Gloucestershire County Council v Evans and others [2008] EWCA Civ 21, [2008] All ER (D) 284 (Jan)
Court of Appeal, Civil Division
Buxton, Dyson and Lloyd LJJ
31 January 2008
By s 58(2)(b) of the Courts and Legal Services Act 1990 (CLSA 1990) the lawfulness of the percentage increase in a standard conditional fee agreement (CFA) is measured not by the “costs at risk” but by reference to the costs which would be incurred if the agreement were not a CFA.
Alexander Hutton (instructed by Clarke Willmott) for the claimant.
Nicholas Bacon (instructed by Tayntons LLP) for the defendants.
In April 2002, the claimant local authority entered into a collective CFA (the agreement) with its solicitors. The agreement defined “basic charges” as the legal representative’s charges for the legal work on the authority’s behalf, at the rate of £145 per hour. “Discounted charges” were defined as the legal representative’s charges in the event that the authority “lost”. “Success fee” was defined as “the percentage of basic charges which the legal representative adds to the basic charges if the client wins the claim, also referred to as the percentage increase”.
The success fee was defined elsewhere in the agreement as being 100%.
The authority subsequently brought an action against the defendants. In December 2004, agreement was reached whereby the defendants were to pay the authority £135,000 and “its costs of the action”. During the course of the detailed assessment of the costs, a dispute arose as to whether or not the agreement complied with the requirements of CLSA 1990, s 58.
The dispute concerned whether or not the success fee exceeded 100%, it being common ground that if so it would be unenforceable due to CLSA 1990, s 58(4)(c) and Art 4 of the Conditional Fee Agreements Regulations 2000 (SI 2000/692), and no profit costs would be recoverable between solicitor and client and (on the indemnity principle) by the authority from the defendants. The master ruled in favour of the authority and the defendants appealed.
LORD JUSTICE DYSON:
It was the defendants’ case that, in substance, the agreement rewarded the solicitors with a success fee of 290%. They submitted that the solicitors would receive £90 per hour whether they won or lost, but in the event of a win, they received an additional £50 per hour. The effect of the agreement was therefore that the solicitors were at risk to the extent of no more than £50 per hour if the authority lost. For that risk, they stood to gain £145 per hour in addition to their basic charges at that rate. It followed that the agreement provided for a success fee of 290% and was, therefore, unenforceable.
His lordship could not accept the defendants’ submissions. It was true that in a standard CFA, the amount of any fees which were increased by the success fee was the amount of costs at risk. But the concept of “costs at risk” did not find expression in s 58(2)(b) and it formed no part of the definition of a CFA which provided for a success fee.
The agreement was a CFA which provided for a success fee within the meaning of s 58(2)(b) because it provided for the basic charges of £145 per hour to be increased in the event of a win. The basic charges of £145 per hour (“the amount of any fee”) was a fee to which the agreement applied and it provided for that fee to be increased in the event of a win (the “specified circumstances”) above the amount which would be payable—the basic charges of £145 per hour—if that amount were not payable only in the event of a win.
It was artificial to construe the agreement as providing for the discounted charges of £95 per hour to be increased to £145 per hour, plus the success fee, in the specified circumstances of a win and to regard that increase as a success fee within the meaning of s 58(2)(b). The only amount of fees that was to be increased in the specified circumstances of a win was £145 per hour. That was what the agreement said.
Heart of the dispute
Section 58(3)(b) was at the heart of the dispute. It provided that the CFA had to state the percentage by which the amount of the fees which would be payable if it were not a CFA was to be increased. Applying the language of s 58(4)(b), the agreement stated 100% as the percentage by which the amount of the fees which would be payable if it were not a CFA (£145 per hour) was to be increased. The agreement provides for basic charges of £145 per hour, which was the amount of the fees that would be payable if the agreement were not a CFA.
His lordship could not accept the submission that the amount of the fee that would be payable if the agreement were not a CFA was £50. The agreement provided that the basic charges were £145 per hour. If it were not a CFA, it would not have provided for payment of the success fee on the basic charges if the client won. It would simply have provided for payment of basic charges at £145 per hour. There was no basis for saying that it would have provided for payment of charges at the rate of £50 per hour.
In a standard CFA the fees which were increased by the success fee in the event of success were the costs at risk. That was because if the claim did not succeed, the legal representative would not recover those—or any—fees. The lawfulness of the percentage increase was measured not by reference to the costs at risk, but by reference to the fees that would have been payable if the CFA were not a CFA. The concept of “costs at risk” could not be extracted from the statute and could not be invoked to place upon it a meaning that it could not bear.
The appeal would be dismissed. Lords Justices Lloyd and Buxton delivered concurring judgments.
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