Stephen John Finnan v Candey Ltd
[2024] EWHC 2157 (Ch)
Diag Human SE & Anor v Volterra Fietta
4 October 2023
[2023] EWCA Civ 1107
Court of Appeal
The solicitors' agreement with their clients was illegal because it had a success fee that could be over 100%. The court said they couldn't get paid anything and had to give back the money the clients already paid, because the law doesn't let lawyers have agreements like that.
Key Facts
- •Volterra Fietta (appellants), a firm of solicitors, engaged by Diag Human SE and Josef Stava (respondents) for an investment treaty arbitration claim against the Czech Republic.
- •Parties entered into a conditional fee agreement (CFA) in September 2017 with a success fee potentially exceeding 100% and without stating the success fee percentage.
- •The CFA was unenforceable due to non-compliance with section 58 of the Courts and Legal Services Act 1990.
- •Solicitors appealed the Costs Judge's decision to assess their bill at nil and order repayment of sums paid on account.
- •The High Court upheld the Costs Judge's decision.
- •The appeal to the Court of Appeal focused on severance, quantum meruit, and restitution.
Legal Principles
Public policy prohibits enforcement of champertous agreements (agreements where a lawyer's interest in the outcome of litigation creates a conflict of interest).
Common law, as reaffirmed in Wallersteiner v Moir (No 2) [1975] 1 QB 373, Awwad v Geraghty & Co [2001] QB 570, Sibthorpe v Southwark LBC [2011] EWCA Civ 25, and Farrar v CANDEY Ltd [2022] EWCA Civ 295.
Section 58 of the Courts and Legal Services Act 1990 creates a limited exception to the common law rule, making compliant CFAs enforceable.
Courts and Legal Services Act 1990, section 58.
A three-stage test for severance of unenforceable contract provisions: (1) provision is severable, (2) remaining terms have adequate consideration, (3) severance doesn't change the contract's character.
Beckett Investment Management Group Ltd v Hall [2007] EWCA Civ 613, approved in Egon Zehnder Ltd v Tillman [2019] UKSC 32.
Quantum meruit claims are not available where public policy prohibits enforcement of the underlying agreement.
Awwad v Geraghty & Co [2001] QB 570, Garrett v Halton BC [2006] EWCA Civ 1017.
In solicitor's bill assessments under section 70 of the Solicitors Act 1974, sums paid on account are repayable if the bill is assessed at nil, regardless of the reason for the assessment.
Solicitors Act 1974, section 70; CPR Part 47 and Practice Directions 46 and 47.
Outcomes
Appeal dismissed on all grounds.
Severance was not permitted because it would fundamentally change the character of the CFA, converting it from a conditional fee agreement to a conventional retainer. This is contrary to public policy and the principles of Awwad and Garrett. Quantum meruit was also rejected due to public policy considerations. Repayment of sums paid on account was ordered based on the assessment of the solicitor's bill at nil under section 70 of the Solicitors Act 1974.