David Rees [1] and Another v Gateley Wareing (A Firm)[1] and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lord Justice McFarlane,Lord Justice Elias |
| Judgment Date | 22 October 2014 |
| Neutral Citation | [2014] EWCA Civ 1351 |
| Docket Number | Case No: A2/2014/0331 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 October 2014 |
[2014] EWCA Civ 1351
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr. Justice Morgan
HC09C04659
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Elias
Lord Justice McFarlane
and
Lord Justice Lewison
Case No: A2/2014/0331
Justin Fenwick QC and Lucy Colter (instructed by K & L Gates LLP) for the Applicants
John Randall QC and Dominic Roberts (instructed by Clyde & Co LLP) for the Respondents
Hearing dates: 15 October 2014
Approved Judgment
This appeal from the judgment of Morgan J, brought with the judge's permission, raises two principal questions. The first is whether the terms on which Gateley Wareing were retained as solicitors by Mr and Mrs Rees amounted to or became an unenforceable contract. The second, on the assumption that an enforceable contract was created and continued to subsist, is the extent of Gateley Wareing's entitlement to fees.
The judge dealt with the facts in meticulous detail. A reader interested in the full story should read his comprehensive judgment at [2013] EWHC 3708 (Ch) (available on BAILII). I hope that the following summary will be enough to put the issues into context.
Mr and Mrs Rees are farmers. Mrs Rees owned 100 acres of farmland known as Coton Farm South near Rugby which had development potential that they wished to unlock. They were introduced to Mr Derrick Matthews and Mr Richard Rowe who advised them that the land should be transferred offshore to reduce tax liabilities. In pursuance of the scheme the land was transferred to Neyland Properties Ltd ("Neyland") and then to Primlake Ltd ("Primlake"), under the terms of an agreement between those two companies. Primlake entered into an option agreement and deed of variation with Kyle Stewart Properties Ltd in 1994 and 1997 respectively. In 2000 this agreement was novated to Grosvenor, who developed the land.
Primlake and Neyland were administered and managed by Mercator Trust Company Ltd ("Mercator") of which Mr Rowe was at various times a director.
By 2001, Mr and Mrs Rees were concerned on a number of fronts. Some of their concern stemmed from the fact that they did not know exactly what was happening in relation to payments being made for the land to Primlake and then by Primlake to Neyland. Grosvenor was not paying Primlake and Primlake was not paying Neyland. Mr and Mrs Rees were also deeply suspicious of the role played by Mr Matthews in some way or other. Mr and Mrs Rees thought that they or Neyland should have received far more money from the series of transactions than they had so far received. They turned first to their family solicitor who was unable to resolve everything. In the following year they went to Mr Bradshaw whom they described as a "troubleshooter". Mr Bradshaw introduced them to Gateley Wareing. In late April and May 2002 Mr and Mrs Rees had a number of meetings with Mr Craig Mitchell and Mr Mukesh Patel of Gateley Wareing.
On 23 May 2002 Mr Patel wrote to Mr and Mrs Rees setting out the terms of Gateley Wareing's retainer. However, this was superseded by a later agreement made on 5 August 2002 which is at the heart of the case.
By this time another firm of solicitors, Wedlake Bell, had been acting on behalf of Mercator and Neyland. They had been trying to put pressure on Primlake, possibly by threatening to wind it up, or possibly by an action for an account against Primlake. Mr and Mrs Rees were concerned at the lack of action by Wedlake Bell, and on their instructions Mr Patel chased them up. On 3 July 2002, Wedlake Bell wrote to Gateley Wareing stating that the directors of Neyland wished to instruct Wedlake Bell in connection with any application to be made by Neyland. Wedlake Bell had also arranged for an insolvency practitioner to take on the job of liquidator of Primlake on a conditional fee basis. On 4 July 2002, Mr Patel faxed this letter to Mr Rees and discussed it with him. On 29 July 2002, Wedlake Bell on behalf of Neyland wrote to Primlake demanding payment of £6,085,360 within 3 working days and threatening a petition to wind up Primlake. Primlake was in fact ordered to be wound up in due course. That was the state of play when the crucial agreement was made. The judge summarised what was in the contemplation of the parties at [133] as follows:
"As regards the contemplation of the parties as to litigation on or after 5 August 2002, I find that the parties considered that the future was uncertain in that respect. They thought that it might just be possible to make progress without any litigation. They considered that litigation might well be necessary. By 5 August 2002, it looked likely that, in particular, a winding up petition would have to be issued by Neyland in relation to Primlake. It was not clear one way or the other whether Gateley Wareing would conduct litigation on behalf of Mr and Mrs Rees or on behalf of Neyland or a liquidator of Primlake, or not at all. It was quite likely that any litigation by Neyland or by a liquidator would not be conducted by Gateley Wareing."
The judge also found that at the date of the agreement Mr Patel knew that the effect of the rules about conditional or contingency fees was that Gateley Wareing could not conduct litigation on the terms of the agreement of 5 August 2002. However, he did not tell Mr and Mrs Rees that fact. Thus the judge also said that he was "quite sure that Mr and Mrs Rees did not know the relevant law as to litigation and conditional fee agreements."
The agreement was made between Mr and Mrs Rees and Mr Bradshaw. However, it also contained the terms of Gateley Wareing's retainer. It began by thanking Mr and Mrs Rees for instructions in "the Coton Park Industrial Estate Rugby project". The critical provision read as follows:
"As you know, I am trying to resolve matters on a commercial basis, without the need for formal proceedings being taken. In terms of the work involved, much depends upon the reaction of the other parties and their approach to matters. There has been a significant amount of paperwork to consider contained within 7 lever arch files. It has been agreed that you will pay on client account the sum of £5,000.00 to cover the initial investigative cost. I also understand from your discussions with Craig [Mitchell] that it has been agreed that from there on in the case will be dealt with on a conditional fee basis. This firm's charges shall be 5% of any monies recovered on your behalf, up until 22 May 2003. As from 23 May 2003, this firm's charges shall be subject to review and agreement between the parties, but in any event not less than 5% as specified above. We shall, of course, give credit for the £5,000.00 against any eventual recovery."
The issue of interpretation raised at trial was whether, under the terms of the retainer, Gateley Wareing were obliged to conduct litigation on behalf of Mr and Mrs Rees should that become necessary. If it did, Mr and Mrs Rees argued that it was invalid and unenforceable either because of statutory provisions or at common law. The judge held that the retainer did not oblige them to conduct litigation.
Although both sides argued the question of interpretation on the appeal before us, by the end of the hearing it was agreed that we did not need to decide whether the judge was right or wrong in his interpretation of the agreement. That is because if Gateley Wareing in fact provided litigation services (as defined in the Courts and Legal Services Act 1990) on the terms of the retainer Mr Randall QC for Gateley Wareing accepted that, unless it was a non-contentious business agreement, the contract was unenforceable. Conversely, Mr Fenwick QC for Mr and Mrs Rees accepted that even if the retainer contemplated the provision of litigation services as so defined, then if none were in fact provided the retainer was enforceable. There were two relevant actions which have been referred to as the Matthews litigation and the Foreshew litigation.
The Matthews litigation was a claim by Primlake (not by Mr and Mrs Rees) against Mr Matthews and others begun on 11 December 2003. Primlake (acting through its liquidator) were represented by Wedlake Bell, acting under a conditional fee agreement, who were the only solicitors on the record. The upshot of the proceedings was a judgment in Primlake's favour against Mr Matthews on 26 May 2006 for £836,500 plus interest. However, Primlake was not able to recover the whole of the judgment sum.
Although Wedlake Bell were the only solicitors on the record Gateley Wareing played a role mostly behind the scenes. The judge held at [87] that Gateley Wareing:
"…continued to do the work they did in relation to the Matthews litigation on the basis of their fee agreement with Mr and Mrs Rees."
There is no challenge to this conclusion. The judge summarised what he saw as the most important parts of the evidence about what they did. Mr and Mrs Rees had provided some funding for the action and had agreed to indemnify Primlake's liquidator against any adverse costs order. On 23 August 2004, Mr Matthews applied for security for costs. Wedlake Bell explained to Gateley Wareing that the court was likely to consider Mr and Mrs Rees as potential funders of the litigation. Mr and Mrs Rees' instructions were that they were not in a position to fund the claim. Gateley Wareing took instructions from Mr and Mrs Rees and prepared...
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