England and Wales High Court (King's Bench Division) Decisions

Neutral Citation Number: [2023] EWHC 875 (KB)

Case No: SC-2021-APP-001272

IN THE HIGH COURT OF JUSTICE

SENIOR COURT COSTS OFFICE

Transferred to the KING’S BENCH DIVISION for hearing only

 

 

Date: 17/04/2023

 

Before :

 

Judge Brown sitting as a Master of the KB

- - - - - - - - - - - - - - - - - - - - -

Between :

 

 

- - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - -

 

Mr. Richard Wilcock (instructed by Clarion Solicitors) for the Claimant

Mr. Imran Benson instructed by  and for the Defendant

 

Hearing dates:13-15 February 2023

Further written submissions: 22 March 2023

Draft circulated: 27 March 2023

Hand down delayed due to limited counsel availability

- - - - - - - - - - - - - - - - - - - - -

Judgment Approved

 

 

Judge Brown :

1. I  am required  to decide whether, in principle, fees are  now payable  to  the Defendant  solicitors by  the Claimants, their former client,  pursuant to two  discounted conditional fee agreements (DCFA/s) following success in the claims to which they relate. It  has arisen  in  an assessment sought by the Claimants  of a statutory or statute bill delivered on or about  9 September 2021 for   fees  and disbursements of £201,480.48 (the fees amount to some £144,000 plus VAT). There are also issues arising on a claim  by the Defendant for damages  (which is pursued in the alternative to the claims made on the bill) [1] and an issue as to whether the fees now sought are subject to a cap.

 

(Although no issues of privilege  arise  between the parties some of the relevant matters occurred in the course of a mediation and are likely to be caught by privilege of a third party, see para. 6 below.  I have, accordingly, omitted certain passages -marked by square brackets- from this judgement  in public, albeit they are set out in the decision in private.)

 

The facts in broad overview

 

2. The First Claimant is a limited company involved  in  the business of purchasing and management of commercial and residential  property. The Second Claimant, Mr  Daniel,  was a director and shareholder of the company.  

 

3. The First Claimant instructed the Defendant to act on its behalf in February 2020 in respect a claim for rent arrears and forfeiture (‘the Rent claim’). It did so on the basis of a DCFA (‘the Rent DFCA’) which provides that a  payment was  be made if  the claim was lost  (‘losing fee’) but at a much reduced amount from that  might otherwise be payable (hence ‘discounted’).  The amount of the losing fee was capped at £10,000, in addition to any disbursements.

 

4. The First Claimant issued  proceedings against various parties (‘the ‘Opponents’)  on 25 February 2020 in the Rent claim. The Opponents counterclaimed asserting   ownership   over a number of properties  held by the Second Claimant,   Mr  Daniel. Further, on 7 May 2020 the Opponents issued  proceedings against the first  Claimant and   Mr.  Daniel, asserting  a  beneficial ownership of the First Claimant (‘the Chancery Proceedings’).

 

5. The separate cases were consolidated on 16 June 2020. Following  consolidation, the Defendant  and the  Claimants agreed  a further DFCA (‘the Chancery DFCA’)  in respect of the Chancery proceedings. The  losing fee  for this DFCA was in   agreed in the sum of £8,000  (inclusive of VAT) in addition to any disbursements.

 

6. A mediation took place  by videolink on 3 March 2021  before a  trial listed  for 12 - 16 April 2021. Counsel  was instructed  on the Claimants’  behalf. In the course of  the  mediation and after an initial exchange of offers,  there were discussions, in particular, between  Mr.  Daniel and Counsel, following which   it was proposed that  an offer be made  to  the Opponents to resolve the disputes on the basis of a number of different proposals (which  it is not necessary for me to recite)  but which included  the proposal that each party bear  their own costs.  Following this proposal, and whilst there is a dispute   as to what was said at this point, it is common ground that Mr. Ijieze,  who is a fee earner of  the Defendant with conduct of the claims, raised the issue of his firms’  fees.  On  the Claimants’  case, as appears  in Mr.  Daniel’s  witness statement, Mr Ijieze said that his firm’s costs  were “in the region of £30-£50,000” and that Mr.  Daniel “presumed” this included disbursements. Mr. Ijieze, in his witness statement, says that he said that “up to that stage” his firm’s costs were “not less than £50,000 plus VAT”.  That factual dispute, as it was initially presented,    concerning  what was said about costs might be understood to have  widened in the course of evidence (and I deal with this below). It appears however to be further common ground (and in any event I so find), that […]. It appears also to be clear, and I so find, that he did so  in circumstances where he conveyed to Mr. Ijieze that the rent arrears (and other such recoveries)  would be used to cover the Claimants’ liability to  the Defendant in costs.

 

7. In the early hours of 4 March  2021, a broad understanding of the way forward appears to have been reached. The deal anticipated was a complex one involving the transfer of property. The Defendant  says that at this point the agreement was subject  to  contract and thus not binding. It was not entirely clear to me whether this was challenged by the Claimant at the hearing. In any event the Opponents in their correspondence  after the  mediation referred to the agreement reached  at mediation as being ‘subject to contact’. Indeed Mr.  Daniel refers in an email of 8 April 2021 to the agreement at mediation as “provisional”.  In any event it appears clear from the documentation and the way the parties appear to have proceeded, indeed the course of further negotiation after the mediation, that neither party considered that the mediation had created a binding agreement. It seems to me   clear that there was indeed no such agreement at the mediation.

 

8. [….]  It also appears that Mr.  Daniel had concerns about proceeding with the  proposed deal and counsel provided further advice on the merits of the claims.   Significantly for these purposes, it was anticipated by the agreement that had been reached at mediation  that the parties would bear their own costs. 

 

9. On 22 March 2021,  the day before a  PTR (rescheduled it would appear because of the continuing negotiations),  a deed of settlement was concluded  in the substantive action. The deed  recognised (inter alia)   the First Claimant’s interest in a number of properties and provided that a substantial sum be payable by way of rent (and, possibly other matters) in the sum of  £170,379.  It  also provided that the parties were to bear their own costs. 

 

10.  A substantial amount of work, it seems to me, had been undertaken after the mediation and before a binding  deal  could be reached. Indeed, there was clearly some prospect that the matter might go to  trial,  and some work continued on the claim and in preparation for the trial.  In this period there were further communications  between the Claimants and the Defendant  as to costs, in particular an email from the Defendant  15 March 2021 stating that their  fees were now “circa £75,000 plus VAT”.     

The issues

 

11. After the deed was finalised, in an email of 8 April 2021,  Mr.  Daniel appears  to have argued that  the  DFCA “[excluded] the event of a mediation settlement” (which he nevertheless described as “the probable and preferred outcome") and contended that in such circumstances  the Claimants were required to pay a “capped fee” only and  I understand that to be a reference to a losing fee. That argument is not now pursued.

 

12. It is clear that the Rent Claim was successful and it was also accepted by Mr. Wilcock  for the Claimants at the hearing  that I should proceed on the basis that  the Chancery claim was also successful [2],  no point had been taken  about this in the Statements of Case. There is also no dispute that disbursements are payable and that sums were  payable in respect of orders for costs made in the course of proceedings (‘interim orders’).  My understanding  is that a sum, which the Defendant has put at  £31,559.70, has effectively been paid in respect of disbursements and fees.

 

13. It is  however now said  by the Claimants that  by the terms of the  DFCAs  any liability to pay charges was limited to basic charges recovered from the Opponents and since the deed did not give rise to any enforceable order as to costs (and in fact had the effect of waiving previous interim orders for costs in the Claimants’ favour which had not yet been assessed or paid) no further fees are payable. Further, and in the alternative, if further fees are payable then by reason of representations made  in the course of the  mediation, those fees  should be capped at £50,000.

 

14. The Defendant  denies both contentions  saying that the Claimants’ first case  is based on a misconstruction of the DFCAs and  that no such objection can  properly be made at this stage to the payment of basic fees (even if the Defendant were wrong in its interpretation as to the proper meaning of the retainers). Although  there were  representations made in the mediation as to costs,  they were not such as could justify any cap. Only if the DCFAs are to be construed as the Claimants contend is a claim is made for compensation by the Defendant (the basis of such a claim being that  the Claimants  were in breach of the terms of the DFCAs).

 

15. At  an earlier hearing, directions were given for the  setting out the parties’ respective cases in Statements of Case. I address the  issues arising in the manner in which  the disputes were  set out in the Statements of Case,  and as  subsequently refined or clarified  at the outset of the hearing. They are  as follows :

 

(1)           Whether on the correct interpretation of the DCFAs, or by virtue of an implied term, the Defendant should be  paid its basic charges for the work done. If not, whether   the Claimants are estopped, by  reason  of  any representation or otherwise, or barred by reason of  any collateral contract or variation of the DFCAs,  from  relying upon   the sub clause which they say prevents the Defendant from seeking its fees (‘basic charges’). 

 

(2)          If the effect of the DCFAs is  that nothing further is payable as basic charges, were the Claimants in breach of their obligation to co-operate to recover basic charges and, if so, what loss is recoverable for this?

 

(3)          Whether the Defendant is estopped from claiming more than £50,000 (including VAT and disbursements)  by way of basic charges in circumstances where it is alleged  that Mr Ijieze had,  at the mediation, estimated  or stated the Defendant’s fees as between £30,000 and £50,000?

 

The relevant terms of the DFCAs

16. The Rent DFCA  provides as follows:

 

Basic Charges      [the Defendant] charges for the legal work carried out in connection with the Claim which [the Defendant] will seek to recover from the Opponent, if the Client wins.

 

Claim                Claim against the Opponent for recovery of rent and forfeiture of  the lease

 

Damages:             Money that is awarded to the Client by a Court decision or that the Opponent agrees to pay the Client in settlement of the Claim.

