COST BITES 77: JUDGE REJECTS ARGUMENT THAT TERMS OF DISCOUNTED CONDITIONAL FEE AGREEMENTS MEANT THE SOLICITORS WERE NOT ENTITLED TO ANY COSTS OF ALL: COMPULSORY READING HERE – AND MUCH TO THINK ABOUT

The judgment of Judge Brown, sitting as a Master of the Kings Bench, in  Ascension Asset Management Ltd & Anor v Sky Solicitors Ltd [2023] EWHC 875 (KB) should be mandatory reading for any litigator who enters into a retainer with a client.  The judge was considering issues relating to whether a solicitor was entitled to recover fees following acting for the claimant and acting under a Discounted Conditional Fee Agreement. In particular whether the fact that an action had been settled with “no order for costs” meant that the solicitors were not entitled to any costs at all.  The judge further considered, and rejected, an argument that the solicitors costs were “capped” by an estimate of costs given in the course of a mediation.

LESSONS TO BE LEARNT

There are two aspects of this case that merit close attention.

 

  1. The drafting of the retainer document, which appears to have been adapted from a personal injury conditional fee agreement.
  2. The very practical point that, at any mediation or settlement meeting, it is prudent for a solicitor to have an exact figure of costs incurred to date.

 

THE CASE

The claimant company is involved in the business of purchasing and managing commercial property. It instructed the defendant solicitors to act for it in relation to a claim for rent arrears and forfeiture.  That action was settled, after a mediation,  the claimant was to receive damages and there was an order that each party pay their own costs.

The claimant then sought assessment of the bill of costs its own solicitors (the defendant in this action) rendered. That bill was for £201,480.44 with the fees element being £144,000 plus VAT.

THE DISCOUNTED CONDITIONAL FEE AGREEMENTS

The retainer between the parties was a Discounted Conditional Fee Agreement (a DCFA). These provided a cap of £10,000 on fees if the action was lost, plus disbursements.    The terms of the agreement are set out in detail in the judgment.

 

THE VARIOUS ARGUMENTS IN RELATION TO THE DCFAS

Interpretation of the DCFAs

 

1.1.1   The  different interpretations canvassed

  1. The Claimants’ case is that subclause 7.3 should properly be read as qualifying the obligation to pay basic charges in clause 3  and that such charges are payable only if there is an order  or provision in the client’s favour in a settlement agreement  expressly providing for the payment of  the client’s basic charges (‘V1’).   
  1.  Alternatively,   the Defendant is  entitled to be   paid its basic charges if they have in fact been recovered from  the opponent whether or not they are described in any agreement with the opponent as costs (‘V2’): the Defendant solicitors say it is clear that the costs were in fact recovered albeit not expressly as costs in the deed but in the form of rent or other financial payment.
  1. Alternatively,  subclause 7 (3)  when  read in sequence with subclause 7.1 and 7.2 only applies where a costs  order has been obtained in the underlying claim but not when no costs order has been obtained: on this interpretation there is  no requirement to show that costs have in fact been recovered in the proceedings  in order to demonstrate an entitlement on the part of the solicitors to be paid their basic charges. Read in this way it may or may not  be  that   costs should not exceed the amount that is recovered from the opponent in any money claim.
  1. There is, I suppose, a further possibility (‘V4’)  that subclause 7.3 is to be read with  subclause 7 (2) (where solicitors agrees costs without the client’s instructions).  But neither party advanced this interpretation.

 

ISSUE NUMBER ONE: DID THE TERMS OF THE DCFAs MEAN THAT THE DEFENDANT HAD NO ENTITLEMENT TO COSTS?

The claimants’ initial argument was that since no costs were recovered in the rent and forfeiture action the defendant had no right to recover costs under the DCFAs. That argument was rejected by the judge.

