Kerry Underwood

CONDITIONAL FEE AGREEMENT DEATH CLAUSE VALID: SIGNATURE HEAVILY LIMITS CHALLENGES

with 2 comments


The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

 

Underwoods Solicitors advised the successful appellant Higgins & Co Lawyers Ltd in this matter.

 

In

Higgins & Co Lawyers Ltd v Evans [2019] EWHC 2809 (QB)

the Queen’s Bench Division of the High Court held that the death clause contained in the standard Law Society Model Conditional Fee Agreement, which allows a firm to terminate the agreement on the client’s death and recover basic charges from the estate, is valid and enforceable.

Here, the court at first instance had held that the clause was unenforceable on the basis that it was unusual and onerous and was not fairly and reasonably brought to the attention of the client, that is the now deceased client.

This is a lengthy, thorough, exemplary and very important judgment concerning solicitor – client contracts.

The original client was an 89-year-old man with asbestosis, and he instructed Higgins & Co Lawyers Ltd to bring a personal injury claim and signed a Conditional Fee Agreement in the Law Society Model Form and the relevant clause reads:

 

 “(c) Death

This agreement automatically ends if you die before your claim for damages is concluded. We will be entitled to recover our basic charges up to the date of your death from your estate.

If your personal representatives wish to continue your claim for damages, we may offer them a new conditional fee agreement as long as they agree to pay the success fee on our basic charges from the beginning of the agreement with you”.

 

Here, the client died and Higgins & Co Lawyers Ltd claimed against the estate for its fees.

In relation to the Consumer Rights Act 2015, it was common ground that it applied to the Conditional Fee Agreement as a contract between a trader and a consumer as per section 61 of that Act.

The court held that the death clause was clear and transparent and phrased in simple language and was not hidden and did not require legal training to understand.

Consequently, it was not invalid under section 62 of the Consumer Rights Act 2015.

The original court had held that the clause was unenforceable under the principle set out in

Interfoto Picture Library Limited v Stiletto Visual Programmes Limited [1989] QB (CA).

The court here held that the principle in Interfoto was not concerned with a general doctrine of unfairness in contract law but rather with whether the term had been properly incorporated in the contract.

The court also held that the Interfoto principle did not apply where, as here, the document had been signed. The deceased had willingly signed the Conditional Fee Agreement and had been asked to read it carefully before signing it.

VII. The Interfoto Principle

69. Before turning to the application of the law to the Clause in the CFA, I should summarise the substance of the principle in the modern case law which was reviewed relatively recently by the Court of Appeal in Goodlife Foods Ltd v Hall Fire Protection Ltd[2018] EWCA Civ 1371, [2018] BLR 491 at [32-33]. The basic principle, as restated at [29], is that:

“i] is a well-established principle of common law that, even if A knows that there are standard conditions provided as part of B’s tender, a condition which is “particularly onerous or unusual” will not be incorporated into the contract, unless it has been fairly and reasonably brought to A’s attention.”

70. Paragraph 13-015 of Chitty on Contracts (38th ed. 2018) summarises the relevant principle as follows:

“Although the party receiving the document knows it contains conditions, if the particular condition relied on is one which is a particularly onerous or unusual term, or is one which involves the abrogation of a right given by statute, the party tendering the document must show that it has been brought fairly and reasonably to the other’s attention.”

71. In Goodlife, the Court cited with approval Bingham LJ’s dictum in Interfoto that;

“The more outlandish the clause the greater the notice which the other party, if he is to be bound, must in all fairness be given.”

72. In assessing the correctness of the Master’s decision, the first question is whether the Clause was “onerous or unusual” (and, if so, how “outlandish” it is). The second is, if it is, whether it has been fairly and reasonably brought to the other party’s attention

73. It is clear that “onerous or unusual” is a high standard. The authorities also refer to like terms as “unreasonable and extortionate”, “particularly onerous”, “outlandish” and “Draconian”: Goodlife Foodsat para. 33. In another case such clauses are referred to as being like a “penalty”: Woodesen v Credit Suisse Limited [2018] EWCA Civ 1103, per Longmore LJ at para. [42]. Although not cited by the parties, one can add to this Rix LJ’s description of terms within the doctrine as being clauses which are “very onerous, unreasonable and extortionate”: HIH Casualty and General Insurance v New Hampshire Insurance Co Ltd[2001] EWCA Civ 735[2001] 2 Lloyd’s Rep 161, para. [211]. One is looking for something out of the ordinary and which would cause serious fairness concerns.

74. For reasons which will become apparent, I will take the two requirements (“onerous or unusual” and “fairly and reasonably brought to the party’s attention”) in reverse order and start with the second which I label the “attention/notice requirement”.

