Court upholds contingency fee agreement

The High Court has given “courage” to those exploring contingency fee agreements, a solicitor at London firm Bolt Burdon has said, after Mr Justice Spencer upheld a retainer that saw the practice recover half of the compensation recovered under it. This amounted to over £400,000, eight times what it would have billed on an hourly basis.

In Bolt Burdon Solicitors v Tariq and Ors [2016] EWHC 811 (QB), the defendants approached Bolt Burdon to represent them in their claim against Allied Irish Bank (AIB) through the Financial Conduct Authority’s review into mis-sold interest rate hedging products.

In light of significant difficulties with the merits of the case, and upon the defendants’ insistence that they would pay nothing up front, the parties entered into a non-contentious business contingency fee agreement (as defined in section 57 of the Solicitors Act 1974), where Bolt Burdon would be paid 50% of the compensation awarded to the defendants.

Following the intervention of Bolt Burdon, the defendants were offered £821,045.06 in compensation in August 2014. Bolt Burdon subsequently issued an invoice for £410,522.53 plus VAT and disbursements, although its records indicated that it would have billed around £50,000 on a time basis. The Tariqs refused to pay, forcing Bolt Burdon to pursue recovery through the courts.

The defendants raised several arguments, including on the basis of contractual interpretation and misrepresentation. These were dismissed, along with the main focus of the ruling – that the agreement was “unfair” and “unreasonable” pursuant to section 57(5) of the 1974 Act. There was no clear judicial authority on this provision.

Spencer J found that:

•    “In the light of these findings and all the evidence in the case, I am satisfied that the agreement was not ‘unfair’. Mr Tariq knew exactly what he was agreeing to. He was a very experienced businessman. He was determined that he should pay nothing for Bolt Burdon’s services unless and until compensation was received from AIB. He was given an accurate assessment of the prospects of success.”

•    Bolt Burdon had fulfilled its code of conduct duties on exploring funding options as “realistically there was no funding option acceptable to both parties, other than a contingency fee agreement”.

•    “There was no obligation on Bolt Burdon to suggest that Mr Tariq should obtain independent legal advice in relation to the terms of the agreement. He did not need to be told this. There was no reason why he could not have sought advice from the solicitor who had acted for him for 30 years in his business affairs. He was put under no pressure of time to sign the agreement. Quite the reverse, he took two months to sign it and did so only when he was satisfied that his precise requirements in relation to disbursements had been met.”

•    “Whilst the fact that it was Mr Tariq who suggested 50% does not necessarily mean the agreement was fair (or reasonable), it is an important factor. Mr Tariq was deliberately seeking to give Bolt Burdon an appetite for the case, as he acknowledged in his oral evidence.”

•    “The court must be careful not to attach undue weight to the actual outcome in this case, rather than judging the reasonableness of the agreement by reference to the circumstances as they existed and were perceived to be when the agreement was signed.”

•    “As it turned out, Bolt Burdon were very fortunate. But so was Mr Tariq. There is no reason, in my judgment why they should not share equally in that good fortune, as the agreement always envisaged in reflecting their shared intention.”

•    “In the light of the findings I have set out, and all the evidence in the case, I have reached the clear and firm conclusion that this agreement Mr Tariq entered into with Bolt Burdon was not ‘unreasonable’.”

Simon Bishop (pictured), an associate at Bolt Burdon, said: “From a neutral perspective this was a very interesting case that goes to the heart of the current issues relating to solicitors’ costs and fee agreements. The profession must react to the changing climate relating to client fee arrangements, particularly in the Jackson era.

“In that context it is very encouraging that the court has upheld the agreement in this case. With the amendments to the damages-based agreement regulations expected very soon, this judgement will no doubt give courage to advisors and clients who want to explore contingency fee and damages-based agreements.”

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Costs News
Published date
22 Aug 2016

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