 THE JUDGMENT ON THIS ISSUE

  1. Turning first of all to V1, I  agree with Mr. Benson that it is, at the very least, doubtful whether the literal meaning could be as the Claimants say: the DFCAs do  not say in terms that the solicitors  can only be paid basic charges if  they are recovered from the opponent and are expressly  described as basic charges, or indeed costs, in a settlement agreement or order. The words used  in this subclause  are “recovered” from the Opponents. Costs may well  in fact  be recovered in a literal sense in a lump sum payment even if that payment is not expressly labelled as  costs.
  1. In any event  I agree with Mr. Benson that if V1 were correct, subclause 7.3 would lack  business  efficacy and be unworkable for, to my mind, obvious reasons.
  1. It  is plain that claims (particularly perhaps non- personal injury claims) can, and perhaps  commonly, do  settle  without  orders for costs. Parties, particularly  perhaps those whose disputes arise in a commercial context, do not want the bother of having to  pursue costs proceedings with the attendant further costs.   Indeed, as here, there may be interim orders going either way, the working out of which  would give rise to considerable further work and costs.          Moreover, it  may matter little whether the   recovery of a sum of money is by way  of damages, specific  performance of an obligation to pay money or costs; and it is scarcely surprising that parties should  ‘trade off’ costs and financial claims   to  agree   one lump sum payment without having to specify whether any sum payable was by way of costs.  But if V1 were  correct then only if the sums recoverable in a compromise agreement  were specifically described as costs would  the client be liable to its solicitors for their fees; and if  no mention is made of any costs recovery the client would avoid any liability for such fees   (beyond those  interim costs recovered)  even if the claim clearly succeeded. And yet,  curiously,  on this interpretation it would seem that  if the claims were lost there would be at least some liability for the losing fee.
  1. Further, it is also  plain that  a client may decide not to take the solicitors’ advice as to settlement  (indeed in mediation the parties may talk directly to each other without any involvement of solicitors) At the risk of stating the obvious in general  solicitors cannot dictate  the terms of settlement: the  solicitor merely advises and the client makes the decision. But it  follows that if the Claimant were right the client could simply cut the solicitors out of its fee  by agreeing an order for settlement of the claim which makes no express provision for costs.  Indeed a client could in this process  effectively give up an  existing entitlement to costs under  interim cost orders and agree  to receive the sums due under such orders by way of damages (which is what Mr.  Benson was saying would happen here  if the Claimants were correct) or by way of set off against a costs order in favour of the opposing party. 
  1. It is not  clear to me that  the solicitors could  in practice do anything  to protect their interests in being paid their basic charges if V1 were correct.  I  had understood that   Mr Wilcock did not resist in his oral submissions at the conclusion of the hearing  the suggestion that there were practical difficulties in doing so. In his later supplementary  submissions (which I had directed should be limited to another different issue) Mr. Willock however developed the  argument    that  if the solicitors  considered  any  settlement agreement  in the underlying claim that did not expressly provide for their costs were in prospect they could  terminate the DFCA and claim their costs on the grounds inter alia  that the client had not reasonably co-operated with  the Defendant or had rejected the solicitor’s advice. Clause 10.2 of the  DFCA, it is said is widely drawn and  entitles the solicitors to terminate an agreement for “any reasonable ground” and,  Clause 10.5 permits the solicitors to terminate when a client rejects the solicitor’s advice.
  1. I think however that Mr. Benson is right in his argument that the  parties cannot have intended to structure their arrangements in this way.     Mr. Wilcock accepted at the hearing  that at the stage this litigation had reached,  with an imminent   trial,  an attempt to terminate the agreement would be, at the very least,  problematic having regard to the solicitor’s  professional obligations; indeed I thought I had  understood him  to accept at the hearing that they could not realistically terminate the retainers.  In any event the settlement of claims by mediation or otherwise shortly before trial is  plainly not an unusual event. It  followed however that if   V1 were right solicitors would have to  keep  providing services (and possibly also incurring disbursements) if  there were a prospect of a successful settlement but that no fees would be payable, an outcome which struck me as potentially serious for a solicitors’ firm (if not in some cases ruinous  for a small firm) or if termination were possible terminate the retainers and quite possibly leave the client without representation  at trial should settlement not in fact occur. That point illustrates just one of the problems. Indeed it would be difficult to see how any right to terminate  might work in practice in a way  that could adequately protect the solicitor’s interest. Solicitors are not always expected to participate in settlement negotiations and may not know be on notice, or adequate notice, of what a client might be negotiating.   There might be a continuing risk throughout  a claim that the client could negotiate a deal which cut  the solicitors out of costs and thereby defeat  the obvious expectation that  the solicitors get paid their basic charges in the event of success.  In any event in my judgment the termination provisions do not provide  an  appropriate  or practical mechanism  by which the  solicitors can secure their basic charges. 
  1.  I should add,  although it is not necessary for me to do so and indeed there was no real argument about this, it is, I think, at very least doubtful that  the termination  clauses themselves can be read as Mr Wilcock’s argues. Indeed I have quite a number of concerns about such a case. His interpretation does not appear to sit with the commercial realities:  the ‘trading off’ of one element of a  formal claim against each another (viz. costs/damages)  is part and parcel of mediation (settlement) in a commercial context and the effective prohibition of such an approach  (by a solicitor’s instruction/advice not to do so) does not fit with the expectations of mediation. Moreover if he  were right it would be appear to oblige  a client to act against its interests (and reject an otherwise reasonable settlement offer) in order to preserve the entitlement of the solicitors to be paid their basic charges. It is difficult to see that solicitors could  terminate a CFA for failure to follow advice that might be unreasonable having regard to the client’s interest and yet still be  able claim its fees. Indeed  I would have thought that  refusal to accept advice that a client must negotiate on specific terms such as these is not unreasonable. Added to this are  the possible conflicts (in the legal [5] and non-legal sense) that such a reading of the provisions might promote.  In these circumstances it is not at all clear to me this would be a workable  interpretation of the termination clauses and  indeed it strikes me as highly questionable whether  clause 10.5, if read in the way contended for,  would be enforceable [6] [7].  However in view of the conclusions set above in the previous paragraph it is  not necessary to reach any formal conclusions or for me to invite further submissions on these points.