 

Interim Application

                             An application for an order made in the course of proceedings which usually leads to an interim court hearing as opposed to the final trial.

…

Loss                      The Court dismisses the Claim, without making any award for damages, or the Client withdraws or discontinues the Claim on [the Defendant]’s advice, with no agreement or order for payment of damages in favour of the client.

 

Wins                     The Claim for recovery of rent and forfeiture is finally decided in favour of the Client whether by a Court decision or an agreement to pay the Client’s damages.

17. Under the heading ‘Payment terms’  in section 3 is the following:

3.1 If the Client wins, the Client shall pay [the Defendant]’s basic charges and any disbursements paid by [the Defendant].

3.2 If the Client loses, the Client shall be liable to pay [the Defendant]’s charges to be capped at £10,000.00, plus any disbursement SSL would have paid in the matter, PROVIDED that the Client should make payment in stages as follows:

(a) £5,000.00 before the first hearing; and,

(b) additional £5,000.00 after the first hearing but before the start of trial preparation.

…..

3.6 If the Client succeeds on an interim hearing, then [the Defendant] shall be entitled to payment of their basic charges and disbursements related to that hearing at that point.

3.7 If the Client terminates this agreement before the claim is concluded, the Client shall pay [the Defendant]’s basic charges and disbursements.

18.     Under the heading ‘Basic Charges’  in section 4 the DFCA provides:

 

4.1 Basic charges cover work done from the date of this agreement until this agreement is terminated.

 

4.2 Basic charges are calculated at the rates specified in sub-clause 3 below by reference to the time spent on the matter

 

19.   Under the  heading ‘The Client’s Responsibilities’ in section 6 the DFCA provides:

 

The Client agrees:

6d   to reasonably co-operate with [the Defendant].

 

 

20. Importantly,  for the purpose of the argument, Section 7 provides as follows (my underlining):

 

Recovery of Costs

 

7.1 If the Client wins, the Client and [the Defendant] shall co-operate to recover the basic charges and disbursements from the Opponent either by agreement or in court through assessment proceedings, if the amount of the legal costs is not agreed with the opponent.

 

7.2 In recovering the legal costs from the Opponent, [the Defendant]  may settle the costs with the Opponents without instruction, agreement or approval of the Client, but in such case the Client shall not be liable to pay the difference of [the Defendant]  basic chargeable fees and the amounts of the costs recovered from the Opponent.

 

7.3 For the avoidance of doubt, if the Client wins, the Client is liable to pay:

 

(a) all [the Defendant’s]  disbursements whether or not they are recovered from the Opponent, although full credit will be given for all amounts recovered from the Opponent; and

 

(b) only   [the Defendant’s]  basic charges recovered from the Opponent.

 

7.4 In the event that the Client receives a cheque from the Opponent, which is made payable to the Client, the Client agrees:

 

(a) to pay such cheque into a designated bank account of [the Defendant]  .

(b) to pay [the Defendant]  basic charges, any remaining disbursements and VAT out

of the proceeds of the cheque; and

(c) the balance of any such money shall be paid to the Client.

 

7.5 [the Defendant] shall be entitled to retain for their own benefit any interest that the Opponent pays on the charges.

 

 

21. Section 10 provides as follows (again, my underlining):

Termination

 

10. 1 The Client may terminate this agreement by notice in writing at any time.

 

10.2 [the Defendant] may terminate this agreement by notice in writing to the Client if the Client is in breach of his responsibilities as set out in clause 6 above or for any reasonable ground including change in prospects and merits of the Claim.

 

 10.3 If this agreement is terminated pursuant to sub-clauses 10.1 or 10.2 above, [the Defendant] may by notice in writing to the Client either:

(a) require the Client to pay the basic charges and disbursements forthwith whether or not the Client subsequently wins; or

(b) require the Client to pay the basic charges and disbursements forthwith,

….

10.5   [the Defendant] may terminate this agreement if the Client rejects [the Defendant’s] advice regarding settlement of the Claim. In this event the Client shall pay [the Defendant] basic charges and disbursements forthwith.

 

22. Neither party have suggested that there is any substantial difference between the  Rent  DFCA and the Chancery DFCA  as to  the issues which have arisen, and I have proceeded on this basis.

 

23.  It is subclause 7.3  in particular which the Claimants say prevent the Defendant recovering any further fees and which lies at the heart of  the dispute as to the proper interpretation of the retainers.

Evidence

24. In respect of the  factual disputes arising, I heard oral evidence from three witnesses. 

 

25. In seeking to resolve the differences between the parties (which are relatively narrow)  I have had regard to the  general guidance  that has recently  been given (substantially by way of summary)  by Cotter J in Muyepa v Ministry of Defence [2022] EWHC 2648 at [10] to [22]  and also that set out in   B-M [2021] EWCA Civ 1371 [3]. In B-M Peter Jackson LJ said as follows  (at pp.23-5):

“No judge would consider it proper to reach a conclusion about a witness's credibility based solely on the way that he or she gives evidence, at least in any normal circumstances. The ordinary process of reasoning will draw the judge to consider a number of other matters, such as the consistency of the account with known facts, with previous accounts given by the witness, with other evidence, and with the overall probabilities. However, in a case where the facts are not likely to be primarily found in contemporaneous documents the assessment of credibility can quite properly include the impression made upon the court by the witness, with due allowance being made for the pressures that may arise from the process of giving evidence….”  

26. Ms. Bamigboye, who is  Mr.  Daniel’s  sister in law  is a solicitor  and assisted the Claimant with in house legal advice. She brought was on board by Mr.  Daniel to assist  in this case. She  was plainly  an honest witness. She was not present at the mediation but had had some involvement in the  negotiation of the terms of the DFCA and in respect of costs after the mediation. Some of what she said was reported conversation.  As seems to me to be understandable I do not think that she she had an entirely precise recollection of the detail of the sequence of events   (she and Mr  Daniel seem to have proceeded on the basis that that some fees were payable  until fresh solicitors were instructed in or about later May 2021, although her account might  suggest otherwise).   
27. I consider Mr.  Daniel to have been an unreliable witness.      
28. erious allegations were made by Mr.  Daniel    against  Mr Ijieze   and the Defendant which could not to my mind  be reconciled  with underlying documents and, in my judgment, were unfounded.  It is not necessary to for me to set out all of these matters.  He  complained, for instance, that Ms Bamigboye was brought in to assist as the   Defendant proved to be   insufficiently  resourced  to deal with the claim but it appears he had made the decision to bring her in very much at the  outset of the instructions. I reject also his contention that counsel instructed in the claims fell out with Mr. Ijieze; there  were, it seems, understandable reasons why two of the  barristers could not continue to assist and the third was severely criticised by Mr  Daniel himself.
29. A  similar  point can be made about the allegation by Mr  Daniel that he was not advised of the cost consequence of settlement on  a drop hands basis; he plainly was  (I deal with this matter further below). He  appeared to criticise the Defendant for what he appeared to contend was  inconsistency between the advice  that in principle he could reject the proposals discussed at  mediation and after and proceed to trial, and the advice given recommending settlement; there did not seem to me to be any inconsistency. It is  also plain to me from the documentation that   the allegation that he had been pressurised  into settlement (see para. 18 of the Points of Claim) is unfounded.  Quite apart from anything  else that may be said, a WhatsApp message on 19 March 2021 from  Mr. Ijieze to Mr.    Daniel said as follows:

“Settlement is your choice and ur decision. U can walk away and go to trial if u wish, at least u now have a fair idea of the chances of success and risk in going to trial. It is the wish of ur legal team for you to settle. For me, your decision to settle should be freewill and u shld be happy with any compromise u reach.”

30. There were quite a number of such points.  It seemed to me that the allegations against the Defendant by Mr  Daniel were made casually at times  and in  my judgment  without  proper thought or consideration.   
31. Mr  Daniel’s  account in the course of giving evidence as to what was said about costs in the mediation to my mind differed from what he had said in his witness statement:  in respect of fees he said in evidence that a sum of  £20,000 was said to be payable, which he understood to be a  losing  fee. It seems to me that if this account were true   it would have been set out in his witness statement- indeed I might have expected to see this appearing communications with Ms. Bambigboye reflecting this (when they did not).  Similarly, he asserted in evidence  that  there were telephone conversations  which he suggested  would  corroborate his  account when, again, no mention was made of these  in his witness statement.     

 

32. Serious allegations had been made by the Opponents in the underlying litigation  including an allegation that a lease was a sham. The  proceedings were of   great importance  to  Mr  Daniel, not least for his reputation, and understandably provoked strong emotions.   Plainly he found  the  mediation, and  coming to terms with the effect of the  proposed agreement, difficult and it  provoked strong emotion; at least  some of that emotion appears to me to have  spilled over into his approach  to  this dispute. 

 

33. Mr  Daniel’s    account in evidence was at times put  in  a forceful manner,  but  I was left with the belief   that much  of his account was  opportunistic  and dictated more  by what he perceived to be the exigencies of his case rather than a  genuine attempt to recall what had happened.   I do not think I can rely on his evidence except where he made admissions against his own interest, or his evidence was  supported by  documentary evidence.

 

34. In contrast, I have no hesitation in rejecting what seemed to me an attack on the credibility of Mr. Ijieze. He  had  previously practised as barrister  in Nigeria and  qualified as a solicitor in this jurisdiction  in 2013 and, as I understand it, has been in practice  as a solicitor -advocate since.     I have considered all the points that  Mr. Wilcock  has made about his credibility. I listened closely  to Mr. Ijieze when giving evidence (as I did with all the witnesses). If there was any diffidence in his answers to some of the questions it struck me in the circumstances as understandable;  quite apart from anything else, it was not always clear  what  the relevance of the questions might be.    It also strikes me  as  understandable that, for instance,  Mr. Ijieze was concerned that the Claimants should try and  to get a costs order in their favour  as this  might increase the pool of money from which the Defendant should be paid.

