Jones v Caradon Catnic Ltd

A conditional fee agreement complies with the statutory scheme only if the success fee stated under it does not exceed the prescribed maximum of 100%. A departure renders the agreement unenforceable where it has a materially adverse effect on client protection or the proper administration of justice.

Stating a success fee of 120% is a serious breach affecting the administration of justice. An overriding contractual term limiting recovery to 100%, and the absence of actual financial loss, do not make that breach immaterial. Treating such a violation as marginal would undermine the legislative policy of confining conditional fee arrangements within strict prescribed limits.

The claimant recovered damages in a personal injury action, together with his costs. His solicitors claimed a success fee of 120% under a collective conditional fee agreement made with his trade union, although they later conceded that recovery should be limited to 100%.

The written risk assessment specified 120%, while the collective agreement and the union's legal-aid conditions stated that the success fee could not exceed 100%. District Judge Regan held that the agreement was valid and enforceable. Judge Price QC dismissed the defendants' first appeal.

The defendants appealed by way of rehearing. The central issues were whether the written statement breached the statutory maximum and, if so, whether the breach was sufficiently material to make the agreement unenforceable.

1. Appeal allowed. The collective conditional fee agreement was declared unenforceable. Brooke LJ delivered the leading judgment. Laws LJ agreed and added reasons of his own. Maurice Kay LJ agreed with both judgments.
2. The agreement between the solicitor and client was the collective conditional fee agreement as implemented when the litigation was brought under its umbrella and the required written risk assessment was prepared and retained. Clause 7.1 provided that the success fee was the fee specified in the written statement. That statement unmistakably specified 120%, notwithstanding another clause which provided that the fee should never exceed 100%. The statement therefore breached section 58 of the Courts and Legal Services Act 1990 and article 4 of the Conditional Fee Agreements Order 2000.
3. Under Hollins v Russell [2003] EWCA Civ 718, a departure from the statutory conditions makes a conditional fee agreement unenforceable when it has a materially adverse effect on client protection or the proper administration of justice. The earlier irregularities in Hollins and Tichband v Hurdman were minor and immaterial. The present breach was materially different.
4. Client protection was not the decisive consideration because the arrangements did not expose the claimant to payment of the excess. The prescribed maximum nevertheless served the independent purpose of protecting the administration of justice. A stated fee above the maximum could generate improper claims, disputes and unnecessary preliminary proceedings. More fundamentally, treating the breach as immaterial would substantially deprive the statutory limit of effect.
5. Per Laws LJ, the 100% maximum was central to the regime upon whose terms conditional fee agreements were accepted as lawful. Disregarding that limit was inimical to the administration of justice even if no person ultimately suffered financial loss. Classifying such a violation as marginal would run contrary to the legislative policy of confining these costs arrangements within strict prescribed limits.

1. Court of Appeal (Civil Division): The defendants' appeal was allowed, and the collective conditional fee agreement was declared unenforceable: [2005] EWCA Civ 1821.
2. Cardiff County Court, Judge Price QC: The defendants' appeal was dismissed on 9 February 2005. The judge upheld the conclusion that the agreement was valid and enforceable.
3. Cardiff County Court, District Judge Regan: On 14 July 2004, following judgments addressing the documentation and risk assessment, the judge held that the agreement was valid and enforceable.