Contractual Interpretation Of Individual CFAs In A Multi Party Action

Contractual Interpretation Of individual CFAs In A Multi Party Action

In a short judgment on costs following conclusion of the Iraqi Civilian Litigation The Hon. Mr Justice Turner was tasked with determining the proper interpretation of the following clause within each of the individual Claimants’ CFAs:

“Our SUCCESS FEE is the additional charge we make if you win your claim. Our Success Fee is calculated as a percentage of our Basic Charges and does not (unless otherwise indicated in the Schedule at the end of this Agreement) relate to the delay in payment which results from these payment arrangements (the delay in payment is reflected by your agreement to pay us the interest which you recover on our charges). The Success Fee is payable as follows:

a. If the case resolves without our needing to serve Particulars of Claim: 33 per cent of our Basic Charges.

b. If the case concludes between service of the Particulars of Claim and service of the Defence: 67 per cent of our Basic Charges.

c. If the case concludes after service of the Defence: 100 per cent of our Basic Charges.

The reasons for setting the Success Fee at this level are set out in the Schedule at the end of this Agreement.”

Leigh Day for the claimants argued that reference to “the case” in sub-paragraphs (a) to (c) should be interpreted as referring generically to any lead case or cases. The consequence of such an approach would mean that, subject to surmounting the hurdle of reasonableness, a 100% success fee could be claimed in respect of all non-lead cases in which no individual Particulars of Claim had been served.

The defendants contended that the clause operated so as to limit the 100% uplift to all cases in which individual Defences had been served. In all other cases in which the individual claimant achieved success without having to serve Particulars of Claim, the corresponding uplift faced a ceiling level of 33%.

The defendant’s arguments were preferred…

“…on the claimants’ interpretation, the reference to “the case” in clause 8 would be rendered meaningless in the event that the individual claimant did not form part of a group despite the fact that the rest of the contract was otherwise perfectly coherent and capable of performance on both sides. Alternatively, the meaning of “the case” would have to differ according to whether or not the claimant became one of a group. Self-evidently, neither of these approaches holds much attraction.”

“I readily accept that if the CFAs had linked the levels of success fees with the procedural stages of lead cases then this arrangement could well be found to have been consistent with what would be expected by the application of business common-sense. This does not mean, however, that linking the levels to the pleadings in the individual cases therefore lacks business common sense despite the fact that such an arrangement was distinctly disadvantageous to Leigh Day”

“It would have been simplicity itself to have drafted the agreements to provide for that which Leigh Day now seek to achieve through what I have found to be an impermissible level of interpretative creativity. I accept that the individual claimants under the CFAs would not be required to pay Leigh Day more in costs than had been recovered from the defendants but this factor does not entitle me to depart from what would otherwise be the clear and natural meaning of clause 8.”