Bolt Burdon Solicitors v aijaz Tariq and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Spencer |
| Judgment Date | 13 April 2016 |
| Neutral Citation | [2016] EWHC 811 (QB) |
| Docket Number | Case No: HQ15X00701 |
| Court | Queen's Bench Division |
| Date | 13 April 2016 |
[2016] EWHC 811 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Spencer
Case No: HQ15X00701
Roger Mallalieu (instructed by Bolt Burdon) for the Claimant
Simon Edwards (instructed by Lopian Wagner) for the Defendants
Hearing dates: 26 th, 27 th, 28 th January
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is a claim by solicitors for professional fees under a Contingency Fee Agreement entered into with their clients, the defendants, in respect of non-contentious business in recovering compensation from Allied Irish Bank Plc ("AIB") under the Financial Conduct Authority Redress Scheme. The complaint was that AIB had mis-sold the defendants an "interest rate swap". The Contingency Fee Agreement which was negotiated entitled the solicitors to 50% of any compensation recovered, plus disbursements. AIB eventually offered compensation of £821,045.06 (gross of tax). Accordingly the sum claimed by the solicitors in this action, including disbursements and VAT, is £498,083.52.
The defendants dispute the solicitors' entitlement to so large a fee. They do so as a matter of construction of the agreement. They also assert that the solicitors wrongly led them to believe that the claim was all but hopeless. Although there is no suggestion of bad faith, it is said that there were misrepresentations as to whether the limitation period had expired and as to the scope and finality of the review process under the Redress Scheme. The defendants further assert that in all the circumstances the agreement was unfair and unreasonable, such that the court should exercise its discretion under section 57 of the Solicitors Act 1974 to set it aside or reduce the fees payable.
I heard oral evidence and submissions in a three day trial. The case raises interesting and unusual issues. The essential facts are, however, largely undisputed.
Factual background
The first defendant, Mr Aijaz Tariq is a very experienced, capable and successful businessman. He has been involved in owning and managing hotels for 30 years. The second and third defendants, Mr Azeem Tariq and Mr Amees Tariq, are his sons. They both work in the family hotel business as hotel proprietors. For practical purposes, however, it is and was Mr Aijaz Tariq who made all the important decisions. I shall refer to him hereafter as "Mr Tariq".
By 2006 Mr Tariq owned and ran three hotels in London. Towards the end of 2007 he approached AIB for finance to acquire a fourth hotel. The total facility advanced to AIB was £6.2million. As a term of the advance, AIB required the defendants to use an interest rate hedging product ("IRHP") in respect of the interest on £3million of the total loan. It was still expected at that time that interest rates would rise. The purpose of this interest rate "swap" was to provide a hedge against inflation. It tied the defendants into fixed rates of interest.
At the beginning of 2008 the defendants sold one of the hotels, enabling them to repay AIB £2million of the outstanding loan. But interest rates had fallen dramatically and the defendants were under severe financial pressure. The interest rate swap worked against the defendants. They were required to make large interest payments to AIB. In January 2009 Mr Tariq complained to the Financial Ombudsman Service about the increase in interest payments on his AIB loan facility. That complaint was rejected on 6 th May 2009, and was not pursued further.
By 2011 the financial position of the business had improved to the extent that the defendants were able to purchase a further hotel. However, Mr Tariq transferred their borrowing from AIB to Lloyds, which involved paying "breakage" costs of £200,000 to AIB under the terms of the IRHP.
On 20 th August 2012, out of the blue, AIB wrote to inform the defendants that the Financial Services Authority had instigated an industry-wide review of the sale of IHRPs, and that AIB had agreed voluntarily to take part in the review. An independent third party, approved by the Financial Services Authority, would be appointed to provide oversight of the review. The letter emphasised that there had not been any finding of mis-selling.
