Kerry Underwood

CONTENTIOUS BUSINESS AGREEMENTS (CBA)

with one comment


CONTENTIOUS BUSINESS AGREEMENTS (CBA)

In Addleshaw Goddard LLP v Wood and Hellard [2015] EWHC B12 (Costs)

the Senior Courts Costs Office, Master Campbell, had a rare opportunity to consider Contentious Business Agreements.

A Contentious Business Agreement (CBA) and a Conditional Fee Agreement (CFA) are mutually exclusive. The judgment is 45 pages long.

The terms of the agreement were that if the action failed Mr Berezovsky, who had entered into the agreement with Addleshaw Goddard, would pay a reduced fee of 50% of normal charges; if the action was successful he would pay the normal rates (level one success fee) and if he recovered a set minimum trigger amount there would be a 100% success fee on top of the normal charges (level two success fee).

The case was settled after Mr Berezovsky had died and the appropriate fee was the highest one, that is the level two success fee. Mr Berezovsky’s solicitors sought recovery of costs from the defendants, who were the Administrators for the now deceased Mr Berezovsky.

There was a dispute as to the actual level of recovery but the court held that, subject to the validity of the CBA, the level two success fee, that is the highest one, had been triggered.

The relevant provisions of the Solicitors Act 1974 in relation to Contentious Business Agreements are sections 59 to 61. Section 70 deals with the application procedure.

Those sections read:-

“”59. Contentious business agreements.

(1) Subject to subsection (2), a solicitor may make an agreement in writing with his client as to his remuneration in respect of any contentious business done, or to be done, by him (in this Act referred to as a “contentious business agreement”) providing that he shall be remunerated by a gross sum or by reference to an hourly rate, or by a salary, or otherwise, and whether at a higher or lower rate than that at which he would otherwise have been entitled to be remunerated.

(2) Nothing in this section or in sections 60 to 63 shall give validity to —

(a) any purchase by a solicitor of the interest, or any part of the interest, of his client in any action, suit or other contentious proceeding; or

(b) any agreement by which a solicitor retained or employed to prosecute any action, suit or other contentious proceeding, stipulates for payment only in the event of success in that action, suit or proceeding; or

(c) any disposition, contract, settlement, conveyance, delivery, dealing or transfer which under the law relating to bankruptcy is invalid against a trustee or creditor in any bankruptcy or composition.

60. Effect of contentious business agreements.

(1) Subject to the provisions of this section and to sections 61 to 63, the costs of a solicitor in any case where a contentious business agreement has been made shall not be subject to taxation or (except in the case of an agreement which provides for the solicitor to be remunerated by reference to an hourly rate) to the provisions of section 69.

(2) Subject to subsection (3), a contentious business agreement shall not affect the amount of, or any rights or remedies for the recovery of, any costs payable by the client to, or to the client by, any person other than the solicitor, and that person may, unless he has otherwise agreed, require any such costs to be taxed according to the rules for their taxation for the time being in force.

(3) A client shall not be entitled to recover from any other person under an order for the payment of any costs to which a contentious business agreement relates more than the amount payable by him to his solicitor in respect of those costs under the agreement.

(4) A contentious business agreement shall be deemed to exclude any claim by the solicitor in respect of the business to which it relates other than —

(a) a claim for the agreed costs; or

(b) a claim for such costs as are expressly excepted from the agreement …

61. Enforcement of contentious business agreements.

(1) No action shall be brought on any contentious business agreement, but on the application of any person who —

(a) is a party to the agreement or the representative of such a party; or

(b) is or is alleged to be liable to pay, or is or claims to be entitled to be paid, the costs due or alleged to be due in respect of the business to which the agreement relates,

the court may enforce or set aside the agreement and determine every question as to its validity or effect.

(2) On any application under subsection (1), the court —

(a) if it is of the opinion that the agreement is in all respects fair and reasonable, may enforce it;

(b) if it is of the opinion that the agreement is in any respect unfair or unreasonable, may set it aside and order the costs covered by it to be assessed as if it had never been made;

(c) in any case, may make such order as to the costs of the application as it thinks fit.

(3) If the business covered by a contentious business agreement (not being an agreement to which section 62 applies) is business done, or to be done, in any action, a client who is a party to the agreement may make application to a costs officer of the court for the agreement to be examined.

(4) A costs officer before whom an agreement is laid under subsection (3) shall examine it and may either allow it, or, if he is of the opinion that the agreement is unfair or unreasonable, require the opinion of the court to be taken on it, and the court may allow the agreement or reduce the amount payable under it, or set it aside and order the costs covered by it to be assessed as if it had never been made.

(4A) Subsection (4B) applies where a contentious business agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

(4B) If on the assessment of any costs the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into —

(a) the number of hours worked by the solicitor; and

(b) whether the number of hours worked by him was excessive.

(5) Where the amount agreed under any contentious business agreement is paid by or on behalf of the client or by any person entitled to do so, the person making the payment may at any time within twelve months from the date of payment, or within such further time as appears to the court to be reasonable, apply to the court, and, if it appears to the court that the special circumstances of the case require it to be re–opened, the court may, on such terms as may be just, re–open it and order the costs covered by the agreement to be assessed and the whole or any part of the amount received by the solicitor to be repaid by him…

70. Assessment on application of party chargeable or solicitor.

(1) Where before the expiration of one month from the delivery of a solicitor’s bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.

(2) Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment), order —

(a) that the bill be assessed ; and

(b) that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.

(3) Where an application under subsection (2) is made by the party chargeable with the bill —

(a) after the expiration of 12 months from the delivery of the bill, or

(b) after a judgment has been obtained for the recovery of the costs covered by the bill, or

(c) after the bill has been paid, but before the expiration of 12 months from the payment of the bill;

no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the assessment as the court may think fit.

(4) The power to order assessment conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill…”

The defendants argued that this was in fact a CFA and not a CBA and that sections 59 to 61 of the Solicitors Act 1974 therefore had no application.

The document looked like a CFA and was structured like a CFA and the letter referring to it was headed “Discounted Conditional Fee Agreement”. Nevertheless the court found that it was in fact a Contentious Business Agreement.

The court held that the CBA entered into between a firm of solicitors and an experienced businessman was valid, and, in the circumstances reasonable. There was no reasonable basis for the defendants to be allowed to assess these charges.

The case also dealt in detail with a solicitor’s right to a lien and the law in relation to solicitors’ charging orders for costs.

The court also held that the fact that a solicitor gets paid something in any event in a No Win Lower Fee Agreement as compared with a No Win No Fee Agreement, is of less relevance in relation to the success fee where the success fee is not recoverable from the other side. Thus the court distinguished the case of Gloucestershire County Council v Evans [2008] 2 Costs LR 308.

The court said this at paragraph 76 of the judgment:-

“Both sides relied on Gloucestershire CC. I agree with Mr Atherton that “costs at risk” and the fact that win or lose, AG would recover the Reduced Fee, are relevant factors to take into account when considering the reasonableness of the success fee, but that is tempered by the fact that that was a case about costs between the parties. The position here is once removed, in the sense that, contrast Gloucestershire CC where it was the paying party saying that the success fee was too high, here we are addressing charges as between solicitor-and-own client under a contractual agreement which has provided for its level. It follows that in accepting Mr Bacon’s submission, I am not doing so simply because agreements embodying such terms, in particular that the success fee can be 100%, have been permitted since 1999 under Section 58 Access to Justice Act 1998. On the contrary, in the circumstances as they have been explained to me, I do not consider that the success fee is either unreasonable or unfair, having been commercially negotiated by both sides in the way I have described, so the point fails.”

In fact the court is wrong in that such arrangements were sanctioned by the Courts and Legal Services Act 1990 and had been permitted since 1995.

Contentious Business Agreements essentially deprive the client of the right to challenge the agreed rate of remuneration although the court can still inquire into the number of hours worked. Thus they have attractions for solicitors.

However given that restriction, which does not apply to Conditional Fee Agreements, the courts are likely to look more carefully at the validity of such agreements.

Few lawyers or judges realise that the Solicitors Act 1974 allowed a form of Conditional Fee Agreement long before the Courts and Legal Services Act 1990 and the 1995 Regulations. The Act also specifically sanctions Pre-Action Contingency Fee Agreements and the Damages-Based Agreements Regulations 2013 specifically state that nothing in those regulations affects those provisions.

Advertisements

Written by kerryunderwood

September 24, 2015 at 9:42 am

Posted in Uncategorized

One Response

Subscribe to comments with RSS.

  1. […] Kerry Underwood again on Contentious Business Agreements […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: