Diag Human SE v Volterra Fietta (A Firm)
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Foster DBE |
| Judgment Date | 29 July 2022 |
| Neutral Citation | [2022] EWHC 2054 (QB) |
| Docket Number | Case/Appeal No: QA-2021-000084 |
| Court | Queen's Bench Division |
[2022] EWHC 2054 (QB)
Mrs Justice Foster DBE
Sitting with:
Master Simon Brown
As an Assessor
Case/Appeal No: QA-2021-000084
SCCO Ref: SC-2019-APP-000068
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM THE SENIOR COURTS COSTS OFFICE
IN THE MATTER OF AN ASSESSMENT UNDER PART III
OF THE SOLICITORS ACT 1974
MASTER ROWLEY
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Jamie Carpenter QC (instructed by Mishcon de Reya LLP) for the Respondents/Claimants
Mr Nicholas Bacon QC and Mr Simon Teasdale (instructed by Saunders Law) for the Appellant/Defendant
Hearing dates: 2–3 February 2022
Approved Judgment
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Friday, 29 July 2022 at 3:30 pm .
INTRODUCTION
This is an appeal against the decision of Master Rowley made on 17 December 2020 and a consequential decision on 19 March 2021. The matter arises from proceedings under the Solicitors Act 1974 and issues which arose at the start of proceedings in respect of a bill of costs dated 3 December 2019 regarding costs incurred from 6 September 2017.
The Claimants (in this appeal the Respondents) retained the Defendant (Appellant) firm of solicitors Volterra Fietta (“Volterra” or “the Firm”) for the purposes of an arbitration under a bilateral investment treaty against the Czech Republic. The detail of that arbitration is not relevant to the issues before the court, however in broad terms, it related to a previous arbitration award in favour of the First Claimant (“Diag”) which remained unsatisfied as against the Czech Republic. The amount claimed in the arbitration was about $2.4 billion, made up of the sum in question, interest and additional losses.
A retainer in respect of the work was entered providing for payment by reference to hourly rates and the terms were set out in a letter from Volterra to the Second Claimant, Josef Stava (“Mr Stava”) dated 23 February 2017. This Engagement Letter indicated that the contract was between Diag and Volterra. The Engagement Letter contained the usual ancillary terms as to limitation of liability and billing. The history is described by the Appellant in terms that in late 2018 or early 2019, the Claimants were in substantial fees arrears to Volterra and the Firm found it difficult to continue acting, accordingly, on 29 May 2019, Mr Stava emailed Mr Volterra to terminate the Firm's retainer on behalf of the Claimants, with immediate effect.
On 6 September 2017 a Side Letter had been written stating that a new retainer was created which incorporated the terms of the Engagement Letter insofar as not inconsistent, and Mr Stava was expressly made a party to this new retainer. The Side Letter was signed by both Mr Volterra, the senior partner of the Firm, and Mr Stava. The learned Master dealt succinctly with the Engagement Letter as above. I set out with gratitude the description by him of the Side Letter in his judgment and his description of its effect, with which no issue is taken before me. He introduced the Side Letter thus:
“ 12. …After the introductory paragraph, there are 21 numbered paragraphs setting out the altered terms. They are at the heart of the issues between the parties. I set out the letter up to the end of the third numbered paragraph as follows:
“ “Dear Mr Stava
This is a side letter to the engagement letter (the “ Engagement Letter”) signed between Diag Human SE (“Diag”) and Volterra Fietta. To the extent of any inconsistency between the terms of this side letter and those of the Engagement Letter, the terms of this side letter shall prevail. All terms of the Engagement Letter, to the extent not inconsistent with this side letter, shall continue in force. Terms defined in the Engagement Letter and not otherwise defined in the side letter shall bear the same meanings in this side letter as in the Engagement Letter.
1. The terms of the Engagement Letter and this side letter shall (notwithstanding anything else contained herein) apply to you personally, jointly and severally with Diag, to the extent that you are a claimant in a BIT claim brought on your behalf solely or jointly with Diag against the Czech Republic. In the event that we believe that there is a conflict of interest between you and Diag, we may be required to terminate our engagement with one of you.
