COST BITES 106: BARRISTERS BEWARE: COUNSEL ON DIRECT ACCESS NOT ENTITLED TO RECOVER COSTS FROM THEIR (FORMER) CLIENT: AN UNFAIR TERM MEANT THEY WERE ENTITLED TO NOTHING

The judgment of Mr Justice Turner in  Glaser & Anor v Atay [2023] EWHC 2539 (KB) is one that needs to be looked at by every barrister involved in direct access work, and their clerks.   The judge found that a contractual term that meant Leading counsel and junior counsel would be paid even if a trial was adjourned was unfair. Being an unfair term the position was as if it did not exist.  Consequently counsel were not entitled to any payment. The finding that they were entitled to payment on a quantum meruit basis was overturned.

“One of the occupational hazards of direct access arrangements is that the absence of any instructing solicitor inevitably exposes counsel more acutely to the unfiltered, uncomfortable and persistent demands of the importunate client.”

THE CASE

The claimants, leading counsel and junior counsel, had worked on a direct access basis in relation to the defendant’s matrimonial dispute.  The matter was listed for trial but the trial was adjourned.  The barristers’ terms of business meant that they were entitled to payment notwithstanding the adjournment.  The defendant withdrew instructions and the barristers sued for their fees.  At first instance the trial judge found the barristers were entitled to payment of 70% of their fees on a quantum meruit basis.  Both sides appealed. The claimants arguing that they were entitled to their fees in full, the defendant argued that the existence of an unfair contractual term meant that nothing should be paid.  The defendant succeeded on appeal. The judge held the claimants were not entitled to anything.

THE ISSUES

The judge set out the main issues.  Did the Consumer Rights Act 2015 operate in this context? If it did was the term  relied on by the claimants unfair? If it was unfair what were the consequences? In particular were the claimants entitled to recover their fees on a quantum meruit basis.

THE JUDGMENT

1. 1. The central issues are:

(i) the extent, if any, to which the provisions of the Consumer Rights Act 2015 (“the 2015 Act”) operate so as to preclude the claimants from relying upon one of the central terms of their agreement relating to payment; and

(ii) the consequences which are to follow in the event that the 2015 Act so operates.

1. 1. The defendant contended below that the application of the 2015 Act meant that the claimants were entitled to nothing. The claimants argued that the 2015 Act did not apply and, even if it did, they were nevertheless entitled to payment in full.

1. In the event, the Judge held that the operation of the 2015 Act did indeed preclude the claimants from relying on the contractual term relating to payment but that the defendant should nevertheless pay 70% of what would otherwise be the contractual sum due by way of quantum meruit. The defendant seeks to challenge this decision on appeal and the claimants cross appeal. The primary stance of each therefore remains that this is an all or nothing case in their favour.

THE BARRISTERS’ TERMS OF BUSINESS

the terms of business were set out in a letter.

1. 1. By a letter dated 29 June 2020, the first claimant set out the terms under which he was prepared to accept the defendant’s instructions. In so far as is material, it provided:

“I thought it would be helpful to set out the work that I will carry out for you and the fees that I will charge for this work.

The work I will carry out

The work you are instructing me to carry out is:

Preparation of and representation at the PTR hearing on the 10 July 2020, and the 10 [day] Final hearing commencing from the 21 September 2020, listed at the Central Family Court.

For the avoidance of doubt, the fee covers the above mentioned work and therefore if the hearing concludes early or is adjourned to another date or does not go ahead for any reason beyond our control, then the full fee is still payable and another fee will be payable for any adjourned hearing.

If subsequent work is needed on this matter, there will be another letter of agreement between us.

Because I carry out all my work personally and cannot predict what other professional responsibilities I may have in the future, I cannot at this stage confirm that I will be able to accept instructions for all subsequent work that may be required by your case.

My fees for this work

My fee for accepting the instruction to appear as an advocate on the occasions described above will be £90,000 plus VAT. You and I agree that I will not attend the hearing unless you have paid the fee in advance.

