Spencer v Wood & Anor (t/a Gordons Tyres, A Firm)

A conditional fee agreement must satisfy every applicable statutory and regulatory condition. A failure to state the proportion of a success fee attributable to deferred payment of fees and expenses is a material breach where it adversely affects the client’s protection. Under section 58(1) of the Courts and Legal Services Act 1990, the consequence is all-or-nothing: the agreement is unenforceable, rather than unenforceable only to the extent of the breach. The court cannot add words to create a graduated sanction through purposive interpretation where the statutory wording is clear.

The claimant’s personal injury claim settled for £30,000 plus reasonable costs. On detailed assessment, the District Judge assessed Part 2 of the bill at nil and held that the conditional fee agreement was unenforceable because it failed to comply with regulation 3(1)(b) of the Conditional Fee Agreements Regulations 2000.

Judge Cockcroft allowed part of the claimant’s appeal after the decision in Hollins v Russell [2003] EWCA Civ 718, but dismissed the remaining challenge. On this second appeal, the claimant argued that the agreement should be unenforceable only to the extent of the breach and that the relevant proportion of the success fee could be identified. The central issue was whether section 58(1) permitted a proportionate sanction for breach of the regulations.

Disposition. Lord Justice Brooke delivered the judgment. Lord Justices Jonathan Parker and Maurice Kay agreed. The appeal was dismissed, with costs assessed in the agreed sum of £7,500.

1. The agreement specified a success fee of 75 per cent of basic charges. Its schedule described postponement of payment as one factor but did not state what proportion of the 75 per cent related to that postponement. A separate risk assessment marked deferment of costs at 50 per cent, without identifying 50 per cent of what. The omission breached regulation 3(1)(b) of the Conditional Fee Agreements Regulations 2000. The claimant accepted both the breach and its materially adverse effect on the protection afforded to him.
2. The court applied the approach stated in Hollins v Russell [2003] EWCA Civ 718: the question is whether the particular departure from a regulation materially adversely affected the protection afforded to the client. If it did, the applicable conditions were not satisfied.
3. The substituted section 58(1) of the Courts and Legal Services Act 1990 imposed an all-or-nothing consequence. Unless the conditional fee agreement satisfied all applicable conditions, it remained subject to the general rules rendering such agreements unenforceable. The legislation provided no graduated response permitting partial enforceability.
4. The court could not add words to section 58(1) so as to assess the consequences of individual breaches. The statutory wording was clear and had to be interpreted as enacted. The purposive and imaginative approach invoked from a dictum in R (Quintavalle) v Secretary of State for Health [2003] UKHL 13 did not justify the proposed construction. The conditional fee agreement was therefore unenforceable.

• Court of Appeal (Civil Division). The appeal was dismissed with costs assessed at £7,500.
• Leeds County Court. The District Judge assessed Part 2 of the bill at nil and held the conditional fee agreement unenforceable. Judge Cockcroft allowed the claimant’s appeal in part but dismissed the balance.