On the recommendation of his finance broker, Mr Tariq instructed a specialist hedging product adviser, Mr Abishek Sachdev of Vedanta Hedging Limited, to seek compensation from AIB. Vedanta's fee for providing a summary opinion was £1,500 plus VAT. Written submissions were prepared by Vedanta and approved by Mr Tariq. The sum the defendants were seeking to recover was £490,000 plus interest paid under the swap, plus the breakage fee of £200,000. There was also mention of consequential losses. Mr Tariq and Mr Sachdev met with AIB's independent reviewer on 28 th November 2012 to discuss the complaint. It is significant that in negotiating Mr Sachdev's terms of business Mr Tariq was, in effect, inviting him to act on a "no win no fee" basis, and specifically mentioned the possibility of instructing a lawyer on a no win no fee basis should a lawyer become necessary.
Eleven months passed before AIB communicated their decision on the review. By letter dated 15 th October 2013 AIB informed the defendants that the review had found that the IRHP was sold in a "non-compliant way", but that no compensation was being offered. The letter stated:
"Based on a review of information available, the Review has found that no redress is due to the Business. In reaching this conclusion the Review has considered, given that hedging was a condition of lending, what alternative IRHP the Business would have purchased at the time of the original sale, if all Regulatory Requirements had been met. The Review has concluded that the Business would have purchased the same IRHP product and that the failure to meet certain Regulatory Requirements did not impact upon the choice of IRHP purchased by the Business."
An appendix to the letter set out a detailed explanation of the review. Of the ten complaints, five had in fact been upheld. The letter set out the "next steps" available and explained that if the findings of the review were accepted no further action was required. The letter stated, however:
"If you would like to discuss the Review in further detail, or provide any additional information you believe should be considered, then please complete and return Section B of the attached Customer Reply Form (Appendix 2), and upon receipt the Bank will contact you to discuss this matter."
The form in Appendix 2 invited the customer to set out in writing the issues which the customer wished to discuss further. The letter made it clear that in the absence of a response within 42 days the Bank would write confirming the review was closed. It is important to note, therefore, that the Review provided for no formal appeal procedure.
Mr Tariq was told by Mr Sachdev that he could "appeal" the decision but that he could not assist him further. He would need to find a solicitor specialising in disputes over mis-sold IRHPs. Mr Tariq's own solicitor (whom he had been instructing for 30 years) could not recommend a specialist solicitor so Mr Tariq undertook a Google search on the internet. It was the claimant solicitors, Bolt Burdon, who came out top in the search results. Their website described their expertise in claims for interest rate swap mis-selling. It referred prominently to "no win no fee". It also mentioned contingency fee agreements, describing what they entailed and emphasising that they were not available once court proceedings had been issued:
"This agreement provides that we take a percentage of whatever you win. These agreements are often suitable for debt collection and financial mis-selling cases during the redress process."
Mr Tariq made a number of calls to other solicitors, whose names he cannot now remember. He first made contact with Bolt Burdon on 28 th October 20The person he spoke to was Mr Simon Bishop, then a trainee solicitor. Mr Bishop joined Bolt Burdon in July 2013 and qualified as a solicitor later that year, prior to the formal execution of the Contingency Fee Agreement in this case. Before training as a solicitor Mr Bishop had gained extensive valuable experience in the financial services sector, including interest rate swaps. During his training contract with Bolt Burdon he had worked on several cases of this kind. He impressed me in the witness box as a diligent and careful solicitor. His supervisor during his training contract was Mr Matthew Miller.
In the initial telephone call on 28 th October Mr Tariq made it plain that he was only willing to proceed on a no win no fee basis. Mr Bishop invited Mr Tariq to email him the key documents which he would review to asses the merits of the case. Normally Bolt Burdon would charge for a formal file review, although it seems there was no mention of this on the website.
On 30 th October Mr Tariq emailed Mr Bishop thanking him for showing interest in the case, stressing:
"… The only basis for the case I can give to you is no win no fee. If you are interested please let me know criteria and terms and conditions."
The relevant documents were duly sent by Mr Tariq and reviewed by Mr Bishop and by a very experienced consultant in the firm, Mr Gary Walker. It was noted that the "trade date" for the...
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