Stephen John Finnan v Candey Limited

The Court of Appeal (Chancery Division) rejected the appellant's challenge to a costs judge's decision that a written agreement dated 6 March 2018 between the appellant and his former solicitors was an enforceable contentious business agreement (a conditional fee agreement) within s.61 of the Solicitors Act 1974. The court construed Clause 3 as creating a liability to pay fees calculated by reference to hourly rates, but concluded that Clauses 3 and 4 operated together so that the appellant's exposure was effectively capped at £60,000 (payable in any event) or £100,000 on success, with any excess waived.

Applying s.61 of the 1974 Act, the judge was entitled to enforce the agreement because it was fair and reasonable. The court rejected the argument that the hourly rate bands were too imprecise to constitute a contentious business agreement, holding that the express cap and payment mechanics gave sufficient certainty and that the solicitors elected to pursue the clear contractual sums rather than any hourly-rate claim. The court also held that the costs judge did not err in refusing to order an enquiry under s.61(4B) because the respondent did not pursue recovery by reference to hourly rates. Finally, the court found that the agreement did not involve a success fee within s.58 of the Courts and Legal Services Act 1990 so as to engage the additional formal requirements of that section.

Background and parties: The appellant instructed Candey Limited to act for him in s.994 Companies Act 2006 petitions. The parties signed a written agreement dated 6 March 2018 providing for time to be recorded at hourly rates (between £150 and £700) and for payment of £60,000 plus VAT on account and a further £40,000 plus VAT on success, with clauses addressing recovery from opponents and payment timing.

Procedural posture and relief sought: The respondent invoiced the appellant for £100,000 plus VAT; the appellant disputed enforceability. The respondent commenced proceedings under s.61(2)(a) of the Solicitors Act 1974 seeking enforcement of the agreement alternatively an assessment under s.61(2)(b). A costs judge ordered the appellant to pay £120,000 inclusive of VAT. The appellant obtained permission to appeal four grounds and sought to overturn that order.

Issues framed:

• Construction of the CFA: whether Clause 3 applied only where costs were ordered against opponents or also made the appellant liable to hourly-rate fees;
• Whether the agreement was a "contentious business agreement" enforceable under s.61 of the Solicitors Act 1974 given its hourly-rate provisions and the breadth of hourly rate bands;
• Whether the court should order an enquiry under s.61(4B) into hours worked and excessiveness;
• Whether the agreement provided for a success fee engaging s.58 of the Courts and Legal Services Act 1990 and its formal requirements.

Court's reasoning and disposition: The court construed Clause 3 as creating a liability to pay fees at hourly rates but concluded that Clauses 3 and 4 must be read together: the £60,000 was payable in any event (and the further £40,000 only on success) and both sums operated as payments on account of any hourly-rate total, with any excess effectively waived. That construction gave sufficient certainty so the agreement qualified as a contentious business agreement under s.59 and was enforceable under s.61(2)(a) because it was fair and reasonable. The court held that an enquiry under s.61(4B) was unnecessary because the respondent did not seek to enforce hourly-rate charges and therefore there was nothing to assess under that provision. On s.58 of the 1990 Act, the judge accepted that the agreement did not in substance provide for a separate success fee requiring the additional formalities, so s.58(4) did not apply. The appeal was dismissed on all four permitted grounds.

Appeal dismissed. The court upheld the costs judge's construction that Clause 3 created a liability to pay hourly-rate fees but that Clauses 3 and 4 limited the appellant's exposure to £60,000 (or £100,000 on success) with any excess waived; the agreement was an enforceable contentious business agreement under s.61 of the Solicitors Act 1974, there was no basis to order an s.61(4B) enquiry because the respondent did not seek hourly-rate recovery, and the agreement did not constitute a success fee within s.58 of the Courts and Legal Services Act 1990 requiring additional formalities.

Appeal from the decision of Costs Judge Nagalingam dated 6 February 2024 (ref. SC-2022-APP-001089). Permission to appeal on four grounds was granted by Richards J on 1 May 2024. The appeal was heard by His Honour Judge Cadwallader on 3 July 2024 and judgment given on 19 August 2024. Neutral citation: [2024] EWHC 2157 (Ch).