Total fees for my work as described above (exc. VAT): £90,000

VAT: £18,000

Total amount due: £108,000

The first payment of £12,550 is due by 6 July 2020

The second payment of £12,550 is due by the 10 July 2020

The third payment of £79,200 is due by the 31 August 2020

The final payment of £3,700 and any other fees due in respect of additional work is due 28 days after receiving the final order

Unless otherwise agreed failure to send payments on the aforementioned dates will mean that I will not be able to represent you at the hearings.

Any additional work will be billed at my hourly rate of £500 plus VAT.“

[Emphasis not added]

1. 1. The second claimant’s terms were identical save that the level of fees was one half that of the first claimant.

1. This was the basis upon which the defendant retained the claimants. The Judge below observed, in my view reasonably, that “given the significant sums involved one would have expected a more carefully thought through document”.

THE ADJOURNMENT OF THE TRIAL TRIAL

The trial was adjourned. Shortly after, on the day that counsels’ fees became due, the defendant client terminated the retainer.  She had paid sums previously but refused to pay balance due under the contract.  The claimants then issued proceedings for that balance.

THE KEY TERM

1. 1. The term upon which the Judge concentrated his attention in this regard is the stipulation in the letter of instruction that:

“For the avoidance of doubt, the fee covers the above mentioned work and therefore if the hearing concludes early or is adjourned to another date or does not go ahead for any reason beyond our control, then the full fee is still payable and another fee will be payable for any adjourned hearing.”

This has been referred to both below and on appeal as “the payment term”.

1. In summary, the defendant complains that this term is unfair because, in the event of the trial not going ahead, it had the potential to entitle the claimants to claim a lot of money for doing little or nothing. The defendant further sought to argue that the term relating to the price was parasitic upon the survival of the payment term and they should both fall together. I reject this latter contention for reasons set out later in this judgment.

WHY THE TERM WAS UNFAIR

Mr Justice Turner held that the term was unfair.

1. 1. I am satisfied, after taking into account the matters referred to in section 62(5), that the term as to timing of payment and the consequences of the trial not going ahead created a significant imbalance in the parties’ rights and obligations under the contract. In short, the claimants were entitled to be paid far in advance for two weeks’ preparation and participation thereafter in a two week trial. Even if there had been no work done whatsoever, the fees would have remained payable and subject to no element of reimbursement at all. Counsel would thus be entitled to take on alternative remunerative work during the relevant period and any sums thus earned would not go towards reducing the liability of the defendant. I accept that it not always easy for counsel, particularly leading counsel, to find work at relatively short notice but it is by no means impossible.

1. 1. In contrast, the financial risk of the trial not proceeding was borne entirely by the defendant. In particular, there was provision for additional work to be charged at £500 per hour for leading counsel but with no abatement in the event that no work whatsoever actually was carried out. It is not suggested that the contractual sums had been reduced to reflect, in advance, the possibility that the trial may not go ahead as listed.

1. 1. As the Judge below put it, the relevant term is “an “all or nothing” term weighing 100% in favour of the barrister. Clearly the imbalance was to the detriment of the consumer. I agree with his reasoning on this issue.

1. 1. But for that term, the barristers would have been entitled at common law to payment of the fees upon conclusion of their performance.

1. 1. The issue of fair dealing in this case must take into account a number of features. Firstly, save for some enquiries from the defendant aimed at clarification, the terms reached between the parties were not the product of individual negotiation. The letter in which they are to be found is worded in the form of a fait accompli and the defendant, as will almost invariably be the case in direct access arrangements, was not separately legally advised. Secondly, the risks of any given trial being rendered ineffective are much more familiar to members of the legal profession than to lay clients. They would have known, for example, that the fact that a trial had already been adjourned once provided no assurance that it could not happen again. Thirdly, the means by which a direct access barrister could provide some means of reimbursement in the event of the trial not proceeding fell also (or ought to have fallen) within the knowledge of the claimants. Fourthly, as is the case in most litigation, and particularly family proceedings, the lay client is almost inevitably placed in a stressful, dependant and potentially vulnerable position. I do not overlook the fact that the claimants clearly considered the defendant to be a demanding and difficult client but this feature does little of nothing to redress the imbalance in the relationship between professional and lay client. One of the occupational hazards of direct access arrangements is that the absence of any instructing solicitor inevitably exposes counsel more acutely to the unfiltered, uncomfortable and persistent demands of the importunate client.

