Home > What Does Happen When a CFA Ends Before the Claim for Damages Ends?

What Does Happen When a CFA Ends Before the Claim for Damages Ends?

15th April 2020

What Does Happen When a CFA Ends Before the Claim for Damages Ends?

Butler v Bankside Commercial Ltd [2020] EWCA Civ 203

Background

The Appellant (‘Mrs Butler’) entered into a CFA with the Respondent solicitors, (‘Bankside’) in respect of a claim for damages against one company, Metris, for termination of a commercial agency.   The CFA was standard form on Law Society terms and, as such, incorporated the following terms contained in a Law Society document:

Ending this agreement

If you end this agreement before you win or lose, you pay our basic charges and disbursements. If you go on to win, you also pay a success fee.”

What happens when this agreement ends before your claim for damages ends?

(a) Paying us if you end this agreement

You can end this agreement at any time. We then have the right to decide whether you must:

  • pay our basic charges and our disbursements including barristers’ fees but not the success fee when we ask for them; or
  • pay our basic charges, and our disbursements including barristers’ fees and success fees if you go on to win your claim for damages.

(b) Paying us if we end this agreement

(iii) We can end this agreement if you reject our opinion about making a settlement with your opponent. You must then:

  • pay the basic charges and our disbursements, including barristers’ fees;
  • pay the success fee if you go on to win your claim for damages.

If you ask us to get a second opinion from a specialist solicitor outside our firm, we will do so. You pay the cost of a second opinion.”

Metris subsequently made a settlement offer in the sum of €90,000.  Bankside advised Mrs Butler to make a counter-offer of €90,000 plus 50 percent of her costs, however, Mrs Butler did not respond to the advice.  Bankside subsequently wrote to Mrs Butler, requesting instructions by a specified deadline and informing her that, in the absence of such instructions, they would treat the retainer terminated under term (b)(iii) of “We can end this agreement if you reject our opinion about making a settlement with your opponent…” of the Law Society Document (‘the Term’).  Mrs Butler, again, did not respond but proceeded with her claim with different solicitors.  She ultimately obtained an arbitration award just over £40,000.

Bankside then presented Mrs Butler with a bill and, following a detailed assessment between Mrs Butler and Metris, issued a claim for its allowable costs in the sum of £209,518-odd under the terms of the CFA.

Before Master Yoxall, there was no dispute as to quantum; the issue was whether the Term had been satisfied, thereby triggering Mrs Butler’s liability to pay the sum.  Master Yoxall granted Bankside summary judgment in that sum, and Mrs Butler’s appeal was dismissed by Turner J.

The Court of Appeal

The sole issue was the meaning of the Term:

We can end this agreement if you reject our opinion about making a settlement with your opponent.

Counsel for Mrs Butler submitted that, in line with Wood v Capita Insurance Services Ltd [2017] UKSC 24, both a textual and contextual readings favoured the interpretation that ‘making a settlement’ means ‘causing a settlement to be made,’ but did not include making an offer which might or might not lead to a settlement.  Five submissions, based on the other terms of the Law Society document were advanced.

Lewison LJ, with whom David Richards LJ and Rose LJ agreed, found there were a number of difficulties with these submissions:

  1. If, as contended, the Term were limited to the acceptance of an offer already made, the clause would have said so; at least in a contract that does deal with the refusal of a Part 36 offer in terms. It cannot be said that the drafter was unaware of the possibility of accepting an offer already made, and the phrase “advice about making a settlement” is a much looser expression.
  2. Although it is possible to point to a contrast between (a) (set out above, where the client terminates the CFA) and the Term, an earlier provision in the Law Society document, under the heading ‘Ending this Agreement’ already contemplates payment of both basic charges and success fee in the event that the client terminates the retainer. The only possible reading of the Term is that the solicitors are entitled to their basic charges and disbursements irrespective of the eventual outcome of the case.
  3. Although the risk to a client in refusing to accept an offer made by their opponent may be high, as Turner J pointed out at [22]: “one would not expect the level of protection which [solicitors] are afforded against the whims of the unreasonably optimistic client to turn upon the random happenstance of whether or not the other side has made an approach which can be categorised as a contractual offer capable of acceptance.” The protection is, essentially, against the risk that, if the client only makes a small recovery, they will not be able to pay the additional costs incurred by the solicitors in pursuing the case “to the bitter end.”
  4. The outcome is not entirely surprising and respects the underlying bargain: the CFA provided for the payment of the solicitors’ costs and disbursements, and the success fee, if the client won. She did.
  5. There is no ambiguity in the words of the contract, so there was no need to resolve any doubt in its interpretation in favour of the client. The clause is not confined to “making” a settlement. It extends to advice “about” making a settlement. As a matter of ordinary English, advice “about” making a settlement includes advice to the client about making an offer of their own calculated to lead to a settlement. The words are clear, even though the result may expose the client to a greater liability than they might have expected.

The appeal was therefore dismissed.

Commentary

This case provides useful guidance on the interpretation of a standard CFA in the context of Part 36 Offers.  Solicitors will be relieved to note that clients will be liable on sums due to them under a CFA, even if several times greater than the sum recovered by the client, as an unsurprising outcome that ‘respects the underlying bargain.’

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