  1. As the guidance I have cited above makes clear, when  interpreting an agreement the  quality of the  drafting is relevant. The  original template of the DCFAs appears to have been  drafted for use in a personal injury case (see a requirement   in clause  6 that  a client consent  to  expert examination).  It was Ms. Bambigboye,  who, I understand, suggested some additional   or revised  terms of the DFCA and the original version of the agreements have been adapted  to some extent in discussion with the parties. In these circumstances I  am not satisfied that they are the standard terms of  the solicitors or indeed solicitors in general.  In any event I am satisfied no-one involved in the setting up of these retainers  really or adequately addressed their minds to what would happen if the claim were to  be resolved  at mediation or otherwise settled. Both Mr. Ijieze and Mr  Daniel were no doubt concentrating on the challenges of the litigation.  Further, I am satisfied that had they turned their mind to it,  they would have agreed,  as a matter  that was  obvious, that if settlement had been reached in terms which meant the claims were  a success but  without any express order for costs in the Claimants’ favour nevertheless  the Defendant would have  to  be paid its  basic charges.   Indeed it was  the  Claimant who contended in his email of 8 April 2021 that the  agreement had not catered for the possibility of settlement in mediation.
  1. No imagination is required to reach this conclusion  because it  seems to me that it was on this  basis that the parties proceeded   in the mediation: no-one appears to have suggested that the Claimants  did not have a liability under the proposed agreement notwithstanding  subclause 7.3 and notwithstanding the  provisional ‘drop hands’ agreement on costs. The absurdity of  V1 is obvious.   If it were right the client might, absent termination (on the Claimants’ case),  simply cut the solicitors out from payment of basic changes; indeed V1 would   lead to the odd conclusion that the solicitors  are liable to be worse off in the  event of success than if the claim were lost. It  is  plainly unworkable as an interpretation even if the solicitors could terminate the retainer when such an agreement which did not include a costs order were in prospect.
  1. Mr. Wilcock  appeared to argue at one stage  that I should not  look at  the  commercial considerations because he  suggested, at least as I understood his point,  that this was not a contract made in commercial context. The  DFCAs were, he appeared to contend,  not   commercial contracts and  the commercial consequences are irrelevant. But quite apart  from the fact that the contracts were made in a commercial context his point struck me as proceeding from  a plain misunderstanding  of the guidance which I have set out above:  the need to consider commercial considerations, such as the practical workability, of a contract do not necessarily require both sides to be commercial entities or for a contract to be made in a strictly business context (as I think was his contention).  
  1. Mr. Wilcock relies on what he says is the  ordinary and natural meaning  of the provisions. This is plainly an important consideration  but as the guidance makes clear contractual interpretation is not a literalist exercise. Even if  I were to  accept that the clear meaning  derived by such  process was as the Claimants contend (which, for the reasons set out above I do not)  and there would have to be  a express  costs order or provisions for liability for basic charges to be payable, that would not be an end to the matter: as it was put, if the parties expressly referred to Mary, they could have meant Jane.
  1. The Claimant’s  case essentially is, as I understand it and as it was perhaps put somewhat starkly  by Mr Wilcock, that the Defendant is  “hamstrung” by its own agreement which it had negotiated and that  the court should not, as I understand him to say, save  the solicitors from the consequences of a bad agreement in circumstances where the problem is of their own making. I  took the substance of Mr  Wilcock’s point to be that the  Defendant being solicitors, they should, in effect,  be stuck with  what they had  negotiated; and that they  should have known better than to enter into a contract such as this.
  1. In Candey v Bosheh [2022] EWCA Civ 1103 the Court of Appeal held that there could   not be implied into a conditional fee agreement an obligation of good faith on the part of a client. Mr Wilcock referred to the passage in the judgment of Coulson  LJ where the learned judge was considering conflicts which might arise  where terms are drafted in a CFA in such a way that the solicitor’s costs recovery is dependent on the client recovering  something in the proceedings ([53]).     In this passage he said that  “such conflicts cannot be resolved by an implied duty owed by the client to consider the solicitor’s natural interests rather than his own; it is for the solicitor to ensure that such conflicts do not arise in the first place.”  Mr. Wilcock relied on this upon this for the proposition that it was for a solicitor to ensure that no conflict arises  on the interpretation of the contract; and having failed to do so, the client’s version should be preferred.  In my view this is  not what the  judge was saying: the important point he was making was that the difficulties created by  conflicts  of the sort he was referring to  (ie where the solicitors costs are dependent on the client recovering something) cannot be resolved by an implied duty of good faith;   the conflicts to which  the learned judge was referring were not disputes as to the meaning of the retainer.
  1. Whilst solicitors can,  of course, be  expected to have an understanding of the significance of legal terms that a  layman will not,  and  in general  solicitors  bear  some burden  in ensuring that a retainer is clear (see Gray v Buss Martin [1999] PNLR 882),  I had difficulty seeing how the approach advocated by Mr. Wilcock  could be reconciled with the principles that I am required to apply. There are no  special  principles of interpretation applicable where solicitors are a contracting party. The relevant clauses were not offered by the solicitors as standard clauses; the agreement was negotiated.  Indeed whether or not the  contra proferentum rule applies, I still have to have regard to the relevant principles.  Solicitors may be presumed to have greater knowledge and experience in respect of these types of agreement, but that is just part of the circumstances to which I should have regard. In this case the Claimants  had the benefit of assistance from Ms Bambigboye who had legal  training and experience  (albeit I think in a different area of law) and in any event Mr.  Daniel was himself an experienced businessman.
