Birmingham City Council v Forde

A conditional fee agreement may validly be retrospective, including as to a success fee, unless statute or public policy prevents it. Its reasonableness remains subject to detailed costs assessment, and an excessive retrospective success fee may be reduced or disallowed.

A later conditional fee agreement may operate alongside an earlier agreement where the parties objectively intended the earlier agreement to remain available if the later agreement failed. An enforceable promise to continue providing legal services can constitute consideration where the earlier retainer is subject to a genuine validity challenge.

Undue influence requires a transaction calling for explanation. A client’s understanding of the transaction does not by itself rebut the presumption, but ordinary motives may explain an agreement made to secure continued representation. A solicitor whose conditional fee agreement is statutorily unenforceable cannot recover the same remuneration through a quantum meruit.

The Council appealed from preliminary costs rulings made by Master Campbell concerning the validity and effect of two conditional fee agreements entered into by Rose Forde in housing disrepair litigation.

CFA 1, made in March 2005, contained no success fee and capped the client’s liability if costs were not recovered. In March and April 2006, following challenges to similar retainers and an offer of settlement, CFA 2 was introduced. It provided for a retrospective success fee and broader representation. The Council challenged CFA 2 on contractual, undue influence, public policy, statutory and consumer-protection grounds. It also contended that CFA 1 was invalid because of inadequate advice about public funding.

The central issues were whether CFA 2 formed part of the retainer, whether it replaced CFA 1, whether it was supported by consideration, whether it could be retrospective, and whether the solicitors could rely on CFA 1 if CFA 2 failed.

1. Appeal dismissed. CFA 2 was a valid and enforceable agreement. The solicitors were entitled to recover their basic charges and disbursements under it, although no success fee was pursued.
2. The March 2006 letter formed part of the contractual package. CFA 2 did not completely replace CFA 1. Properly construed, CFA 1 remained available if CFA 2 was held invalid, subject to there being no double recovery.
3. Continuing to act under CFA 2 was sufficient consideration. The Council’s challenge created a genuine doubt about whether CFA 1 imposed an enforceable obligation to act. CFA 2 also conferred additional benefits, including wider appeal coverage.
4. The presumption of undue influence did not arise. Although there was a relationship of trust and confidence, the transaction was explicable by ordinary motives. Miss Forde wished to secure continued representation and ensure that the solicitors would be paid. An agreement obtained by undue influence would be voidable, not void, and the Council could not avoid it on her behalf.
5. A CFA could be retrospective. Section 58 of the Courts and Legal Services Act 1990 contained no prohibition on retrospectivity. A retrospective success fee was not per se contrary to public policy. Its reasonableness had to be assessed by reference to the circumstances reasonably appearing when it was agreed, and it could be reduced or eliminated on detailed assessment.
6. The fact that CFA 2 was made after 1 November 2005 but related to work before that date did not invalidate it. The revocation and transitional provisions did not revive the former regime by implication.
7. If CFA 1 had been invalid, the solicitors could not recover its charges through a quantum meruit. That would defeat the statutory purpose of making a non-compliant CFA unenforceable.
8. There had been no established breach of regulation 4 of the 2000 Regulations. The advice, viewed in the round, reasonably explained public funding, after-the-event insurance and the advantages and risks of CFA funding.

• High Court (Queen’s Bench Division): On appeal from Master Campbell’s judgment of 30 April 2008, the appeal was dismissed.