High Court Rules That City Law Firm Breached Duties By Acting For Client Despite Conflict Of Interest And By Failing To Provide Adequate Costs Information Under CFA: Forster V Reynolds Porter Chamberlain [2023] EWHC 1150 (Ch)

• Published date: 23 August 2023
• Subject Matter: Litigation, Mediation & Arbitration, Professional Negligence
• Law Firm: Travers Smith LLP
• Author: Joseph Moore, Lucy Jay, Philippe Lopeman and Annabelle Witte

In its recent decision in Forster v Reynolds Porter Chamberlain LLP, the High Court found that City law firm, RPC, had breached its duty of care to its client, Ms Forster, after failing to keep her adequately informed of costs incurred under a conditional fee agreement ("CFA"). The Court also held that RPC were conflicted in acting for Ms Forster, and that in failing to enforce the settlement agreement in accordance with Ms Forster's wishes, it caused her to suffer loss. The decision serves as a useful reminder that whilst a CFA governs the solicitor's remuneration, it does not alter the duties owed to the client. Insofar as solicitors prioritise their own interests under a CFA, or the interests of one client at the expense of another, they risk incurring liability for negligence and for breach of fiduciary duty (in addition to possible regulatory exposure).

1. Background

Ms Forster instructed RPC to defend her in a fraudulent misrepresentation claim brought by two individuals (the "Opponents"). RPC acted for Ms Forster under a CFA with a 100% uplift on their fees, as did the three Counsel who represented her at trial. Ms Forster arranged 'after the event' insurance (the "ATE Policy") which covered limited adverse costs, non-lawyer disbursements payable to RPC and repayment of a loan taken out by Ms Forster at a late stage of the proceedings to fund her expert witness, a forensic accountant from Deloitte (the "Loan Agreement"). Ms Forster had reluctantly agreed to instruct Deloitte, having been persuaded by RPC. The loan was provided by Giltspur Capital LLP ("Giltspur"), a firm controlled by Mr Deacon. The Judge found that Giltspur was effectively RPC's 'in house resource' for funding arrangements. RPC recommended the Loan Agreement to Ms Forster, who only became aware of the pre-existing relationship between Giltspur and RPC when it emerged in the evidence at trial. Also unbeknown to Ms Forster, RPC had been incurring significant costs in the litigation for several months and at a mediation in December 2010, Ms Forster discovered that total costs were almost £2.5m. After several rejected settlement offers and counteroffers, the matter proceeded to trial on 30 March 2011.

The claim was settled soon after the start of the trial, via a Tomlin Order under which it was agreed that the Opponents would pay Ms Forster £350,000 plus 80% of her costs. By this point, the total fees incurred by RPC and Counsel acting for Ms Forster exceeded £5.3m. Under the terms of...