judge erred in finding that the defendant was not bound by the conditional fee agreement.  The claimant’s appeal was unsuccessful.  Mr Justice Griffiths held that the trial judge’s decision was not that the CFA was not binding but that the professional fees claimed were not recoverable under the terms of the CFA.

THE CIRCUMSTANCES THAT LED UP TO THE TERMINATION OF THE CONDITIONAL FEE AGREEMENT

The claimant (solicitor) ended the conditional fee agreement after the expiry of the limitation period.  Under the terms of the agreement this meant that they were entitled to recover costs from the defendant (their client).  The circumstances in detail are that:-

“i) The Defendant saw the Claimant on 27 March 2015 about a claim against his broker, Sabre. The detail of that claim is not important to this appeal.

ii) The Claimant introduced the Defendant to his colleague Mr Ellis who would be acting, and did subsequently act, on the Claimant’s behalf in relation to the Defendant’s claim.

iii) The Claimant and the Defendant entered into the CFA on 31 March 2015.

iv) The Claimant expressed confidence that Sabre was in breach of duty and advised that an expert report should be obtained. (The fee for this was a disbursement which the Defendant appears to have paid, because his unsuccessful Counterclaim was for recovery of that sum.)

v) The limitation period expired on 12 July 2017 without the Defendant authorising the issue of any proceedings. The claim therefore died.

vi) The Claimant then terminated the CFA on 18 July 2017 “for failing to give instructions to issue the claim” (judgment para 9). The fact that it was the Claimant and not the Defendant who terminated the CFA was part of the Claimant’s pleaded case (Particulars of Claim para 3).

1. 1. After these primary findings of fact, the judgment moves to a discussion based on the evidence, in which the following additional points are made or can be deduced.

i) It is said that the CFA “is of course familiar to lawyers but not easily understood for a lay client”.

There is no suggestion in the judgment that the CFA contained unusual, onerous or inappropriate terms. Indeed, it bears a Law Society copyright notice on the first page which suggests that it was in standard form.

ii) There is a finding that the Defendant was “only given a cursory explanation” of the CFA before it was signed; and a finding that “the Claimant’s explanation” of the CFA “fell below the standard of care which one would expect”.

However, there is no suggestion that anything was misstated, or misrepresented before it was signed. The rule in L’Estrange v F Graucob [1934] 2 KB 394 would seem to apply, whereby (quoting the headnote) “as the buyer had signed the written contract, and had not been induced to do so by any misrepresentation, she was bound by the terms of the contract, and it was wholly immaterial that she had not read it and did not know its contents; and… the sellers were entitled to judgment”. Of course, there are exceptions to that rule, but none of them appears to apply in this case.

iii) Some time after the CFA was signed and dated 31 March 2015, Sabre denied liability “in September 2015 and May 2017. It was a detailed denial of liability on any view” (judgment para 7).

iv) After the denial of liability, the Claimant wrote to the Defendant promising further advice. The judgment says “That didn’t happen. The Claimant simply said that prospects hadn’t changed but in my view it was at that time that it cried out for a proper reassessment of the claim”.

On the face of it, stating that the prospects had not changed was the further advice which had been promised. But the judge is here clearly saying that this was inadequate; that it fell short of the “proper reassessment of the claim” which the circumstances required. It is not clear what difference that could make to the enforceability or otherwise of a CFA signed and dated a long time before, on 31 March 2015. There is no finding (for example) that an opportunity either to make money or to save money was missed, because of negligent or inadequate advice. There was no Counterclaim for damages for negligent or inadequate advice, and the Counterclaim which was brought (for reimbursement of the expert fee paid by the Defendant) was dismissed.

v) Counsel was instructed in June 2017 (and the Defendant was informed of this in a letter of 21 June 2017) but no opinion was ever received (para 18).

vi) The limitation period expired, as I have said, on 12 July 2017. It is clear that all parties were aware of the impending expiry of the limitation period, which created (as the judgment puts it) a “frantic situation” (para 20).

