Awwad v Geraghty & Co

A solicitor's agreement to charge a reduced fee if the client loses, but the solicitor's normal fee if the client wins, was in 1993 an unlawful contingency fee arrangement unless authorised by statute. Such an arrangement exposed the solicitor to a financial interest in the result of the litigation and was contrary to public policy as then understood.

The court held that rule 8(1) of the Solicitors' Practice Rules 1990 prohibited such an arrangement, and that the Rules had statutory force. A solicitor could not avoid the consequence by recasting the agreement as a promise to forgo part of the fee on defeat, nor recover instead on a quantum meruit.

An appellate court should not expand the common law in this field where Parliament had chosen to regulate conditional fees incrementally through Courts and Legal Services Act 1990 legislation.

A solicitor acted for a client in libel proceedings under an oral arrangement made in September 1993. Rougier J found that the agreement was that the solicitor would charge her normal rate if the client won, but only £90 per hour if he lost. The solicitor later delivered a bill and sought to recover fees. The client challenged the bill on a solicitor and own client taxation.

Rougier J held that the retainer was unenforceable and stayed the proceedings. The solicitor appealed, relying in particular on [1998] QB 781. A former partner also appealed against a costs order made in the originating summons proceedings.

The central issue was whether, in 1993 and apart from statutory exceptions, a conditional normal fee agreement of that kind was lawful and enforceable, and if not whether the solicitor could recover by variation, estoppel or quantum meruit.

1. Appeals dismissed. The court held that the oral retainer found by Rougier J was unlawful and unenforceable. In 1993 a solicitor's agreement to receive the ordinary fee only on success, while accepting a lower fee on failure, was a contingency fee arrangement prohibited by rule 8(1) of the Solicitors' Practice Rules 1990 and contrary to public policy.

2. Per Schiemann LJ, with whom May LJ and the Lord Chief Justice agreed in the result, the common law in 1993 still treated a lawyer's financial stake in success as objectionable unless statute permitted it. Although there were substantial arguments of access to justice in favour of such arrangements, Parliament had chosen to move cautiously through Courts and Legal Services Act 1990, section 58. The court should not extend the common law in parallel with that legislative scheme.

3. Per May LJ, the difference between charging an enhanced fee on success and forgoing part of the fee on failure was not one of substance. The extra amount payable only on success was a contingency fee within rule 18(2)(c). The Solicitors' Practice Rules were subordinate legislation with statutory force, following [1983] 1 AC 598. Breach therefore involved unlawfulness as well as professional misconduct.

4. The court declined to follow the reasoning in [1998] QB 781 so far as it treated breach of a professional rule as not of itself contrary to law. It accepted the criticism made in [1999] 2 WLR 1229, and treated [1999] 3 All ER 699 as showing that an agreement prohibited by the Rules could be unenforceable.

5. The solicitor's further arguments failed. There was no later variation replacing the conditional arrangement with an unconditional £90 per hour retainer. No estoppel could prevent the court from taking illegality of its own motion. Nor could the solicitor recover on a quantum meruit, because public policy denied payment for acting under the prohibited arrangement itself.

6. The former partner's separate appeal against the costs order also failed. He had been a respondent to the originating summons as a partner in the firm which delivered the bill, and the judge was entitled to leave him jointly liable for the costs of those proceedings.

• Court of Appeal: appeals dismissed. The court upheld Rougier J's decision that the retainer was unenforceable and upheld the refusal to relieve the former partner from the costs order.
• High Court: on appeal from Rougier J, who tried preliminary issues arising from the client's originating summons for taxation and held that the conditional fee retainer was unenforceable.