Louise Michelle Reeves v Simon Kevin Frain

Damages-based agreements are enforceable only within the closely defined statutory exception to champerty. Under the Damages-Based Agreements Regulations 2013, payment must derive from damages awarded or sums actually recovered from the opposing party in the proceedings. A contingent future benefit, or the preservation of assets following a successful defence, is insufficient.

Regulation 1(2) requires counsel’s fees to be included in the DBA payment where applicable. They cannot be charged separately as expenses. A material breach of these requirements renders the agreement unenforceable. Severance will not save an agreement where removal of the offending terms would alter its substance or undermine public protection.

The appellants were defendants in contested probate proceedings concerning the validity of two wills. The claimant sought probate of a 2014 will; the court instead upheld a 2012 will. The appellants’ solicitors had entered into damages-based agreements providing for percentages of the appellants’ financial benefit, together with separate payment of expenses including counsel’s fees.

Costs Judge Brown held the DBAs unenforceable. On appeal, the court considered whether the arrangements permitted payment from a benefit arising from the declaration in favour of the 2012 will, and whether counsel’s fees could be charged outside the DBA payment. The central question was whether either alleged breach made the DBAs unlawful and unenforceable.

1. Appeal dismissed. The standard appeal test under CPR 52.21 required the court to determine whether the Costs Judge was wrong in law. He was not. Each DBA was unenforceable on two independently sufficient grounds.
2. Under section 58AA of the Courts and Legal Services Act 1990, read with the Damages-Based Agreements Regulations 2013, the Act creates the statutory exception in principle, while the Regulations define and limit the types of DBA that are permitted. Payment must be a share of damages awarded or sums recovered by the client from the opposing party. The appellants’ retention of assets, and the declaration that one will was valid, involved no recovery from the respondent.
3. The word “ultimately” in regulation 4 refers to the amount determined or recovered by the end of the relevant proceedings. It does not authorise payment calculated by reference to an unquantified contingent right or a future receipt. Candey Ltd v Tonstate Group Ltd [2022] EWCA Civ 936 was binding or, at minimum, highly persuasive on the requirement for recovery of a specified financial benefit from the opposing party.
4. Regulation 1(2) excludes expenses from payment but expressly includes disbursements incurred for counsel’s fees in the relevant non-employment cases. Counsel’s fees therefore had to form part of the DBA payment and could not be charged additionally as expenses. The breach was clear and material.
5. The appellants could not rely on Lexlaw Ltd v Zuberi [2021] 1 WLR 2729. That case concerned an early-termination provision, not an attempt to contract out of an express statutory protection concerning counsel’s fees.
6. Severance was unavailable. The offending provisions could not be removed without modifying the agreement, their removal would produce a major change to the bargain, and partial enforcement would conflict with public policy. The statutory conditions were deliberately strict, even if their application produced a harsh result.
7. The court did not need to decide the alleged wrongful termination or repudiation of the DBAs. An order was to be agreed reflecting dismissal of the appeal.

• High Court (King’s Bench Division): appeal from the order of Costs Judge Brown dated 21 January 2025 dismissed.
• Chancery Division: in Reeves v Drew & Ors [2022] EWHC 159 (Ch), the 2012 will was upheld and probate granted, making the claimant the paying party for costs purposes.