Kerry Underwood

CONDITIONAL FEE AGREEMENTS AND SOLICITOR’S RIGHT TO TERMINATE: COURT OF APPEAL DECISION

with 8 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

Butler v Bankside Commercial Ltd [2020] EWCA Civ 203

the Court of Appeal upheld the High Court’s decision that the wording of a Conditional Fee Agreement on offers of settlement applies to advice re an offer to be made by the client as well as to advice on offers received from the other side.

Here the solicitors represented a claimant and the defendant made an offer which was not accepted and the solicitors advised the claimant to make an offer of settlement.

The client rejected that advice and the solicitor terminated the retainer.

The client went on to win, but failed to beat the other side’s offer and thus was punished in costs.

The client then disputed that anything was due to the solicitor, but the Master entered summary judgment in favour of the solicitor, a decision upheld by the High Court, and now by the Court of Appeal.

 

The key issue centred on the wording in the Conditional Fee Agreement:

 

“7 (iii) We can end this agreement if you reject our opinion about making a settlement with your opponent.

You must then:

  • pay the basic charges and our disbursements, including barrister’s fees;
  • pay the success fee if you go on to win your claim for damages.”

 

The client argued that the solicitor’s right to terminate arose only on advice about “making a settlement” and not on advice about “making an offer” and that making an offer does not settle a case.

The Court of Appeal rejected that argument and quoted, with approval, from the High Court Judge’s decision at paragraphs 19, 22 and 23 of the original judgment.

 

“10. In an admirably concise and clear judgment, the judge accepted Bankside’s interpretation. At [19] he said:

“I am satisfied that the suggestion that any opinion about “making a settlement” is to be construed as being limited to the consideration of the acceptance [of] any offers made by the opponent is inconsistent with the language of the clause and would, in any event, lead to procedural distinctions devoid of either logical justification or practical coherence.”

11. He went on to point out the differences between a case where there is no CFA, in which case the client is entitled to ignore the advice of her solicitors, and a case governed by a CFA where the solicitors themselves are at financial risk. He said at [22]:

“Where, however, there is a CFA under which the solicitors, themselves, face significant economic risks in the event of an adverse result at trial, one would not expect the level of protection which they are afforded against the whims of the unreasonably optimistic client to turn upon the random happenstance of whether or not the other side has made an approach which can be categorised as a contractual offer capable of acceptance. For such solicitors to be required to wait, like Vladimir and Estragon, for an offer from the other side which might never come rather than, where appropriate, to take the initiative in negotiations would impose artificial and unjustifiable limits on their ability to protect their own legitimate interests.”

12. And at [23] he added:

“a solicitor’s opinion about making an offer, on the facts [of] any given case, is perfectly capable of being one which is about “making a settlement”. A settlement is an end point but the making of one is a process.””

 

Comment

Spot on.

Written by kerryunderwood

March 4, 2020 at 7:57 am

Posted in Uncategorized

8 Responses

Subscribe to comments with RSS.

  1. Good o! #godot

    Nathan Roughton

    March 4, 2020 at 9:14 am

  2. The CoA always seems to find in favour of the receiving party. This judgement won’t do much for public confidence in the legal profession if claimants can enter into a CFA and be hit with a bill like this. The two major problems with this judgement are:

    1) An offer isn’t the same as a settlement. An ordinary consumer can’t be expected to know the somewhat tenuous difference referred to by the CoA and there’s nothing to show the consumer was made aware of the risks.

    2) The amount of costs awarded is wholly disproportionate to the arbitration award.

    Anonymous

    March 4, 2020 at 2:01 pm

    • You are, as they say, having a giraffe are you not/? What about Herbert v HH Law Ltd; Bott and Co v Ryanair etc etc.
      Kerry

      kerryunderwood

      March 4, 2020 at 3:38 pm

      • True, but these are somewhat exceptions which prove the rule. The CoA tends to favour the higher amount in costs disputes. In the case here, there are significant consumer concerns, as a member of the public entering into a contract and thinking they have no financial risks ends up with a bill because the CoA has decided that A means B. Also, the amount of the bill is a multiple of the damages awarded. Yes, solicitors should be protected from a client who doesn’t accept a reasonable offer, but this, and the minimum size of the offer which will allow the solicitor to terminate, need to be made clear at the outset. This case must dent the publics’ faith in CFAs.

        Anonymous

        March 4, 2020 at 4:10 pm

      • I agree with you entirely about the level of costs, although it is not clear to me from the judgment how much was originally claimed. Generally I think that the problem is Part 36. If you take conditional fee agreements out of the equation, you have the same issue – a party can win, but be bankrupted by the costs of failing to beat a losing party’s Part 36 offer. I also take your point about what level of offer a solicitor can advise the client to make, but remember it is only, in effect , if the client fails to do better than what the solicitor advised, that the consequences come in to play. It is worth remembering here that the client did much worse than the offer proposed to be made by the solicitor.
        I also take your point about clients thinking that conditional fee agreements mean that they are without risk; that is a matter of education and explanation.
        The reality is that clients are virtually always better off under a conditional fee agreement as compared with an old-fashioned hourly rate- win or lose -agreement, but i accept that that may only be the lesser of two evils.
        Overall, the level of legal costs in any given case needs to be reduced massively, and I am in favour of fixed recoverable costs in all cases, whatever their value.
        I realize that it does not deal with the issue of solicitor and own client costs, but it would go a long way. If, for example, a party in this case would have been able to recover a maximum of say, £60,000, then they are less likely to have entered into an agreement leaving them open to many times that figure, and a court on a solicitor and own client assessment would take the same view.
        I would have no problem at a rule which capped solicitor and own client costs at say 1.5 times the level of fixed recoverable costs.

        Kerry

        kerryunderwood

        March 4, 2020 at 6:47 pm

  3. Yes, I think the Part 36 comparison is a good one. I think a key point here is that the Claimant, as a consumer, would have been unlikely to think in their wildest dreams that signing up to a CFA could leave them facing bankruptcy or losing their home, and I think that the minimum level of acceptable damages should have been established at the outset. I do wonder if there is a remedy under consumer protection laws for cases like this if the potential costs weren’t made clear.

    Also, thanks for providing this blog, it highlights a lot of important cases which don’t get much coverage elsewhere.

    Anonymous

    March 5, 2020 at 8:57 am

    • All true. If the potential costs implications were not fully explained, then the court will reduce costs – see Herbert v HH Law Ltd. In truth courts far more willing to attack a success fee of even a few hundred pounds than “ordinary” costs of £250,000. Generally consumer protection laws do not apply to solicitor/client contacts because of the apparently much greater protection given by the Solicitors Act. There is an inherent tension when the solicitor, rather than, or as well as, the client is taking a risk on costs.

      Thank you for your kind remarks.
      Kerry

      kerryunderwood

      March 5, 2020 at 7:44 pm


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 )

Google photo

You are commenting using your Google 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 )

Connecting to %s

%d bloggers like this: