The High Court has held that a conditional fee agreement (CFA) was a contentious business agreement (CBA) to which section 61 of the Solicitors Act 1974 (SA 1974) applied. The claim should, accordingly, have been commenced as a Part 8 rather than a Part 7 claim.
Several applications were made in a dispute between the claimant solicitors (Healys) and the defendants about the payment of Healys’ fees under a CFA. This update focuses on the application regarding whether the claim should be a Part 7 or Part 8 claim. It had been commenced as the former.
Kelyn Bacon QC found that the correct interpretation of section 61 was that a CBA does not give rise to a cause of action capable of founding a claim for costs. Rather, a CBA must first be submitted for determination as to whether it is fair and reasonable. Only then can the court enforce the CBA (if found to be fair and reasonable) or (if not) proceed to a costs assessment. Since an application for such a determination is for an order under Part III of the SA 1974, it must be made either under Part 8 (in existing proceedings) or under Part 23 (CPR 67.3(2)).
The judge also found that the CFA was a CBA, as it met the definition for CBAs in section 59(1). A CFA was an agreement as to the solicitor’s remuneration, and where, as here, it set out an hourly rate, the remuneration was set by reference to an hourly rate. It mattered not whether the CFA provided for reduced or no fees in the event of failure.
The judge noted that the Court of Appeal in Hollins v Russell [2003] EWCA Civ 718 had unambiguously confirmed that a CFA was in principle a CBA for the purposes of Part III. He also acknowledged that this does not necessarily mean that every CFA will be a CBA. For example, the Law Society’s model form CFA provides expressly that it is not a CBA.
The judge held that the action should continue as if commenced under Part 8.
The question of whether a CFA is a CBA is a tricky one, and this decision illustrates the importance of knowing which yours is, as a CBA can only be enforced under Part 8.
Case: Healys LLP v Partridge and another [2019] EWHC 2471 (Ch) (23 September 2019) (Kelyn Bacon QC)
