Louise Michelle Reeves v Simon Kevin Frain & Anor

A damages-based agreement for non-employment proceedings must provide for the solicitor’s payment to be calculated by reference to an actual sum or benefit recovered in the proceedings. A merely contingent financial benefit, such as the prospective benefit of a declaration affecting an estate, is insufficient where the amount recovered cannot be ascertained.

Regulatory requirements concerning counsel’s fees and inter partes costs recovery must also be respected. Material departures, assessed by their tendency to adversely affect client protection or the administration of justice, render the agreement unenforceable. An associated retainer cannot be used to circumvent the statutory limits, and severance is unavailable where it would require rewriting the agreement or undermine the statutory policy.

The claimant brought contested probate proceedings concerning the validity of a 2014 will. Judgment was given for the second and fourth defendants, and an order required the claimant to pay 70% of their costs on the indemnity basis, subject to detailed assessment: [2022] EWHC 159 (Ch). The defendants’ solicitors had funded parts of the proceedings under damages-based agreements.

The claimant challenged the enforceability of those agreements, arguing that they did not comply with the statutory DBA regime. The issues included whether the agreements provided for payment from sums recovered, whether counsel’s fees could be charged separately, whether severance was possible, whether the DBAs had been repudiated, and whether later work was covered by a new private retainer.

1. The court held that the DBAs were unenforceable because the proceedings produced no sum recovered from which the contractual payment could be calculated. The defendants obtained a declaration invalidating the later will, but that created only a contingent and unascertained financial benefit. The relevant regulations required payment out of a sum actually recovered, and the statutory objective could not displace their clear limits.

2. The departures were material. The inability to specify the financial benefit affected client protection and created practical difficulties in calculating the statutory cap and the sums payable. It was irrelevant that the cap might not in fact be exceeded.

3. If the first objection had failed, the agreements would nevertheless have been unenforceable because counsel’s fees were treated as expenses payable in addition to the DBA payment. In non-employment matters, counsel’s fees formed part of the payment and could not be charged separately in that way. The terms “expenses” and “disbursements” were used substantially interchangeably.

4. The hybrid-agreement analysis in Zuberi did not permit an associated agreement to circumvent prohibitions in the DBA regulations. The offending provisions could not be severed under the Beckett test, since removal would require rewriting the agreements and would undermine the statutory policy.

5. The DBAs covered the proceedings through the consequential hearing. The solicitors’ mistaken assertion that their DBA obligations had ended did not amount to repudiation because there was no indication that they would refuse to perform the remaining obligations.

6. No effective variation or new private retainer was proved for work already covered by the DBAs. Continuing to give instructions was consistent with the existing agreements. Any retainer induced by the solicitors’ mistaken representation would in any event have been void or voidable and liable to be avoided. The court reserved determination of whether the affected bill parts should consequently be assessed at nil.

High Court (Senior Court Costs Office): preliminary issues determined on 31 January 2025. The court held the relevant damages-based agreements unenforceable, dismissed the repudiation challenge, rejected the alleged private retainer for work already covered by the DBAs, and reserved consequential questions concerning assessment of the bills.