Stevensdrake Ltd (trading as Stevensdrake Solicitors) v Stephen Hunt (liquidator of Sunbow Ltd)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Hamblen,Lord Justice Briggs |
| Judgment Date | 31 July 2017 |
| Neutral Citation | [2017] EWCA Civ 1173 |
| Date | 31 July 2017 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2016/2911 |
[2017] EWCA Civ 1173
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
HIS HONOUR JUDGE BARKER QC
(sitting as a Judge of the High Court)
Case No: HC-2014002213
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Briggs
and
Lord Justice Hamblen
Case No: A3/2016/2911
Andrew Sutcliffe QC and Cameron Miles (instructed by Stevensdrake Solicitors) for the Appellant
Hugh Sims QC and Simon Passfield (instructed by Devonshires Solicitors LLP) for the Respondent
Hearing dates: 18 and 19 July 2017
Judgment Approved
Introduction
The Appellant ("SL") is a firm of solicitors. The Respondent ("SH") is a licensed insolvency practitioner and SL's former client. The partner acting at all material times on behalf of SL was Gavin Pickering ("GP").
SL appeals against the judgment of His Honour Judge Barker QC (the "Judge") dated 26 February 2016 (the "Judgment") whereby he dismissed SL's claim against SH for its fees under a CFA dated 10 April 2008 ("the CFA") for legal services provided in relation to the liquidation of Sunbow Limited ("Sunbow"), of which SH was the liquidator.
The central issue between the parties at trial was whether SH was only liable for the fees if a recovery was made out of which the fees could be paid. The Judge upheld SH's case that he was only liable in those circumstances as a matter of contract, alternatively by reason of estoppel by convention. Alternatively, if SH was liable irrespective of recoveries made, the Judge upheld SH's claim that SL could not recover its fees by reason of undue influence and/or breach of its contractual and/or tortious duty of care and skill and/or breach of its fiduciary duty of loyalty. He also found that SH was not contributorily negligent. SL appeals against all these grounds of decision.
Factual background
This is fully set out in the Judgment at [11] to [73] and is largely undisputed. For the purposes of this judgment it is not necessary to repeat that complete account. Instead a summary will be given drawing on and giving references to the Judgment.
SH and GP first worked together on an insolvency matter in 1993 and had worked together on numerous insolvency matters since then [13]. The Judge found that they were both "experienced and skilled at their respective roles in the field of insolvency and that they had a well established working relationship, each knowing what to do and what was expected of the one by the other" [69].
It was common ground that in respect of a number of those matters the arrangement was that GP's firm of solicitors agreed to be paid on a recoveries basis, including in instances where there was a CFA in place in respect of the solicitors' fees [14].
The Judge found that: "In nil-asset cases SH expected these specialist labour resources to be self-funding in the sense of having no personal recourse against him and being willing to limit their reward to a share of recoveries up to the limit of their time costs and any agreed uplift. In relation to the claims against TP, although GP (and SL) and counsel might advise, SH conveyed the impression of being fully confident as to the prospects of recovery which enabled him to remain in the driving seat without question from his legal team. SH also made clear, from time to time, that if his advisers sought to deviate from the course he was charting in order to protect their own interests he would have no compunction about cutting them adrift. All of this was known to and fully understood by GP, for SL, from past dealings with SH" [71].
The Judge further found that: "Whatever the law might be as to the relationship between a solicitor and client, to which I shall return, in the working relationship between SH and GP SH was unquestionably the dominant party" [72].
SH was appointed as liquidator of Sunbow in July 2005. Creditors were keen that the conduct of the former administrators, Theodolous Papanicola ("TP") and Alan Simon ("AS"), should be investigated, and any losses caused by wrongdoing on their part recovered [15].
As the judge found: "Shortly thereafter SH contacted GP and engaged SL to act in relation to the Sunbow liquidation. To confirm the instruction SL sent SH a retainer letter dated 1 September 2005 and enclosed SL's standard terms of business. The subject matter of the instruction was the liquidation of Sunbow. Although the standard terms provided for the rendering of monthly accounts and payment within 28 days, the letter modified the terms by providing an assurance that, except in relation to out-of-pocket expenses, the terms of business were amended by the letter so that SL would wait for payment of its charges until recovery of any assets in the estate, regardless of source. The letter also raised the possibility of later consideration of funding, insurance and/or a conditional fee agreement. On 5 September 2005 SH signed and returned SL's terms of business on this basis" [16].
By November 2005 SH had instructed SL to prepare an application to challenge TP's and AS's release from liability, which had been granted by an order made on 12 September 2005. There were exchanges between SL and SH in relation to the costs of that application which included GP stating "As discussed on the phone, I am not looking for my own costs at this stage" [17].