  1. I acknowledge that  the suggestion that  something may have gone wrong with the wording of a funding arrangement  is a substantial matter requiring  a  close consideration. But in circumstances where the   parties  and solicitors are doing their utmost in  difficult and demanding circumstances it strikes me as possible that even solicitors can, when considering their funding arrangements, fail to cater for every eventuality.
  1. Mr Wilcock  said that  that subclause 7.3 had been  drawn   from   section  3 dealing with payment  terms. He also said that the original drafting of the agreement included  a clause that made  clear (for the avoidance of doubt) that the Claimants would be liable to the solicitors for any shortfall in a costs recovery from the Opponents (removal, as I understood his case, indicating  that the parties must have intended that there is no such liability). Both matters were said  to support his case as to the way in which the retainers were to be interpreted. Quite apart from any evidential difficulties associated with these assertions,   at least one of the further  difficulties is that  I am required   to disregard   pre-contractual  negotiations when considering the meaning of a contract (see inter alia Wood, [10]; see too the Entire Agreement clause in retainers).  Moreover I  am not sure that it necessarily helps the Claimants where the  subclause  may have been in circumstances where the parties have chosen to locate the term under the heading ‘Recovery of Costs’ (my underlining).
  1. Nor do I accept Mr. Wilcock’s argument that  the Defendant solicitors must have understood that subclause 7.3 would have precluded the payment of basic charges if no costs order or costs recovery was provided for in the settlement (and this is why they insisted, it is said, that the Claimant only settle on terms that the opponent pay costs). I deal with this matter further below in a different contact, but whatever concerns Mr. Ijieze and the Defendant may have had as to the terms of the agreement cannot determine the proper meaning of the contract. Indeed it made sense  (even if V1 were acknowledged as incorrect) that the Claimants should press for and obtain a costs order in their favour and that they should be encouraged to do so.
  1. Mr. Wilcock  also relied  on a comment  apparently  by Mr. Ijieze   in a Word ‘Comment’ box  alongside clause 10.3 of the revised Chancery DCFA. This clause provides for payment of basic charges in the event of termination (by the client, on notice, see subclause 10.1) and the comment next it was  that this clause,  ie 10.3,  was “protecting ourselves against unreasonable termination”.    It  was not clear to me  how this might have shown that the Defendant foresaw, prior to entering into the CFA, that the Claimants would seek to avoid paying  fees if there were no termination and that clause 10  (generally) protects against this (as Mr. Wilcock contended). The obvious intention of subclause 10.3 is to anticipate a situation  where the client seeks to terminate on notice; it provides  protection to the solicitors by providing for payment of their basic charges:  the client might otherwise terminate and thereby escape liability for paying basic charges by the termination. It seems to me obvious why the Defendant would not accede to the request on behalf of the Claimants  to limit the costs in 10.3  to a losing fee and it is this request which prompted the comment relied upon.  This view of the comment does not assist the Claimants. I do not think in any event that this  point assists the Claimants, not least because I am not entitled to have regard to pre-contractual negotiations;  nor would it outweigh the concerns that I have raised as to the commercial consequences of the relevant clauses if the comment were read in the way that  the Claimants contend.
  1. Turning then to V2,  the difficulty  with this interpretation, to my mind,  is that it  appears to require an enquiry  of some forensic  difficulty  into what has in fact  been recovered  by way of costs, however  it might be described. This is particularly so where  the parties might not have turned their minds to any issue as to how a lump sum payment may be made up. Indeed there may also be difficulties associated with the such interpretation particularly where the claim/defence is in respect of  for non-money relief so that no money is to be paid over.
  1. V3 is, to my mind,  consistent with the analysis in Edmondson. It seems to me that the Supreme Court’s analysis of the function and effect of the provisions in the client care  letter in the case support the conclusion that  subclause 7.3 should relate to the recovery of costs where a  costs order is made and cannot, as the terms of the client care letter could  not in Edmondson,  be used as means of ‘cutting out’ the solicitors from payment; an interpretation of a unding arrangement which permitted the client  to  do so was rejected. I have fully in mind Mr. Wilcock’s point that there is a difference between the facts of that case and this case. The wording of the main CFA was different (it expressly  provided that the amount of costs was not limited to damages) and in this case, unlike   that case,  the clause creating that liability of for costs (section 3)  and subclause 7.3, which  Mr Wilcock says, limits the quantum of costs are in the same document (the DCFA). It does not matter however that I might not be strictly  bound by this decision it is plain to me that the reasoning does however assist in the proper interpretation of the retainers with which I am concerned.
  1. It strikes me  as significant  in considering the facts of this case that sub clause 7.3 is  in a section dealing with the recovery of costs in and not the liability for basic charges. It is also, I think, notable, and as I pointed out in the course of the argument, that subclause 7.3 is  to be read in sequence with subclauses  7.1 and 7.2   which both proceed on the assumption  that a costs order has been  made in the client’s favour and deal with the situation that arises when a claim is made against the Opponent (inter partes)  for  costs pursuant to such an order.  Further, the term ‘Basic Charges’ does not state expressly    that a costs order is required in order  for there to be a ‘win’ (albeit it refers the solicitors “seeking” to recover costs in the event of a ‘win’) nor does the definition of ‘win’.
  1. Considering   subclause 7.3 in this context and noting that there is no express requirement for a costs order  to be made in order to trigger a liability for basic charges, either  within section 3 which sets out the primary obligations as to   payment, or indeed in the definition of ‘win’ where  it  might be expected to be seen  (if it were to have the effect contended for by the Claimants)    it  seems to me that subclause 7.3 should be read as applying  where  a costs order had been  made and  to the extent that a costs order is made,  so that in these circumstances the clause only limits the quantum of costs such that the solicitor/client cost liability mirrors the inter partes costs recovery,  but not when no order at all  has been made.
