Costs News

22 July 2021
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Costs judge sets aside “unreasonable and unfair” £250,000 fixed-fee agreement

A costs judge has set aside a fixed-fee agreement on the grounds that its terms were unreasonable and the client did not have the time to seek advice on it.

In Tripipatkul v WH Lawrence Ltd (t/a WH Lawrence Solicitors) [2021] EWHC B13 (Costs), the claimant was an experienced property investor who instructed the defendant law firm to act for her on a dispute with a long leaseholder of one of the properties she owned.

There was a history of the claimant being late in paying invoices and, in the wake of the decision of the First-tier Tribunal (Property Chamber) in February 2020, and shortly before the time limit for appeal was to expire, the parties agreed that the claimant would pay a fixed fee of £250,000 plus VAT in respect of unpaid invoices and work to be done on the appeal.

The parties agreed that it was a contentious business agreement within the meaning of section 59 of the Solicitors Act 1974 and Master Brown had to determine whether, pursuant to section 61, its terms were unfair or unreasonable.

The claimant argued that the fees were grossly excessive, that she took no legal advice in respect of it and had no opportunity to do so, did not fully understand the agreement, and entered into it at a ‘pressure point’ – the appeal deadline – when she had no real choice but to accept what was offered.

She was debarred from making further representations, having failed to comply with an order to make an interim payment of £100,000.

The law firm said that it was a simple agreement which was adequately explained. It submitted that the terms were reasonable having regard to past and anticipated future work, the “indulgence” the solicitors had already given the claimant, and the further deferment of payment.

Master Brown held that the terms were “unreasonable having regard to the kind and amount of work done” if had the claimant been reasonably advised that there were strong or good prospects of obtaining permission to appeal and succeeding on the appeal, which she had not been.

“In reaching this conclusion, I take into account that there was some potential advantage to the claimant in the deferment of the date of payment of the fees.”

If the history of unpaid invoices was relevant to the question of reasonableness – which the judge considered it was not – this did not help. “To my mind, overall the level of demands for interim and upfront payments of fees and disbursements were unreasonable.”

Master Brown added that, even if he were wrong on this, he would conclude that the agreement was unfair “having regard to the manner in which it came to be made”.

The claimant was “not provided with sufficient information to be able to consider the reasonableness of the terms and was not otherwise in a position to consider the same”, he explained. “I think that more is required than advice as to the effect of entering into fixed fee agreement.

“Significantly in this context, there was, I consider, no adequate or realistic opportunity to take independent advice. To my mind, this could not realistically be obtained when the agreement was entered into and when the claimant’s efforts were fully or substantially engaged in the demands of the litigation.”

As a result, the law firm did not obtain informed consent, the master ruled, and in any case the imminence of the appeal deadline meant the claimant was not in a position to properly negotiate the terms, “as the solicitors would have appreciated”.

The judge was also concerned about the lack of advice as to the effect of the agreement on the recovery of costs, in particular in the event that the appeal had been successful.

“The net effect of the agreement was that a sum was payable by way of costs which, it appears, would be likely to dwarf the claim (as determined by FTT). My concerns about this are not integral to my decision as to the outcome in this case given my other findings.

“However, the agreement, it seems, would expose the claimant to a shortfall in costs even if she were to have the benefit of a costs order in the appeal. The shortfall itself would potentially exceed the value of the sums recovered in respect of the claim for service charges.

“It seems to me that, acting in the claimant’s best interests, some advice as to the effect of the agreement on any potential recovery of costs was reasonably to be expected.”

Though it was open to the judge to reduce the sums due under the agreement, he could see no way of doing so that would render it reasonable, short of an assessment.

“It seems to me in any event, in the light of all the findings including those relating to fairness, that the only proper course is to set aside the agreement.”

Robert Marven QC (instructed by the defendant) appeared for the defendant.

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