Deed of rectification of a CFA – Permission to Appeal granted

The Court of Appeal has recently been asked to consider an application for permission to appeal an Order of Warby J in relation to the Appellants’ funding arrangement.

In Frade & Ors v Radford & Anor [2017] EWCA Civ 1010 (14 July 2017) the underlying dispute concerned a Spanish film. The First Claimant was commissioned to direct the film; the Second was the corporate vehicle through which he traded.

A dispute arose following the First Claimant leaving the set. The film contracts themselves were subject to an exclusive jurisdiction clause in favour of the Spanish Courts, however, in July 2010 the Claimants issued proceedings against the Defendants in the English courts. All the Defendants were resident outside of the jurisdiction. They initially disputed service and Taylor Hampton Solicitors were instructed in July 2011.

A retainer letter was sent setting out the basis of charging; this was a straightforward retainer and had no conditional element. The individual Defendants countersigned the retainer letter on behalf of the Fourth and Fifth Defendants (“the Corporate Defendants”) as well as themselves.

Counsel was instructed and a CFA was entered into. This covered the whole proceedings but named only the Individual Defendants as clients.

In August 2011, Taylor Hampton sent the Defendants a draft CFA. This, unlike Counsel’s CFA, named, as clients, the Corporate Defendants as well as the Individual Defendants. This covering letter explained the limited scope of the CFA: “my role is to deal with the procedural position in England and not to consider your rights under the film contracts”.

However the CFA itself was based on the standard Law Society CFA terms, allowing for work done on “Your claims….to have the proceedings against you dismissed, to set aside the interim injunction, any assessment of damages under the cross undertaking, and any ancillary applications such as seeking an anti-suit order….”.

The Defendants entered into the CFA with Taylor Hampton or about 10 August 2011. The covering letter referred back to the original retainer letter and specifically extended it to cover the claims of the Corporate Defendants. Thereafter, Taylor Hampton and Counsel represented the Defendants in the English proceedings. The Individual Defendants played no part in the substantive claim following an Order in May 2012 discharging an injunction, however, proceedings against the Corporate Defendants continued. An unsuccessful mediation occurred, followed by a Defence and Counterclaim.

In March 2013, the Corporate Defendants applied to strike out the claim, which was granted. That Order was unsuccessfully appealed and the Defendants were awarded their costs of the claim and of the appeal by Sir David Eady

On detailed assessment, a number of issues were raised by the Claimants, including the contention that the Taylor Hampton CFA only covered the application to dismiss for want of service and not the later application by the Corporate Defendant to dismiss on other grounds. Issue was also raised with Counsel’s CFA given that it did not name the Corporate Defendants as his clients.

In response, it was accepted by Counsel and Taylor Hampton that an oversight had occurred. Taylor Hampton’s retainer had been expressly extended in August 2011 so as to cover the Corporate Defendants, but there was no corresponding change in Counsel’s CFA. Given this, Counsel and Taylor Hampton executed a “deed of rectification” to extend his CFA with retrospective effect, to cover the proceedings against the Corporate Defendants.

A number of issues were submitted in the original appeal hearing before Warby J. It was held that Taylor Hampton’s CFA only applied to the non-service work. He concluded that although there was an implied retainer in respect of non-CFA work, that retainer was on terms which replicated the CFA, and was, therefore, unlawful because CFAs are required to be in writing. As to Counsel’s CFA, Warby  J similarly held that although there was an implied retainer for work done outside of the scope of the CFA, he also found it to be unenforceable as it was not in writing. With regard to the deed of rectification, Warby J accepted that it was effective to cure the position as between Counsel and his clients, however, given the rectification post-dated the costs order, it should be disregarded.

The Defendants sought to appeal the Order of Warby J on seven grounds, of which three were granted. The further four were then considered in the Court of Appeal by Lord Justice Hickinbottom.

LJ Hickinbottom dismissed three of the four issues surrounding the CFAs of Taylor Hampton and Counsel. The final issue considered was the deed of rectification.

Ben Williams QC, on behalf of the Defendants, accepted that on the face of the CFA, the Defendants would not have been liable for Counsel’s fees in respect of the Corporate Defendants. However, it was submitted that this was pure oversight on behalf of the Defendants and Counsel, and that in those circumstances it was correct to rectify the CFA in order to reflect the true agreement and intention between them. It was repeated by Mr Williams that Warby J found that Taylor Hampton and Counsel had acted reasonably in entering into a deed of rectification, albeit, after the inter partes order had been made.

In response, Alex Hutton QC, for the Claimants, relied on the matter of Kellar v Williams which made it clear that that a variation in the charging basis as between receiving party and his solicitor made after the relevant order for inter partes costs had been made is ineffective as against the paying party.

 Hickinbottom J was not in agreement with Mr Hutton QC, where it was held that the rectification of a contract to give effect to its meaning is different to a variation of a contract after the event. Permission to appeal was, therefore, granted on that issue.

This is an important issue, as, assuming the appeal is successful, it could allow a retainer to be rectified in order to give effect to the parties’ genuine intentions at the outset. A successful outcome could potentially allow for rectification on a number of issues: such as the wrong Defendant; where the work has gone past the scope of the retainer; and to cover new parties to a litigation.

This case outlines the difficulties in attempting to retrospectively remedy an incorrect retainer. It is imperative that funding arrangements are given full consideration at the outset to ensure that the correct parties are named and that the retainer covers the scope of the work required.