Pentecost v John

A conditional fee agreement may operate retrospectively where its wording shows that intention. A later agreement can therefore bring earlier instructions and previously prepared compliance documents within its scope, unless legislation prohibits retrospective effect. Section 58 of the Courts and Legal Services Act 1990 contains no such prohibition. Where an existing written statement of the success fee satisfies the statutory requirement, it may continue to do so under a retrospective replacement agreement. If a conditional fee agreement fails to state the required percentage uplift, it is unenforceable; it cannot instead be construed as providing for no success fee, since that would defeat the statutory protection. The indemnity principle consequently depends on whether the retainer is enforceable.

The claimant’s clinical negligence claim against the defendant had been compromised for £525,000 plus costs. The claimant’s solicitors acted under a collective conditional fee agreement between the solicitors and the GMB. A 100 per cent success fee was recorded in a written statement dated 25 March 2009.

A second collective agreement was executed on 2 July 2009. It applied expressly to claims for which instructions had been received before its date, but no new statement of the success fee was prepared. The Master held that the second agreement superseded the first and was unenforceable from 2 July 2009. Applying the indemnity principle, he held that costs incurred thereafter could not be recovered from the defendant.

The appeal concerned whether the earlier statement satisfied the second agreement and section 58 of the Courts and Legal Services Act 1990, together with related issues concerning novation, agency and the consequences of non-compliance.

1. Appeal allowed on the third ground. The second collective conditional fee agreement was retrospective. Its express application to all claims, whether instructions had been received before, on or after its date, brought the claimant’s existing retainer within its scope.
2. The retrospective wording applied to the agreement’s compliance machinery. The requirement in clause 3.1 to provide information did not require repetition where the information had already been supplied. The same reasoning applied to clause 3.2, which required a written statement of the success fee. The statement prepared on 25 March 2009 was brought within the second agreement and satisfied section 58 of the Courts and Legal Services Act 1990.
3. The court applied the principle in Trollope and Colls Ltd v Atomic Power Constructions Ltd [1963] 1 WLR 333 that a contract may have retrospective effect where the parties so intend. The reasoning in Northern and Shell Plc v John Laing Construction Ltd [2002] EWHC 2258 (TCC) supported the same conclusion. Section 58 contained no express or implied prohibition against retrospective conditional fee arrangements, consistently with Forde v Birmingham City Council [2009] 1 WLR 2732.
4. For completeness, the second agreement was a novation rather than a mere variation, but its retrospective operation avoided any commercially absurd consequence. The Union remained the claimant’s agent and bound him when entering into the second agreement.
5. The alternative argument that a failure to state a percentage uplift merely meant that no success fee was payable was rejected. That construction would make section 58(4)(b) ineffective and undermine the protection intended by Parliament.
6. The costs assessment was to proceed on the basis that the second agreement was enforceable between the claimant and his solicitors. The indemnity principle therefore did not prevent recovery of the relevant costs from the defendant.

• High Court (Queen's Bench Division): On appeal from the decision of Master Gordon-Saker, the claimant succeeded on the third ground. The remaining grounds were not determinative.