1. 1. I readily accept that the relevant term was clear and brought openly to the attention of the defendant but that is not a feature which is sufficient, of itself, to establish that the requirement of good faith has been fulfilled.

1. I wish to make it plain that my adjudication on this issue is not to be taken as an imputation of professional impropriety whatsoever on the part of the claimants. Subjectively, they doubtless considered that there were sound commercial reasons to seek to protect themselves in clear terms against the risk of not being paid in full regardless of whatever procedural course the ligation might subsequently take and, in particular, against the adverse consequences of any and all potential threats to the viability of the trial. Had the other contracting party not been a consumer then the principle of freedom of contract would have readily permitted this. However, on an objective appraisal, the relevant term went significantly beyond what would have been consistent with good faith in the context of the aims and intentions of the statutory framework.

THE RESULT

The judge found that this was a consumer contract. It was subject to the provisions of the Consumer Rights Act 2015.  Because it was an unfair term it was not binding on the consumer.   The claimants were not entitled to recover any sums, not even on a quantum meruit basis.

THE JUDGMENT ON APPEAL

The result was that the claimant barristers were not entitled to recover their fees based on the unfair term.

CONSEQUENCES

1. 1. S 62(1) of the 2015 Act provides: “An unfair term of a consumer contract is not binding on the consumer…”

1. 1. In my view, this precludes the claimants from relying on the so-called payment term. The level of fees provided for is thus preserved as is the scope of the work to be provided by way of consideration therefor.

1. 1. Notwithstanding this consequence, the claimants argued that they should be awarded a reasonable sum by way of quantum meruit or (with less enthusiasm) an implied term.

1. 1. The Judge below was persuaded to approach the issue on a quantum meruit basis but it does not appear that he was provided with a great deal of assistance either as to the appropriateness of a quantum meruit basis of assessment or as to the nature of any such assessment, if made. In giving permission to appeal, the Single Judge observed:

“It is arguable that both the issues of principle and their application to the facts should have been more fully explored than they were…”

1. 1. In deciding that a quantum meruit approach was appropriate, the Judge referred to Chitty on Contract 34^th Ed Chapter 32 and in particular 32-077 which provides:

“32-077 In a contract for work to be done, if no scale of remuneration is fixed, the law imposes an obligation to pay a reasonable sum (quantum meruit). The circumstances must clearly show that the work is not to be done gratuitously before the court will, in the absence of an express contract, infer that there was a valid contract with an implied term that a reasonable remuneration would be paid. The court may infer from the facts a contract to pay for services to be rendered, even though this entails disregarding the actual intention of the parties at the time; as, for instance, where both parties, under a mistake of fact, assumed that the defendant was entitled to claim, without charge, the services of the particular fire brigade he had summoned.”

1. 1. In this case, however, the scale of remuneration had been agreed. It was expressly set out in the claimants’ letters and preserved intact by the safe harbour provisions of the 2015 Act. But once the claimants are precluded from relying upon the payment term, the contract falls to be treated as providing for a lump sum payment for the services of preparation and appearance at trial. The parties could have agreed a divisible contract but they did not.

1. 1. This background brings into focus the issue of partial performance of entire obligations which is addressed in Chitty at 24-029:

“Where a party has performed only part of an entire obligation it can normally recover nothing, neither the agreed price, since it is not due under the terms of the contract, nor any smaller sum for the value of its partial performance, since the court has no power to apportion the consideration. The refusal of pro rata payment is based on the inability of the court, as a matter of construction, to add such a provision to the contract, and also upon the rule that the mere acceptance of acts of part performance under an express contract cannot, taken alone, justify the imposition of a restitutionary obligation to pay on a quantum meruit basis. Thus where an employee is engaged for a fixed period for a lump sum, but fails to complete the term for a reason other than breach of contract by the employer, e.g. frustration, the common law rule is that he can recover nothing. In the famous case of Cutter v Powell, to which reference has already been made, a seaman was to be paid a lump sum when he completed the voyage; he died before completion of the voyage and it was held that his executor could not recover pro tanto wages because it was an “entire contract”.”

