Awwad v Geraghty & Company

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeLORD JUSTICE SCHIEMANN,the Lord Chief Justice,LORD JUSTICE MAY,LORD CHIEF JUSTICE
Judgment Date25 Nov 1999
Neutral Citation[1999] EWCA Civ J1125-3
Judgment citation (vLex)[1999] EWCA Civ J1125-41
Docket NumberCase No: 98/0150,Case No: 98/0150 98/0750

[1999] EWCA Civ J1125-3

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HON. MR JUSTICE ROUGIER

Before:

The Lord Chief Justice

Lord Justice Schiemann and

Lord Justice May

Case No: 98/0150 98/0750

Geraghty and Co.
Appellant
and
Awad Awwad
Respondent
Eric Gustavson
Second Respondent

TIMOTHY DUTTON Q.C. and LOUISE MERRETT (instructed by Wright Son & Pepper for Miss Geraghty)

GEOFFREY SHAW Q.C. (instructed by Peter Carter-Ruck & Partners for Mr. Awwad)

STEPHEN JONES (instructed by Russell-Cooke Potter & Chapman for Mr. Humphreys

1

Thursday, 25 November 1999

LORD JUSTICE SCHIEMANN
2

St Yves of Brittany, patron saint of lawyers, used in the thirteenth century to act for nothing for the poor. Many lawyers still do. At the other extreme are those who will only act in return for payment. In the middle are those who would be prepared to act for nothing or less than usual if their client loses but wish to be paid if their client wins. One such is the appellant Miss Geraghty. After a trial, Rougier J found that, prior to her carrying out the work in question, the solicitor and the client orally agreed on 20 th September 1993 that she would charge him at her normal rate if he won the litigation and would charge him at a lower rate (�90 per hour) if he lost the litigation. These appeals are concerned with the enforceability by her of that particular type of conditional fee agreement entered into by her with her client, Mr Awwad, in relation to libel litigation brought by him against Mr Gustavson.

3

The area of the law is one in which judicial perceptions have differed and in which there has been much public and parliamentary debate and some recent legislation. Many professions operate with the concept of success fees. But the position of solicitors and barristers is to a degree different in that they are regarded as owing a duty to the court which may require them to reveal to the court matters which it would be in the interests of their client to conceal. The background to the debate has been, on the one side, a historically widespread perception that if the lawyer has too much at stake in the success of the litigation then he may yield to the temptation to prolong litigation which could have settled or to a temptation to act improperly in order to secure success, and on the other side, a conviction that it aids access to justice if clients can litigate without the fear of having to pay both sides' costs if they lose.

4

The debate has been concerned purely with financial temptation. There are three categories of reward for success � (1) where the lawyer will recover some of the clients winnings; (2) where the lawyer will recover his normal fees plus a success uplift; (3) where the lawyer will only recover his normal fees. They used all to be described as contingent fees but, in what H.H. Judge Cook in the third edition of his book on Costs refers to as a triumph of semantics, situations (2) and (3) have in recent years been given the name of conditional fees whereas situation (1) is still described as a contingent fee. I shall keep that nomenclature for situation (1). The present case is concerned with situation (3) which I shall call a conditional normal fee case to distinguish it from situation (2) which I shall call the conditional uplift case.

5

So far as the position in the case of his client losing is concerned, the lawyer may agree to forego all his normal fees or a part of his normal fees. No one suggests that the answer to the questions posed in the present case should be determined by whether the lawyer agrees to forego all or merely part of his fees.

6

Manifestly the greater the potential gain for the lawyer the greater the potential temptation to misbehave. Looked at from that point of view, situation (1) is worse than (2) which is worse than (3). Looked at from the point of view of accessibility the converse is generally the case � the greater the reward of the lawyer if his client wins the more palatable for him is the risk that he may receive little or nothing if his client loses. The result of the public debate over the years has been a shift from a situation in which both contingency fees and conditional fees were generally regarded as unprofessional to one in which conditional fees are regarded as acceptable in closely defined circumstances.

7

The oral agreement between the solicitor and her client in the present case was not evidenced in writing. On the contrary, her letter of 20 th September 1993 merely refers to the charge of �90 per hour. The judge found that the absence of any reference to charging at her normal higher rate in the event of the client winning the litigation, was attributable to her desire to keep out of written correspondence and memoranda any reference to an agreement which appeared to be prohibited by the Solicitors Practice Rules. In due course the client took out the money which his opponent had paid into court and the libel litigation came to an end. She sent in a bill to her client charging merely the lower rate. Had there only been the letter of 20 th September and no oral agreement there would have been no problem. However, having found that the real agreement was the oral agreement of that date, Rougier J found that she was not entitled to recover a penny because the proceedings were champertous.

8

The Common Law so far as presently relevant was originally formulated in a context where these matters were not regulated by Statute. Recently Parliament has increasingly intervened to modify the Common Law and recent judgments regularly refer to the relevant statutes. Inevitably, Parliament legislates against its perception of the Common Law and the Courts' enunciations of public policy arguments take place in a context which includes changing public perceptions as evidenced in legislation. The appellant challenges the correctness of Rougier J.'s decision on the basis of recent developments in Statute Law and Common Law. She submits that it is no longer the policy of the law to deny a solicitor her ordinary profit costs in circumstances where she has agreed with her client that he should pay her nothing or less than her normal profit costs if he loses and her normal profit costs if he wins.

9

It is convenient to set out first the relevant statutory provisions and then to set out the developing case law.

10

II

11

The legislation

12

The Solicitors Act 1974 contains the following relevant sections:

13

s. 31

(1)..� the Council 1 may � make rules, with the concurrence of the Master of the Rolls, for regulating in respect of any matter the professional practice, conduct and discipline of solicitors.

14

The Solicitors Practice Rules 1990 provided in 1993

15

Rule 8(1)

16

A solicitor who is retained or employed to prosecute any action, suit or other contentious proceeding shall not enter into any arrangement to receive a contingency fee in respect of that proceeding.

17

That rule has since been amended to add the following words

18

A solicitor who is retained or employed to prosecute or defend any action, suit or other contentious proceeding shall not enter into any arrangement to receive a contingency fee in respect of that proceeding save one permitted under statute or by the common law.

19

Rule 18(2) is a definitions rule and defines 'contingency fee' under Rule 18(2)(c) as meaning

20

�.. any sum (whether fixed, or calculated either as a percentage of the proceeds or otherwise howsoever) payable only in the event of success in the prosecution of any action, suit or other contentious proceeding.

21

Section 58 2 of the Courts and Legal Services Act 1990 as originally enacted provided

22

(1) In this section "a conditional fee agreement' means an agreement in writing between a person providing advocacy or litigation services and his client which -

(a) does not relate to proceedings of a kind mentioned in subsection (10) 3;

(b) provides for that person's fees and expenses, or any part of them, to be payable only in specified circumstances;

(c) complies with such requirements (if any) as may be prescribed by the Lord Chancellor 4; and

(d) is not a contentious business agreement (as defined by section 59 of the Solicitors Act 1974).

23

(2) Where a conditional fee agreement provides for the amount of any fees to which it applies to be increased, in specified circumstances, above the amount which would be payable if it were not a conditional fee agreement, it shall specify the percentage by which that amount is to be increased.

24

(3) Subject to subsection (6), a conditional fee agreement which relates to specified proceedings shall not be unenforceable by reason only of its being a conditional fee agreement.

25

(4) In this section "specified proceedings" means proceedings of a description specified by order made by the Lord Chancellor for the purposes of subsection (3) 5.

26

(5) Any such order shall prescribe the maximum permitted percentage for each description of specified proceedings.

27

(6) An agreement which falls within subsection (2) shall be unenforceable if, at the time when it is entered into, the percentage specified in the agreement exceeds the prescribed maximum permitted percentage for the description of proceedings to which it relates.

28

(7) Before making any order under this section the Lord Chancellor shall consult the designated judges, the General Council of the Bar, the Law Society and such other authorised bodies (if any) as he considers appropriate.

29

(8) Where a party to any proceedings has entered into a conditional fee agreement and a costs order is made in those...

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