When A CFA Says One Thing And Means Another

In a nutshell

In Stevensdrake v Stephen Hunt [2017] EWCA Civ 1173 (31 July 2017) the Court of Appeal considered the application of contractual principles to a Conditional Fee Agreement ("CFA") between a Solicitor and his liquidator Client.

The CFA expressly provided that the Solicitor's costs and disbursements were payable if the claim succeeded. The claim succeeded by settlement and the Solicitor sued for his fees. The Client argued that in reality he was only liable to pay the Solicitor's fees out of recoveries. To use costs parlance, he argued that the CFA was in reality a "CFA light", and as there were no further recoveries, there was no further liability. The Court of Appeal agreed, upholding the first instance decision, but for different reasons.

There are important lessons for a legal representative acting under a CFA, in how to minimise the risk of losing rights he had believed he had bargained for.

Why is the Case Interesting?

Firstly, costs lawyers and commercial lawyers alike sometimes forget that while a CFA operates in an area regulated by statute and rules, they are at their heart, agreements. They are therefore subject to many of the same common law principles, for example in relation to construction, implied terms, misrepresentation and so on.

The Stevensdrake decision analyses the application of the law of implied terms and estoppel by convention to CFAs. The effect was dramatic; to re-write the express terms of the CFA in favour of the Client.

Secondly, it is not uncommon that a vanilla CFA is treated by the Solicitor as a CFA light. As a matter of good business and good client relations, the solicitor may not seek to enforce his right to costs beyond recoveries. That is conceptually different from the Solicitor foregoing his contractual entitlement - but as Stevensdrake shows, the Solicitor's conduct could have that very effect.

Background

Pre CFA

The Solicitor and Client had a longstanding relationship. In respect of a number of claims run by the Solicitor on behalf of the Client, the Solicitor had been content to limit its fees to a proportion of the recoveries (which is of course the norm for nil-asset claims for officeholders).

In 2005 the Solicitor was engaged generally by the Client as liquidator of Sunbow Limited under a private retainer providing for its fees to be deferred until there were recoveries.

In 2006 there was an exchange of emails. The Client stated.

"In the event that there are no realisations I, as...