Stephen John Finnan v Candey Ltd

A written agreement regulating solicitors’ remuneration for contentious business may be a contentious business agreement even if it provides for payment by hourly rates and gross sums. The agreement must give the client sufficient certainty about the financial liability, but uncertainty in hourly-rate provisions may be immaterial where the solicitor enforces only separate, clearly ascertainable sums subject to an agreed cap.

Where a solicitor seeks to enforce fixed sums rather than hourly-rate remuneration, the statutory assessment inquiry into hours worked and excessive hours does not arise. An arrangement is a conditional fee agreement where fees are payable only in specified circumstances, but it does not necessarily provide for a success fee merely because an additional sum becomes payable on success.

The appellant had instructed the respondent solicitors in proceedings under section 994 of the Companies Act 2006. Their written agreement provided for recording time at hourly rates, an initial payment of £60,000 plus VAT, and a further £40,000 plus VAT if the proceedings were successful.

The underlying proceedings settled without an inter partes costs order. The respondent sought enforcement of the agreement under section 61 of the Solicitors Act 1974. The Costs Judge held that the agreement was a fair and reasonable contentious business agreement and ordered payment of £120,000 inclusive of VAT.

Permission to appeal was granted on four grounds concerning construction, the validity of the agreement, the availability of an assessment of hourly work, and compliance with section 58 of the Courts and Legal Services Act 1990.

1. Appeal dismissed. The appeal was limited to reviewing whether the Costs Judge’s decision was wrong.
2. Clause 3 created a liability to pay fees calculated by reference to hourly rates, although that liability was to be waived to the extent that the relevant costs were not recovered. Clause 4 required payment of £60,000 plus VAT in any event and a further £40,000 plus VAT on success. Those sums were payments on account of hourly-rate fees as well as the maximum amount payable by the appellant.
3. The reference to payment within 12 months of judgment applied equally where the proceedings concluded by settlement. The respondent’s later email was inadmissible as evidence of the agreement’s construction under Whitworth Street Estates (Manchester) Ltd v James Miller & Partners Ltd [1970] A.C. 583.
4. Section 59 of the Solicitors Act 1974 is permissive rather than prescriptive and covers almost any written remuneration agreement for contentious business, subject to statutory exceptions which did not apply. The agreement was therefore a contentious business agreement. Although hourly-rate provisions must be sufficiently specific to tell the client what costs are being undertaken, the agreed £100,000 ceiling and fixed payment structure supplied sufficient certainty. The respondent was enforcing the free-standing fixed liability, not sums based on the hourly rates.
5. Section 61(4B) of the Solicitors Act 1974 would have permitted inquiry into hours worked and excessive hours if payment had been sought by reference to hourly rates. It did not apply because the respondent pursued only the fixed sums, and an inquiry would serve no purpose.
6. The agreement was a conditional fee agreement because part of the remuneration was payable only in specified circumstances. However, the Costs Judge was entitled to find that the £40,000 was not a success fee. The fees which would have been payable absent the arrangement were not less than the agreed estimated time costs. The further conditions in section 58(4) of the Courts and Legal Services Act 1990 therefore did not arise.

• High Court (Chancery Appeals (ChD)): HHJ Cadwallader dismissed the appeal from the Costs Judge’s order.
• Costs Judge Nagalingam: On 7 February 2024, the Costs Judge enforced the agreement and ordered payment of £120,000 inclusive of VAT, together with interest and costs.
• Permission to appeal: Richards J granted permission on four grounds on 1 May 2024.