COST BITES 222: A “RETROSPECTIVE” CONDITIONAL FEE AGREEMENT WAS STILL VALID AND THE PAYING PARTY HAD TO PAY: COURT OF APPEAL DECISION

March 14, 2025 · by · in Appeals, Costs

In Singh & Ors v Ingram [2025] EWCA Civ 264 the Court of Appeal rejected an argument that a retrospective conditional fee agreement was invalid. The Court was, to say the least, suspicious of argument that the receiving party’s solicitors alleged regulatory breaches gave rise to a reason for the paying party to not pay.  The client’s were perfectly happy and understood the agreement.

“the point throws into relatively stark relief the potential difference between, on the one hand, the validity or effect of a CFA and, on the other, alleged regulatory breaches by the solicitors raised, not by the client, but the paying party, at the end of the case.”

THE CASE

The respondent (a liquidator) of a company had been successful in an action against the appellants in relation to their conduct of the company’s financial affairs.  The trial judge had ordered the appellant’s to pay costs on the indemnity basis.

THE SUBSEQUENT COSTS HEARINGS

The subsequent costs hearings were highly contentious. Not least because the appellants were arguing that the respondent’s conditional fee agreement was not valid as it had had retrospective effect.  This argument was rejected by the Cost Judge and, on appeal, the High Court Judge (sitting with an assessor).

THE UNSUCCESSFUL APPEAL TO THE COURT OF APPEAL

The appellants (paying party) were equally unsuccessful on appeal.

THE COURT OF APPEAL’S SUMMARY OF THE ISSUES

    1. This appeal can be seen as a final attempt by the appellants to avoid the cost consequences of what has been, for them, a disastrous piece of litigation. In 2015, the respondent, in his capacity as liquidator of MSD Cash and Carry PLC, commenced proceedings against the appellants (former directors and others concerned with the running of MSD) in the Business and Property Courts. The trial, before His Honour Judge Hodge KC, was concerned with allegations that the appellants had sought (through void dispositions, a false credit note and other illegitimate means) to diminish the assets available to the respondent. Judge Hodge found against the appellants, describing them as untruthful and dishonest witnesses and repeatedly making adverse findings against them (see the judgment at [2018] EWHC 1325 (Ch)).

 

    1. Judge Hodge KC subsequently ordered the appellants to pay the respondent’s costs of the proceedings on an indemnity basis. This was because, as he put it, their conduct “both before and during the proceedings, has been so far outside the norm of commercial litigation in general that it is appropriate that the costs should be assessed on the indemnity basis”: see [84] of his costs judgment ([2018] EWHC 4033 (Ch)). That decision was not appealed.

 

    1. The assessment of those costs was, however, a highly contentious affair. Numerous issues were raised before Costs Judge Nagalingam (“the Costs Judge”), which were heard over no less than seven separate hearings. The fifth hearing, on 20 September 2021, was taken up with the determination of the question whether the CFA was retrospective. The Costs Judge heard evidence from the respondent and from the relevant former solicitor at BT, Mr Branson.

 

  1. In his judgment of 3 December 2021 (SCCO ref: PN1904239) the Costs Judge concluded that the CFA was retrospective. He set out the evidence of the respondent and Mr Branson in some detail between [2]-[46]. He then set out Mr Dunne’s submissions at [47]-[88], Mr Taussig’s submissions at [89]-[124], and Mr Dunne’s counter-submissions at [125]-[137]. He explained the reasons for his conclusion that the CFA was retrospective between [138]-[188]. Those reasons were based on the wording of the CFA and what he found, as a matter of fact, to be features of the past working relationship between the respondent and Mr Branson.

 

THE ISSUES ON APPEAL

Lavender J (sitting with Costs Judge Rowley) dismissed the appellant’s appeal against this finding.  At the Court of Appeal stage the issues were summarised:

 

    1. “The Grounds of Appeal were framed in the following terms:

 

(1) The judge was wrong to find that the conditional fee agreement signed between the Claimant and his solicitors on 24th March 2015 was expressly retrospective. The term as to retrospectivity was not express, clear or unambiguous.

(2) The judge was wrong to find that the combination of terms contained within the CFA was sufficient to amount to an express term on retrospectivity so as to disapply the presumption that a CFA will not be retrospective.

(3) The judge erroneously treated the definition of “the Claim” and use of the word “Claim” in clauses 2 and 4 of the CFA as an express and unambiguous term on retrospectivity, notwithstanding the fact that the definition of “the Claim” could reasonably be interpreted as a pure description of the proceedings. The fact that the term “Claim” was capable of having more than one meaning ought to have led the judge to conclude that it was not an unambiguous term on retrospectivity.