In March 2006 applications under s.236 of the Insolvency Act 1986 against the former administrators and the former officers of Sunbow were issued [19]. New files were created by SL for each of these s.236 applications [20].
As the judge stated at [21]: "As new files had been opened, SL sent SH retainer letters with terms of business for each of the s.236 applications. The retainer letters contained the same modifications to the standard terms of business, confirming SL's willingness to wait for payment of its charges, but not out-of-pocket expenses, until recovery of assets in the estate."
SH returned the signed terms of business under cover of a letter dated 27 April 2006 which stated amongst other things as follows:
"I currently hold a negative balance of £2,601.54 in the estate of Sunbow Limited. In the light of this, your fees in this matter can only be paid out of realisations. In the event that there are no realisations I, as Liquidator, will not be in a position to pay your fees, nor will I accept personal liability for those fees. Notwithstanding anything which may be stated in your terms of business, which may have been, or will be, signed by me, your instructions are given on the basis stated here. If you are not willing to act in this matter on this basis, please return to me all papers currently held by you. Should you wish to discuss this matter, please do not hesitate to contact either myself or Linda Golding."
The Judge found that in cross-examination GP acknowledged that he accepted these conditions at the time [23].
This is borne out by GP's response by email of 26 May 2006 which stated that:
"… I am happy to wait for payment of our costs until you make a recovery from any source. I would require disbursements to be paid though. In particular this will mean counsel's fees. Smaller travel related costs we can wait for also. If it is possible to get HMRC to pay as we go that would be preferable. This means I do need to know if you recover assets into the liquidation, at which point we should discuss how our fees will be paid. If at any stage it looks like there will be no recovery, we reserve the right to discontinue acting, including if we are instructed in relation to ongoing litigation."
The 27 April 2006 letter and the 26 May 2006 email reply will be referred to as "the 2006 exchange".
By February 2007 it had become necessary to engage counsel in respect of a proposed misfeasance claim against AS and TP. By the end of May 2007 counsel had formed a view as to the overall merits of these claims and confirmed to GP that he would undertake work on a CFA if SL was also retained on a CFA, to which GP agreed [25–26].
On 3 August 2007 GP wrote to SH to confirm the agreed basis for the main claims against TP and AS and also to confirm that both counsel and SL had agreed to undertake the claim on CFAs. GP explained the perceived risks and sought an uplift of 100 per cent [28].
Both GP and SH considered that there were significant assets against which a recovery could be made [29].
On 29 January 2008 GP wrote to SH enclosing a proposed CFA for SL's services going forward and an insurance proposal form to obtain quotes for litigation insurance. The letter contained an explanation of the risks which justified a 100 per cent uplift and provided an estimate of SL's future costs of the main claim against TP and AS [31].
The Judge summarised the main relevant terms of the CFA as follows at [31]:
"The CFA starts with the statement:
"This agreement is a binding legal contract between you and your solicitor/s. Before you sign please read everything carefully. This agreement must be read in conjunction with the attached schedules 1 and 2."
The CFA itself, which is very short, identifies the parties (SL as the solicitor, SH as the client), what is and is not covered by the agreement, the terms for paying SL, and the success fee (set at 100 per cent). The terms for SH to pay SL are stated as:
"If you win your claim, you pay our basic charges, our disbursements and a success fee. You are entitled to seek recovery from your opponent of part or all of our basic charges, our disbursements, a success fee and insurance premiums as set out in the schedules."
The schedules, which extend to 10 pages and are clearly laid out and easy to...
To continue reading
Request your trial
-
Tinkler v Revenue and Customs Commissioners
...principles have also been considered more recently by the Court of Appeal in Stevensdrake Ltd (t/a Stevensdrake Solicitors) v Hunt [2017] EWCA Civ 1173 (“Stevensdrake”). That case concerned a claim for fees made by a firm of solicitors against a liquidator. The liquidator contended that he ......
-
William Andrew Tinkler v The Commissioners for HM Revenue and Customs
...we have referred above. Those principles have also been considered more recently by the Court of Appeal in Stevensdrake Ltd v Hunt [2017] EWCA Civ 1173 (‘Stevensdrake’). That case concerned a claim for fees made by a firm of solicitors against a liquidator. The liquidator contended that he ......
-
When A CFA Says One Thing And Means Another
...a nutshell In Stevensdrake v Stephen Hunt [2017] EWCA Civ 1173 (31 July 2017) the Court of Appeal considered the application of contractual principles to a Conditional Fee Agreement ("CFA") between a Solicitor and his liquidator The CFA expressly provided that the Solicitor's costs and disb......