Deborah Anne Forster v Reynolds Porter Chamberlain LLP

A solicitor acting under a conditional fee agreement remains obliged to act in the client’s best interests and to follow the client’s lawful instructions. A CFA does not, without express terms, permit the solicitor to prefer its own financial interests or substitute its judgment for the client’s, including during enforcement of a settlement. An oral variation of a CFA is ineffective where the agreement is required by statute to be in writing. A solicitor must disclose material costs risks, funding arrangements and conflicts of interest. Where negligent failure to enforce a settlement causes loss of a realistic recovery opportunity, damages may be assessed as a percentage of the value of that chance.

The claimant instructed the defendant solicitors under a conditional fee agreement to defend fraud proceedings and pursue an unfair-prejudice petition. The litigation settled by a Tomlin Order for £350,000 compensation and 80% of costs, with £750,000 due by 30 September 2011.

The claimant alleged that the defendant had assured her that the compensation would be paid from the first tranche of recoveries, and that it later breached its duties by failing to enforce the settlement, preferring its own interests and those of a litigation funder. The issues included variation or estoppel, the scope of the solicitor’s duties under the CFA, conflicts arising from the funding agreement, breach, causation and loss.

1. Estoppel and settlement assurance. There was no effective contractual variation of the CFA. However, the defendant’s solicitor, with the support and authority of the defendant, clearly assured the claimant that she would receive £350,000, less interest payable to the funder, from the £750,000 due under the settlement. She relied on that assurance in agreeing to settle. The defendant was therefore estopped from relying on the CFA to deny that entitlement.
2. Written variation. A conditional fee agreement is required by Courts and Legal Services Act 1990, s 58(3)(a), to be in writing. Applying Greenhouse v Paysafe Financial Services Ltd [2018] EWHC 3296 (Comm) and Goss v Lord Nugent (1833) 5 B & Ad 58, any contractual variation also had to be in writing.
3. Client instructions and solicitor interests. The CFA expressly required the defendant to act in the claimant’s best interests. It contained no term allowing the defendant generally to protect its own financial interests or to override the claimant’s instructions. Groom v Crocker [1939] KB 194 and Butler v Bankside Commercial Ltd [2020] EWCA Civ 203; [2020] PNLR 15 concerned particular contractual terms and did not establish a general right to act contrary to a client’s instructions. The proposed implied term was inconsistent with the express CFA and was unnecessary and insufficiently obvious.
4. Conflicts and funding. The defendant breached duty by advising the claimant to enter the Deacon Funding Agreement without adequate advice or disclosure of the defendant’s relationship with the funder and its separate retainer of him. The agreement gave the funder extensive control over the litigation and enforcement. The defendant’s later conduct in acting for the funder against the claimant aggravated the conflict.
5. Enforcement and loss. The defendant breached duty by refusing in October 2011 to convert and enforce the First Tomlin Order in accordance with the claimant’s instructions, and by later compelling or attempting to compel her to accept further delay. The claimant lost a realistic chance of recovering £350,000 from assets secured by charges. Applying the loss-of-chance approach in Perry v Raleys Solicitors [2019] UKSC 5; [2020] AC 352 and Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602, the chance was assessed at 55 per cent. Judgment was entered for £192,500, with the agreed £17,000 Deacon interest disregarded in valuing the loss.