Fenton v Holmes

A conditional fee agreement must comply with the statutory and regulatory requirements in force when it was made. A breach does not automatically render it unenforceable. The question is whether the departure, assessed prospectively at the agreement date, had a materially adverse potential effect on client protection or the proper administration of justice. A complete failure to include a required provision is more likely to be material than partial non-compliance. The omission of a provision permitting disclosure of the reasons for a success fee can materially affect costs assessment and the administration of justice. Important contractual terms contained in an unsigned document may also make the agreement unenforceable, particularly where legislation requires signature by both parties.

The appellant challenged a costs assessment decision concerning a settled professional-negligence claim conducted under a conditional fee agreement. The Master held that the CFA was unenforceable because a letter forming part of the contractual arrangements could not be treated as part of the CFA documentation. The respondent accepted on appeal that the letter could be read with the formal agreement and satisfied Regulation 3(2)(b) of the Conditional Fee Agreements Regulations 2000.

The respondent nevertheless relied on further alleged breaches, including failure to comply with Regulation 3(2)(a) and the signature requirement in Regulation 5. The central issues were whether those departures were materially adverse under the approach in Hollins v Russell, and whether the CFA was therefore enforceable.

1. The appeal was dismissed. The Master’s conclusion that the CFA was unenforceable was upheld, although the principal reasoning differed.
2. The relevant test was whether the particular departure from the requirements of Courts & Legal Services Act 1990 or the Conditional Fee Agreements Regulations 2000, assessed at the date of the agreement and by reference to potential rather than actual prejudice, had a materially adverse effect on client protection or the proper administration of justice. This was the approach applied in Hollins v Russell and clarified by Garrett v Halton Borough Council.
3. The omission of the provision required by Regulation 3(2)(a) was material. The provision served the administration of justice by facilitating disclosure of the reasons for the success-fee percentage during costs assessment. Its absence could deprive the court and the paying party of significant evidential material. The CFA was therefore unenforceable on this ground alone.
4. The formal CFA was signed by both parties, but the letter containing important contractual terms was signed only by the solicitor. The statutory and regulatory requirements concerning a written agreement signed by both parties reflected client-protection and administration-of-justice policies. The failure to sign the material letter was not immaterial and was independently fatal to enforceability.
5. The CFA was sufficiently clear, when read as a whole, to cover an appeal by the defendant and would therefore have complied with Regulation 2(1)(a). The written explanation requirements in Regulations 4(3) and 4(5) were also satisfied.
6. There was no order as to the costs before the Master. The appellant was ordered to pay £6,000 towards the respondent’s costs of the appeal.

• High Court (Chancery Division): Appeal from the decision of Master O’Hare dated 10 January 2007. The appeal was dismissed and the CFA was held unenforceable on grounds different from the Master’s principal ground.