Diag Human SE and Anor v Volterra Fietta 2023 EWCA Civ 1107 - 4 October 2023
Country
Year
2023
Summary
Introduction
1. The appellants are a firm of solicitors. The respondents engaged them to provide legal advice in relation to an investment treaty arbitration claim against the Czech Republic. Dr Stava is and was at all material times the controlling mind and ultimate beneficial owner of Diag Human SE ["Diag"]. In September 2017 the parties entered into a conditional fee agreement ["CFA"], which provided for the solicitors to be paid on an hourly basis but at a discounted rate for work done pursuant to the agreement, in consideration of which the solicitors would be entitled to success fees in specified circumstances.
2. The CFA was unenforceable because it included a success fee that could exceed 100% and because it did not state the success fee percentage. The solicitors, however, submit that they are entitled to sever the offending success fee provisions and recover fees at the discounted rate for the work they have done; alternatively they submit that they are entitled to recover fees assessed on a quantum meruit for the work they have done for and at the request of their clients; and, in any event, they submit that they are entitled to retain sums that the clients had paid on account of their costs.
3. In a judgment that addressed these submissions as preliminary issues in an assessment of the solicitors' bill, Costs Judge Rowley held against the solicitors on each point. Put shortly, he held that the consequence of the CFA being unenforceable was that the solicitors could recover nothing under their bill, which he assessed at nil, and that they were required to repay to their clients sums that the clients had paid on account. The solicitors appealed to the High Court. On 29 July 2022 Foster J, sitting with Master Simon Brown as an assessor, upheld the decision of the Costs Judge, largely for the reasons he had given: [2022] EWHC 2054 (QB).
4. The solicitors now appeal against the decision of Foster J, essentially repeating the submissions that they made before the Courts below. The issues on this appeal can be shortly stated, as follows:
i) Ground 1: was the Judge wrong to hold that severance is not available to the solicitors?
ii) Ground 2: was the Judge wrong to hold that Quantum Meruit is not available to the solicitors?
iii) Ground 3: in the absence of a claim founded on principles of restitution, was the Judge wrong to hold that the solicitors must repay to their clients sums that they have already been paid on account of costs?
5. For the reasons I shall explain, which substantially reflect the reasons of the Courts below, I would dismiss the appeal on all grounds.
6. Two points may be noted at the outset. First, a feature of the CFA upon which the solicitors rely is that the discounted element of their fees was to be paid in any event, win or lose. That has led to the agreement being variously described as a "discounted fee agreement" or as an "hybrid agreement", meaning one where some fees fall to be paid by the client in any event and some only arise in the specified circumstances. Although these may be convenient labels, they are not terms of art: describing the agreement as an "hybrid agreement" does not invest the fees that fell to be paid in any event with any special status. What is important and common ground is that the agreement between the parties as a whole is a CFA. The starting point, therefore, is that the agreement as a whole is unenforceable because it is a non-compliant CFA.
7. Second, the sums in play in this appeal are considerable, with the clients' claim against the Czech Republic being measured in billions and the fees claimed by the solicitors being measured in millions. The precise figures do not matter. That said, the issues that arise in this appeal are important irrespective of the sums at stake in the present case. They are capable of arising in much less exalted circumstances and could be of major significance to solicitors and clients even where the sums involved are more modest by many orders of magnitude.
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