2. The fees payable by Diag to Volterra Fietta in the first instance, to be invoiced and paid as set out in the Engagement Letter, shall be subject to a discount of 30%. This discount shall apply only to fees for work done by Volterra Fietta. It shall not apply to disbursements paid by Volterra Fietta on behalf of Diag which are re-invoiced to Diag. Nor shall it apply to fees charged by third parties for work done for Diag, whether or not this work is requested, mandated or supervised by Volterra Fietta.
3. In consideration of the discount referred to in paragraph 2, Diag shall, in the event (the “ relevant event”) of an award or settlement of its investment treaty arbitration claim against the Czech Republic, or enforcement or settlement of the Final Award (the “ commercial arbitration award”) issued in an ad hoc arbitration between Diag and the Czech Republic – Ministry of Health (Case No. RSP 06/2003) on 4 August 2008, or a combination of both, pay Volterra Fietta within 30 days of the relevant event additional fees as set out in paragraphs 5 to 7 (all of these paragraphs being cumulative).”
…
“ 13. Numbered paragraph 4 of the letter deals with exchange-rate issues arising from payment in any currency other than US dollars. Paragraphs 5 to 7, as stated in paragraph 3, set out sums which would be payable depending upon the outcome of the BIT arbitration. There are then paragraphs regarding payment and the effect of an early termination of the agreement. The last 10 paragraphs deal with how the sums payable in the event of a termination were to be calculated depending upon whether the issues of jurisdiction and merits were bifurcated.
“ 14. Since the terms in paragraph 5 onwards set out terms which were contingent upon the outcome of the arbitration, the agreement was subject to sections 58 and 58A of the Courts and Legal Services Act 1990 (“CLSA 1990”). It is common ground between the parties that the agreement did not comply with the terms of those provisions because the secondary legislation to them requires any success fee to be no more than 100% of the base fees (which in this case amount to the profit costs based on an hourly rate). Under the terms of the side letter, there was undoubtedly the prospect of more than 100% being claimed by way of a success fee. Indeed, the worked example produced to show the workings of the agreement apparently produced a figure of 280%.” [Emphasis added].
THE PRELIMINARY ISSUES
Master Rowley was required to decide four preliminary issues between the parties described by him as follows:
a. Is there an enforceable retainer between the Defendant and the Claimants (and/or either Claimant)?
b. If not, can any offending provisions be severed so as to leave an enforceable retainer between the Defendant and the Claimants (and/or either Claimant)?
c. If not, is there any other basis on which the Defendant is entitled to be paid for the professional services rendered to the Claimants (and/or either Claimant)?
d. If not, should the Defendant be ordered to return the sums paid to date by the Claimants (and/or either Claimant) in respect of the work covered by the Final Statute Bill?
There was no dispute before the Master that the answer to “a” above was “ no”, as he recorded at paragraph 14 of his decision see paragraph [4] above.
The amount at stake is significant. Fees under the original agreement totalled $106,639.39 up to 6 September 2017, whereas under the Conditional Fee Agreement (“CFA”) contained in the Side Letter, the Firm has charged $2,929,928.38 for work after that date.
The Master articulated the main dispute as being the second and third preliminary issues, namely severance, and the Defendant's entitlement to seek a quantum meruit for services provided. The Master concluded (as reflected in his Order dated 19 March 2021) the answers to the preliminary issues were as follows:
a. no
b. no
c. no
d. yes, sums beyond those chargeable for the period up to 6 September 2017 must be returned.
By notice of appeal dated 8 April 2021 the Appellant/Defendant sought permission to appeal arguing:
a. That the Master was wrong in law to hold that severance was not available to the Defendant and an enforceable retainer for work from 6 September 2017 could not be established.
b. That the Master was wrong in law to hold that remuneration on a quantum meruit basis was unavailable to the Defendant for its work from 6 September 2017 on the basis that any enrichment was not just.
c. That the Master was wrong in law to hold that the consequence of his findings was that any sums paid to the Defendant in relation to work from 6 September 2017 should be re-paid to the Claimants.
The Master had granted permission to appeal in respect of his conclusions on the issue of return of monies paid but refused it in respect of his conclusions on severance and quantum meruit. Permission in respect of the remaining grounds was later given by Bourne J on 28 May 2021.
Mr Nicholas Bacon QC with Mr Simon Teasdale appeared before us for the Appellant, and Mr Jamie Carpenter QC on behalf of the Respondents. I am very grateful to them for their careful written and oral submissions.
THE LEGAL FRAMEWORK
It is well established, and common ground, that the public policy...
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