Stevensdrake Ltd (t/a Stevensdrake Solicitors) v Hunt (as Liquidator of Sunbow Ltd)

Where a solicitor has previously accepted that fees for work in an insolvency matter will be paid only from recoveries, that understanding may form part of the later retainer even where a conditional fee agreement contains apparently inconsistent terms. The agreement must be construed against the relevant background, including the parties’ communications and subsequent conduct. A solicitor who intends a CFA to introduce personal liability for fees irrespective of recoveries must draw that significant change expressly to the client’s attention. The court may also find an estoppel by convention where the parties shared an understanding on which they conducted their dealings. Liability for disbursements may remain separate from liability for the solicitor’s own charges.

Stevensdrake Limited claimed its own base costs and 100% success fee from Stephen Hunt, who had acted as liquidator of Sunbow Limited, under a CFA concerning claims against former administrators under section 212 of the Insolvency Act 1986. The claims were settled successfully, but the recoveries were insufficient or unavailable to meet the claimed fees.

Hunt contended that the CFA was subject to an established recoveries-only arrangement arising from the parties’ earlier dealings and express communications. He also relied on estoppel by convention, undue influence, negligence, breach of contract and breach of fiduciary duty. The court had to determine whether Hunt was personally liable for Stevensdrake’s own charges and, separately, for disbursements.

1. Claim for Stevensdrake’s own charges dismissed. Hunt was not personally liable for Stevensdrake’s base costs or success fee. He remained liable for counsel’s fees, other disbursements and out-of-pocket expenses.
2. The CFA could not be construed in isolation. The relevant background included Hunt’s letter of 27 April 2006, Stevensdrake’s acceptance on 26 May 2006, and the parties’ subsequent dealings. Those matters established that payment of Stevensdrake’s fees was conditional upon recoveries and that Hunt had no personal liability for a shortfall. That term was fundamental to the retainer and operated notwithstanding contrary wording in the CFA.
3. The court rejected the contention that the earlier arrangement constituted the broader pleaded Practice, including pro-rating of recoveries. Nevertheless, the recoveries-only condition was incorporated into the agreement by construction or implication. The court emphasised that implication cannot improve a contract, but may spell out what the agreement, read as a whole against its background, reasonably means.
4. Independently, the parties shared an understanding that Stevensdrake’s fees would be paid from recoveries and Hunt would not be personally liable. It would therefore be unconscionable for Stevensdrake to resile from that understanding. The requirements of estoppel by convention were satisfied.
5. The findings on undue influence, negligence and fiduciary duty were unnecessary to the dismissal of the claim. The court nevertheless found that, if the CFA had introduced personal liability irrespective of recoveries, Stevensdrake should have drawn that material change expressly to Hunt’s attention. Failure to explain the CFA’s asserted effect fell below the reasonable standard of care and involved non-disclosure of a material change in the solicitor-client relationship.
6. Hunt had suffered no recoverable loss because he had not paid Stevensdrake’s charges. The court made no finding on contributory negligence. Interest remained payable on unpaid or late-paid disbursements.

• High Court (Chancery Division): counsel’s fees had already been awarded summarily against Hunt by Chief Master Marsh on 15 October 2014.
• High Court: HHJ Purle QC granted permission to appeal and dismissed Hunt’s appeal on 20 May 2015. The decision is cited as [2015] EWHC 1527 (Ch).
• High Court (Chancery Division): the present court dismissed Stevensdrake’s claim for its own charges, while confirming Hunt’s liability for disbursements and counsel’s fees.