(4) The judge failed to take into account (either sufficiently or at all) and failed to give proper weight to the “matrix of fact” which included clear evidence that the signatories to the CFA had no commercial imperative to sign a retrospective CFA.

(5) The judge failed to take into account at all or failed to give proper weight to the “matrix of fact” which included clear evidence of the fact that the solicitor had at no time explained (or even mentioned) to their client that the CFA was designed to have retrospective effect (in a clear breach of their regulatory duties). The judge was wrong to dismiss this highly relevant fact.”

 

THE PAYING PARTY’S UNSUCCESSFUL APPEAL

As stated above the appellants lost on all points. A few points to highlight here.

THE UNSUCESSFUL ARGUMENT THAT THERE WAS A NEED FOR THE RETROSPECTIVITY TO BE EXPRESS

 

The ‘Presumption’ and The Alleged Need for Retrospectivity to be Express

    1. In many ways, the high watermark of the appellants’ case was the obiter remark of Lord Neuberger MR in Motto v Trafigura [2011] 1WLR 657 at [61]:

 

“[A]lthough of course solicitors and their clients can agree terms otherwise … the natural presumption in a contract by which a person engages a solicitor to act for him must be, in the absence of such a term, that he is agreeing to pay for work done in the future, not for work already done.”

    1. I have a certain amount of difficulty with this statement, which did not arise from the issues in the case, and which is not linked to any authority. Perhaps it is doing no more than noting that a contract of any sort is usually agreed at the outset of the relationship between the parties, rather than part way through. But even if, which I doubt, he was intending to suggest that there was some special presumption in law that a solicitor-client relationship is prospective only, Lord Neuberger made plain that that was subject to the obvious qualification that solicitors and their clients “can agree terms otherwise”. That seems to me to recognise that, ultimately, these things are always a matter of contract.

 

    1. Mr Dunne also argued that any term as to retrospectivity had to be express. He derived this principle from Holmes v Alfred McAlpine Homes (Yorkshire) Limited [2006] 3 Costs LR 466 where the dispute was concerned, not with retrospectivity as such, but with the effect of backdating a contract. Stanley Burnton J noted at [19] that they were very different things. He went on to say:

 

“A properly drafted agreement would have borne the date on which it was executed, but would have expressly provided for its application to work done from the prior date agreed by the parties.”

  1. Again, speaking for myself, this seems to offer rather scant support for an argument that a retrospectivity provision must always be express. Stanley Burnton J was talking there about a different topic (backdating), and simply expressing a view about what a properly drafted agreement might have said. Furthermore, for what it is worth, I note that the learned editors of Friston on Costs, fourth edition, at paragraph 29.129, note that retrospective effect may arise by implication, and cite in support of that proposition the decision in Northern & Shell PLC v John Laing Construction Limited [2002] EWHC 2258 (TCC) at [40(2)], upheld on appeal. I can see no reason why, as a matter of general principle, such a term could not be implied into a CFA, provided always that the necessary test for implication has been made out. But since implication does not arise in the present case, I need say no more about it.

ALLEGED REGULATORY BREACHES

The Difference between the Proper Construction of a CFA and Regulatory Breaches

    1. It is the appellants’ case that BT were in breach of the relevant Code of Conduct because they failed to give advice to the respondent as to the costs consequences of his agreement to the retrospective CFA. Of course, there was a slightly artificial element to that argument, given that the respondent was, on the Costs Judge’s findings of fact, entirely happy with the CFA and always understood that it was retrospective. But the point throws into relatively stark relief the potential difference between, on the one hand, the validity or effect of a CFA and, on the other, alleged regulatory breaches by the solicitors raised, not by the client, but the paying party, at the end of the case.

 

    1. In Garbutt v Edwards [2005] EWCA Civ 1206, the point was taken by the paying party that, because the solicitors had failed to advise the client about the estimate of costs, there was breach of the relevant Code, thus rendering the entire retainer unenforceable. That argument was rejected. At [31] Arden LJ said:

 

“In making these Rules, the Council of the Law Society is acting in the public interest…the inference I would draw is that the Code is there to protect the legitimate interests of the client, and the administration of justice, rather than to relieve paying parties of their obligations to pay costs which have been reasonably incurred.”

She went on to explain why a breach of the Code did not render the whole contract unenforceable.

  1. I accept Mr Dunne’s submission that Garbutt was a different case to the present appeal, not least because the appellants here are not arguing that the alleged failure on the part of BT rendered the CFA unenforceable. However, I consider that Garbutt is of some assistance, because it demonstrates the fundamental difference between arguments as to the validity or effect of the contract between the solicitor and client, and a breach of a regulatory Code, which might give rise to disciplinary proceedings.
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