  1. The Claimants’  interpretation, were it to be correct, would in effect re-define the term ‘win’ and is to be weighed against the  commercial considerations I have set out above.
  1. Mr. Wilcock argued   that the  problem with all the interpretations save V1  was that they expose the client  to a claim for costs which might equal (or, I suppose, exceed)   the sums recovered by way of damages or otherwise. But in circumstances where a claim has been ‘won’   it might ordinarily be  assumed that  a party could agree a costs order in their favour. If instead the client choses to receive a financial payment in another form that party cannot be  surprised that the solicitor should maintain its claim for costs whether strictly out of that sum or up to the limit of that sum or  indeed otherwise. That the  client  could not simply cut the solicitor out of their costs was material to the approach of the Supreme Court in Edmundson; moreover the concern that Mr. Wilcock raised  did not deter the Court in that case  from  reaching a conclusion which might have the effect on the claimants that all their damages be used to pay of costs.     The client can scarcely be ignorant of his liability to his solicitor for basic charges and it seems to me to be entirely natural  that when entering into a ‘drop hands’  costs agreement there should be a  discussion about the  client’s liability to solicitors in advance  of entry into a settlement agreement (as the Defendant proposed here). In short the client can be expected to consider, and perhaps address, this matter before a final agreement with opponent.
  1. I agree with Mr. Benson that reference to terminology  such as ‘CFA Lite’    is not helpful: the  term ‘lite’   implying perhaps that   solicitor’s liability  to pay  legal representative’s fees and expenses only to the extent that sums are recovered in respect of the relevant proceedings, whether by way of costs or otherwise.   Indeed neither side, at least initially, relied upon such an approach.  The meaning of words  used in  a contract  are ascertained by using the principles set out above against the  background knowledge  which would reasonably have been available to the parties, not just one side which is relevantand it is not clear to me that any such terminology could properly be deployed  by Mr. Wilcock in support of the Claimant’s interpretation.
  1.  The reasoning  in Edmondson  might also suggest that a restriction on the amount of basic charges payable to the financial sums recovered should apply here.  However it does not, as I understand it, appear to matter whether there is such a restriction in this case as it is common ground the further fees sought do not exceed the financial recovery and in absence of detailed argument on this point I do not think I should do so.  I have some difficulty seeing how a financial restrictions could apply in a case in which   financial relief (which is perhaps the case in the  DFCA or indeed that such would be inferred on the fact of this case (cf Edmondson).  If it were to matter I could however address it.
  1.  It does not matter for current purposes whether it is V3 that applies or V4: on either interpretation   the Defendant is entitled to be paid  its reasonable basic charges. The only effective   difference between V3 and V4 would   arise in a situation where   a costs order has been made in the clients’ favour – which is not the situation here. As  I indicate above neither parties contend for V4 and I  was (understandably) not  addressed  in any detail on it by Mr. Benson. The fact that the obligations or provisions in subclauses 7.3 and 7.2 were set out in separate clause would appear to weigh  against this interpretation which reads  7.3 as complimentary to 7.2 (indeed on Mr. Wilcock’s argument V4  would make 7.3 otiose).
  1. I  should perhaps also say that at the end of his submissions and without having raised the point either in the Statement of Case or in  the skeleton argument  (he was then relying upon) Mr Wilcock  suggested  that if V1 were not correct then there would  an unenforceable   contract for a   share of  the  ‘spoils’ of the litigation, in effect an unlawful contingency fee agreement (see Chitty  18-098  and 18-099).  Not only was it too late to raise such a point in this preliminary issue hearing  the point seemed to me to me, in any event, to  be   misconceived. By  V2 or V3  the parties are contracting for payment of   solicitors’ base fees   on a conditional basis but not for  a share of  any damages.  An arrangement whereby costs are in effect paid out  of damages (something obviously quite different for a contingency fee agreement) is entirely common place, particularly after the LASPO reforms (which ended the recovery of additional liabilities  from defendants  in most litigation). In any event not only does V3 not necessarily contain the restriction that basic changes could not exceed damages but  there could nothing objectionable about that if it were the case. Not only did such a restriction not seem to trouble the Supreme Court in Edmondson  such restrictions are entirely common place in  CFA’s, indeed  the Conditional Fee Agreements Order 2013 restricted the payment of success fees by reference to damages recovered.
  1. It appeared at one stage to be common ground that nobody would have entered into the contract knowing  that it  had the meaning set out V1.   Even Mr Wilcock, as I recall  from his written submissions,  appeared at one stage to accept  that it  would be absurd for  the solicitors to have done so.  His arguments in his supplementary submissions appear to have evolved somewhat since then. I have considered all his arguments, even if I have not expressly referred to them. I am not persuaded by any of them. Even if there might be  refinements as between say   V3 and V4 the agreement must have  been that where an agreement is reached through  mediation  which gives rise to a win, basic charges are payable. Applying a unitary and  iterative process, it seems to me, be clear for the reasons that I have set out above that V3 is the correct reading and that the Defendant is entitled to be paid its basic charges.
  1. It seems to me that the Claimants would have  succeeded only if they are correct about V1. It was contended   as I understand it, that  the sums recovered (essentially by way of  rent arrears)  would in fact be used to  pay  debts other that those by way of costs, and such a recovery  could  not  be treated as recovery of costs   (indeed as Mr. Wilcock pointed out clause 3.26 (a) of the deed which obliges the First  Claimant  to discharge sums due pursuant to a mortgage). In the event it is not necessary for me to decide this as I do not consider V2 to be correct. However it seems to  me clear from the conduct of   Mr   Daniel  at mediation and from what happened afterwards that the sums recovered were, in the contemplation of both parties and   mutually understand the other  to understand, to   be used to pay  the Defendant’s costs and if I were necessary to do so I should find that the basis charges sought have been recovered. 

IMPLICATION OF A TERM

 

Discussion and findings

  1. I think the requirements set out  above are satisfied.  If I were wrong to interpret the retainers as I have, I would have reached the conclusion  that such a term to the same effect  as V3 is implicit in the  DFCAs.
  1. Such  a term would be reasonable and equitable and  it would avoid the absurd and  unfair consequences of V1. It is  to my  mind an entirely safe assumption that  such a term would have been agreed had the issue been raised before the contact was  finalised and, moreover, that it is so obvious that it ‘went without saying’ that sub clause 7.3 was to be read as consistent with basic changes being  payable in the event of a ‘win’ and  that this subclause applied only if and to the extent that an order or provision for costs  is made in the client’s favour. It would  be necessary   to give business efficacy to the retainers and plainly in my view  capable of clear expression and be formulated with sufficient precision.
  1.   Mr  Wilcock  argued that such a term  would be  inconsistent with and contrary to the  express  terms of the contract.    In Barton the Court  was concerned with the terms of a contract between the seller of a property  and the introducer of  a purchaser of the  property; the introducer would receive a payment of £1.2m if the property were bought for £6.5million. It was held that  introducer’s fee  substantially exceeded reasonable remuneration for the  work to be done and the Court, by a  majority,   declined to read in  a requirement to pay a fee when the property was sold for less than £6.5m.
  1.  Lady  Justice Rose (who gave the leading judgment)  said  that: “…, an agreement whereby someone contracts for a higher than normal payment on the fulfilment of a condition and is prepared to take the commensurate risk of getting nothing if the condition is not fulfilled is not a bizarre or uncommercial contract.“ 
  1. She went on  to say  at [37]:

 “What would be strange, in my judgment, would be for  [the seller of the property] to agree to what would become a one-way bet for [the introducer]; that he should receive a fee of almost three times the reasonable fee if the sale price were £6.5 million or more and still receive the full reasonable fee of £435,000 if the sale price were something less than that. I do not see what benefit there would be for them in concluding such an agreement.”

