Rees v Gateley Wareing (A Firm) & Ors

A solicitor cannot avoid the statutory controls on conditional and contingent fees by remaining off the court record. A retainer under which fees are payable only from a recovery becomes a conditional fee agreement when the solicitor actually provides litigation services.

Litigation services include ancillary work which it would be reasonable to expect a solicitor exercising a right to conduct litigation to perform. They need not comprise every function involved in the conduct of the proceedings. A contingent-fee retainer for such contentious work is unenforceable unless it complies with section 58 of the Courts and Legal Services Act 1990. Section 57 of the Solicitors Act 1974 does not validate it where the work is done for the purposes of court proceedings.

Farmers who sought to realise the development value of land retained Gateley Wareing under an agreement providing for a payment of 5 per cent of money recovered. The firm later assisted in litigation brought by a company in liquidation against a third party, although another firm was on the record.

Morgan J held that the retainer did not oblige Gateley Wareing to conduct litigation and that its supporting role did not render the agreement unenforceable: [2013] EWHC 3708 (Ch). He also found that work in a separate professional-negligence action was not done under the August 2002 agreement.

The clients appealed. The central issue was whether the firm’s actual work in the first litigation constituted litigation services, making the recovery-based retainer an unenforceable conditional fee agreement.

1. Appeal allowed. Lewison LJ, with whom McFarlane and Elias LJJ agreed, held that the August 2002 retainer became unenforceable through the way in which it was performed. The firm was not entitled to enforce its 5 per cent recovery-based fee, and the issue of quantification did not arise.

2. Section 58 of the Courts and Legal Services Act 1990 applies to solicitors by virtue of their status as persons entitled to conduct litigation. The relevant distinction is between solicitors and others who possess that right, and persons who do not. It is not a distinction between a solicitor with conduct of proceedings and a solicitor providing support while another firm is on the record.

3. The requirement in section 58(2)(a) is actual provision of litigation services. Under section 119(1), those services are not confined to every function involved in conducting an action. They include ancillary functions which it would reasonably be expected of a solicitor exercising the right to conduct litigation to provide. Drafting witness statements and instructions to counsel, assisting disclosure, and undertaking work which would otherwise have been done by the solicitors on the record met that description.

4. The firm’s fees were payable only if the clients recovered money. The retainer was therefore, at least on performance, a conditional fee agreement. It did not comply with section 58 and was unenforceable. Section 57 of the Solicitors Act 1974 could not save it, because the work was contentious business: it was done by solicitors for the purposes of court proceedings, irrespective of whether they had overall conduct or were on the record.

5. The court did not need to resolve the common-law champerty argument separately. Parliament had prescribed the permissible limits of conditional and contingent fee arrangements for litigation services. The Court of Appeal also declined to disturb the judge’s finding that the separate professional-negligence action was not performed under the August 2002 retainer.

• Court of Appeal (Civil Division) — allowed the clients’ appeal in [2014] EWCA Civ 1351, holding that the recovery-based retainer became an unenforceable conditional fee agreement when litigation services were provided.
• High Court of Justice, Chancery Division — Morgan J held that the firm’s supporting role in the litigation did not engage the statutory conditional-fee regime: [2013] EWHC 3708 (Ch). That conclusion was reversed.