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Court of Appeal upholds a decision regarding the interpretation of the wording of a CFA on “making a settlement” – previous client liable for costs

In Butler v Bankside Commercial Ltd [2020] EWCA Civ 203, the Court of Appeal dealt with the issue of the interpretation of a provision which appears in a standard form of Conditional Fee Agreement (CFA) made on Law Society terms –

“We can end this agreement if you reject our opinion about making a settlement with your opponent.”

The term allows the solicitors, on termination of the retainer in certain circumstances, to payment of their basic charges and disbursements and the success fee if the client goes on to win their claim for damages.

The Court of Appeal upheld the High Court’s decision, where the solicitors were entitled to payment of costs following termination of the retainer and their ex-client’s subsequent award of damages.

Background to the Case

Mrs Butler had a claim for damages against Metris arising out of the termination of a commercial agency. In June 2008, Mrs Butler retained Bankside Commercial Limited under a CFA which incorporated the pro forma conditions of the Law Society “Conditional Fee Agreements: what you need to know” document, and which included the term above.

Metris made an offer to settle. Bankside advised their client to make a counter-offer however, she did not respond to that advice. They wrote to her stating that if they did not receive instructions by a specified date, they would terminate their retainer as per the CFA standard terms. Again, their client did not respond. Bankside terminated the retainer, and Mrs Butler proceeded with her claim with different solicitors, ultimately receiving an arbitration award of just over £40,000.00.

On the detailed assessment of costs between Mrs Butler and Metris, her allowable costs were calculated at £238,527.59, and following confirmation that she had already paid some of the disbursements, resulted in a balance of approximately £209,518.00. Bankside sued Mrs Butler for the costs they alleged were recoverable under the terms of their retainer.

The Initial Decision & the Appeal

The dispute that ensued centred on whether the terms of the CFA between Mrs Butler and Bankside triggered her liability to pay it. The sum itself was not in issue.

Master Yoxall gave summary judgment for the sum in Bankside’s favour, and The Hon. Mr Justice Turner dismissed Mrs Butler’s appeal.

The parties differed in their interpretations of the phrase “if you reject our opinion about making a settlement with your opponent”. Lord Justice Lewison set out the “rival interpretations” of that phrase:

Mrs Butler argued that the phrase had two possible meanings.

[8] “The broad meaning encompasses an opinion about the client making an offer. The narrow meaning is limited to an opinion about something which would directly result in the making of a settlement. In practice that would be restricted to advising the client to accept an offer of settlement made by their opponent.”

Bankside argued that

[9]“the clear and natural meaning of the phrase is that it encompasses advice about settlement with an opponent, including advising the client to make their own settlement offer. There is no reason for departing from that clear and natural meaning.”

LJ Lewison set out what Turner J had stated in accepting Bankside’s interpretation of the phrase at [19] of that judgment:

“I am satisfied that the suggestion that any opinion about “making a settlement” is to be construed as being limited to the consideration of the acceptance [of] any offers made by the opponent is inconsistent with the language of the clause and would, in any event, lead to procedural distinctions devoid of either logical justification or practical coherence.”

LJ Lewison stated that Turner J had further pointed out

“the differences between a case where there is no CFA, in which case the client is entitled to ignore the advice of her solicitors, and a case governed by a CFA where the solicitors themselves are at financial risk.”

At [22] Turner J said

“For such solicitors to be required to wait, like Vladimir and Estragon, for an offer from the other side which might never come rather than, where appropriate, to take the initiative in negotiations would impose artificial and unjustifiable limits on their ability to protect their own legitimate interests.”

And at [23]

“ a solicitor’s opinion about making an offer, on the facts [of] any given case, is perfectly capable of being one which is about ”making a settlement”. A settlement is an end point but the making of one is a process.”

LJ Lewison stated that Mrs Butler put forward “essentially the same arguments”. She favoured the narrow interpretation of the phrase and set out the issues with adopting a broader interpretation, arguing that any doubt about interpretation should be resolved in the client’s favour.

LJ Lewison set out the difficulties with Mrs Butler’s arguments. Inter alia,

“The CFA provided for the payment of the solicitor’s costs and disbursements, and the success fee, if the client won. She did.”

Further

“there is no ambiguity in the words of the contract. The clause is not confined to “making” a settlement. It extends to advice “about” making a settlement.”

And

“As a matter of ordinary English, advice “about” making a settlement includes advice to the client about making an offer of their own calculated to lead to a settlement. The words are clear, even though the result may expose the client to a greater liability than they might have expected.”

The appeal was therefore dismissed.

Conclusion

The case demonstrates the importance of advising a client on the terms of an offer. It’s also an important word of warning to litigants who do not follow the advice of their solicitors. Practitioners may also find it a useful reference case when seeking to explain to clients the potential implications to them of not listening to advice or in this case simply failing to respond to the same.

If you find yourself in a situation whereby you are concerned about preserving your entitlement to costs under the terms of your retainer then seek professional advice, not doing so could come at a price. The answer will be guided by the case specific circumstances and details.

To discuss this matter or indeed any other costs related matter, contact us by clicking here

Allison Green – Costs Consultant – Partners in Costs

04.06.20