After a period of relative quiet on this front it seems that the peace has been broken with the recent case of Vilvarajah v West London Law Limited  EWHC B23 (Costs) which looks at the terms of a CFA.
CFA declared unreasonable
In a case heard before Master Gordon-Saker on 19 May 2017 the CFA was declared unenforceable on the grounds of being unreasonable and unfair.
The case concerned costs sought by the Defendant from the Claimant in relation to professional fees incurred by Hodders Law in respect of proceedings pursued against him. In acting for him under a contentious business agreement, the Defendant now required payment of costs in the sum of £31,945.48. The Claimant sought to invoke their rights under S70 of the Solicitors Act 1974 for those costs to become the subject of a Detailed Assessment.
The Detailed Assessment was listed for 1 day on 9 February 2017 but upon attending Court it was clear that there were substantial discrepancies between the Defendant's file of papers, time recording and the breakdown provided to the Claimant which were unexplained by the advocate. The Court therefore adjourned the assessment part heard to 2 May to enable the Defendant to explain the discrepancies. At the hearing the Claimant raised an issue as to fairness of the CFA and sought to challenge the same. The Court directed a deadline for submission of a s61(1) Solicitors Act 1974 application to be heard (if applicable) at the same time as the resumed assessment.
Solicitors to receive £15,323.20 and to pay out £20,000 in Assessment costs
The Claimant pursued the application along with the assessment which proceeded before Master Gordon-Saker on 2 May 2017 when he concluded that the CFA was unfair and unreasonable and should be set aside. His reasoning was provided in writing at a later date due to the time constraints of the assessment, with the concluding result that the Defendant's bill of £31,945.48 was assessed at £15,323.20 and the Defendant was ordered to pay the Claimant’s costs of the assessment (save for those of the adjournment which were thrown away); the Claimant’s costs were assessed in the sum of £20,000.
‘Sophistication’ of the Claimant to be taken into account
The Court provided written reasoning for the decision on the CFA in this Judgment which addresses the complexity of the agreement, the ‘average sophistication’ of the Claimant in relation to legal matters and the lack of correspondence between the parties in support that the complex CFA was sufficiently explained to the Claimant. Master Gordon-Saker commented that he sees ‘many conditional fee arrangements and by comparison with most this is a complicated agreement’. The CFA sought to differentiate between success (when no success fee would be payable) and success plus an award of costs (when a success fee would be payable) plus the Court was not satisfied that the application of rates and calculation of risk were anything more than arbitrary.
It is clear to conclude that challenges as to the enforceability of retainers remain a live issue and it remains a high priority to get them right. Paragon Costs are able to assist you with this if advice is required.