Interfoto: “the attention/notice requirement”

75. As to this issue, the Master was regrettably deprived of the benefit of any authority or argument on this point. In particular, she was deprived of reference to the well-established principle that a party who signs a document knowing that it is intended to have legal effect will generallybe treated as being bound by its terms and will be taken to have read them and be on notice of them – at least absent the case being an extreme one where there is cogent evidence of the signature being obtained under pressure or by some other improper conduct.

76. I refer in this regard to L’Estrange v Graucob[1934] 2 KB 394, Ocean Chemical Transport Inc v Exnor Craggs Ltd[2000] 1 All ER (Comm) 519 and Do-Buy 925 Ltd v National Westminster Bank PLC [2010] EWHC 2862 (QB). I also find assistance in the Peekay case which was not cited to me but addresses the issue of signatures and was cited in Do-Buy 925 Ltd.”

The court also made the important point that a Conditional Fee Agreement does not have to be signed and “the signature was not therefore included merely as some general statutory requirement, but is instead included specifically to record the client’s assent to the terms of the agreement and his confirmation that he has read, understood and agrees to all of those terms”. (Paragraph 85)

At paragraph 101, in a key statement, the court said:

“(iii) … Without the ability to have terms which protect the solicitor in certain circumstances (be it death, or client ceasing to instruct otherwise), one can identify why some solicitors would not be prepared to enter into such agreements and access to justice – and in consequence, consumers rights generally – would be impaired”.

 

Comment

This is a very important and valuable decision and should put an end to many technical challenges to solicitor and own client retainers.

It is also very clearly at odds with the ludicrous, wrong and unintelligible decision of the Court of Appeal in

Herbert v HH Law Ltd [2019] EWCA Civ 527

and the extremely thorough and well-argued decision here is obviously right and the Court of Appeal is obviously wrong.

Importantly the court here rejected the submission that the clause was “onerous or unusual and held that the court at first instance had erred saying:

“Whether based on that model or on solicitors’ own variations of that model, it is not merely a, but the usual clause relating to the consequences of death in the context of a CFA and one which has been used in countless personal injury claims, including mesothelioma claims. Accordingly, it cannot properly bear the description of being “unusual”.”

That must be right.

However, in Herbert v HH Law Ltd the Court of Appeal proceeded on the basis of a concession made, very clearly wrongly in my view, by junior counsel for HH Law Ltd that an irrecoverable success fee could be regarded as a cost of an “unusual nature or amount”.

Given that Parliament has ruled that all success fees are irrecoverable, except now in mesothelioma claims, and given that all success fees were irrecoverable before the change in the law in 2000, since repealed by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, it is utterly absurd to say that an irrecoverable success fee is a cost of an unusual nature.

It is prescribed by Parliament.

The key paragraph from the decision in

Herbert v HH Law Ltd [2019] EWCA Civ 527

is paragraph 35:

“There is no longer any dispute between the parties in relation to CPR 46.9(3)(c). The Judge recorded (at [27]) that Mr Andrew Hogan, counsel for HH before him and junior counsel for HH before us, accepted that an irrecoverable success fee could be regarded as a cost of an “unusual nature or amount” but had submitted that, as the retainer made it clear that the success fee could not be recovered from the other party, the condition in CPR 46.9(3) (c)(ii) was not satisfied, and so there was no presumption under CPR 46.9(3)(c) that it was unreasonably incurred. The Judge agreed with that submission (at [47]). There is no respondent’s notice challenging that decision.”

It is well established that a finding made on the basis of a concession is of limited authority, and a concession was made in the original High Court decision in Herbert as well, and it is strongly arguable that the decision now given in

Higgins & Co Lawyers Ltd v Evans

takes precedence over a ruling made on the basis of a very obviously wrong concession.

Herbert v HH Law Ltd is wrong on so many levels, and I will blog about it shortly, but this aspect alone appears to strip the decision of any meaningful authority.

The factual matrix is that the model adopted by HH Law Ltd was accepted by everyone to be extremely common within the personal injury field, and could not therefore have been unusual.

 

Signature

Another important matter arising from the decision here is that the client’s signature on an agreement makes it very much harder for the client to challenge the agreement.

There is no legal requirement that a Conditional Fee Agreement be signed, just that it must be in writing, but always should insist that any Conditional Fee Agreement, or indeed any solicitor – client retainer, be signed by the client and should refuse to act if the client refuses to sign the retainer.

Higgins & Co Lawyers Ltd deserve the thanks of the profession for pushing this matter forward at considerable financial risk to the firm.

 

Underwoods Solicitors advised the successful appellant Higgins & Co Lawyers Ltd in this matter.

Written by kerryunderwood

November 15, 2019 at 8:11 am

Posted in Uncategorized

2 Responses

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  1. Worrying that the Master was unaware of such a basic aspect of contract law.

    JE

    November 15, 2019 at 9:45 am

    • I agree. This particular Master is not our greatest judge – responsible for the Mitchell fiasco.
      Kerry

      kerryunderwood

      November 15, 2019 at 10:57 am


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