Costs News

09 March 2018
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Out of Kilter

David Cooper fires a warning shot:  get the retainer right first time & watch out for the mule

In the recent case of Radford v Frade, Clair, Gheko Films SL and Gheko Films SUR SL [2018] EWCA Civ 119, the Court of Appeal has again had to consider a retainer between solicitors and their clients.

London solicitors Taylor Hampton were acting for individual and corporate defendants in an action brought by Oscar-nominated film director Michael Radford over a project to make a Spanish film called La Mula (The Mule). Mr Radford was retained to direct the film but in time the parties fell out and the director left the shoot and was replaced. 

In July 2010, Mr Radford and the partnership through which he traded started legal action and obtained injunctions, which included prohibiting the defendants from using or publishing film footage he had shot without his authority. 

Taylor Hampton contended that the retainer entered into in July 2011 with the defendants was a conventional one. It was not expressed as a conditional fee agreement (CFA) and the solicitors indicated in their retainer letter that a CFA would be explored at a later date. 

The solicitors entered into a CFA with leading counsel, Augustus Ullstein QC. This did not name the corporate clients as his clients. 

The solicitors then decided to enter into a CFA with both the individual clients and two corporate clients (companies owned and controlled by the individuals). The lawyers were instructed to try and set aside the injunctions and also dispute the jurisdiction of the English court and service of the proceedings. The CFA was therefore of limited scope. 

According to Mr Justice Warby’s ruling in the High Court: “The initial objective was substantially achieved by a consent order made by Tugendhat J on 23 May 2012… By this point the substantive proceedings against the individual defendants were over. But they continued against the corporate defendants.” The case continued for another 26 months, when Taylor Hampton successfully applied for summary judgment. 

However, as the case progressed, they failed to address the issue as to the scope of the CFA and carried out work outside of the scope of that agreement. The problem arose in 2014, when they obtained an order for costs and were confronted with the challenge that the costs were not recoverable due to the application of the indemnity principle. 

Having realised during the course of detailed assessment proceedings that they had a problem, the solicitors decided to enter into a deed of rectification in order to extend counsel’s CFA to cover work done for the corporate clients. This was entered into after judgment had been given. They sought to argue that any work which was outside the scope of the CFA was either covered by the original retainer or alternatively an implied retainer as the clients had continued to instruct them to deal with the case and that those costs should be on a quantum meruit basis. 

At first instance, Master Haworth decided that neither the solicitors nor counsel could recover fees charged for work done after 23 April 2012, as they were not within the scope of the CFAs of either the solicitor or counsel. In addition there was no other enforceable retainer in existence which entitled them to charge such fees. 

Of particular relevance was the fact that counsel entered into his CFA with the solicitors and therefore the client had no liability to pay them or counsel. Additionally, as counsel did not name the corporate clients in the CFA, he was not entitled to any fees in respect of that work. The indemnity principle meant these fees were not recoverable from the paying party. 

On appeal, Mr Justice Warby upheld this decision. These were the key points in his and the Court of Appeal’s rulings: 

  1. The Court of Appeal agreed with Warby J that upon the making of the CFA, the “reasonable expectations” of the parties would have been that all work done thereafter was to be done on a ‘no win, no fee’ basis and not under a conventional retainer. However, any such work had to be covered by a CFA in writing to be enforceable (section 58 of the Courts and Legal Services Act 1990). This was not done. 
  1. Counsel’s CFA did not cover the work after 23 May 2012, it only named the individuals as clients and it was on this date that the claims against them ended. There was nothing that could assist by construing the document as covering work for the corporate parties after that date. Additionally, if there was an implied retainer with counsel, that was also unenforceable for want of writing. 

The deed of rectification, even if effective, did not impose a greater liability upon the paying parties as it had been made subsequent to the costs order under which payment was sought. 

  1. It was argued that the original retainer co-existed with the CFA so as to pick up such items of work by the solicitors as were not covered by the CFA. Lord Justice McCombe said: “I simply can find no room, on the facts of this case, for the two types of express retainer to have subsisted side-by-side or for the original retainer to spring back into life, when, contrary to all expectations, the CFA did not cover all the steps taken.” 
  1. Adams v Improved Motor Coach Builders Ltd [1921] 1 KB 495(CA) established the ordinary rule of law that “a client who instructs a solicitor to perform work comes under an obligation to pay for it”. It was considered that this provision applied where the facts indicate the absence of any other retainer during the course of the solicitor/client relationship, but that was not the case here. 

So, take heed therefore and learn the lesson well, for as Mark Twain once said, there is nothing to be learned from the second kick of a mule. 

David Cooper is a council member of the Association of Costs Lawyers and a partner at Taylor Rose TTKW Solicitors

This article was first published in the New Law Journal on 9 March 2018.

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