Geraghty & Co v Awwad & Anor

The Court of Appeal held that, in the state of the law in 1993, an agreement by a solicitor to recover only her ordinary profit costs if the client wins but to forgo those fees (or accept a reduced fee) if the client loses (a "conditional normal fee") was contrary to public policy and unenforceable.

The court treated such arrangements as falling within the Solicitors' Practice Rules definition of a contingency fee and as prohibited by Rule 8(1) read with Rule 18(2)(c), and held that the Rules are secondary legislation whose breach can render an agreement unenforceable.

This appeal concerned the enforceability of an oral agreement made on 20 September 1993 between a solicitor and her client that the solicitor would charge her normal rate if the client won libel proceedings but would charge a reduced rate (£90/hr) if he lost.

Rougier J found the oral agreement proved and held it unenforceable as champertous. The solicitor appealed. The Court of Appeal heard argument addressing the common law doctrines of maintenance and champerty, the Solicitors' Practice Rules, the Courts and Legal Services Act 1990 and subsequent statutory developments, and recent authorities including [1998] QB 785 (Thai Trading) and [1999] 2 WLR 1229 (Hughes).

The central question was whether a "conditional normal fee" was lawful and, if not, whether a solicitor could recover in quantum meruit.

1. Disposition: Appeals dismissed. The Court of Appeal (Schiemann LJ (lead), May LJ and the Lord Chief Justice) upheld Rougier J's conclusion that the conditional normal fee agreement was unenforceable.
2. Legal characterisation: A provision under which a solicitor recovers more only on success, or forgoes fees on defeat so that payment depends on success, falls within the definition of "contingency fee" in Rule 18(2)(c) of the Solicitors' Practice Rules as they stood in 1993. Such an arrangement is therefore an "arrangement to receive a contingency fee" prohibited by Rule 8(1).
3. Rules as delegated legislation: The Solicitors' Practice Rules were made under s.31 of the Solicitors Act 1974 and have the force of subordinate legislation. Accordingly a breach of those Rules can render the underlying private agreement unenforceable in the courts. The court followed the analysis in [1983] 1 AC 598 (Swain) and accepted the Divisional Court's approach in [1999] 2 WLR 1229 (Hughes).
4. Public policy and common law: The historical doctrines of maintenance and champerty inform the present law. The court rejected the approach in [1998] QB 785 (Thai Trading) to the extent that it treated conditional normal fees as enforceable at common law. The court held that, in 1993, the authorities (including Wallersteiner and Trendtex) and statutory context supported treating such conditional normal fees as contrary to public policy.
5. Quantum meruit and restitution: The court held that where public policy precludes enforcement of the agreement because the solicitor continued to act under an unlawful conditional normal fee, the solicitor cannot recover on quantum meruit for the work done under that unlawful retainer. The distinction in [1999] 3 All ER 699 (Mohammed) did not avail the solicitor here.
6. Practical guidance: The relevant date for assessing the Common Law position is the date of the agreement. The court noted the subsequent statutory changes effected by later orders and the Access to Justice Act 1999 but determined the case by reference to the law as it stood in 1993.
7. Orders: Appeals dismissed. Costs orders made below were sustained.

• Court of Appeal (Civil Division): Appeal from Rougier J in the High Court. Judgment delivered 25 November 1999; appeals dismissed.
• High Court (Chancery/King's Bench list): Rougier J determined preliminary issues and held the oral conditional fee agreement unenforceable; ordered Geraghty & Co to pay two thirds of Awwad's costs.