CFA Lite arrangement upheld by the Supreme Court

One interesting case that highlights just how far the courts are prepared to go to protect a solicitor’s lien is that of Gavin Edmondson Solicitors Limited Respondent/Cross-Appellant)(“Edmondson”) v Haven Insurance Company (Appellant/Cross-Respondent)(“Haven”) [2018] UKSC 21.

The appeal arose out of Edmondson’s claim against Haven for (i) wrongful inducement to Edmondson’s clients to breach their retainer contract; (ii) intentional causing of loss by unlawful means and (iii) by way of amendment, equitable enforcement of its solicitor’s lien.

Edmondson had acted for a number of clients in respect of their claims for personal injuries arising out of three separate road traffic accidents. Each claim was subject to the Pre-Action Protocol for Low Value Personal Injury Claims in Road Traffic Accidents (“the RTA Protocol”) and the defendants’ insurer, Haven had been put on notice of all three claims by way of the bespoke online platform, the ‘RTA Portal’.

The RTA protocol scheme and the RTA Portal provides for a platform on which solicitors can register and conduct low value RTA claims and expect payment of their fees by reference to a table of fixed recoverable costs for each stage of the process, which are then payable direct by the defendant’s insurer.

Upon receipt of notice of each claim by way of the RTA Portal, Haven contacted the claimants and settled the cases with each of them directly for around £2,000 per claim. The settlements made no provision for the legal costs of each claim.

The difficulty for Edmondson was that their retainer contract with each client was a ‘CFA Lite’, a form of conditional fee arrangement that provided for the firm’s fees only if such costs were recovered from the client’s opponent. Haven’s position was that as no costs had been recovered, the solicitors were not entitled to anything given the specific terms of their retainer.

Before the High Court, Edmondson’s claims in tort were rejected on the basis that there had been no collusion between Haven and the claimants to cheat the solicitors and because Haven was not on notice of the specific terms of the retainers.

In the Court of Appeal, Haven’s argument was that, as there was no contractual liability for the client to pay Edmondson’s fees under the CFA Lite terms, there was nothing upon which an equitable security could be founded.

The Court of Appeal agreed that there was no contractual liability upon the true construction of the retainers but decided that equitable jurisdiction to intervene could be extended enough to enable the court to recognise and enforce Edmondson’s interest under the RTA Protocol (an expectation of payment of fixed costs and charges) or Edmondson’s interest under the terms of the retainer that enabled the firm to sue Haven in its clients’ names for recovery of its fees, both of which Haven were on notice of. Haven were, therefore, ordered to pay Edmondson’s fees but only to the extent allowed under the RTA Protocol.

On appeal to the Supreme Court, Haven repeated its main submission that the CFA Lite retainers created no contractual liability for costs and submitted that the Court Appeal had been wrong to extend the principle of equitable intervention as it did. Edmondson’s submissions were that the Court of Appeal was right to extend the principle of equitable intervention to the facts of this case and argued that a CFA Lite created a contractual liability despite the limitation as to recoverable costs.

On an examination of the CFA Lite terms, Client Care Letter and Law Society’s standard terms, which together formed the solicitor’s retainer, the Supreme Court found that “the Client Care Letter did not destroy the basic liability of the client for Edmondson’s charges expressly declared in the CFA and Law Society’s standard terms. It merely limited the recourse from which Edmondson could satisfy that liability to the amount of its recoveries from the defendant. It both preserved and in my view affirmed that basic contractual liability, to the full extent necessary to form the basis of a claim to an equitable charge as security.”

The Supreme Court also found that Haven did have notice of Edmondson’s lien by reason of the online Claim Notification Form that contains a tick box opposite a statement that the solicitors had been retained under a CFA, which Edmondson had completed.  In any event, it was clear from Haven’s conduct in settling the cases early (with a view to avoiding the payment of costs to solicitors) that it was aware that Edmondson’s retainer was one that gave rise to an expectation of payment upon settlement of the claims. Haven, therefore, did have prior knowledge of the CFA Lite retainers and had interfered with the solicitor’s interest in the fruits of the litigation.

In this instance, given the findings that (a) the CFA Lite terms were sufficient to create a contractual liability for the claimants to pay Edmondson’s costs and (b) Haven had prior knowledge of Edmondson’s lien; Haven were liable to pay Edmondson its costs to be calculated in accordance with the CFA Lite terms – not by reference to the RTA Protocol fixed costs provisions. In respect of all but one claimant, this resulted in a slightly lower recovery for Edmondson than that awarded by the Court of Appeal.

In light of the Law Society’s intervention in this case (in respect of its interests in both the RTA Protocol and CFA Lite agreements) the Supreme Court went on to find that the provision for fixed recoverable costs under the RTA Protocol does not, by itself, “create legal or equitable rights of any kind, if the client has no responsibility to the solicitor sufficient to support he solicitor’s lien. There is no legal entitlement of the solicitor direct against the insurer which the lien can support by way of security.”

This decision shows that under the terms of a CFA Lite (if properly worded) the client has a primary (and enduring) liability for the solicitor’s costs. The agreement merely limits the solicitor’s ability to enforce that liability by reference to the outcome of the case. Also, the courts are clearly prepared to protect a solicitor’s lien where a party, who has had prior notice of it, seeks to interfere.