1. 1. A recent illustration of the operation of this rule is to be found in Barton v Jones [2023] AC 684 in which an agreement had been entered into to the effect that the claimant would be entitled to a substantial fee in the event that he introduced a buyer for the defendant’s property in an agreed sum of £6.5m. A buyer was duly introduced but the sum he paid fell short of the contractual level agreed between the claimant and the defendant. The Supreme Court held that, on the express terms of the introduction agreement, the obligation accepted by the company was an obligation to pay the claimant a specified sum on the happening of a particular occurrence, namely the sale of the property for at least £6.5m to a buyer introduced by the claimant. There was no express term of the introduction agreement creating an obligation on the company to pay the claimant a fee in any other circumstances, including those in which a buyer should purchase the property for less than £6.5m.

1. 1. Of course, the original intention of the claimants in this case was that the entirety of the obligation should arise by way of their reserving their time and not by the actual preparation and appearance at trial but they cannot rely upon the term providing for this because it is unfair. By the operation of the statutory regime, an unfair term must be deemed never to have existed. Where a term is unfair, the whole of that term must be removed and not just the unfair aspects of that term. Otherwise this would amount to amending the term which would be impermissible (see Consumer and trading Standards Law and Practice at 9.121 and the cases therein referred to).

1. 1. In Dexia Nederland BV v XXX and Z Joined Cases C-229/19 and C-289/19 the First Chamber held:

“57 Secondly, it should be recalled that Article 6(1) of Directive 93/13 provides that unfair terms are not binding on the consumer and must, therefore, be deemed never to have existed.”

1. 1. Even if it were otherwise permissible to apply a quantum meruit approach at common law it would, in my view, be precluded on the facts of this case by the operation of the statutory regime. The court in Dexia went on to hold:

“64 The Court has held that if it were open to the national court to revise the content of unfair terms included in such a contract, such a power would be liable to compromise attainment of the long-term objective of Article 7 of Directive 93/13. That power would contribute to eliminating the dissuasive effect on sellers or suppliers of the straightforward non-application with regard to the consumer of those terms, in so far as those sellers or suppliers would still be tempted to use those terms in the knowledge that, even if they were declared invalid, the contract could nevertheless be modified, to the extent necessary, by the national court in such a way as to safeguard the interest of those sellers or suppliers…”

1. 1. In short, if a quantum meruit approach were permissible in this case, it would have the potential to disincentivise traders from ensuring that the terms under which they contracted were fair. Otherwise they could opt to incorporate unfair terms in the hope that they would not be challenged but confident that there would be a safety net providing for the payment of a reasonable sum in the event that they were.

1. 1. For the sake of completeness, I will go on to consider, even if (contrary to my findings) a quantum meruit approach were permissible, whether or not there was sufficient material before the Judge below to make an assessment as to the level of payment which would follow.

1. 1. The Judge concluded that the claimants were entitled to “a reasonable fee” amounting to 70% of the contractually agreed fee. I can well understand his reluctance to reach a conclusion which would deprive the claimants of the entirely of their commercial rewards but there are several flaws to be found in his reasoning.

1. 1. His first error, in my view, was to assume that the defendant had acted in breach of contract and that this was a relevant matter when considering the quantum meruit issue.

1. 1. Once it has been determined that the term relating to the obligation upon the defendant to pay up front is one which the claimants were not entitled to rely upon by the operation of s62 of the 2015 Act then there was no remaining basis upon which it could be concluded that, by not making such a payment in advance and where the claimants’ performance had been rendered impossible by the adjournment, the defendant was in default.

1. 1. Furthermore, there was nothing in the agreement which placed the defendant under any obligation to continue to instruct the claimants beyond the period covered by the terms set out in the claimants’ letters. On the contrary, the letters provide that any further work would have to be the subject matter of a further agreement between the parties with no guarantees that the claimants would be willing to undertake any such work. They may well have been willing to negotiate some sort of reduction in future fees but there was no contractual obligation upon them to do so. In so far as is material to this appeal, the contractual obligations of the parties were expressly defined so as to apply to the preparation of and representation at the hearing commencing from the 21 September 2020. Neither side was committed to extending the commercial relationship any further. Accordingly, the Judge below was not entitled to take into account, as he expressly did, the loss of the claimants’ opportunity to recover fees thereafter. He held at para 111:

“I conclude that the termination of the retainer when there was no good reason…does amount to a breach of contract by Mrs Atay. She unilaterally decided to remove the prospect of the claimants acting further for her.”

