CFA Is A Contentious Business Agreement, High Court Rules

CFA Is A Contentious Business Agreement

The Law Society’s Model Form CFA contains a specific clause providing that “The parties acknowledge and agree that this agreement is not a Contentious Business Agreement within the terms of the Solicitors Act 1974.”.

Is this clause necessary?

It was argued by the solicitors in this case that even absent this specific clause any CFA which provides that no fees are recoverable in the event of failure, cannot be a Contentious Business Agreement within the meaning of s59 Solicitors Act 1974 (“the Act”), which states:

“(1) Subject to subsection (2), a solicitor may make an agreement in writing with his client as to his remuneration in respect of any contentious business done, or to be done, by him … providing that he shall be remunerated by a gross sum or by reference to an hourly rate, or by a salary, or otherwise, and whether at a higher or lower rate than that at which he would otherwise have been entitled to be remunerated.”

The effect of this submission, if right, would be that the agreement was not caught by s61 of the Act, which provides:

“(1) No action shall be bought on any contentious business agreement, but on the application of any person who –

(a) is a party to the agreement or the representative of such a party; or

(b) is or is alleged to be liable to pay, or is or claims to be entitled to be paid, the costs due or alleged to be due in respect of the business to which the agreement relates,

the court may enforce or set aside the agreement and determine every question as to its validity or effect.

(2) On any application under subsection (1), the court –

(a) if it is of the opinion that the agreement is in all respects fair and reasonable, may enforce it;

(b) if it is of the opinion that the agreement is in any respect unfair or unreasonable, may set it aside and order the costs covered by it to be assessed as if it had never been made.”

Accordingly, the solicitors would be free to sue for their fees by bringing proceedings under Part 7. The attempt to do so in this case was however met with an application by the former clients for an order that the CFA was a CBA within the meaning of s59 and the claim should continue as if commenced as a Part 8 claim.

Kelyn Bacon QC (sitting as a Deputy Judge of the High Court) agreed.

“On the plain and natural reading of s. 59(1), a CFA is an agreement as to the solicitor’s remuneration, and an agreement such as the present CFA which sets out an hourly rate is an agreement where the remuneration is set by reference to an hourly rate. It matters not, in that regard, whether the CFA provides that the remuneration is to be reduced or extinguished altogether in the event of failure.”

As a result, in her judgment, the CFA was caught by s61 and did not in itself give rise to a cause of action.

“The opening words of s. 61(1) are quite specific: “No action shall be brought on any contentious business agreement …” It is necessary to give some meaning to those words. The correct interpretation, I consider, is that a contentious business agreement does not, in itself, give rise to a cause of action on the basis of which a claim for costs may be brought. Rather, the agreement must first be submitted for the determination of whether it is fair and reasonable. Only once that determination has been made can the court enforce the agreement (if it is found to be fair and reasonable) or simply proceed to an assessment of costs (if the agreement is not found to be fair and reasonable).”

In light of her conclusion the Judge directed that the claim should proceed as if it was brought under Part 8.

Is this a mere technicality?

“At first blush this might appear to be an arcane procedural technicality. In fact, however, the particular procedural route reflects a point of some substance, namely that s. 61 provides for a specific layer of protection for the client in relation to a contentious business agreement, in that no cause of action will arise under the agreement unless and until the court has determined that the agreement is fair and reasonable.”

The Judge concluded…

“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.”