 

35.   Mr. Ijieze had, it seems to me,  an  impressive understanding of the issues in the  underlying litigation. Whilst there is more to be said about the drafting of the DCFAs,   the Claimants’ general  attack on his handling of the claim,  which seemed to me  to be part of an attempt to devalue the  work that was done and lower Mr Ijieze  and the Defendant    in the eyes of the court, was plainly misconceived. It appears that Mr. Ijieze’s   evident  forensic skills were concentrated on doing the best he could for the Claimants; he  plainly sought, to use the vernacular,   to ‘do right’ by Mr.  Daniel.  He offered   him a  discounted  conditional fee agreements without any success fee  when other solicitors might well, I suspect,  have refused to do so - indeed    my impression is that Mr  Daniel was in a state of some desperation or upset when he came to seek help from the Defendant, as Mr. Ijieze put it, ‘pleading’ the Defendant to offer him a CFA. Moreover, the litigation was  plainly  complex and demanding and  it  is  clear that Mr. Ijieze worked  hard on the case, working on Statements of Case long into  the night (when it emerged that counsel could not help out)  and  indeed drafting  witness statements which were complimented by counsel.

 

36. Mr. Ijieze  was, in my judgment,  a reliable witness. As with Ms. Bamigboye, that does not mean he  could not have been mistaken in the detail  of his recollection.   He  was however conscientious in his handling of the claim and in  my judgment  he brought this approach to his evidence.

 

Interpretation of the DCFAs

 

1.1.1   The  different interpretations canvassed

 

37. The Claimants’ case is that subclause 7.3 should properly be read as qualifying the obligation to pay basic charges in clause 3  and that such charges are payable only if there is an order  or provision in the client’s favour in a settlement agreement  expressly providing for the payment of  the client’s basic charges (‘V1’).   

 

38.  Alternatively,   the Defendant is  entitled to be   paid its basic charges if they have in fact been recovered from  the opponent whether or not they are described in any agreement with the opponent as costs (‘V2’): the Defendant solicitors say it is clear that the costs were in fact recovered albeit not expressly as costs in the deed but in the form of rent or other financial payment.

 

39. Alternatively,  subclause 7 (3)  when  read in sequence with subclause 7.1 and 7.2 only applies where a costs  order has been obtained in the underlying claim but not when no costs order has been obtained: on this interpretation there is  no requirement to show that costs have in fact been recovered in the proceedings  in order to demonstrate an entitlement on the part of the solicitors to be paid their basic charges. Read in this way it may or may not  be  that   costs should not exceed the amount that is recovered from the opponent in any money claim.   

 

40. There is, I suppose, a further possibility (‘V4’)  that subclause 7.3 is to be read with  subclause 7 (2) (where solicitors agrees costs without the client’s instructions).  But neither party advanced this interpretation.

 

1.1.2   The law

 

1.1.2.1                The underlying principles

 

41. The principles  are well known. They have recently been  authoritatively  considered by  Lord Hodge in Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173 at [10] and  summarised by Lord Hamblen in Sara v Hossein [2023] UKSC 2,  so   far as was relevant   to the fact of that case,  as follows:

 

(1) The contract must be interpreted objectively by asking  what a reasonable person, with all the background knowledge  which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean. 

 

(2) The court must consider the contract as a whole and, depending on the nature, formality and quality of its drafting, give more or less weight to elements of the wider context in reaching its view as to its objective meaning. 

 

(3) Interpretation is a unitary exercise which involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its implications and consequences are investigated.

 

42. In Wood  Lord   Hodge said that ascertaining the objective meaning of the language which the parties have chosen to express their agreement, is “not a literalist exercise focused solely on a parsing of the wording of the particular clause”. He went on to say,

“Textualism and contextualism are not conflicting  paradigms in a battle for exclusive occupation of the fuelled of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements.

43. As is clear, the correct interpretation of a contract may not therefore  follow the literal reading of each word: see the example  relied upon by Mr Benson for the Defendant in Sara  [21], [57]. As Mr. Benson pointed out, it is not necessary to set out exactly what words are needed in order to the reach the correct meaning  of a contract even though such a meaning may involve substantial departure from the  literal reading: see [Sara 46] and [49-57]).  

 

44. By way of further  illustration or exposition of the approach to be taken, Mr. Benson referred me to the  passage in the speech of Lord Hoffmann in Mannai v Eagle Star  Insurance [1997] WLR 945   in which he said  that it is “ a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words” and example that he give at where an acquaintance might mistakenly (needs clarification) If one meets an acquaintance and he says "And how is Mary?" it may be obvious that he is referring to one's wife, even if she is in fact called Jane. One may even, to avoid embarrassment, answer "Very well, thank you" without drawing attention to his mistake. The message has been unambiguously received and understood.”

 

45. Subject to one point which Mr Wilcock made which I deal with below, I do not think these principles  are seriously in dispute, nor their application to this case. However, in the context of the arguments that have been put by Mr. Wilcock it is  perhaps helpful to have in mind  the following general  observations of  Lord Leggatt  in his  (dissenting) judgement   in Barton v Morris [2023] UKSC 3:

 

126. The idea of freedom of contract is that contractual obligations should be freely chosen. But that does not mean that the choice to be bound by an obligation must be expressly stated. If it did, there would be very little to the law of contract. A principal function of contract law is to provide a framework of rules which apply to contractual relationships unless the parties expressly opt out of them.

 

127. The essential reason why such rules are necessary is, to put the point  colloquially, that life is too short to negotiate contract terms designed to cover every contingency that may occur. Even the most comprehensive and carefully drafted written contract cannot anticipate and provide expressly in advance for every possible contingency. And even where contingencies are foreseeable, commerce would be stultified if time and cost was routinely incurred in discussing and making provision for situations that are not thought likely to happen. 

 

128. Establishing default rules serves to reduce the costs and inconvenience of negotiating terms and also to avoid unfair outcomes in cases where parties, whether through inertia, lack of opportunity or foresight, or deliberate choice, have not negotiated express terms to cover certain significant contingencies. Such default rules are generally optimal when they reflect prevailing social norms and expectations and therefore create rights and obligations which reasonable parties would be likely to agree between themselves. 

 

46. One point of (possible) controversy which is appropriate to address at this  stage is Mr. Wilcock’s argument to the effect, at least as  I had understood it,  that  it was not open to me to  do anything other take anything other than what appears to  be  literal meaning to a conditional fee agreement because such agreements are required to be  in writing; see 58 (3) of the Courts and Legal Services Act 1990. I accept and understand the point that regard  should be given to policy which underlines such a requirement; it is intended to enhance certainty and understanding as to the obligations under the contract. However, to the extent that the argument goes further and requires a different approach from that which applies  in relation to any contract in writing is not supported, as I understand it, by  any authority and I reject it. It  is difficult to see that the principles that apply in  ascertaining the meaning of the words used should depend on whether there is a requirement that a contract be  in writing as opposed to just in fact being in writing  (because the parties considered it appropriate for it to be in writing)  or indeed was oral.  The corollary of this argument is that the court would be required to parse only the literal meaning of words used,  and  a party  would be stuck with a plainly  unworkable agreement where there was a requirement that  agreement be in writing but not otherwise, a matter which  would seem odd and indeed  not sit with  the approach of Lord Leggatt  in Barton.

 

1.1.2.2 Gavin Edmondson Solicitors Ltd v Haven [2018] UKSC 21

 

47. In Edmondson various  claimants  had pursued claims under the RTA protocol.  To  avoid having to pay costs   the insurers sought  to settle their claim directly with  claimants  for damages  in order to avoid having to pay their costs.   The  immediate concern of the  Court was a claim   by the solicitors for the claimants for an  equitable lien for their own fees and disbursements against   damages paid by the insurers. The Court of Appeal had  held   there was no   contractual liability under the   retainer for such costs [4]. Importantly, for these purposes, the retainers were in some respects  similar to those here and included this provision in the client care letters:

 

For the avoidance of any doubt if you win your case I will be able to recover our disbursements, basic costs and the success fee from your opponent. You are responsible for our fees and expenses only to the extent that these are recovered from the losing side.

 

48. The Court of Appeal had found that this was a  term of the retainer and that it override the main body of the CFA which provided that the client  was liable  to pay all basic charges and, further,  that the effect of this term was that if only damages were recovered  no costs were payable. The  Supreme Court disagreed on the question as to the liability created by the CFA. In the leading judgment Lord  Briggs   (with which other members of the court agreed) doubted that  the contents of the  client care letter  had any contractual  effect at all (a point which does not arise in this case). However on the assumption that it did, he held that the effect of it was merely  to limit  the recourse from which the solicitors could satisfy their liability for costs (under the main  agreements with  solicitors)  to the amount of its recoveries from the defendant (i.e. damages).

 

49. At [42]  when referring  to the client care letter, Lord Briggs said this:

 

“I consider that the language of that passage does three things. First, it asserts a right for [the solicitors]  to recover its fees and charges from the defendant. That affirms the equitable lien, since there would otherwise be no basis upon which [the solicitors]  could do so. Secondly it states in clear terms that such a recovery is the means by which [the solicitors]   can give effect to  a continuing responsibility of the client for those fees. Thirdly it limits [the solicitors’]   recourse for the fees to the amount recovered from the defendant.

 

50. Mr Benson argued  that  I was  bound by the determination of the Supreme Court   as to the meaning and effect of the terms of the  retainer  in this  case (albeit that the issue arose in a different context and on an agreement that was structured differently):    subclause 7.3 properly interpreted only limited the recourse of fees to the amount recovered in the same way that the client care letter had in that case.  In any event he contended that  the  reasoning was at least highly persuasive   even if there were,  strictly speaking,  some basis for distinguishing the  facts of that case it was an insufficient basis for not following  the outcome on this issue.

 

1.1.4 Discussion and findings

 

51. Turning first of all to V1, I  agree with Mr. Benson that it is, at the very least, doubtful whether the literal meaning could be as the Claimants say: the DFCAs do  not say in terms that the solicitors  can only be paid basic charges if  they are recovered from the opponent and are expressly  described as basic charges, or indeed costs, in a settlement agreement or order. The words used  in this subclause  are “recovered” from the Opponents. Costs may well  in fact  be recovered in a literal sense in a lump sum payment even if that payment is not expressly labelled as  costs.

 

52. In any event  I agree with Mr. Benson that if V1 were correct, subclause 7.3 would lack  business  efficacy and be unworkable for, to my mind, obvious reasons. 

 

53. It  is plain that claims (particularly perhaps non- personal injury claims) can, and perhaps  commonly, do  settle  without  orders for costs. Parties, particularly  perhaps those whose disputes arise in a commercial context, do not want the bother of having to  pursue costs proceedings with the attendant further costs.   Indeed, as here, there may be interim orders going either way, the working out of which  would give rise to considerable further work and costs.          Moreover, it  may matter little whether the   recovery of a sum of money is by way  of damages, specific  performance of an obligation to pay money or costs; and it is scarcely surprising that parties should  ‘trade off’ costs and financial claims   to  agree   one lump sum payment without having to specify whether any sum payable was by way of costs.  But if V1 were  correct then only if the sums recoverable in a compromise agreement  were specifically described as costs would  the client be liable to its solicitors for their fees; and if  no mention is made of any costs recovery the client would avoid any liability for such fees   (beyond those  interim costs recovered)  even if the claim clearly succeeded. And yet,  curiously,  on this interpretation it would seem that  if the claims were lost there would be at least some liability for the losing fee.

 

54. Further, it is also  plain that  a client may decide not to take the solicitors’ advice as to settlement  (indeed in mediation the parties may talk directly to each other without any involvement of solicitors) At the risk of stating the obvious in general  solicitors cannot dictate  the terms of settlement: the  solicitor merely advises and the client makes the decision. But it  follows that if the Claimant were right the client could simply cut the solicitors out of its fee  by agreeing an order for settlement of the claim which makes no express provision for costs.  Indeed a client could in this process  effectively give up an  existing entitlement to costs under  interim cost orders and agree  to receive the sums due under such orders by way of damages (which is what Mr.  Benson was saying would happen here  if the Claimants were correct) or by way of set off against a costs order in favour of the opposing party. 

 

55. It is not  clear to me that  the solicitors could  in practice do anything  to protect their interests in being paid their basic charges if V1 were correct.  I  had understood that   Mr Wilcock did not resist in his oral submissions at the conclusion of the hearing  the suggestion that there were practical difficulties in doing so. In his later supplementary  submissions (which I had directed should be limited to another different issue) Mr. Willock however developed the  argument    that  if the solicitors  considered  any  settlement agreement  in the underlying claim that did not expressly provide for their costs were in prospect they could  terminate the DFCA and claim their costs on the grounds inter alia  that the client had not reasonably co-operated with  the Defendant or had rejected the solicitor’s advice. Clause 10.2 of the  DFCA, it is said is widely drawn and  entitles the solicitors to terminate an agreement for “any reasonable ground” and,  Clause 10.5 permits the solicitors to terminate when a client rejects the solicitor’s advice.

 

56. I think however that Mr. Benson is right in his argument that the  parties cannot have intended to structure their arrangements in this way.     Mr. Wilcock accepted at the hearing  that at the stage this litigation had reached,  with an imminent   trial,  an attempt to terminate the agreement would be, at the very least,  problematic having regard to the solicitor’s  professional obligations; indeed I thought I had  understood him  to accept at the hearing that they could not realistically terminate the retainers.  In any event the settlement of claims by mediation or otherwise shortly before trial is  plainly not an unusual event. It  followed however that if   V1 were right solicitors would have to  keep  providing services (and possibly also incurring disbursements) if  there were a prospect of a successful settlement but that no fees would be payable, an outcome which struck me as potentially serious for a solicitors’ firm (if not in some cases ruinous  for a small firm) or if termination were possible terminate the retainers and quite possibly leave the client without representation  at trial should settlement not in fact occur. That point illustrates just one of the problems. Indeed it would be difficult to see how any right to terminate  might work in practice in a way  that could adequately protect the solicitor’s interest. Solicitors are not always expected to participate in settlement negotiations and may not know be on notice, or adequate notice, of what a client might be negotiating.   There might be a continuing risk throughout  a claim that the client could negotiate a deal which cut  the solicitors out of costs and thereby defeat  the obvious expectation that  the solicitors get paid their basic charges in the event of success.  In any event in my judgment the termination provisions do not provide  an  appropriate  or practical mechanism  by which the  solicitors can secure their basic charges. 

 

57.  I should add,  although it is not necessary for me to do so and indeed there was no real argument about this, it is, I think, at very least doubtful that  the termination  clauses themselves can be read as Mr Wilcock’s argues. Indeed I have quite a number of concerns about such a case. His interpretation does not appear to sit with the commercial realities:  the ‘trading off’ of one element of a  formal claim against each another (viz. costs/damages)  is part and parcel of mediation (settlement) in a commercial context and the effective prohibition of such an approach  (by a solicitor’s instruction/advice not to do so) does not fit with the expectations of mediation. Moreover if he  were right it would be appear to oblige  a client to act against its interests (and reject an otherwise reasonable settlement offer) in order to preserve the entitlement of the solicitors to be paid their basic charges. It is difficult to see that solicitors could  terminate a CFA for failure to follow advice that might be unreasonable having regard to the client’s interest and yet still be  able claim its fees. Indeed  I would have thought that  refusal to accept advice that a client must negotiate on specific terms such as these is not unreasonable. Added to this are  the possible conflicts (in the legal [5] and non-legal sense) that such a reading of the provisions might promote.  In these circumstances it is not at all clear to me this would be a workable  interpretation of the termination clauses and  indeed it strikes me as highly questionable whether  clause 10.5, if read in the way contended for,  would be enforceable [6] [7].  However in view of the conclusions set above in the previous paragraph it is  not necessary to reach any formal conclusions or for me to invite further submissions on these points.

 

58. As the guidance I have cited above makes clear, when  interpreting an agreement the  quality of the  drafting is relevant. The  original template of the DCFAs appears to have been  drafted for use in a personal injury case (see a requirement   in clause  6 that  a client consent  to  expert examination).  It was Ms. Bambigboye,  who, I understand, suggested some additional   or revised  terms of the DFCA and the original version of the agreements have been adapted  to some extent in discussion with the parties. In these circumstances I  am not satisfied that they are the standard terms of  the solicitors or indeed solicitors in general.  In any event I am satisfied no-one involved in the setting up of these retainers  really or adequately addressed their minds to what would happen if the claim were to  be resolved  at mediation or otherwise settled. Both Mr. Ijieze and Mr  Daniel were no doubt concentrating on the challenges of the litigation.  Further, I am satisfied that had they turned their mind to it,  they would have agreed,  as a matter  that was  obvious, that if settlement had been reached in terms which meant the claims were  a success but  without any express order for costs in the Claimants’ favour nevertheless  the Defendant would have  to  be paid its  basic charges.   Indeed it was  the  Claimant who contended in his email of 8 April 2021 that the  agreement had not catered for the possibility of settlement in mediation.

 

59. No imagination is required to reach this conclusion  because it  seems to me that it was on this  basis that the parties proceeded   in the mediation: no-one appears to have suggested that the Claimants  did not have a liability under the proposed agreement notwithstanding  subclause 7.3 and notwithstanding the  provisional ‘drop hands’ agreement on costs. The absurdity of  V1 is obvious.   If it were right the client might, absent termination (on the Claimants’ case),  simply cut the solicitors out from payment of basic changes; indeed V1 would   lead to the odd conclusion that the solicitors  are liable to be worse off in the  event of success than if the claim were lost. It  is  plainly unworkable as an interpretation even if the solicitors could terminate the retainer when such an agreement which did not include a costs order were in prospect.  

 

60. Mr. Wilcock  appeared to argue at one stage  that I should not  look at  the  commercial considerations because he  suggested, at least as I understood his point,  that this was not a contract made in commercial context. The  DFCAs were, he appeared to contend,  not   commercial contracts and  the commercial consequences are irrelevant. But quite apart  from the fact that the contracts were made in a commercial context his point struck me as proceeding from  a plain misunderstanding  of the guidance which I have set out above:  the need to consider commercial considerations, such as the practical workability, of a contract do not necessarily require both sides to be commercial entities or for a contract to be made in a strictly business context (as I think was his contention).  

 

61. Mr. Wilcock relies on what he says is the  ordinary and natural meaning  of the provisions. This is plainly an important consideration  but as the guidance makes clear contractual interpretation is not a literalist exercise. Even if  I were to  accept that the clear meaning  derived by such  process was as the Claimants contend (which, for the reasons set out above I do not)  and there would have to be  a express  costs order or provisions for liability for basic charges to be payable, that would not be an end to the matter: as it was put, if the parties expressly referred to Mary, they could have meant Jane.  

 

62. The Claimant’s  case essentially is, as I understand it and as it was perhaps put somewhat starkly  by Mr Wilcock, that the Defendant is  “hamstrung” by its own agreement which it had negotiated and that  the court should not, as I understand him to say, save  the solicitors from the consequences of a bad agreement in circumstances where the problem is of their own making. I  took the substance of Mr  Wilcock’s point to be that the  Defendant being solicitors, they should, in effect,  be stuck with  what they had  negotiated; and that they  should have known better than to enter into a contract such as this.

 

63. In Candey v Bosheh [2022] EWCA Civ 1103 the Court of Appeal held that there could   not be implied into a conditional fee agreement an obligation of good faith on the part of a client. Mr Wilcock referred to the passage in the judgment of Coulson  LJ where the learned judge was considering conflicts which might arise  where terms are drafted in a CFA in such a way that the solicitor’s costs recovery is dependent on the client recovering  something in the proceedings ([53]).     In this passage he said that  “such conflicts cannot be resolved by an implied duty owed by the client to consider the solicitor’s natural interests rather than his own; it is for the solicitor to ensure that such conflicts do not arise in the first place.”  Mr. Wilcock relied on this upon this for the proposition that it was for a solicitor to ensure that no conflict arises  on the interpretation of the contract; and having failed to do so, the client’s version should be preferred.  In my view this is  not what the  judge was saying: the important point he was making was that the difficulties created by  conflicts  of the sort he was referring to  (ie where the solicitors costs are dependent on the client recovering something) cannot be resolved by an implied duty of good faith;   the conflicts to which  the learned judge was referring were not disputes as to the meaning of the retainer.  

 

64. Whilst solicitors can,  of course, be  expected to have an understanding of the significance of legal terms that a  layman will not,  and  in general  solicitors  bear  some burden  in ensuring that a retainer is clear (see Gray v Buss Martin [1999] PNLR 882),  I had difficulty seeing how the approach advocated by Mr. Wilcock  could be reconciled with the principles that I am required to apply. There are no  special  principles of interpretation applicable where solicitors are a contracting party. The relevant clauses were not offered by the solicitors as standard clauses; the agreement was negotiated.  Indeed whether or not the  contra proferentum rule applies, I still have to have regard to the relevant principles.  Solicitors may be presumed to have greater knowledge and experience in respect of these types of agreement, but that is just part of the circumstances to which I should have regard. In this case the Claimants  had the benefit of assistance from Ms Bambigboye who had legal  training and experience  (albeit I think in a different area of law) and in any event Mr.  Daniel was himself an experienced businessman.

 

65. I acknowledge that  the suggestion that  something may have gone wrong with the wording of a funding arrangement  is a substantial matter requiring  a  close consideration. But in circumstances where the   parties  and solicitors are doing their utmost in  difficult and demanding circumstances it strikes me as possible that even solicitors can, when considering their funding arrangements, fail to cater for every eventuality.

 

66. Mr Wilcock  said that  that subclause 7.3 had been  drawn   from   section  3 dealing with payment  terms. He also said that the original drafting of the agreement included  a clause that made  clear (for the avoidance of doubt) that the Claimants would be liable to the solicitors for any shortfall in a costs recovery from the Opponents (removal, as I understood his case, indicating  that the parties must have intended that there is no such liability). Both matters were said  to support his case as to the way in which the retainers were to be interpreted. Quite apart from any evidential difficulties associated with these assertions,   at least one of the further  difficulties is that  I am required   to disregard   pre-contractual  negotiations when considering the meaning of a contract (see inter alia Wood, [10]; see too the Entire Agreement clause in retainers).  Moreover I  am not sure that it necessarily helps the Claimants where the  subclause  may have been in circumstances where the parties have chosen to locate the term under the heading ‘Recovery of Costs’ (my underlining).

 

67. Nor do I accept Mr. Wilcock’s argument that  the Defendant solicitors must have understood that subclause 7.3 would have precluded the payment of basic charges if no costs order or costs recovery was provided for in the settlement (and this is why they insisted, it is said, that the Claimant only settle on terms that the opponent pay costs). I deal with this matter further below in a different contact, but whatever concerns Mr. Ijieze and the Defendant may have had as to the terms of the agreement cannot determine the proper meaning of the contract. Indeed it made sense  (even if V1 were acknowledged as incorrect) that the Claimants should press for and obtain a costs order in their favour and that they should be encouraged to do so.

 

68. Mr. Wilcock  also relied  on a comment  apparently  by Mr. Ijieze   in a Word ‘Comment’ box  alongside clause 10.3 of the revised Chancery DCFA. This clause provides for payment of basic charges in the event of termination (by the client, on notice, see subclause 10.1) and the comment next it was  that this clause,  ie 10.3,  was “protecting ourselves against unreasonable termination”.    It  was not clear to me  how this might have shown that the Defendant foresaw, prior to entering into the CFA, that the Claimants would seek to avoid paying  fees if there were no termination and that clause 10  (generally) protects against this (as Mr. Wilcock contended). The obvious intention of subclause 10.3 is to anticipate a situation  where the client seeks to terminate on notice; it provides  protection to the solicitors by providing for payment of their basic charges:  the client might otherwise terminate and thereby escape liability for paying basic charges by the termination. It seems to me obvious why the Defendant would not accede to the request on behalf of the Claimants  to limit the costs in 10.3  to a losing fee and it is this request which prompted the comment relied upon.  This view of the comment does not assist the Claimants. I do not think in any event that this  point assists the Claimants, not least because I am not entitled to have regard to pre-contractual negotiations;  nor would it outweigh the concerns that I have raised as to the commercial consequences of the relevant clauses if the comment were read in the way that  the Claimants contend.  

 

69. Turning then to V2,  the difficulty  with this interpretation, to my mind,  is that it  appears to require an enquiry  of some forensic  difficulty  into what has in fact  been recovered  by way of costs, however  it might be described. This is particularly so where  the parties might not have turned their minds to any issue as to how a lump sum payment may be made up. Indeed there may also be difficulties associated with the such interpretation particularly where the claim/defence is in respect of  for non-money relief so that no money is to be paid over.   

 

70. V3 is, to my mind,  consistent with the analysis in Edmondson. It seems to me that the Supreme Court’s analysis of the function and effect of the provisions in the client care  letter in the case support the conclusion that  subclause 7.3 should relate to the recovery of costs where a  costs order is made and cannot, as the terms of the client care letter could  not in Edmondson,  be used as means of ‘cutting out’ the solicitors from payment; an interpretation of a unding arrangement which permitted the client  to  do so was rejected. I have fully in mind Mr. Wilcock’s point that there is a difference between the facts of that case and this case. The wording of the main CFA was different (it expressly  provided that the amount of costs was not limited to damages) and in this case, unlike   that case,  the clause creating that liability of for costs (section 3)  and subclause 7.3, which  Mr Wilcock says, limits the quantum of costs are in the same document (the DCFA). It does not matter however that I might not be strictly  bound by this decision;  it is plain to me that the reasoning does however assist in the proper interpretation of the retainers with which I am concerned.  

 

71. It strikes me  as significant  in considering the facts of this case that sub clause 7.3 is  in a section dealing with the recovery of costs in and not the liability for basic charges. It is also, I think, notable, and as I pointed out in the course of the argument, that subclause 7.3 is  to be read in sequence with subclauses  7.1 and 7.2   which both proceed on the assumption  that a costs order has been  made in the client’s favour and deal with the situation that arises when a claim is made against the Opponent (inter partes)  for  costs pursuant to such an order.  Further, the term ‘Basic Charges’ does not state expressly    that a costs order is required in order  for there to be a ‘win’ (albeit it refers the solicitors “seeking” to recover costs in the event of a ‘win’) nor does the definition of ‘win’.  

 

72. Considering   subclause 7.3 in this context and noting that there is no express requirement for a costs order  to be made in order to trigger a liability for basic charges, either  within section 3 which sets out the primary obligations as to   payment, or indeed in the definition of ‘win’ where  it  might be expected to be seen  (if it were to have the effect contended for by the Claimants)    it  seems to me that subclause 7.3 should be read as applying  where  a costs order had been  made and  to the extent that a costs order is made,  so that in these circumstances the clause only limits the quantum of costs such that the solicitor/client cost liability mirrors the inter partes costs recovery,  but not when no order at all  has been made.   

 

73. The Claimants’  interpretation, were it to be correct, would in effect re-define the term ‘win’ and is to be weighed against the  commercial considerations I have set out above.

 

74. Mr. Wilcock argued   that the  problem with all the interpretations save V1  was that they expose the client  to a claim for costs which might equal (or, I suppose, exceed)   the sums recovered by way of damages or otherwise. But in circumstances where a claim has been ‘won’   it might ordinarily be  assumed that  a party could agree a costs order in their favour. If instead the client choses to receive a financial payment in another form that party cannot be  surprised that the solicitor should maintain its claim for costs whether strictly out of that sum or up to the limit of that sum or  indeed otherwise. That the  client  could not simply cut the solicitor out of their costs was material to the approach of the Supreme Court in Edmundson; moreover the concern that Mr. Wilcock raised  did not deter the Court in that case  from  reaching a conclusion which might have the effect on the claimants that all their damages be used to pay of costs.     The client can scarcely be ignorant of his liability to his solicitor for basic charges and it seems to me to be entirely natural  that when entering into a ‘drop hands’  costs agreement there should be a  discussion about the  client’s liability to solicitors in advance  of entry into a settlement agreement (as the Defendant proposed here). In short the client can be expected to consider, and perhaps address, this matter before a final agreement with opponent.

 

75. I agree with Mr. Benson that reference to terminology  such as ‘CFA Lite’    is not helpful: the  term ‘lite’   implying perhaps that   solicitor’s liability  to pay  legal representative’s fees and expenses only to the extent that sums are recovered in respect of the relevant proceedings, whether by way of costs or otherwise.   Indeed neither side, at least initially, relied upon such an approach.  The meaning of words  used in  a contract  are ascertained by using the principles set out above against the  background knowledge  which would reasonably have been available to the parties, not just one side which is relevant; and it is not clear to me that any such terminology could properly be deployed  by Mr. Wilcock in support of the Claimant’s interpretation.