In the absence of any contractual obligation to instruct the claimants to do any such further work, she cannot be held to have been in breach.

1. 1. The Judge below further observed:

“It is also relevant that they also lost the opportunity of securing a substantial payment for Mrs Atay from Mr Atay in respect of the adjourned trial, which would have taken a large part of the sting out of this dispute had they been successful.”

1. 1. I do not follow this reasoning. Any relevant costs of the adjournment to be recovered from the defendant’s husband would be limited to costs incurred by her to the claimants. The claimants’ entitlement to and assessment of the level of costs against the defendant, whether by way of quantum meruit or otherwise, could not be dependent on what she subsequently sought to recover from Mr Atay.

1. 1. This leaves the assessment of 70% as being dependant almost entirely on the consequences of the claimants blocking out their respective diaries between 7 July 2020 and 31 August 2020 for a period of about four weeks from 7 September 2020. Evidence of the extent of this impact is set out in the claimants’ witness statements.

1. 1. However, the Judge made no finding of the value of any actual benefit having been conferred upon the defendant as a consequence of the claimants’ blocking out their diaries. He appears to have assumed that the evaluation of a claim brought by way of quantum meruit is based, at least primarily, upon detriment to the party bringing such a claim than of benefit to the recipient.

1. 1. I have every sympathy for the Judge on the quantum meruit issue as a whole. He was provided with little to work on but was nevertheless encouraged by the parties to make an adjudication. His understandable lack of enthusiasm for the task is reflected in his rueful observation in paragraph 108 of his judgment: “I shall have to proceed as best I can on what I have available to me.”

1. 1. In these circumstances, I am reluctant to reach more than a tentative and provisional conclusion and further appreciate that my observations are, in any event, obiter. However, with these reservations in mind, I conclude that the Judge’s approach was probably wrong. The general rule in, for example, cases in which no contract has been concluded but one party, in legitimate expectation of a binding agreement, expends money to the benefit of the other is that the level of restitution is generally assessed not by reference to the cost to the provider but the benefit of the recipient. Normally, where no benefit is conferred then no award is made.

1. 1. There remains much doubt as to the circumstances, if any, in which a quantum meruit claim must be founded upon an element of unjust enrichment (see, for example, Goff & Jones 16-18 – 16-19 in the context of work done in anticipation of a future agreement).

1. 1. For the reasons I have given, this judgment is not the place for any detailed exposition or resolution of this issue. Suffice it to say that I am not persuaded that the Judge was entitled to adopt the course he took in evaluating the element of quantum meruit and his conclusion was flawed.

CONCLUSION

1. 1. In summary my findings are as follows:

(i) The payment term was one which fell within the parameters of paragraph 5 of the so-called “grey list” to be found in Part 1 Schedule 2 of the 2015 Act;

(ii) Even if it had not fallen within the grey list, it did not, in any event, fall within either of the categories excluded from assessment under section 64 of the 2015 Act;

(iii) The payment term was unfair under the provisions of section 62 of the 2015 Act;

(iv) The effect of this finding was that the contract fell to be treated as if the entirety of the payment term had never existed;

(v) The consequence of this was that there was an entire obligation upon the claimants which included attendance at the trial which, once the trial had been adjourned, was incapable of being fulfilled;

(vi) It followed that the claimants had no contractual right to payment of the agreed price at any time;

(vii) There was no legal basis upon which a non-contractual assessment by way of quantum meruit was appropriate;

(viii) Even if a claim by way of quantum meruit were theoretically available, the Judge below took into account impermissible factors in his approach to assessment and so his evaluation of 70% could not stand;

(ix) The Judge was probably wrong, in any event, to evaluate the assessment in the proportion of 70% based on the cost to the claimants rather than to any benefit to the defendant.

1. It follows that this appeal is allowed. The claim for fees that was subject of this appeal be dismissed.