Know Your Retainer Documentation Or Pay The Price


This case highlights the importance of familiarising yourself fully with the retainer documentation under which you are acting. And not over-complicating matters.

In the course of a detailed assessment in the SCCO Deputy Master Friston (costs judge) found that the conditional fee agreements (there were three, of which one “The Third Agreement” was relevant to the instant proceedings) were so confusing as to be almost incomprehensible.

“Before I deal with [the cfa] documentation in any detail, I should explain that it is quite unlike anything I—or, I suspect, any costs judge—have ever seen before. Some of it was provided to me electronically, but when printed onto paper, it filled an entire lever-arch file. I spent some time removing duplicate pages, but even once I had done this, it barely squeezed into a standard ring binder. The documentation was difficult to navigate: not only were the three conditional fee agreements (which were linked to each other in various ways), but those agreements were divided into a number of ‘kits’, ‘sections’, ‘parts’, ‘topics’ and ‘schedules’.”

Upon dissecting the retainer documentation one particular clause came to light:

‘Our agreement is conditional upon you getting insurance cover to cover the risk that you may need to pay the legal costs of the other side, and we must approve the terms of the cover.’  (“The ATE Condition”)

In the event no insurance cover had been taken out. The defendant argued that this was fatal to the agreement. Unsurprisingly, the claimant (or rather his solicitors) argued that it was not.

The claimant’s position was that the ATE Condition had been included by mistake. Unfortunately, for them, this did not overcome the contractual consequence of its inclusion.

“Mr Johansson says that the ATE Condition was included by reason of a mistake on his part. His intention was ‘to insert wording that made the CFA conditional on ATE Cover only at the option of [the Solicitors]’. That may be so, but this is not what the ATE Condition says.”

The secondary position adopted by the claimant’s solicitors was that the condition had been impliedly waived.

“Mr Smith says that the Claimant and the Solicitors impliedly waived the condition by way of their conduct, that conduct being the fact that the Solicitors continued to supply legal services which the Claimant continued to accept. In a similar vein, Mr Smith says that the Claimant and the Solicitors are estopped from relying on the ATE Condition, this being for similar reasons.”

This was not accepted by the Deputy Master.

“…it is difficult to see how the Claimant could have waived the ATE Condition given the fact that he was unaware of its existence. The same point could be made of the Solicitors, as they too seem to have been unaware of what the ATE Condition actually said. In essence, Mr Smith is asking the court to simply ignore the ATE Condition; this, in my view, is not something that the court is able to do.”

The claimant then sought to argue that the court had the power to interpret the ATE Condition in a way that preserved the effectiveness of the CFA, ie by way of ‘common law rectification’. Again, this was not accepted.

“Mr Smith contended that the ATE Condition is not a condition precedent to the making of the Third Agreement, but that it gave rise to a conditional right that would allow one or both parties to elect whether to continue to be bound by the contract. Mr Smith contended for the latter interpretation. The difficulty with this argument is that the condition could not be clearer: it says ‘our agreement is conditional upon you getting insurance’. I cannot see how this could be interpreted to mean anything other than what it says, which is that the formation of the Third Agreement was conditional upon insurance being obtained.”

The Deputy Master had further concerns about the approach he was being asked to adopt.

“To my mind, a client—especially a consumer client—is entitled to know with certainty whether he or she has entered into a conditional fee agreement: where a legal services provider fails to make the position clear, the court should, in my view, be slow to resolve that uncertainty in favour of the legal services provider.”

In all the circumstances, the Deputy Master found that the CFA was unenforceable.

“I take the view that the ATE Condition was a condition precedent to the making of the Third Agreement and that it could not be disapplied by the parties’ conduct. As such, I find that the Third Agreement was never made. It is not in dispute that the possession proceedings were intended to be funded on a conditional fee basis, so I conclude that the Claimant entered into an unwritten conditional fee agreement, this being in breach of section 58(3)(a) of the Courts and Legal Services Act 1990 (as amended)(‘the 1990 Act’).”

Although largely academic in light of this conclusion the Deputy Master went on to make alternative findings with regards to:

  • Contractual certainty;
  • Comprehensibility in general;
  • Control, champerty and public policy;
  • Suitability in terms of the success fee; and
  • Misconduct