 

76.  The reasoning  in Edmondson  might also suggest that a restriction on the amount of basic charges payable to the financial sums recovered should apply here.  However it does not, as I understand it, appear to matter whether there is such a restriction in this case as it is common ground the further fees sought do not exceed the financial recovery and in absence of detailed argument on this point I do not think I should do so.  I have some difficulty seeing how a financial restrictions could apply in a case in which   financial relief (which is perhaps the case in the  DFCA or indeed that such would be inferred on the fact of this case (cf Edmondson).  If it were to matter I could however address it.

 

77.  It does not matter for current purposes whether it is V3 that applies or V4: on either interpretation   the Defendant is entitled to be paid  its reasonable basic charges. The only effective   difference between V3 and V4 would   arise in a situation where   a costs order has been made in the clients’ favour - which is not the situation here. As  I indicate above neither parties contend for V4 and I  was (understandably) not  addressed  in any detail on it by Mr. Benson. The fact that the obligations or provisions in subclauses 7.3 and 7.2 were set out in separate clause would appear to weigh  against this interpretation which reads  7.3 as complimentary to 7.2 (indeed on Mr. Wilcock’s argument V4  would make 7.3 otiose).

 

78. I  should perhaps also say that at the end of his submissions and without having raised the point either in the Statement of Case or in  the skeleton argument  (he was then relying upon) Mr Wilcock  suggested  that if V1 were not correct then there would  an unenforceable   contract for a   share of  the  ‘spoils’ of the litigation, in effect an unlawful contingency fee agreement (see Chitty  18-098  and 18-099).  Not only was it too late to raise such a point in this preliminary issue hearing  the point seemed to me to me, in any event, to  be   misconceived. By  V2 or V3  the parties are contracting for payment of   solicitors’ base fees   on a conditional basis but not for  a share of  any damages.  An arrangement whereby costs are in effect paid out  of damages (something obviously quite different for a contingency fee agreement) is entirely common place, particularly after the LASPO reforms (which ended the recovery of additional liabilities  from defendants  in most litigation). In any event not only does V3 not necessarily contain the restriction that basic changes could not exceed damages but  there could nothing objectionable about that if it were the case. Not only did such a restriction not seem to trouble the Supreme Court in Edmondson  such restrictions are entirely common place in  CFA’s, indeed  the Conditional Fee Agreements Order 2013 restricted the payment of success fees by reference to damages recovered.  

 

79. It appeared at one stage to be common ground that nobody would have entered into the contract knowing  that it  had the meaning set out V1.   Even Mr Wilcock, as I recall  from his written submissions,  appeared at one stage to accept  that it  would be absurd for  the solicitors to have done so.  His arguments in his supplementary submissions appear to have evolved somewhat since then. I have considered all his arguments, even if I have not expressly referred to them. I am not persuaded by any of them. Even if there might be  refinements as between say   V3 and V4 the agreement must have  been that where an agreement is reached through  mediation  which gives rise to a win, basic charges are payable. Applying a unitary and  iterative process, it seems to me, be clear for the reasons that I have set out above that V3 is the correct reading and that the Defendant is entitled to be paid its basic charges.   

 

80. It seems to me that the Claimants would have  succeeded only if they are correct about V1. It was contended   as I understand it, that  the sums recovered (essentially by way of  rent arrears)  would in fact be used to  pay  debts other that those by way of costs, and such a recovery  could  not  be treated as recovery of costs   (indeed as Mr. Wilcock pointed out clause 3.26 (a) of the deed which obliges the First  Claimant  to discharge sums due pursuant to a mortgage). In the event it is not necessary for me to decide this as I do not consider V2 to be correct. However it seems to  me clear from the conduct of   Mr   Daniel  at mediation and from what happened afterwards that the sums recovered were, in the contemplation of both parties and   mutually understand the other  to understand, to   be used to pay  the Defendant’s costs and if I were necessary to do so I should find that the basis charges sought have been recovered. 

 

1.2         Implication of a term

 

81.  In  Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, [2016] AC 742, the Court distinguished the process of interpreting a  contact   from the process of implication,   and   if I wrong in my conclusions above it would be necessary to consider whether a terms should be implied to the same effect.   

 

1.2.2. Principles to apply

 

82. In Candey v Bosheh [2022]  EWCA Civ 1103 Coulson LJ formulated  the applicable principles in this way:

 

(a)          The term must be reasonable and equitable; and  

 

(b)          The term must be necessary to give business efficacy to the contract (in other words, does the contract lack commercial or practical coherence without the term?); or

 

(c)          The term must be so obvious that it 'went without saying'; in other words, if pointed out to the parties that it was  missing, they would say "of course, so and so will happen; we did not trouble to say that; it is too clear": see Reigate v Union Manufacturing Co. (Ramsbottom) Limited [1918] 1 KB 592 at 605 ; and

 

(d)          The term must be capable of clear expression and be formulated with sufficient precision: see Shell UK Limited v Lostock Garage Limited [1976] 1 WLR 1187 at 1204; and

 

(e)  The term must not be inconsistent with, much less contradict, an express term: see Marks and Spencer PLC v BNP

 

83. It is plain  there are no special rules  in respect of agreement  which must be in writing (not least because Candey in which the above principle were set out involved an issue as to whether    terms could be implied into a conditional fee agreement and no mention is made of such a qualification).  Subject to this point there is  no dispute about these principles and no      dispute of course that there can be any implied duty of good faith on the part of the client.  

 

Discussion and findings

 

84. I think the requirements set out  above are satisfied.  If I were wrong to interpret the retainers as I have, I would have reached the conclusion  that such a term to the same effect  as V3 is implicit in the  DFCAs.

 

85. Such  a term would be reasonable and equitable and  it would avoid the absurd and  unfair consequences of V1. It is  to my  mind an entirely safe assumption that  such a term would have been agreed had the issue been raised before the contact was  finalised and, moreover, that it is so obvious that it 'went without saying' that sub clause 7.3 was to be read as consistent with basic changes being  payable in the event of a ‘win’ and  that this subclause applied only if and to the extent that an order or provision for costs  is made in the client’s favour. It would  be necessary   to give business efficacy to the retainers and plainly in my view  capable of clear expression and be formulated with sufficient precision.

 

86.   Mr  Wilcock  argued that such a term  would be  inconsistent with and contrary to the  express  terms of the contract.    In Barton the Court  was concerned with the terms of a contract between the seller of a property  and the introducer of  a purchaser of the  property; the introducer would receive a payment of £1.2m if the property were bought for £6.5million. It was held that  introducer’s fee  substantially exceeded reasonable remuneration for the  work to be done and the Court, by a  majority,   declined to read in  a requirement to pay a fee when the property was sold for less than £6.5m.   

 

87.  Lady  Justice Rose (who gave the leading judgment)  said  that: “…, an agreement whereby someone contracts for a higher than normal payment on the fulfilment of a condition and is prepared to take the commensurate risk of getting nothing if the condition is not fulfilled is not a bizarre or uncommercial contract.“ 

 

88. She went on  to say  at [37]:

 

 “What would be strange, in my judgment, would be for  [the seller of the property] to agree to what would become a one-way bet for [the introducer]; that he should receive a fee of almost three times the reasonable fee if the sale price were £6.5 million or more and still receive the full reasonable fee of £435,000 if the sale price were something less than that. I do not see what benefit there would be for them in concluding such an agreement.”

 

89. It is in this context  that a finding was made that the implied term proposed would be inconsistent with express terms of the contract. However that situation is to be contrasted with the situation here where more natural understanding of the contract as a whole is that the solicitors would get paid if the claims succeeded. A clause cannot I think be said to be  inconsistent and/or contradict the express terms merely because if  without it there would be no such term:  it is obvious that will always be the case where a terms has to be implied.  In my view the a term to the effect of V3 would not be contrary to the express terms of the contract but arise by implication from them.

 

1.3  Estoppel,  variation, collateral contract.

 

90. I do not consider I need to deal with these issues either.  However in case I am wrong about  the above, I should perhaps state my view, at least on the issue of estoppel by convention. I assume for  this purpose that V1 is the correct interpretation, that no terms can be implied to the effect set out above, and that  subclause 7.3 is a  bar to any entitlement for any further fees by the terms of the retainers.  

 

1.3.2 The law

 

91. The essential requirements for an estoppel by convention are not in dispute. They were set out by  Akenhead J in Mears Limited v Shoreline  [2015] EWHC 1396 (TCC)  as follows:

(a)  An estoppel by convention can arise when parties to a contract act on an assumed state of facts or law. A concluded agreement is not required but a concluded agreement can be a “convention”.

 

(b)  The assumption must be shared by them or at least it must be an assumption made by one party and acquiesced in by the other. The assumption must be communicated between the parties in question.

 

(c)  At least the party claiming the benefit of the convention must have relied upon the common assumption, albeit it will almost invariably the case that both parties will have relied upon it. There is nothing prescriptive in the use of “reliance” in this context: acting upon or being influenced by would do equally well.

 

(d)  A key element of an effective estoppel by convention will be unconscionability or unjustness on the part of the person said to be estopped to assert the true legal or factual position. I am not convinced that “detrimental reliance” represents an exhaustive or limiting requirement of estoppel by convention although it will almost invariably be the case that where  there is detrimental reliance by the party claiming the benefit of the convention it will be unconscionable and unjust on the other party to seek to go behind the convention. In my view, it is enough that the party claiming benefit of the convention has been materially influenced by the convention; in that context, Goff J at first instance in the Texas Bank case described that this is what is needed and Lord Denning talks in these terms.

 

(e)  Whilst estoppel cannot be used as a sword as opposed to a shield, analysis is required to ascertain whether it is being used as a sword. In this context, the position of the party claiming the benefit of the estoppel as claimant or indeed as defendant is not determinative or does not even raise some sort of presumption one way or the other. While a party cannot in terms found a cause of action on an estoppel, it may, as a result of being able to rely on an estoppel, succeed on a cause of action on which, without being able to rely on the estoppel, it would necessarily have failed.

 

(f)  The estoppel by convention can come to an end and will not apply to future dealings once the common assumption is revealed to be erroneous.

