Kerry Underwood

CLAIM AGAINST FORMER PARTNER FOR LOST CHANCE TO SETTLE COSTS CLAIM NOTWITHSTANDING UNENFORCEABILITY OF CONDITIONAL FEE AGREEMENT

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In FPH Law (A firm) v Brown (t/a Integrum Law) [2018] EWCA Civ 1629 (16 July 2018)

the Court of Appeal upheld a decision permitting a claim by solicitors against a former partner who had taken cases to a new firm and had undertaken to keep the original firm informed about matters raised in costs negotiations, including a specific claimant personal injury case.

The substantive claim was settled and there were then negotiations in relation to costs, during which the defendant challenged the validity of the claimant’s Conditional Fee Agreement and, ultimately, at the detailed assessment the District Judge upheld that challenge and ruled that the Conditional Fee Agreement was unenforceable and allowed the claimant no profit costs at all and indeed ordered the claimant to pay the losing defendant’s costs of £5,000 in relation to the defendant’s successful conduct of the detailed assessment proceedings.

Consequently neither the original firm of solicitors, nor the new firm, got any costs.

Before the detailed assessment took place, there had been negotiations in relation to costs, the vast majority of which were due to the original firm.

By 5 May 2011 the defendant had offered £64,000 in relation to costs, but had repeated their concerns about the validity of the Conditional Fee Agreement.

On 6 May 2011 the defendant here, that is the solicitor who had moved firms, suggested to the claimant here – the original firm of solicitors that he worked for – that they counteroffer £77,000, with a view to settling at £73,000.

In fact he counteroffered in the sum of £78,000 and on 16 May 2011 the defendants increased their offer to £70,000.

Thus, in a case where the validity of the Conditional Fee Agreement was being challenged, ultimately successfully, the defendants were in the substantive action were prepared to pay £70,000 and the claimants in the substantial action were prepared to accept £73,000.

 

The Court of Appeal said:

 “13.There, for reasons which are wholly unexplained, the matter rested. Even though Jarvis’ solicitors were prepared to offer £70,000, and the claimant was prepared to accept £73,000 (even without knowing about the challenge to the validity of the CFA), the defendant failed to effect a settlement of the costs dispute. Instead the defendant allowed the dispute with Jarvis’ solicitors to continue to formal pleadings and a final determination. The claimant had no involvement in any of this.

 

Following the detailed assessment proceedings the original law firm brought these proceedings and the former partner argued that the ultimate finding of invalidity in relation to the Conditional Fee Agreement was a complete defence to the claim that had the original solicitors known about the challenge to the validity of the Conditional Fee Agreement, it would have instructed the former partner to accept the offer of £70,000.

At first instance the High Court held that a compromise of claims made under contracts said to be illegal was an enforceable comprise, applying

Binder v Alachouzos [1972] 2 Q.B. 151

Here the Court of Appeal rejected the argument that Binder could be distinguished and rejected the idea that a higher standard should be applied to the Conditional Fee Agreement drawn up by solicitors as officers of the court.

In Binder the agreement had been put into place on the basis of legal advice. The knowledge and experience of those involved in the drafting of an agreement could not affect the application of the principle in that case.

 

The Court of Appeal went on to say:

 

43. More widely, it seems to me that the argument that the CFA must be treated as if it was always illegal or unenforceable (thus striking down any agreement subsequently based upon it), is commercially unrealistic. It would discourage the compromise of costs issues, and instead encourage lawyers for the losing party to work through existing CFAs with a fine-tooth comb to try and find a reason why the entire CFA was illegal or unenforceable, so as to provide the losing party with some sort of windfall on costs. Solicitors enter into CFAs in good faith, as a way of providing legal services to a claimant who needs them and who would otherwise be unable to pay for them. Sometimes things go wrong, and the CFA which has been entered into will be found to be unenforceable. But it would go much too far to say that such a result must always strike down an earlier bona fide compromise of costs based on that Conditional Fee Agreement.”

 

Comment

A sensible and correct decision.

It beggars belief how some solicitors deal with costs issues.

This is one of them.

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Written by kerryunderwood

August 20, 2018 at 8:10 am

Posted in Uncategorized

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