The judgment of HHJ Cadwallader in Escalate Law Ltd & Anor v Kennedy & Anor [2021] EWHC 2232 (Ch) is an example of legal funders and solicitors falling out with their clients.  The  judge upheld the decision to withdraw from the funding agreement and found that the defendant (former clients) were liable to pay the claimants £75,148.02. It offers an insight into the litigation process when lawyers, funders and their former clients fall out. It also shows the importance of taking careful attendance notes.


The defendants instructed the claimant solicitors in relation to a professional negligence action against solicitors, relating to planning issues following the purchase of land. The work was done on a conditional fee agreement and the solicitors arranged funding through the first claimant Escalate Law Ltd.  Work was done under the agreement and offers of settlement were received, but not accepted.


The claimants withdrew from the case and served a termination notice. They claimed payment of their fees on the grounds that the defendants had failed to comply with their obligations under the agreement.  The defendants defended the action and brought a counterclaim.


The defendants argued that the original funding agreement had been displaced by a later agreement.   The judge rejected that argument, finding that there was an agreement to work under the terms of the original conditional fee agreement.


    1. On 10 March 2018 Mr Harvey emailed Mr Kennedy to say that although, ordinarily, qualifying claims would first pass through Path A under the Escalate process, because it was a claim in professional negligence it had no realistic prospect of settling under that Path because of the involvement of insurers, so that it made no sense to waste time under Path A, so that
“we should crack on straightaway under path B and ramp up the pressure ASAP. That being the case, though, I should flag up that the Path B contingent pricing model of 30% of damages recovered now will apply”;
and the following day Mr Kennedy responded,
“Understood, path B! The critical factor for Vanessa and me is we sufficient funds from the process to enable development in line with our planning permission.”
  1. The Defendants’ case is that the CFA was varied by this, so as to turn it into an unenforceable damages based agreement. But in my judgment it was not varied. The contract was originally made and accepted by the Defendants’ execution of the Acceptance, in my judgment. The original agreement provided for both Path A and Path B. The suggestion in Mr Harvey’s email of 9 March 2018 that one should move immediately to Path B was a suggestion about how to operate the original contract, not a proposed amendment of that contract. The reference to the contingent pricing model was expressed as a reference to the contingent pricing model under the original contract, not as a variation to or amendment of the contract. It is true, of course, that the contract did not provide for a flat price of 30% of damages, but for a variable price subject to a cap amounting to 30% of damages: in other words, the email is referring to the maximum payable, not to the lesser sums which might be payable (unless he was just using abbreviation). That was appropriate in an email intended to flag up and warn of consequences of adopting a particular course of action under the agreement. Acceptance of the terms of that email did not indicate that there was any subjective understanding on the part of the Defendants that the agreement had been varied: ‘Understood, path B!’ was the Defendants’ authority for Bermans to pursue the claim under the CFA by which they were already bound, not agreement to a variation.


The judge found that the defendants were in breach of their duties under the agreeement.   He rejected the argument that the work done was outside the terms of the contract.

“The argument started with an attempt to define the ambit of the claim by reference to the telegraphic language of the contractual documentation. That is unrealistic. In any case, the scope of a claim may often change over time, while remaining identifiably the same claim. It would not necessarily fall out of any applicable CFA just because of that. “


The judge rejected the defendants’ argument that the claimant had been negligent.   The defendants had been fully warned of the risks of litigation, of the risks of rejecting offers and would not have accepted offers even if they had been advised to do so.