“…the Claimant wrote to the Defendant saying that the claim had to be issued and that the Defendant had to pay the 5% Court fee. At that point, the Defendant decided not to pursue the claim and the Claimant says that was a breach of the [CFA]” (para 20).”

THE TRIAL JUDGE’S DECISION

The trial judge dismissed the claimant’s (that is the solicitor’s claim).

“In my mind, the Defendant was put in an invidious position. There was no proper analysis of the claim for him to make an informed decision.

The first real attempt by the Claimant to assess the risk/benefit was in the letter of 21 June 2017 when it is the first time that they said they would get a Barrister’s opinion.

The Claimant sent the Claim Form to the Defendant 6 days before the [end of the] limitation [period] and with no advice on the risks. The Defendant didn’t pursue the claim and the Claimant alleges that he failed to cooperate and was accordingly in breach of the Agreement.

It is my view that the Defendant was not in breach of the Agreement given the circumstances.

The Claimant failed to act in the Defendant’s best interests, or to explain properly and in a timely fashion and that is why matters got to that stage at limitation.

I do not find that the Defendant was in breach of the Conditional Fee Agreement and, as such, the Claimant’s claim is dismissed.”

THE CLAIMANT’S UNSUCCESSFUL APPEAL

The claimant’s appeal was unsuccessful.

1. 1. Although the Claimant ended the CFA rather than the Defendant, it was obviously entitled to do this in circumstances where the limitation period had expired without the Defendant agreeing to the issue of proceedings. The CFA said “We may end this agreement before you win or lose”, which is what the Claimant did.

   2. What is not immediately obvious from the judgment (because they are not expressly referred to in this context) is which of the two following clauses from the CFA in relation to payment was applicable to the events which happened:

“(i) We can end this agreement if you do not keep to your responsibilities. We then have the right to decide whether you must:

● pay our basic charges and our expenses and disbursements including barristers’ fees…

(ii) We can end this agreement if we believe you are unlikely to win. If this happens, you will only have to pay our expenses and disbursements. These will include barristers’ fees if the barrister does not have a conditional fee agreement with us.”

1. 1. Had the Defendant failed to keep to its responsibilities?

i) If so, under (i), the Claimant was entitled to payment of basic charges, as well as expenses and disbursements.

ii) If not, termination by the Claimant after expiry of the limitation period must have fallen under (ii) (“We can end this agreement if we believe you are unlikely to win…”), but that would entitle the Claimant only to payment of expenses and disbursements – not charges.

1. 1. I think, however, that the following concluding passages from the judgment (paras 23- 26), which I have already cited, do decide this point:

“The Defendant didn’t pursue the claim and the Claimant alleges that he failed to cooperate and was accordingly in breach of the Agreement.

It is my view that the Defendant was not in breach of the Agreement given the circumstances.

The Claimant failed to act in the Defendant’s best interests, or to explain properly and in a timely fashion and that is why matters got to that stage at limitation.

I do not find that the Defendant was in breach of the Conditional Fee Agreement and, as such, the Claimant’s claim is dismissed.”

1. Since the Defendant was not in breach of the CFA (and this was a finding open to the judge, whose findings of fact cannot be challenged in this appeal as permitted by the limited order of Murray J), the Claimant was entitled to payment of expenses and disbursements, but not charges, under para (ii), in the passage I have just quoted from the CFA.

2. The claim was, however, “for the recovery of professional fees” (judgment para 1), which were charges, and not expenses or disbursements.

3. Therefore, the judge’s findings are fatal to the claim and support irrefutably the conclusion that he reached. I say this on a careful reading and analysis both of the Note of Judgment (for all its imperfections as a record of the ex tempore judgment) and of the CFA upon which it was based.

4. Indeed, it does not appear to me that the decision was based on a finding that the CFA was not binding, which is the basis of the Grounds of Appeal. Rather, it is a finding that the professional fees claimed were not recoverable under the terms of the CFA.

5. Consequently, the appeal must be dismissed.