Lexlaw Ltd v Zuberi, Court of Appeal - Chancery Division, June 09, 2017, [2017] EWHC 1350 (Ch)

Issuing Organization:Chancery Division
Actores:Lexlaw Ltd v Zuberi
Resolution Date:June 09, 2017
 
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Case No: HC-2016-000259

Neutral Citation Number: [2017] EWHC 1350 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Date: 9/6/2017

Before:

MASTER CLARK

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Between:

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Robert Jones (of Lexlaw Ltd) for the Claimant

Adrian Davies (instructed by Woodford Wise Solicitors) for the Defendant

Hearing date: 24 May 2017

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JudgmentMaster Clark:

The application

1. This is my judgment on the defendant's application dated 7 November 2016 seeking an order for the trial of a preliminary issue.

Parties and the claim

2. The claimant is an incorporated solicitors practice. The defendant is its former client, for whom the claimant acted in her claim against National Westminster Bank Plc and the Royal Bank of Scotland for mis-selling interest rate hedging products. The claim arises out of a damages based agreement between the parties on 15 April 2014 (``the DBA'').

3. Although the ``Brief Details of Claim'' on the front page of the claim form state that the claim is for damages for breach of contract and payment of an unpaid invoice for legal services, the very brief particulars of claim endorsed on the second page of the claim form refers only to the non-payment of an invoice dated 1 July 2015 in the sum of £125,123.14 (plus interest thereon). The claim as it stands is therefore in debt only.

4. The defendant disputes her liability to pay this amount on a number of grounds:

(1) that the DBA was procured by the actual, alternatively presumed, undue influence of the claimant's principal, Mohammed Akram;

(2) that the defendant was induced to sign the DBA by misrepresentations made by Mr Akram, so that it was voidable and has been avoided by her;

(3) that the claimant negligently, and/or in breach of its tortious, contractual and/or fiduciary duties to the defendant, failed to advise her of the true nature and consequences of the DBA causing damage, the compensation for which is to be set off against the sum claimed by the claimant;

(4) that the DBA is unenforceable against the defendant by reason of failing to comply with section 58AA(2) and 58AA(4) of the Courts and Legal Services Act 1990 (``CLSA 1990'').

5. The defendant does not assert that she has no liability to the claimant for the work carried out by it in the period between 15 April 2014 and 18 May 2015 (the date on which she wrote to the claimant formally disinstructing it). Although no claim in quantum meruit is currently pleaded against her, she accepts (in her witness statement dated 10 June 2016) that she is liable to pay the claimant for its reasonable fees on a time-costed basis for that period.

The preliminary issue

6. The preliminary issue (``the issue'') sought to be tried by the defendant is (as reworded in the course of the hearing with the agreement of both sides):

``Whether the DBA is unenforceable by virtue of section 58AA(2) of the CLSA 1990, by reason of failing to satisfy the conditions in section 58AA(4) CLSA 1990, as pleaded in paragraph 64 to 71 of the Amended Defence dated 22 June 2016.''

Unenforceability of the DBA

The DBA

7. Clause 6.2 of the DBA provides:

``With the exception of the circumstances set out in clause 6.3 (in which you agree not to terminate this Agreement), you may terminate this Agreement at any time. However, you are then liable to pay the Costs and the Expenses incurred up to the date of termination of this Agreement within one month of delivery of our bill to you.''

8. ``Costs'' and ``Expenses'' are defined in clause 1.2 as, respectively, charges for time spent working on the claim calculated in accordance with hourly rates, and disbursements. There is no issue between the parties as to the meaning and effect of clause 6.2; and that in certain circumstances it would require the payment of a sum greater than the agreed percentage provided for in the DBA. In addition, neither side alleges that the clause was engaged in the events that happened in this case.

The statutory framework

9. The statutory framework consists of Section 58AA of the CLSA 1990 and the regulations made under it, the Damages-Based Agreements Regulations 2013 (``the Regulations''). The drafting in both is not user friendly.

10. Section 58AA(2) of the CLSA 1990 provides, so far as relevant:

``(1) A damages-based agreement which satisfies the conditions in subsection (4) is not unenforceable by reason only of its being a damages-based agreement.

(2) But ... a damages-based agreement which does not satisfy those conditions is unenforceable.

(3) For the purposes of this section--

(a) a damages-based agreement is an agreement between a person providing advocacy services, litigation services or claims management services and the recipient of those services which provides that--

(i) the recipient is to make a payment to the person providing the services if the recipient obtains a specified financial benefit in connection with the matter in relation to which the services are provided, and

(ii) the amount of that payment is to be determined by reference to the amount of the financial benefit obtained.

(4) The agreement--

...

(b) if regulations so provide, must not provide for a payment above a prescribed amount or for a payment above an amount calculated in a prescribed manner.''

11. The Regulations provide, so far as relevant:

``(2) In these Regulations--

``the Act'' means the Courts and Legal Services Act 1990;

...

``client'' means the person who has instructed the representative to provide advocacy services, litigation services (within section 119 of the Act) or claims management services (within the meaning of section 4(2)(b) of the Compensation Act 2006) and is liable to make a payment for those services;

``costs'' means the total of the representative's time reasonably spent, in respect of the claim or proceedings, multiplied by the reasonable hourly rate of remuneration of the representative;

...

``expenses'' means disbursements incurred by the representative, including the expense of obtaining an expert's report and, in an employment...

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