  1. It is in this context  that a finding was made that the implied term proposed would be inconsistent with express terms of the contract. However that situation is to be contrasted with the situation here where more natural understanding of the contract as a whole is that the solicitors would get paid if the claims succeeded. A clause cannot I think be said to be  inconsistent and/or contradict the express terms merely because if  without it there would be no such term:  it is obvious that will always be the case where a terms has to be implied.  In my view the a term to the effect of V3 would not be contrary to the express terms of the contract but arise by implication from them.

 

AN ARGUMENT THAT THE FEES WERE CAPPED TO £50,000

There was a further argument that, because there was a mention of costs being around £50,000 during the course of the mediation, then the recoverable sums should be capped at that amount.

 

  1. Cap on fees/costs of £50,000 by an estoppel  

 

  1.  The parties disagree as to the nature and effect of representations made as to the defendant’s fees and disbursements   in the course of the mediation and as to whether there was any material reliance upon them. 

 

3.1  The law

 

  1. It is not, I think, necessary for  me to set  out the relevant principles in any detail in order to deal with this. It is plain that in order for an estoppel to arise:

(1) there must be a promise or an assurance or representation (in the nature of a promise) which is intended to affect the legal relationship between the parties  and which indicates that the promisor will not insist on their strict legal rights  (Chitty 6-098);

(2)   the representation must be clear or unequivocal (Chitty 6-099); and

(3)  it must also be  “inequitable” for the promisor to go back on the promise;  the promisee must have acted in reliance on the promise  so that they can no longer be restored to the position in which they were before they took such action; if  the promisee can be restored to that position, it will not be inequitable for the promisor to go back on the promise. (Chitty 6-103)

 

Discussion and findings

 

  1.  I think it is clear that if  solicitors  had represented that  its fees  were no more than a  particular figure and in reliance  upon that representation  a client were to have entered into an agreement with opponents in litigation on a ‘drop hands’ basis,  or one which did not provide for costs in their favour,   this could amount to an estoppel preventing the solicitors from claiming  a sum in excess of that which they had  said  was payable. The client may be taken to have acted to their detriment by relying upon the representation and agreeing to payment of a particular sum by the opponent, making it  inequitable for the solicitors to claim any higher sum.  That was not however the case here.

 

  1. I did not have the benefit of any attendance note on this issue.  There  had  however been a very significant  amount of correspondence as to the Defendant’s  fees and disbursements  prior to and in the run up to the mediation.  In a letter  sent on 2 March, the day before the mediation, Mr. Ijieze   wrote to the  Opponents about unrecovered interim costs which   alone were over £33,000 plus VAT (over £40,000 inclusive of VAT; Mr.  Daniel was provided with a copy of  this letter on the same date. He was informed of   other costs including counsel’s fees (which for the mediation  alone were £5,000 plus VAT) and would have been aware that other work had been done  by the solicitors  progressing the litigation  and   in preparation for the mediation.   The consolidated claims had been  costs  budgeted and   the costs  budgets  were sent  to Mr.  Daniel on 10 October 2021. Having provided Mr.  Daniel with such information he would have understood that a substantial amount of costs was payable by the Claimants. It was perhaps  important to remind him of the Claimants’ liability to pay costs before entering into any binding agreement but Mr. Ijieze  was, it strikes me, likely to have proceeded on the assumption that Mr. Daniel had a pretty good idea of the amount of costs involved and any reference to a figure  was likely to have been in passing.   Against this background and in circumstances   where  the primary focus was on a complex negotiation  with the Opponents involving a number of different elements  with a number different matters being discussed in different  online rooms, it is to my mind   understandable that any such figure was not written down. Moreover to my mind it is  inherently  unlikely that Mr. Ijieze  would  have thought costs were limited to  £50,000  and, to my mind, unlikely that he would have made any such representation.

 

  1. When the issue of the defendant’s costs was raised in the mediation by Mr. Ijieze, he was not offering an estimate of the costs which was to be relied upon. The discussion appears to have taken place at relatively early stage of the  negotiations. It seems to me clear that that any representation as to costs or the fees of solicitors made in the mediation  could  in any event only have been in respect of costs incurred up to that point; and thus be a broad approximation. The Defendant was charging on the basis of a hourly rate.  That was known to the Clamant. Nobody knew at the initial stages of this mediation how much time would reasonably be required to complete the work that was necessary to for a deal to be reach.   Whatever words were used by Mr Ijieze  it seems  unlikely that   they could have suggested to Mr.  Daniel  there was likely be a cap on  fees and any indication as to the outstanding amount was in  broad terms which would have made it clear that the costs might well   exceed  £50,000 (consistent  perhaps  seems with the WhatsApp message of 13 March from Mr. Ijieze).    Whilst the information provided does suggest that Mr  Daniel sought   to recover  by way of rent arrears a  figure of reflecting the figure Mr. Ijieze had referred to,  I think he did so at his own risk knowing that  he might owe his solicitors more than this; such a risk being considered reasonable in the context of the risk of not achieving a settlement before trial.