    1. At the mediation, which Mr Kennedy attended with Mr Harvey, Mr Harvey took notes. To the extent that there is any suggestion that these notes were inaccurate as a record of what occurred, I reject it. Mr Kennedy’s uncorroborated evidence is not reliable: he gave his evidence generally in an unimpressive way: he made few concessions, even where they were obviously appropriate; was not infrequently evasive; and his responses seemed calculated with an eye to what he thought would advance his case at that point, rather than to the unvarnished truth. In this, his evidence contrasted with that of Mr Harvey, which represented in my judgment an attempt to assist the court with his best recollection (albeit quite often with lengthy attempts to set it in context), and was overwhelmingly consistent with the contemporaneous documents.
    1. According to Mr Harvey’s notes, the Solicitors’ insurers initially offered simply to fund proceedings for the rectification of the overage agreement, and to take an assignment to argue the case. On behalf of the Defendants that was rejected, and Mr Harvey asked for an offer plus costs based on a rationale which he had noted overleaf. It included notes of his response to the offer: which included the following points: rectification of the overage agreement would only deal with part of the problem, the Groundhog Day scenario; the deduction of costs and the valuation approach also remained to be dealt with; the offer did not address the planning situation in 2016 and the loss over the lack of planning; it would involve the Defendants losing control of the process; they would be left in limbo for an unspecified period; the advice they had had was that it was a strong claim; costs would be wasted, and time too. Instead, on the basis of a concessionary assumption that 3 units would have been developed (not 5) but adding back development costs, he had in mind a figure of £190,000. An offer of £66,000, inclusive of costs was received, and he made a counteroffer about £190,000 on the basis of 3 units. Three quarters of an hour later, the Solicitors’ insurers made an offer of £80,000, and he made a counteroffer of £173,915. The mediation then ended because someone was unwell.
    1. Contrary to the impression Mr Kennedy tried to give, the Defendants were advised repeatedly about the difficulties with their claim before the mediation. Counsel’s opinion drew attention to the difficulties over causation and loss in clear terms, as Mr Harvey pointed out to Mr Kennedy in his emails of 14 and 20 November 2018, and as I accept was recorded in his telephone attendance note of 15 November 2018. It is clear from that note, and from his response to the email dated November 14, 2018, that Mr Kennedy understood the position, and that he said so. Mr Kennedy accepted in evidence that Mr Harvey had warned him about the difference between assessing the merits of the case for trial, and trying to negotiate a settlement. The letter of claim itself said clearly that the Defendants had not been aware of the supposed defect in the overage agreement before October 2017, which ought to have made it impossible to claim that the Solicitors’ negligence, rather than his own choice, meant that he had not obtained planning permission for multiple dwellings. It was there to be seen by those negotiating on behalf of the Solicitors, too. Nonetheless, for reasons which I cannot know, they were prepared to negotiate on a substantive basis.
    1. In the light of this documentation, and Mr Harvey’s evidence, I cannot accept the idea that Mr Kennedy did not understand exactly where he stood. Perhaps anticipating this, Mr Kennedy said that he did not understand that the Claimants’ costs would be deducted from the settlement on a costs inclusive basis. I do not accept that either. It is hard to understand what alternative meaning he would say he ascribed to the words ‘cost inclusive basis’ used at the mediation. In any case his own spreadsheet showing his attempt to work out what it would mean in a number of scenarios plainly shows he had a good understanding of the concept. Finally, it was wholly unclear how this alleged failure to understand had any bearing on his approach to the mediation.
    1. But it is submitted that Mr Kennedy is not saying that he received incorrect advice on the merits after all. His complaint is that, instead of telling him to accept the £80,000 offer, Mr Harvey said at the unexpected conclusion of the mediation he thought that there was ‘more to come’. Mr Harvey did not deny this. It was exactly what Mr Kennedy wanted, of course. And in fact, Mr Harvey might have been right (particularly since the Solicitors appeared to be negotiating already substantially above the true value of the claim, considered in the context of its prospects of success at trial); but on no footing can he said to be negligent about it, even though in the event no greater offer has in the event been received.
    1. The Claimants submit that Mr Kennedy would never have accepted the offer anyway, even if he had been advised to do so. Mr Kennedy’s evidence was that he wanted to accept the offer, but that Mr Harvey refused, saying something along the lines of “what about my costs?” Mr Kennedy tried to persuade him, saying that they could talk about his costs if they did the deal, the Mr Harvey was having none of it. I reject Mr Kennedy’s account. It does not sit well with his email of 30 January 2019 referring to the Solicitors’ advice as over-confident, and suggesting that he give them notice that the Defendants’ next step would be to serve court papers. A complaint, even of the mildest kind, that Mr Harvey had refused to allow him to accept an offer he wanted to accept, is conspicuous by its absence. On the contrary, by his further email of same date, Mr Kennedy is saying that he would not want to be anchored to offer about £140,000: that email makes it clear that he wanted more, rather than less; and that he was saying £140,000 was very marginal for the Defendants based on the spreadsheet which I have already referred, which was attached. The spreadsheet showed his understanding that his net receipt on that basis would be £65,408. What that shows is that he was considering what he needed, not the value of the claim. I agree: on the balance of probabilities, Mr Kennedy would not have accepted the offer of £80,000 even had he been advised to do so. It was a negotiating risk and one which I accept that at the time Mr Kennedy was prepared, even eager, to take. There really was no evidence to the contrary.
  1. I therefore reject the claim on behalf of the Defendants that the Claimants work for them was worthless. On the contrary, it secured an offer of settlement which the Defendants now say was acceptable (and I have rejected their attempt to blame the Claimants for the Defendants not accepting it), and an agreement in principle for a useful variation of the overage agreement (and I have rejected their attempts to blame the Claimants for its not being formalised), and did so in a way which was effectively risk-free for the Defendants (and I have rejected their attempts to blame the Claimants for finding themselves obliged to pay the Claimants’ fees).