Birmingham City Council v Crook & Ors

A conditional fee agreement charging a discounted fee where damages are recovered without a costs order does not thereby provide for a success fee. The relevant comparison is with the solicitor’s normal fees and expenses absent the conditional fee agreement.

Wrong legal advice is not reasonable advice merely because the error is understandable. It will nevertheless invalidate the agreement only if, applying Hollins v Russell [2003] EWCA Civ 718, the breach materially adversely affects client protection or the administration of justice. Funding advice must be assessed in the round.

The respondents were tenants pursuing housing disrepair claims against Birmingham City Council. Their solicitors used a standard conditional fee agreement under which, if damages were recovered without a costs order, the client’s liability was capped at a discount from the solicitors’ normal charges. The solicitors also gave written funding advice and later entered contentious business agreements with the clients.

Master Campbell held that the conditional fee agreement complied with the statutory scheme and that the funding advice satisfied the information requirements. Birmingham appealed, challenging the construction of the agreement, the adequacy and accuracy of the advice, and the efficacy of the contentious business agreements.

1. Appeal dismissed. The decision of Master Campbell was reaffirmed, although on slightly varying grounds.
2. The conditional fee agreement was a CFA within section 58(2)(a) of the Courts and Legal Services Act 1990, as amended. The discounted charges were not a success fee under section 58(2)(b). The statutory reference to fees and expenses meant the normal fees and expenses chargeable without a CFA. Treating the discounted liability as the ordinary market fee would effectively make almost every CFA subject to a success fee.
3. The acknowledged advice that Legal Help costs would be recovered through a statutory charge was wrong. Understandable confusion caused by obscure regulations did not make wrong legal advice reasonable. Applying the materiality test in Hollins v Russell [2003] EWCA Civ 718, however, the error did not materially affect the clients’ protection or the administration of justice.
4. The funding letter, read as a whole, adequately explained the risk of adverse costs, available funding methods and the significance of public funding. A public funding certificate gave substantial, but not complete, protection against an adverse costs order. The advice complied with regulation 4 of the Conditional Fee Agreements Regulations 2000.
5. The court declined to give general guidance on contentious business agreements. It expressed hesitation about treating an agreement made after an adverse costs order as retrospectively curing a defect in a CFA so as to create or increase the defendant’s costs liability. That issue was academic because the CFA was enforceable.

• High Court (Queen’s Bench Division): The appeal from Master Campbell was dismissed. The decision was reaffirmed on slightly varying grounds.