 

  1.   On this point I have in mind that Mr   Daniel is  supported in his account by  Ms. Bambigboye who  says that Mr.   Daniel  told him that Mr. Ijieze said that costs were £30,000 to £50,000.    If  Ms. Bambigboye correctly  recounts the detail of  what she was told  by  Mr.  Daniel   then Mr.  Daniel was  inaccurate in his   account of what was said in mediation. It is to my mind unlikely Mr. Ijieze would have  suggested that his costs could be as low as £30,000 or that Mr.   Daniel would have thought that. Indeed it is perhaps of significance  that  in his email of 8 April Mr. Daniel described having  been told [in mediation]  that costs would  be “in  the region of £50,000 (including disbursements)” – not £30,000 to £50,000 and this representation seems inconsistent with a clear or unequivocal  representation that the costs would not exceed £50,000. In my judgment  there was no clear or unequivocal representation to that effect.

 

  1. Nor, even if were wrong about this,  am I satisfied that  Mr.  Daniels relied upon any such representation or that if he did, he did so to his detriment. Even if Mr  Daniel had not specifically turned his  mind  to the precise figures in the various emails that were sent to him about costs  he would have had some idea of the costs that were liable to exceed £50,000 (not least because of his ongoing liability for interim costs which had been awarded to the Claimants but not paid) and I reject his evidence that he had not considered such information. In any event any agreement, such as it was, at mediation, was subject to contract. As I have noted above Mr Daniel was informed by email on 15 March that the fees were some  £75,000 plus VAT. It is perhaps surprising that when he  received this email he did not specifically refer to the   representation that is now alleged to have been made. But he  plainly knew at this stage  (if he did not know before this)  before entering into  the deed  that  the Defendant  would be seeking over  £50,000 in basic charges.

 

  1. Some time shortly  before the sending of the first email in the chain I have set out above on 15 March  it appears there was some discussion  between Ms. Bambigboye and Mr. Ijieze about costs. Ms. Bambigboye said that   Mr. Ijieze had accepted that he had made a  mistake and should not have told Mr.  Daniel  that his costs were some £30- £50,000  because their fees were between £50,000 and £60,000 something.  I accept that  Mr Ijieze  would  have been aware that the impression he might have given at the mediation was the  fees could  have been as low as £50,000  and that this would have required some correction. Further, I accept  that he was likely to have made it clear that he was correcting any such misapprehension. But he was  not correcting a mistaken indication that the costs could not exceed £50,000, so I do not think this assists the Claimants.

 

  1. Accordingly, and for all these various reasons I must reject the Claimants’ case that there should be a cap of £50,000 as alleged.

 

  1.  I cannot however leave this issue without  raising some concerns as to how the claim for costs  appears to have increased so substantially from the figures that were   put in in the emails   of  15 March.   I raised myself the issue as to whether even if there were no estoppel,   a  representation given as to costs may have an effect on   reasonableness of the costs  (per  the guidance in Mastercigars Direct Ltd v Withers LLP [2007] EWHC 2733 (Ch)  and    [2009] EWHC 651 (Ch)  (see  [102]). In the earlier of these two judgments Morgan  J   explained at [99] that an  estimate of costs may be  a useful ‘yardstick’ by which the reasonableness of the costs may be measured: if there is no satisfactory explanation for any departure from  any estimate something less than an estoppel may suffice in terms of reliance for the purpose of deciding whether any departure from an estimate may be reasonable [8]. The following passage of the later judgment    has recently cited with apparent approval by Vos MR  in the context of non-contentious costs (Belsner v Cam Legal Service [2022] EWCA Civ 1387, [96]): 

  …even if the solicitor has spent a reasonable time on reasonable items of work and the charging rate is reasonable, the resulting figure may exceed what it is reasonable in all the circumstances to expect the client to pay and, to the extent that the figure does exceed what is reasonable to expect the client to pay, the excess is not recoverable…[102]

 

  1.   I was  not  sure Mr Benson was correct to suggest that the guidance given in Mastercigars  only applied where an estimate of costs was provided in advance of the work to be undertaken and not here. However  I consider that further arguments and indeed  consideration of the detail as to what happened is appropriate.  On the face of what I have seen however there seems some basis for thinking that costs  indications of the sort given at least on 15 March might be a yardstick against which to measure reasonableness. However, I leave all such matters for further consideration if the parties cannot now resolve their remaining differences.