FPH Law (a firm) v Brown (t/a Integrum Law)

A claim for damages for loss of a chance to compromise a costs dispute is assessed by reference to the position when the contractual breach occurred. An unresolved challenge to the enforceability of a conditional fee agreement does not prevent a bona fide compromise of the paying party’s costs liability. Such a compromise may remain enforceable even if the underlying agreement is later held illegal or unenforceable. The challenge can be given appropriate weight in negotiation. No special rule applies merely because solicitors drafted the agreement, although their knowledge may bear on the bona fides of a later compromise. The court left open whether non-compliant conditional fee agreements remain unlawful at common law after the statutory amendments.

FPH Law sued Brown for breach of undertakings given when he left the firm, alleging that he failed to pass on challenges and offers concerning costs payable in a personal injury claim. FPH alleged that it lost the chance to accept £70,000 and settle the costs dispute. Brown relied on the invalidity of the conditional fee agreement as a complete defence.

Slade J determined a preliminary issue in FPH’s favour, holding that the enforceability of a possible compromise was to be assessed when it could have been made and that the damages claim could proceed. The Court of Appeal considered whether public policy, illegality or unenforceability prevented such a compromise.

Disposition

Coulson LJ gave the principal judgment. Patten LJ and Sir Colin Rimer agreed. The appeal was dismissed. Slade J’s conclusion was correct, although the court criticised the vague formulation and appropriateness of the preliminary issue. The merits and quantum of the loss-of-chance claim remained for trial.

1. Relevant date and contractual loss. The claim was for breach of the undertakings. The counterfactual was the position FPH would have occupied if the undertakings had been performed. In April and May 2011, the challenge to the conditional fee agreement had not been judicially determined. It was therefore a matter to be valued in commercial negotiations, not a reason why a compromise could not have been reached.
2. Bona fide compromise. The principle in Binder v Alachouzos [1972] 2 QB 151 applied. A bona fide compromise of a disputed costs liability could be enforceable even where the underlying conditional fee agreement was later held illegal or unenforceable. The parties’ dispute could be compromised without retrospectively invalidating the compromise.
3. No special CFA rule. The fact that solicitors drafted the agreement did not justify a higher standard displacing that principle. Their knowledge and experience could be relevant to the bona fides of a later compromise, but that issue did not arise on the assumed facts. The public interest in settling disputes outweighed the suggested policy against compromise.
4. Later challenge. The court could go behind a compromise if justice required. A fully informed client would generally have no basis to set it aside, but absence of full and frank advice could leave the client able to challenge the agreement and potentially reopen the compromise.
5. Unresolved illegality issue. The court declined to decide whether the former common-law rule concerning unlawful conditional fee agreements, derived from Wallersteiner v Muir [1975] 1 QB 373 and Awwad v Geraghty & Co [2001] QB 570, survived the statutory amendments. The issue was academic because it could not affect the result.

• Court of Appeal (Civil Division) — In [2018] EWCA Civ 1629, Brown’s appeal was dismissed.
• Queen’s Bench Division — Slade J determined the preliminary issue in FPH Law’s favour and held that the loss-of-chance claim could proceed. No separate citation is stated in the judgment.