Kerry Underwood

CONDITIONAL FEE AGREEMENTS ARE CONTENTIOUS BUSINESS AGREEMENTS: YOU CAN’T JUST SUE ON THEM

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.

 

In

Healys LLP v Partridge and another [2019] EWHC 2471

the Chancery Division of the High Court held that a Conditional Fee Agreement was a Contentious Business Agreement to which section 61 of the Solicitors Act 1974 applied and consequently Part 8 proceedings, rather than Part 7 proceedings, should have been issued to enforce the agreement.

The claimant firm of solicitors and the defendants were in dispute about the payment of the solicitors’ fees under a Conditional Fee Agreement and the solicitors issued proceedings using the Part 7 procedure but for money due under the Conditional Fee Agreement.

Section 61 of the Solicitors Act 1974 provides that a Contentious Business Agreement does not give rise to a cause of action capable of founding a claim for costs, but rather such an agreement must first be submitted for determination by the court as to whether it is fair and reasonable.

If the court finds that the agreement is fair and reasonable, then it can be enforced, and if not then the matter goes to a detailed costs assessment.

As an application for such a determination is for an order under Part III of the Solicitors Act 1974, it must be made either under Part 8, in existing proceedings, or under Part 23 – see CPR 67.3(2).

Here the court found that the Conditional Fee Agreement was a Contentious Business Agreement as it met the definition for such agreements contained in section 59(1) of the Solicitors Act 1974 as it was an agreement as to the solicitors’ remuneration, and set out an hourly rate, and so the remuneration was set by reference to an hourly rate.

The fact that a Conditional Fee Agreement might provide for reduced or no fees in the event of failure was irrelevant.

Consequently, the action should continue as though it had been commenced under Part 8.

This is a difficult area, and different courts have taken different views at different times.

Here the court noted that the Court of Appeal in

Hollins v Russell [2003] EWCA Civ 718

had stated that a Conditional Fee Agreement was in principle a Contentious Business Agreement for the purposes of Part III, but the Law Society’s model form of Conditional Fee Agreement expressly provides that it is not a Contentious Business Agreement.

The court here accepted that not every Conditional Fee Agreement will be a Contentious Business Agreement.

That was very much the view taken by the court in

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

In

Vilvarajah v West London Law Ltd [2017] EWHC B23 (Costs)

the court held that the Conditional Fee Agreement there was a Contentious Business Agreement and set it aside pursuant to section 61 as being unfair and unreasonable.

– See my blog – NO SEE NO FEE? IS CFA VOIDABLE IF CLIENT NOT SEEN?

In relation to the Law Society Model Conditional Fee Agreement, and its statement that the agreement is not a Contentious Business Agreement, which also appears in the Underwoods Model Conditional Fee Agreement, the court had this to say:

 

“38. That does not of course necessarily mean that every CFA will be a contentious business agreement for the purposes of Part III of the 1974 Act. I note, for example, that the Law Society’s model form CFA for personal injury and clinical negligence cases contains a specific clause providing that the agreement is not a contentious business agreement within the terms of the 1974 Act. Without expressing any view on the construction and effect of agreements containing a clause of that nature, I note that the present CFA contained no such clause, nor anything else to suggest that it should fall outside the scope of the s. 59 definition.

 

It is trite law that simply giving an agreement a particular name does not affect the legal position, and therefore the position now seems to be that all Conditional Fee Agreements are in fact Contentious Business Agreements.

Elsewhere I have written about the fact that Conditional Fee Agreements where the fee is capped by reference to damages, as is required by law in relation to personal injury matters, appears to be caught by the Damages-Based Agreements Regulations as section 58AA(iii) apply to cases where it “is to be determined by reference to the amount of the financial benefit obtained”.

 

Comment

The whole issue of Conditional Fee Agreements, Contingency Fee Agreements, Damages-Based Agreements and Contentious Business Agreements, and indeed the Solicitors Act 1974 generally is a complete and utter mess that urgently requires codification.

This decision has potential serious ramifications for solicitors, in that they cannot sue for costs incurred under a Conditional Fee Agreement without first submitting the bill to the court for it to be determined whether the agreement is fair and reasonable.

It also means that old-fashioned hourly rate retainers are caught if they cover litigation, which means that no solicitor can sue on a bill for litigation services if charging by the hour.

Written by kerryunderwood

December 11, 2019 at 8:37 am

Posted in Uncategorized

2 Responses

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  1. If all hourly rate retainers for litigation services are contentious business agreements so we can’t just sue for our fees, what other retainer options are there? Some bills are not huge and getting them assessed first would be disproportionate to the amount in issue so we need a way in which we can just sue the odd client who just doesn’t pay up his few hundred quid for the couple of hours work we’ve done.

    Elizabeth King

    December 11, 2019 at 10:04 am

    • No right to assessment in Contentious Business case UNLESS court finds not fair or not reasonable – so key is in explanation to client – see Vilvarajah. Remember pre-issue work is non contentious until issued – so 2 hours work unlikely to be caught. Answer is to get £ on account of costs to cover bill, or fixed fee billable and payable forthwith – that is upfront – and in to office account.

      kerryunderwood

      December 11, 2019 at 10:34 am


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