COST BITES 184: COURT OF APPEAL UPHOLDS DECISION THAT COUNSEL ON DIRECT ACCESS NOT ENTITLED TO RECOVER FEES FROM THEIR (FORMER) CLIENT BECAUSE THE CONTRACTUAL TERMS WERE UNFAIR
In Glaser & Anor v Atay [2024] EWCA Civ 1111 the Court of Appeal upheld the decision 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 the Court of Appeal upheld the earlier decision that counsel were not entitled to any further payment.
“A claim in the law of unjust enrichment has three central elements, the first of
which is that the defendant has been enriched (the other two being that the enrichment
is at the expense of the claimant, and that there is an “unjust factor”: see eg Barton at
[228] per Lord Burrows). That seems to me to focus the claim squarely on the benefit
received by the defendant. Unless there has been such a benefit there has been no
enrichment.”
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. At the appeal before the Mr Justice Turner (considered here) 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. Mr Justice Turner 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.
THE BARRISTERS’ UNSUCCESSFUL APPEAL TO THE COURT OF APPEAL
The barristers appealed to the Court of Appeal. The appeal was unsuccessful. The Court of Appeal turned down the appeal on a number of grounds. Firstly the court found that the contract came to an end with the client withdrew their instructions and there was no obligation to make any further payments.
THE QUANTUM MERUIT ARGUMENT
One particular issue raised on appeal was a quantum meruit argument, coupled with an argument that the client had been “unjustly unriched”. as we shall see these arguments were not accepted by the Court of Appeal.
“Ground 5: quantum meruit
140. That leaves Ground 5 which is that Turner J was wrong to find that counsel were not
entitled to any payment on the quantum meruit basis. Mr Mitchell spent little time on
this. In his skeleton argument he effectively relied on the same arguments as under
Ground 1 in support of the contention that although removal of the Payment Term might
deprive counsel of the fourth instalment, the third instalment had fallen due and counsel
could sue on it, and indeed had Mrs Atay paid it she would not have been entitled to its
return as there had been no total failure of consideration. This way of putting it falls
away if I am right that the third instalment had not fallen due before the contract was
discharged.
141. In oral submissions, he said two things. The first was that if one assumed the case to
have settled, or counsel to have been disinstructed, on the first day of the trial, it could
not be right that counsel would get nothing. I agree, but in that situation the third
instalment would have fallen due. By then counsel would have carried out all the work
of preparation and there would I think be a strong argument that counsel were entitled
to the payment at common law under the principle of Papadopoulos as explained by
Mr Beatson. There might still remain a question under the Act whether it would be fair
that they should keep the entirety of the third instalment, most of which would be
attributable to refreshers yet to be earned; but it is not necessary to pursue that point, as
it would not affect the principle that they would get paid for the work they had actually
done.
142. His other submission, in reply, was that if there is a contract which does not contain an
effective term for payment, then you can find one; if the Payment Term has gone, there
is no term for payment in the contract but there is still a contract. That submission
seems to me to overlook the fact that if the Payment Term is removed there are still
provisions for payment in the contracts, namely the terms for payment by instalments.
Two instalments duly fell due and were paid. The third instalment, on the view I take,
did not, but that is because the contracts had been rendered impossible to perform before
it fell due. This is not therefore a case where the contracts contain no effective term for
payment and hence not a case where a term needs to be implied to provide for payment.
143. As I understood him, Mr Mitchell did not argue that this was a case which justified a
quantum meruit on the basis of unjust enrichment. In those circumstances I do not
propose to consider the question in any detail. The question whether an unjust
enrichment claim will lie where there is a contract between the parties is often one of
some difficulty, although in many cases the existence of the contract will rule out a
claim in unjust enrichment: see the discussion of the point in the various judgments in
Barton (Lady Rose at [88ff], Lord Leggatt at [189ff] and Lord Burrows at [237ff]). In
the present case, if I am right that the contract was frustrated, I think it very doubtful
that a claim in unjust enrichment would lie. The consequences of frustration are now
governed by the Law Reform (Frustrated Contracts) Act 1943 which gives the Court
various statutory powers to adjust the position rather than simply letting the loss lie
where it fell (which was the common law position). No claim under the 1943 Act has
of course been suggested, and I do not intend to consider if one might have been, but
the existence of the statutory regime to regulate the consequences of a frustrated
contract probably makes it inappropriate to resort to the common law rules on unjust
enrichment.
144. But I need not consider this as I think there is a simpler answer to the point in the present
case. A claim in the law of unjust enrichment has three central elements, the first of
which is that the defendant has been enriched (the other two being that the enrichment
is at the expense of the claimant, and that there is an “unjust factor”: see eg Barton at
[228] per Lord Burrows). That seems to me to focus the claim squarely on the benefit
received by the defendant. Unless there has been such a benefit there has been no
enrichment.
145. In the present case therefore the question would be: what benefit had Mrs Atay received
when the hearing was adjourned? She had had the benefit of representation at the pretrial review, and it would appear advice at three consultations. Mr Glaser had also spent
some time thinking about her case generally – I am rather doubtful if that was of any
quantifiable benefit to her, but even if it were, it amounted to no more than 15 to 20
hours of his time. Valuing the representation at the pre-trial review at £5,000 as Mr
Glaser’s clerks did, and his time at £500 per hour as per the contract, this would come
to somewhere in excess of £12,500: for example 15 hours’ thinking time and 3 hours
on each consultation would amount to 24 hours which would take the total to £17,000
plus VAT (=£20,400). But Mrs Atay had already paid Mr Glaser the first two
instalments amounting to £25,500. She has not sought to recover those. The onus
would be on counsel to show that she had received benefits worth more than that, and
on the material before the Court I do not think they would have done that. Even
assuming therefore that a restitutionary claim might lie in principle, I do not think it
would have been made out.
146. I accept that HHJ Berkley awarded counsel 70% of the outstanding instalments. But
that does not seem to me to have been based on any assessment of the benefit actually
received by Mrs Atay, but to have been his assessment of what might have been
appropriate to compensate counsel not only for their work but for the gap in their
diaries. But for the reasons I have given I do not think that is what an unjust enrichment
claim is designed to do: it is designed to require a person enriched at another’s expense
to account for the benefit they have received. Mr Mitchell said that having counsel
clear their diaries so they could represent her was a benefit to her. But as I have already
said that was not what she agreed to pay for. What she agreed to pay for was having
counsel prepare for and represent her at the hearings. I think the only quantifiable
benefit she received was the work they did.
147. I therefore do not accept Mr Mitchell’s Ground 5.
Conclusion
148. I have now considered and rejected each of the grounds advanced. The detailed
examination of the various points argued on this appeal confirms to my mind how right
HHJ Berkley was when he said that the contract was inadequate for the sort of case for
which it was used. I do not mean to say that counsel can never stipulate for payment if
a case goes off at a late stage: under the traditional model of brief fee and refreshers of
course, an adjournment after briefs had been delivered would entitle counsel to payment
of the brief fee but not the refreshers with, in complex cases, the possibility of the brief
fee itself becoming due in stages. Nothing I have said is intended to prevent counsel
from devising and agreeing with their clients contracts that fairly balance their own
interests in not being left with gaps in their diaries with the interests of their clients in
not paying for work that is not carried out.
149. But for the reasons I have sought to give the Payment Term in the contracts in the
present case does in my judgement fall to be characterised as unfair within the meaning
of the Act, with the consequences that I have attempted to identify above.
150. I would therefore dismiss the appeal.