Benaim (UK) Ltd v Middleton & Anor

A conditional fee agreement satisfying the statutory conditions under section 58 of the Courts and Legal Services Act 1990 is not unenforceable for champerty merely because its success uplift is calculated partly by reference to the amount recovered. Parliament accepted that compliant conditional fee agreements would otherwise have been unenforceable on public-policy grounds. The statutory scheme validates such agreements, subject to its prescribed limits, including the maximum percentage uplift. A contingency fee calculated simply as a percentage of recovery may fall outside the statutory definition unless drafted as fees payable only in specified circumstances and as a permitted success fee. The court may uphold the result of an award where the arbitrator gave an erroneous reason, if the underlying legal issue can properly be determined and the conclusion was correct.

The claimant challenged an arbitrator’s determination that a conditional fee agreement between the respondent, which was in administrative receivership, and its solicitors was valid and could be relied on in assessing costs. The agreement provided for a success uplift on basic costs, varying according to the amount recovered and subject to a cap of 25 per cent of the recovery and the statutory maximum uplift.

The arbitrator initially rejected the argument that the agreement contained an unlawful champertous element. He later amended his award, retaining the conclusion but removing wording criticised by the claimant. The claimant appealed against the amendment and sought permission to appeal against the original award. The central issue was whether statutory compliance nevertheless left the agreement unenforceable for champerty or public policy.

1. The appeal was dismissed. The arbitrator reached the correct conclusion that the conditional fee agreement was valid and enforceable, although his reasoning incorrectly suggested that a compliant agreement might contain a further unlawful champertous element.
2. Section 58 of the Courts and Legal Services Act 1990, as amended, defines a conditional fee agreement as one under which fees or expenses are payable only in specified circumstances. A success fee is an increase over the amount otherwise payable. The agreement satisfied the statutory conditions, including the written-form, permitted-proceedings, prescribed-requirements and percentage-limit requirements.
3. The statutory scheme was intended to validate conditional fee agreements, subject to restrictions imposed by Parliament and regulations. It did not preserve a separate category of statutory-compliant agreements that remained unenforceable because of an additional champertous element. Section 58(1) removed the public-policy objection arising merely because the agreement was a conditional fee agreement.
4. A fee expressed simply as a fixed percentage of the amount recovered does not, without more, satisfy the definition in section 58(2)(a), because the circumstances determine the amount rather than whether the fee is payable. It may nevertheless be drafted to fall within section 58(2)(a) and would then be treated as a success-fee arrangement under section 58(2)(b), subject to the statutory requirements and cap.
5. The agreement’s staged uplift, linked partly to recovery, was permissible. The Conditional Fee Agreement Regulations 2000 contemplated limitations by reference to damages recovered, and neither section 58 nor the Regulations prohibited determining the uplift by reference to recovery provided the maximum uplift was not exceeded.
6. The validity of the agreement was a pure question of law determined by its terms, the statutory provisions and the common law. The court therefore treated the arbitrator’s reasons as non-determinative: a correct conclusion would stand despite erroneous reasoning, while an incorrect conclusion would not be saved by an attempted amendment.

1. Arbitration: A consent award dated 16 January 2003 required the claimant to pay the respondent’s costs. The arbitrator’s award dated 19 July 2003 held the conditional fee agreement valid.
2. High Court (Technology and Construction Court): The arbitrator issued an amended award on 9 October 2003. Permission to appeal against that award was granted on 10 December 2003. The court dismissed the appeal and upheld the validity of the agreement.