Rees & Anor v Gateley Wareing (a firm) & Anor

A solicitor’s percentage-based fee agreement is not necessarily a conditional fee agreement or champertous arrangement. The statutory restrictions on conditional fees apply only where the agreement concerns advocacy or litigation services. Work performed while advising a client who is not a party to litigation, where other independent solicitors conduct the proceedings, falls outside that category.

Whether a recovery falls within a percentage-fee agreement depends on its proper construction. The solicitor need not be the effective cause of the recovery, but must have acted on behalf of the client in relation to it. A recovery resulting entirely from later work by other solicitors, after termination of the retainer, may fall outside the agreement.

Mr and Mrs Rees retained Gateley Wareing in connection with the recovery of monies arising from the development of land. Their written agreement provided for an initial payment and a percentage of monies recovered. Gateley Wareing later counterclaimed for fees.

The parties settled the Reeses’ negligence claim, leaving the counterclaim for determination of five issues concerning construction, recoveries, statutory enforceability, champerty and any alternative entitlement to fees. The principal question was whether the agreement applied to recoveries arising from litigation conducted by other solicitors and whether it was unenforceable under the statutory rules governing conditional or contingency fees.

1. Construction and recoveries. The agreement of 5 August 2002 replaced the earlier terms. Gateley Wareing were obliged to give the advice reasonably expected of a competent solicitor concerning the Reeses’ interests in obtaining recoveries from the land transactions. The agreement did not require the Reeses to commence litigation, and it did not entitle Gateley Wareing to payment where it played no part in the recovery.
2. The solicitor did not need to be the effective cause of a recovery. However, the words “recovered on your behalf” required a recovery resulting from, or achieved through, Gateley Wareing’s acting for the Reeses. The Mercator/Rowe settlement fell outside the agreement because all work producing that recovery was carried out after termination of the retainer by other solicitors. The negative return from the Matthews litigation was £34,476.23, including the later settlement with Wedlake Bell.
3. Conditional fees. Applying R (Factortame Ltd) v Transport Secretary (No. 8) and Gaynor v Central West London Buses Ltd, an agreement is within section 58 of the Courts and Legal Services Act 1990 only so far as it provides for fees for advocacy or litigation services. Gateley Wareing did not conduct the Primlake winding-up proceedings or the Matthews litigation. Their work in the Matthews county court proceedings and the Foreshew claim was outside the 2002 agreement. The agreement was therefore not rendered unenforceable by section 58.
4. Practice Rule 8. The rule concerned retention to prosecute or defend proceedings. Gateley Wareing were not retained to conduct the winding-up petition or Matthews litigation under the 2002 agreement, and the work in the county court proceedings and Foreshew claim was not remunerated under that agreement. There was consequently no breach of Practice Rule 8.
5. Champerty. The relevant litigation was conducted by independent solicitors for parties other than Gateley Wareing’s clients. Applying the modern approach in Factortame, Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd and Sibthorpe v Southwark LBC, the agreement did not tend to undermine the purity of justice or corrupt public justice and was not champertous.
6. The Fifth Issue did not arise. The court did not finally determine whether the agreement was a non-contentious or contentious business agreement; that question could require further consideration if relevant to recovery or assessment of the fee.

First-instance determination of defined issues arising from Gateley Wareing’s counterclaim for fees. The parties’ underlying negligence claim had been settled before trial, but the counterclaim remained for determination.