Keep one eye on the retainer.

A recent Court of Appeal decision (Michael Radford and another v Alejandra Frade and others [2018] EWCA Civ 119) concerning the scope of Conditional Fee Agreements highlights the need for attention to detail and the need to review complex engagement terms as a case develops.

Solicitors for the Defendants/Appellants had initially agreed to act for the two individual clients (first and second Appellants) under a conventional retainer entered into in July 2011. Two days later the solicitors entered into a CFA with counsel in relation to the same individual clients. In August 2011, the solicitors agreed to enter into a CFA with the two individual clients together with the corporate clients. The CFA, together with a new retainer letter in the same terms as before, was sent to all four clients. Counsel’s CFA was not amended and, therefore, continued to only relate to the individual clients.

The solicitors’ CFA with the Appellants was limited in its scope in seeking “Your claims against [the Respondents]…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 main reason for the CFA and for limiting its scope to cover summary proceedings was that the Appellants did not have the financial resources to fund the matter to a full trial of the issues.

By a Consent Order, dated 23rd May 2012, the solicitors had succeeded in setting aside the injunctions obtained by the Respondents (which had by that time been continued at hearings on notice) and in setting aside service of the claim form as against the individual Appellants (but not the corporate Appellants). Further, the individual and corporate Appellants had all agreed to make no claim on the cross-undertaking as to damages which the Respondents had given. So, by this point, the substantive proceedings against the individual Appellants were over but they continued against the corporate Appellants. The claims against the corporate Appellants were eventually concluded in February 2014, upon their application for summary judgment, when the Respondents were ordered to pay the Appellants’ costs.

The Respondents, of course, objected to paying for any costs that were not covered by the CFAs i.e. work done by the solicitors and counsel after 23rd May 2012 because they fell outside the scope of the CFAs (in particular they did not cover the summary judgment application against the corporate clients). They also objected to paying any of counsel’s fees in so far as they related to the corporate clients. Counsel’s CFA was amended during the course of the costs assessment by a ‘deed of rectification’ to cover the corporate clients from the CFA commencement date but the Respondents argued that it was too late to have any effect between the parties as it would increase the Respondents’ liability post the costs order (Kellar v Williams [2004] UKPC 30 and Forde v Birmingham City Council [2009] 1 WLR 2732 cited).

The Appellants argued that, where the CFAs did not cover certain aspects of the work done, that work was covered by the initial retainer letter that endured and was renewed when the CFA was agreed and, in the alternative, that an implied retainer existed, relying on Adams v Improved Motor Coach Builders Ltd [1921] 1 KB 495 (CA) [a client who instructs a solicitor to perform work comes under an obligation to pay for it even if another party intends to pay the bill – otherwise there must be express agreement that the client will not pay].

The Court of Appeal, after hearing argument from Benjamin Williams QC for the Appellants and Alexander Hutton QC for the Respondents, found that the question of whether there is an implied agreement can only be decided on the facts of this case and by reference to the conduct of the solicitor and the client. In this case it was clear from the conduct of these parties that the solicitors had expected the CFA to cover the work done. No interim bills were sent to the clients for work that was not covered by the CFAs (as envisaged by the conventional retainer) and, given the clients’ financial circumstances, by entering into a CFA they would not be expecting to pay for future work. The Court found that, given these circumstances, any implied retainer in respect of work falling outside of the CFA would not be an implied conventional retainer but, rather, an implied retainer on CFA terms. Given the requirement for a CFA to be in writing, the implied retainer of this nature would, therefore, be unenforceable.

As to the question of the deed of rectification, the Court of Appeal also agreed with the Respondents and dismissed the appeal.

This case is an interesting development on the issue of implied retainers. Solicitors will enter into CFAs several days or weeks after first seeing a client and often forget to ensure that the CFA commencement date is the date of the first meeting. This presents a problem if significant costs are incurred before the commencement date where there is no retrospective provision and there is no evidence as to the client’s expectations in respect of those costs. Something to watch out for!