 

92. In Tinkler v Revenue and Customs Commissioners [2021] UKSC 39 at [49-50]  Lord Burrows (with whom the other Justices agreed) cited with approval the following passage of Briggs J (as he then was)  in Revenue and Customs Commissioners v Benchdollar Ltd  [2009] EWHC 1310 (Ch); [2010] 1 All ER 174:

 

“(i) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly shared between them.

 

(ii) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it.

 

(iii) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter.

 

(iv) That reliance must have occurred in connection with some subsequent mutual dealing between the parties.

 

(v) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.”

 

93. As appears from Tinkler (and  Chitty, 6-116), however, in respect of  the requirement at (i) in Benchdollar, “something must be shown to have ‘crossed the line’ sufficient to manifest an assent to the assumption” and this  principle  set out in Benchdollar are to be read subject to this further requirement.

 

Discussion and findings

 

94. It seems to me to clear that  the parties proceeded on the  assumption that subclause 7.3 could not be relied upon to deny the Defendant solicitors their basic charges. It was  because of such assumption, and consistent with such an assumption, that Mr.  Daniel reacted as  I have described above (see in particular, [6] above) [….].  

 

95. It seems to me that there are further  matters confirming such a common assumption.  As I have noted above  on 15 March 2021 (and before the deed was entered into)  Mr Ijieze emailed Mr  Daniel about costs saying in terms,

As earlier advised, [the Defendants’] costs to date are circa £75,000.00

[Counsel’s]  costs are estimated at £8,000.00

 

I reiterate my advice to you to try to compromise the Sky and Joss' costs first, since the settlement terms would include a term for parties to bear their own costs.

 

96. Mr.  Daniel replied at 17.49 to say:

Thanks for your email, contents of which are duly noted. In particular, I note that these are fee estimates and subject to negotiation once itemised.

 

As discussed, the estimates for [the Defendants’] fees are significantly higher than expected. As agreed, the matter of costs is an important consideration in reaching a settlement but should not distract from the matters at hand, as they only become an issue if settlement is reached which is far from certain.

 

Once it is clear that settlement is a real prospect, I agree that the next step will be to speak with [counsel]  and [you/the Defendant]   about a compromise payment to reflect where things stand and are likely to end up. 

 

97. This prompted Mr. Ijieze to email back at 19.02 the following:

 

The contents of your email below are noted. However, we disagree with your assertion that:

 

"As discussed, the estimates for [the Defendants’] fees are significantly higher than expected".

 

The assertion is not correct. It ignores the complexity of the case and the time we spent on the case for over 13 months. You know from the costs budget and the order of HHJ Gerald dated 30 October 2020 that [the Defendants’] approved budgeted costs to trial are circa £90,000.00 Plus VAT.

 

About three quarter of the expected works have been carried out to date. Compared to the costs of the others lawyers in the case, our costs are reasonable and proportionate.

 

Of course, we are happy to discuss our costs with you. Please be advised that our stated estimated fee of £75,000.00 is Plus VAT.

 

 

98. On 17 March there was a further email from Mr. Randhawa,  director of the \defendant solicitors,  to Mr.  Daniel  in which  he said  as follows:

 

Further to our telephone conversation, yesterday and today, regarding our professional fees and disbursements payable by you, in the event of the settlement of the matter pursuant to mediation whereby you agreed for parties to bear their own costs.

 

I note your wish to defer discussion on this subject to a later stage. However, for the avoidance of any doubt, I would like to notify you that in the event of the settlement reached with the provision for parties to bear their own costs, you shall be liable to pay our fees in addition to the disbursements. Our fees will be assessed by the Court, if not agreed between you and us, though we do not wish this to be the case.

 

We have informed you that our fees incurred (on standard basis) thus far are in the region of £75,000 plus vat. We have also notified you that the Counsel's fees are additional and fall in the region of £8,000.

 

It is important that you keep these figures in your mind before making a final decision on the settlement with the provision for parties to bear their own costs.

 

 

99.    If Mr  Daniel believed that the Claimants did not have a liability to pay their solicitors’ basic charges I think he would have said so in the communications that I have seen with the Defendant.  It might also be said that  it would have clearly set out in the email communications with Ms. Bambigboye which have been produced.

 

100. I accept Mr. Ijieze’s evidence on this point. Mr. Ijieze understood, and in my judgment reasonably so, that subject to any  objections as to quantum the Claimants would pay basic charges and that they also understood that they were  to pay the basic charges, accepting their liability to do so.   That understanding and assumption is perhaps also consistent with and  necessary to the explain an  earlier WhatsApp message on 4 March (referring to obligations to pay inter alia solicitor’s costs). Moreover, when it appeared that a substantial sum would  be payable by way of rent arrears (and the evidence suggests that this was after the  mediation) Mr.  Daniel cannot  have been  in any doubt that that the Rent claim at least  had succeeded.

 

101. Mr Wilcock says that there was no such assumption  because prior to the mediation  Mr.  Ijieze spent some time making clear that  settlement should be pursued on  the basis that a cost order is made in the Claimants’ favour and that  he must have must have understood that without a costs order  the Defendant would not have been able to seek payment of its basic charges.   I do not accept that this was the case.  Even if  Mr Ijieze  had  doubts about how the retainer might be read there was here an assumption or  ‘convention’ that the basic charge  would be payable. To my mind, Mr. Ijieze was clearly assured by the stance taken by Mr.  Daniel. Indeed as  appears to be common ground, if read  it in the way the Claimants says the contract would have  absurd effects;  it does not take much to proceed on the basis that V1 cannot be correct. In any event Mr. Ijieze  proceeded on an understandable assumption that it was not the way the  retainers were to be read and he considered that he had a legitimate claim to basic charges   even if  there were  no express costs provision in the Claimant’s favour in the  proposed agreement with the Opponent. The  communications by conduct or otherwise  plainly ‘crossed the line’  and conveyed to Mr. Ijieze and the Defendant an understanding that the Claimants expected the Defendant to rely upon  when undertaking further work.    Had Mr.  Daniel thought that no basic charges were payable he would have said so.

 

102. Mr. Ijieze said that he would have terminated the DCFA had  that the Claimants said that  would not pay basis charges in the event of a win.   That seems scarcely surprising; why should he continue to work  if the Defendant was not going to be paid?  He did not need  to threaten any such course of action  because both he and the Defendant understood that the Claimants would pay  the  basic charges and, more particularly, Mr Ijieze understood that the Claimant had such understanding from the communications and conduct, including Mr.  Daniel’s failure to say otherwise.

 

103. I have had no hesitation in rejecting the account of Mr.  Daniel as to the discussions at mediation, in particular his evidence that the fees mentioned were  £20,000 (leaving I think disbursements of £30,000) and that he understood that such fees were payable as a losing fee.   I also did not believe and did not accept his  evidence to the effect that there were telephone calls or other such communications to that effect.   Quite apart from the reasons which I have already set out for reaching this conclusion I agree with  Mr Benson, that this evidence is  difficult to reconcile with the   contemporaneous expressions of gratitude  (which can be seen  in  the WhatsApp exchanges).

 

104. Nor do I accept that the assertions made after the deed was entered into really help. Particular reliance is placed by the Claimant on the email of 8 April.  In the email, as I have set out above, Mr.  Daniel appears to contend that the recovery of sum   fell into a special category   that  were not covered by the DFCA- and that only   a losing fee was payable.  At that stage the Claimants had achieved resolution in the litigation and no longer needed the Defendant to assist with the litigation. In the course of the mediation the Defendant’s assistance was still required and I think it is clear  there would have been  no discussion of  a losing fee only.       

 

105.  On the basis of V2 or V3 there was no need for the Defendant to terminate the agreement  in order to get paid.  But on the assumption that V1 is correct and, further, there were  a right  to terminate for failure to seek settlement which provides a costs recovery (which I, at the very least, doubt) then there would appear to  be detriment in a forbearance  from  any step seeking  to terminate the DFCAs. To my mind such  considerations tend to show  that V1 cannot be correct (to permit termination in the circumstances might be said be unworkable) but I emphasise that I have assumed against myself on that point.

 

106.  In any event the   guidance I have cited   above suggests that there  is no need for specific reliance giving rise to a known and defined detriment and there can be reliance in a more general sense;  the requirement is satisfied where benefit is  conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position. I have no doubt that  Mr Ijieze  and the Defendant  relied upon the communications that the basic charges were in principle to be paid and that  the Defendant continued working on the claim and thereby conferred a substantial benefit on the Claimants. Had the Claimant said or otherwise communicated, that no further fees would have been paid, it is difficult to see that they would not have been worse off.

 

107. I also consider that it would be unconscionable to allow the Claimants to rely upon  subclause 7.3 as defeating  the claim for basic charges. Mr. Wilcock did not accept this. It seems to me clear the conduct of the Claimants   led Mr. Ijieze to believe that he would  be paid for the  work he did and that Claimant has taken considerable benefit for the work done in respect of claims (which carried a significant risk). The test of unconscionability  is plainly  an objective test, not one determined by the conscience of the party attacking the estoppel.  By an objective standard  I have no doubt that to allow the Claimant to rely upon the subclause in this way  would be unconscionable.

 

108. It seems also seem clear that the  estoppel  is not being used a ‘sword’ but  a shield against the assertion that the Claimants can rely upon subclause  7.3  construed in accordance with V1.  The claim for  basic charges may succeed because of the estoppel but that does not, in my view, mean that the estoppel is itself creating a cause of action for basic charges; that cause of action arises from the DCFAs.

 

109. In short I would accept that the Claimants are estopped on this basis. It is not necessary I think to consider whether the Claimants’ conduct could amount to an estoppel by representation, whether there  may have been a collateral  contract  or variation, or whether the same might be defeated by the requirement that  a conditional fee agreement be in writing.

