Deborah Anne Forster v Reynolds Porter Chamberlain LLP

The claimant sued her solicitors for damages for loss allegedly caused by breaches of duty in the conduct of High Court litigation and in the enforcement of a negotiated Tomlin settlement. The court considered (a) the contractual matrix of conditional fee agreements (CFAs) and an ATE policy, (b) the effect of a separate funding agreement with Mr Deacon, and (c) whether RPC varied their CFA entitlements or were estopped from asserting them. The judge found no effective oral variation of the CFA (s.58(3)(a) Courts and Legal Services Act 1990 required writing) but did find a clear assurance by RPC that the claimant would receive £350,000 (less limited Deacon interest) from the monies due on 30 September 2011; that assurance gave rise to promissory estoppel. RPC breached duties by failing to advise adequately about the funding arrangement with Mr Deacon and by acting (or permitting Mr Deacon to be used) in circumstances giving rise to an undisclosed conflict of interest, and by failing to follow the claimant's instructions to enforce the First Tomlin Order. The loss was assessed as a lost chance to recover £350,000; the court assessed the lost chance at 55% and awarded damages of £192,500.

Background and parties: The claimant, an impecunious inventor, was defended in a High Court fraud claim and pursued a s.994 Companies Act 2006 petition. RPC acted on CFAs with 100% success fee uplifts and the claimant held an ATE policy. A trial in March 2011 was settled by a Tomlin order providing for payment of £350,000 compensation and staged payments on account of costs, with a first tranche of £750,000 due by 30 September 2011.

Nature of the claim and relief sought: The claimant sought damages for professional negligence and breach of duty by RPC, alleging loss of the opportunity to enforce the Tomlin settlement promptly in late 2011/early 2012 and thereby recover her £350,000 (less interest). She alleged, among other things, that RPC had become conflicted by virtue of the Deacon Funding Agreement and RPC's relationship with the funder, that RPC preferred its and the funder's interests to hers, and that RPC failed to enforce the terms she instructed.

Issues before the court:

• whether the CFA priorities had been varied by agreement or whether promissory estoppel prevented RPC from asserting the CFA priorities against the claimant;
• whether RPC breached duties in failing to inform the claimant of the scale of costs, in the selection and funding of the expert, in advising on and procuring the Deacon Funding Agreement, and in enforcement decisions;
• whether causation was established and, if so, how to value any lost chance of recovery.

Reasoning and findings: The judge found there was no lawful oral variation of the CFA (a written form is required). However, on the evidence (including contemporaneous notes and subsequent correspondence) RPC, through Mr Ballinger and with the knowledge of others, gave a clear assurance that the claimant would receive £350,000 (less a small deduction for Deacon interest) from the monies due on 30 September 2011. The claimant relied on that assurance and would not otherwise have settled. That assurance gave rise to estoppel. RPC had failed to keep the claimant appropriately informed about escalating costs and about the implications of instructing a large accountancy firm as expert; the latter led to the Deacon Funding Agreement, which the judge found was entered into without proper, informed advice and generated a significant undisclosed conflict because RPC advised or acted for Mr Deacon while still acting for the claimant. RPC therefore breached duties in relation to the Deacon funding and in refusing to follow the claimant's instructions to convert the Tomlin schedule into a judgment and to enforce it in October 2011. The loss was a lost chance to recover the £350,000; after assessing the risks and likely recoverability from the charged properties and other assets, the court fixed the chance lost at 55% and awarded damages of 55% of £350,000, namely £192,500 (also excluding an agreed £17,000 adjustment representing Deacon interest).

Subsidiary findings: RPC was estopped from denying that the claimant had an entitlement to the £350,000 tranche; there was no loss caused by RPC's failure to update the claimant about cost quantum per se; and the court criticised RPC's failure to disclose its relationship with the funder and to call the funder as a witness.

Judgment entered for the Claimant in the sum of £192,500. The court held there was no valid contractual (oral) variation of the CFA (writing requirement) but that RPC gave a clear assurance that the claimant would receive £350,000 (less limited Deacon interest) from the monies due on 30 September 2011 and is estopped from denying that entitlement. RPC breached duties by failing to advise properly on the Deacon funding, by acting in circumstances of an undisclosed conflict of interest, and by failing to enforce the First Tomlin Order in accordance with the claimant's instructions; those breaches caused a loss of a chance to recover the £350,000, assessed at 55%, giving damages of £192,500.