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 the client. Notwithstanding the substantial quantity of material available to assist solicitors to ensure that they get their retainers right – and few things are more important – this case shows there are still instances where they do not do so.

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 its clients at the outset was a conventional retainer based on hourly charging. It was not expressed as a conditional fee agreement (CFA) and the solicitors indicated in their retainer letter that, whilst at this stage the case was too complex to enable them to assess the risks for the purpose of a CFA, it would be explored at a later date.

During the course of this retainer, 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). However, as the clients were stretched financially, they decided to pursue an application to try and dispose of the proceedings without a full trial. The CFA was therefore of limited scope. They made no arrangements to enter into an additional CFA with counsel for work to be carried out on behalf of the corporate clients.

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, during which time Taylor Hampton failed to address the scope of the CFA and carried out work beyond the terms of the agreement. Eventually there was a subsequent successful application for a default judgment on the defendants’ counterclaim and then an application for summary judgment against the claimants. This gave rise to an order for costs.

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 carried out on behalf of the clients 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 finally 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 it was 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 as his clients in the CFA, he was not entitled to any fees in respect of that work. As the clients were not liable for the fees of the solicitors or counsel, the indemnity principle meant these fees were not recoverable from the paying party under the costs orders that had been made.

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

1) The CFA identified what it did and did not cover: it covered work to have the proceedings against the clients dismissed, to set aside the interim injunction, any assessment of damages under a cross-undertaking, and any ancillary application such as seeking an anti-suit order. It did not cover any claim against the claimants or a counterclaim save in relation to any cross-claim for damages under the cross-undertaking.

2)The CFA did not cover the subsequent steps in relation to the service of a defence and counterclaim, the successful application for summary judgment in favour of the surviving defendants (the corporate clients) or successfully resisting the appeal against the judgment.

3) As it had been conclusively decided that the CFAs for both solicitor and counsel did not cover any work carried out after 23 May 2012, the issue was whether fees for subsequent work done by the solicitors and/or counsel were payable by the clients and therefore recoverable from the claimants under the costs orders, or any other basis. 

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.

Warby J said: “A reasonable person with all the knowledge these parties possessed would conclude that the common intention of the parties after 23 May 2012 was that the lawyers should be paid (and entitled to a success fee) if they won, but not otherwise.” This was an implied retainer, but not one of the conventional variety; “it clearly indicates an unwritten retainer on a conditional fee basis”.

4) The work covered by the CFA had been exhausted by the ‘win’ that had been achieved on 23 May 2012. The court was not declining to imply an agreement to pay but the implied agreement was a CFA and the solicitors had failed to take the precaution of ensuring that it was reduced to writing.

5) 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.

6) 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: “It only makes sense that the solicitors and clients understood that the CFA superseded the original conventional retainer which had been entered into in circumstances of urgency and before the viability of the CFA could be assessed. 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.”

7) 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.

 This article first appeared in Litigation Funding on 1st April 2018

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

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06 Apr 2018

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