 

2.             Breach of term of co-operation

 

110. In view  of my findings set out above it is not  necessary for me to address this issue either (as it was a point pursued in the alternative to the Defendant’s case on the points I have already addressed) but some   consideration of  this aspect of the dispute,  to my mind, might  supports my conclusion  as to the proper meaning of the contract.

 

111.   In the absence of any implied of  duty falling on the  Claimants   of good faith it is difficult to see how there  can have been a  failure to co-operate their part. There can it seems   be  no general  obligation  on a client to reach an agreement with an opponent  that secures payment of a solicitor’s fees or costs. Indeed it is difficult to see that there can be  failure reasonably  to co-operate of solicitors  asking the client to do something  which was  may not be in their best interests.  I have not been taken through the  Rent claims or Chancery claims in any detail but it is clear that there were risks with then, as Mr. Ijieze explained and as it clear from the documentation I have read. As far as I can tell however the course taken was in accordance with the advice which the Claimants received,  not least from  counsel.   The costs orders and the potential for a costs order in the Claimants’ favour was I would  infer  part of ‘the mix’ when considering a deal and appears may well have led to the Opponents conceding a substantial amount in respect of rent arrears. 

 

112. In such circumstances I would be bound to reject the Defendant’s case on this point.  

 

3. Cap on fees/costs of £50,000 by an estoppel  

 

113.  The parties disagree as to the nature and effect of representations made as to the defendant’s fees and disbursements   in the course of the mediation and as to whether there was any material reliance upon them. 

 

3.1  The law

 

114. It is not, I think, necessary for  me to set  out the relevant principles in any detail in order to deal with this. It is plain that in order for an estoppel to arise:

 (1) there must be a promise or an assurance or representation (in the nature of a promise) which is intended to affect the legal relationship between the parties  and which indicates that the promisor will not insist on their strict legal rights  (Chitty 6-098);      

(2)   the representation must be clear or unequivocal (Chitty 6-099); and

(3)  it must also be  “inequitable” for the promisor to go back on the promise;  the promisee must have acted in reliance on the promise  so that they can no longer be restored to the position in which they were before they took such action; if  the promisee can be restored to that position, it will not be inequitable for the promisor to go back on the promise. (Chitty 6-103)

 

Discussion and findings

 

115.  I think it is clear that if  solicitors  had represented that  its fees  were no more than a  particular figure and in reliance  upon that representation  a client were to have entered into an agreement with opponents in litigation on a ‘drop hands’ basis,  or one which did not provide for costs in their favour,   this could amount to an estoppel preventing the solicitors from claiming  a sum in excess of that which they had  said  was payable. The client may be taken to have acted to their detriment by relying upon the representation and agreeing to payment of a particular sum by the opponent, making it  inequitable for the solicitors to claim any higher sum.  That was not however the case here.  

 

116. I did not have the benefit of any attendance note on this issue.  There  had  however been a very significant  amount of correspondence as to the Defendant’s  fees and disbursements  prior to and in the run up to the mediation.  In a letter  sent on 2 March, the day before the mediation, Mr. Ijieze   wrote to the  Opponents about unrecovered interim costs which   alone were over £33,000 plus VAT (over £40,000 inclusive of VAT; Mr.  Daniel was provided with a copy of  this letter on the same date. He was informed of   other costs including counsel’s fees (which for the mediation  alone were £5,000 plus VAT) and would have been aware that other work had been done  by the solicitors  progressing the litigation  and   in preparation for the mediation.   The consolidated claims had been  costs  budgeted and   the costs  budgets  were sent  to Mr.  Daniel on 10 October 2021. Having provided Mr.  Daniel with such information he would have understood that a substantial amount of costs was payable by the Claimants. It was perhaps  important to remind him of the Claimants’ liability to pay costs before entering into any binding agreement but Mr. Ijieze  was, it strikes me, likely to have proceeded on the assumption that Mr. Daniel had a pretty good idea of the amount of costs involved and any reference to a figure  was likely to have been in passing.   Against this background and in circumstances   where  the primary focus was on a complex negotiation  with the Opponents involving a number of different elements  with a number different matters being discussed in different  online rooms, it is to my mind   understandable that any such figure was not written down. Moreover to my mind it is  inherently  unlikely that Mr. Ijieze  would  have thought costs were limited to  £50,000  and, to my mind, unlikely that he would have made any such representation.

 

117. When the issue of the defendant’s costs was raised in the mediation by Mr. Ijieze, he was not offering an estimate of the costs which was to be relied upon. The discussion appears to have taken place at relatively early stage of the  negotiations. It seems to me clear that that any representation as to costs or the fees of solicitors made in the mediation  could  in any event only have been in respect of costs incurred up to that point; and thus be a broad approximation. The Defendant was charging on the basis of a hourly rate.  That was known to the Clamant. Nobody knew at the initial stages of this mediation how much time would reasonably be required to complete the work that was necessary to for a deal to be reach.   Whatever words were used by Mr Ijieze  it seems  unlikely that   they could have suggested to Mr.  Daniel  there was likely be a cap on  fees and any indication as to the outstanding amount was in  broad terms which would have made it clear that the costs might well   exceed  £50,000 (consistent  perhaps  seems with the WhatsApp message of 13 March from Mr. Ijieze).    Whilst the information provided does suggest that Mr  Daniel sought   to recover  by way of rent arrears a  figure of reflecting the figure Mr. Ijieze had referred to,  I think he did so at his own risk knowing that  he might owe his solicitors more than this; such a risk being considered reasonable in the context of the risk of not achieving a settlement before trial.  

 

118.   On this point I have in mind that Mr   Daniel is  supported in his account by  Ms. Bambigboye who  says that Mr.   Daniel  told him that Mr. Ijieze said that costs were £30,000 to £50,000.    If  Ms. Bambigboye correctly  recounts the detail of  what she was told  by  Mr.  Daniel   then Mr.  Daniel was  inaccurate in his   account of what was said in mediation. It is to my mind unlikely Mr. Ijieze would have  suggested that his costs could be as low as £30,000 or that Mr.   Daniel would have thought that. Indeed it is perhaps of significance  that  in his email of 8 April Mr. Daniel described having  been told [in mediation]  that costs would  be “in  the region of £50,000 (including disbursements)” - not £30,000 to £50,000 and this representation seems inconsistent with a clear or unequivocal  representation that the costs would not exceed £50,000. In my judgment  there was no clear or unequivocal representation to that effect.

 

119. Nor, even if were wrong about this,  am I satisfied that  Mr.  Daniels relied upon any such representation or that if he did, he did so to his detriment. Even if Mr  Daniel had not specifically turned his  mind  to the precise figures in the various emails that were sent to him about costs  he would have had some idea of the costs that were liable to exceed £50,000 (not least because of his ongoing liability for interim costs which had been awarded to the Claimants but not paid) and I reject his evidence that he had not considered such information. In any event any agreement, such as it was, at mediation, was subject to contract. As I have noted above Mr Daniel was informed by email on 15 March that the fees were some  £75,000 plus VAT. It is perhaps surprising that when he  received this email he did not specifically refer to the   representation that is now alleged to have been made. But he  plainly knew at this stage  (if he did not know before this)  before entering into  the deed  that  the Defendant  would be seeking over  £50,000 in basic charges.  

 

120. Some time shortly  before the sending of the first email in the chain I have set out above on 15 March  it appears there was some discussion  between Ms. Bambigboye and Mr. Ijieze about costs. Ms. Bambigboye said that   Mr. Ijieze had accepted that he had made a  mistake and should not have told Mr.  Daniel  that his costs were some £30- £50,000  because their fees were between £50,000 and £60,000 something.  I accept that  Mr Ijieze  would  have been aware that the impression he might have given at the mediation was the  fees could  have been as low as £50,000  and that this would have required some correction. Further, I accept  that he was likely to have made it clear that he was correcting any such misapprehension. But he was  not correcting a mistaken indication that the costs could not exceed £50,000, so I do not think this assists the Claimants.

 

121. Accordingly, and for all these various reasons I must reject the Claimants’ case that there should be a cap of £50,000 as alleged.

 

122.  I cannot however leave this issue without  raising some concerns as to how the claim for costs  appears to have increased so substantially from the figures that were   put in in the emails   of  15 March.   I raised myself the issue as to whether even if there were no estoppel,   a  representation given as to costs may have an effect on   reasonableness of the costs  (per  the guidance in Mastercigars Direct Ltd v Withers LLP [2007] EWHC 2733 (Ch)  and    [2009] EWHC 651 (Ch)  (see  [102]). In the earlier of these two judgments Morgan  J   explained at [99] that an  estimate of costs may be  a useful ‘yardstick’ by which the reasonableness of the costs may be measured: if there is no satisfactory explanation for any departure from  any estimate something less than an estoppel may suffice in terms of reliance for the purpose of deciding whether any departure from an estimate may be reasonable [8]. The following passage of the later judgment    has recently cited with apparent approval by Vos MR  in the context of non-contentious costs (Belsner v Cam Legal Service [2022] EWCA Civ 1387, [96]):  

"  …even if the solicitor has spent a reasonable time on reasonable items of work and the charging rate is reasonable, the resulting figure may exceed what it is reasonable in all the circumstances to expect the client to pay and, to the extent that the figure does exceed what is reasonable to expect the client to pay, the excess is not recoverable…[102]

 

123.   I was  not  sure Mr Benson was correct to suggest that the guidance given in Mastercigars  only applied where an estimate of costs was provided in advance of the work to be undertaken and not here. However  I consider that further arguments and indeed  consideration of the detail as to what happened is appropriate.  On the face of what I have seen however there seems some basis for thinking that costs  indications of the sort given at least on 15 March might be a yardstick against which to measure reasonableness. However, I leave all such matters for further consideration if the parties cannot now resolve their remaining differences.