Conditional Fee Agreements | Enforceability of Combined Fixed Fee And Hourly Rate Provisions

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Grounds of Appeal

Ground 1 -the Judge erred in construing the Conditional Fee Agreement (“CFA“) in that, contrary to the Judge’s conclusion at [132] and [133] of the Judgment, Clause 3 did not apply only where there was an order for the losing party to pay the Appellant’s costs or if the underlying petition was settled on a “damages plus costs” basis. Accordingly, the CFA could operate to make the Appellant liable for fees calculated by reference to hourly rates other than in the circumstances specified in [132] of the Judgment (that is, where an order for the losing party to pay the Defendant’s costs arose, or the underlying petition was settled on a damages plus costs basis) with the £60,000 figure specified in Clause 4 being a payment on account of fees to be charged at hourly rates.

Ground 2 – the Judge erred in concluding that the CFA was a “contentious business agreement” that could be enforced under s. 61of the Solicitors Act 1974. The CFA provided for remuneration by reference to hourly rates which were not expressed with the precision required of a “contentious business agreement” -see Chamberlain v Boodle and King [1982] 3 All ER 188.

Ground 3 – the Judge erred by (i) declining to order an enquiry into the matters set out in s. 61(4B) of the Solicitors Act 1974 in relation to the Respondent’s fees calculated by reference to hourly rates and/or (ii) declining to order an assessment of the Respondent’s fees on the footing that the CFA was not a “contentious business agreement”.

Ground 4 – the Judge erred in concluding that the CFA satisfied the conditions set out in s58(4) of the Courts and Legal Services Act 1990 in that: the CFA does not state any “percentage” of the kind specified in s58(4)(b); and/or, since the Appellant could be required to pay fees by reference to hourly rates (see Ground 1), s58(4)(b) does not require a simple comparison between £60,000 and the maximum £100,000 fee that could be charged. The £60,000 was a payment on account of fees to be charged at hourly rates. Therefore, the maximum limit set out in s58(4)(c) could be exceeded depending on the level of fees incurred by reference to hourly rates at the point any success fee became payable.

The Respondent’s Position:

1. The CFA limited Finnan’s liability to a maximum of £100,000 plus VAT, regardless of hourly rates worked.

Candey argued that the CFA was structured to provide Finnan with certainty about his maximum liability. They contended that while the agreement mentioned hourly rates, its primary purpose was to cap Finnan’s total liability at £100,000 plus VAT. This cap consisted of the initial £60,000 plus VAT payable on account, and the additional £40,000 plus VAT payable only in the event of success.

Candey maintained that this structure was designed to give Finnan the benefit of a fixed maximum fee, regardless of the actual hours worked or the potential total when calculated at hourly rates. They argued that this interpretation aligned with the intention to provide Finnan with cost certainty while still allowing Candey the potential to recover costs from the opposing party if successful.

2. The CFA was a valid and enforceable contentious business agreement.

Candey contended that the CFA met all the requirements of a valid contentious business agreement under the Solicitors Act 1974. They argued that the agreement was in writing, related to contentious business, and provided sufficient certainty about the fees payable.

While acknowledging the range of hourly rates mentioned in the agreement, Candey argued that the overriding cap of £100,000 plus VAT provided the necessary certainty required by law. They contended that this cap, along with the clear stipulation of when the £60,000 and £40,000 payments were due, gave Finnan a clear understanding of his maximum liability, thus satisfying the requirements set out in cases like Chamberlain v Boodle and King [1982] 1 WLR 1443.

3. An inquiry into hours worked was unnecessary as Candey was not seeking payment based on hourly rates.

Candey argued that an inquiry into the hours worked under s.61(4B) of the Solicitors Act 1974 was unnecessary and irrelevant in this case. They maintained that they were not seeking payment based on hourly rates, but rather enforcement of the fixed fee arrangement capped at £100,000 plus VAT.

Candey contended that since they were not relying on the hourly rates provision of the agreement to calculate their fees, there was no need for the court to inquire into the number of hours worked or whether they were excessive. They argued that such an inquiry would serve no purpose given the nature of their claim for the capped amount.

4. The CFA did not include a success fee and therefore did not need to comply with s.58 requirements.

Candey argued that the additional £40,000 payable upon success did not constitute a success fee as defined in s.58 of the Courts and Legal Services Act 1990. They contended that this payment was not an increase above a base fee, but rather part of a total fixed fee arrangement.

Candey maintained that the £100,000 total represented their estimate of the likely costs to take the matter to trial, with the payment structure designed to give Finnan the benefit of paying less if the case settled early or was unsuccessful. They argued that this arrangement was not a traditional conditional fee agreement with a success fee, but rather a fixed fee agreement with a portion contingent on success.

As such, Candey contended that the specific requirements in s.58(4) of the 1990 Act regarding success fees did not apply to this agreement. They argued that the CFA was a valid and enforceable agreement that did not need to comply with the success fee provisions of s.58, as it did not include a success fee as defined by the Act.