When is a CFA unreasonable?

The Court held in Nadarajah Vilvarajah v West London Law Limited [2017] EWHC B23 (Costs) that the Conditional Fee Agreement entered into between the Claimant and his Solicitor was unreasonable and the Claimant was therefore not liable to pay the costs as claimed by his Solicitor. Indeed the Solicitor’s Bill of Costs was reduced from £31,945.00 to £15,323.00.

The Claimant entered into a CFA with his Solicitor in January 2013 in order that his Solicitor could defend proceedings that were being brought against him by another firm of Solicitors, Hodders Law, for approximately £20,000.00 of unpaid fees.

The CFA provided for a discounted hourly rate of £150 for ‘all fee earners including solicitors, trainee solicitors and paralegals’, payable whether or not the claimant succeeded, and a ‘primary’ rate of £420 for all fee earners in the event he succeeded. Success was defined as reducing the costs claimed by Hodders Law.

However, there was a term within the CFA that if the CFA was terminated then the Claimant would be liable for the primary hourly rate of £420. The CFA was terminated and a Bill was therefore submitted to the Claimant, calculated by reference to the primary hourly rate of £420 and totalling £31,945.00. The Claimant sought a Detailed Assessment of the costs.

The CFA had been entered into following a 30 minute attendance with the Claimant, there being no further correspondence regarding the CFA or the terms contained therein either before or after the attendance, and Master Gordon-Saker concluded that the 30 minute appointment could not have enabled the Claimant to fully understand or appreciate the terms of the agreement and the liabilities that he was assuming. Master Gordon-Saker held that the agreement was unreasonable and should be set aside given the straightforward nature of the case and the likelihood that most of the work would be done by a Grade B fee earner. He was of the view that the hourly rate of £420 was akin to a top Solicitor in the City carrying out complex, high value work and as such it could not be justified.