Nicholas Stoop v Nicola Maxine Johnson

A damages-based agreement for claims management services is unenforceable if it fails to comply with the statutory requirement to specify the true reason for the agreed payment. The omission is material where it prevents the consumer from understanding, in writing, why the success fee was set at that level and from taking informed advice.

An agreement may relate to family proceedings even though its express subject matter concerns property or banking claims, if the fee was intended partly to remunerate work done in family proceedings. Where a success fee is payable after termination, compensation must result from or be consequent upon the assignment. The claimant must have made a very substantial or significant contribution, although it need not have been the effective cause.

The claimant, a regulated claims manager, sought a 50% success fee under a damages-based agreement with the defendant. The agreement concerned consultancy and claims management work aimed at securing compensation or mortgage relief from Barclays in relation to properties connected with the defendant’s former marriage.

The defendant terminated the agreement after the claimant’s involvement in the proposed claim and related political representations. She later reached a settlement with Barclays. The issues were whether the agreement was unenforceable under the Courts and Legal Services Act 1990 and the Damages Based Agreements Regulations 2013, whether the success fee required a causal connection between the claimant’s work and the compensation, whether that requirement was satisfied, and the appropriate calculation of any fee.

1. Enforceability under regulation 3(c). The agreement was a damages-based agreement within section 58AA of the Courts and Legal Services Act 1990. Regulation 3(c) required the terms and conditions to specify the true reason for setting the payment at the agreed level. No reason was specified. If clause 5 was relied upon, it did not state the true reason: the 50% fee was intended to remunerate the claimant for earlier and future work, not to reflect the stated risks.
2. The breach was material. The statutory purpose was to enable the client to perceive, in writing, why the fee had been set at that level and to take advice on that basis. The absence of any genuine reason caused real difficulty in identifying the basis of the fee and deprived the defendant of that protection. The agreement was therefore unenforceable under section 58AA.
3. Family proceedings. The agreement also related to family proceedings because the true reason for the fee included compensation for work on proceedings under Part III of the Matrimonial and Family Proceedings Act 1984. Its wording concerning mortgages and Barclays did not determine the question. Section 58AA(10), concerning employment matters, did not assist with the meaning of “relates to”.
4. Construction and causation. Although unnecessary to the result, “realised pursuant to the Assignment” required a causal connection. The compensation had to result from or be consequent upon the assignment. The claimant did not need to be the effective cause, because the agreement contemplated substantial contributions by lawyers, politicians, regulators and others. However, a merely non-negligible role was insufficient. The claimant’s contribution had to be very substantial or very significant.
5. On the facts, the claimant had not made the requisite contribution. The correspondence through solicitors had not produced a substantive response, the political intervention was principally driven by the defendant and others, and the later negotiations were conducted by different lawyers. The claim would therefore also have failed on causation.
6. If quantum had arisen, post-termination legal costs incurred in obtaining the compensation would have been deducted under the agreement. The resulting fee would have been £475,000. The claim was dismissed.