If a conditional fee agreement (CFA) is found to be unenforceable, can the solicitors:
- Sever the offending provisions from the CFA such as to leave the balance of the agreement enforceable?
- Can the solicitors nevertheless recover costs on a quantum meruit basis?
- If the solicitors have received payments on account, can they retain those payments notwithstanding the unenforceable nature of the CFA?
In short:
- No.
- No.
- No.
So held the Court of Appeal in Diag Human SE & Anor v Volterra Fietta [2023] EWCA Civ 1107.
This is hardly surprising. If it were otherwise in respect of the first two questions, most of the Costs Wars in the decade or so after the introduction of the Access to Justice Act 1999 would have been avoided.
The only real mystery is why the solicitors, who had lost at first instance and on a first appeal, pursued this to the Court of Appeal. No doubt the significant sums at stake, including the $1.5million payments on account that had been ordered to be repaid, were a strong incentive.
The cause of all these problems to the solicitors was that the CFA had clearly not been drafted by a costs professional. It is always cheaper to get the retainer right first time than trying to correct problems down the line. This is particularly import with the extension of fixed recoverable costs.
1 thought on “Severance and unenforceable Conditional Fee Agreements”
(1) and (2) obvioulsy right (1 on the facts of the case, 2 generally). (3) is extremely dubious. The court has failed to focus on the statutory sanction, which is that the CFA is “unenforceable”. But to the extent costs have been paid already, you aren’t enforcing the agreement. So why does that matter? The court has failed to distinguish between “void” agreements and “unenforceable” agreements, but that is a fundamental distinction. The Limitation Act make a debt unenforceable after 6 years. But if, failing to consult the calendar, I pay my creditor in month 73, I certainly can’t get my money back. Precisely because the debt was unenforceable, not void.