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Ghannouchi v Houni Limited, Supreme Court Costs Office, 4 March 2004

27 April 2004
The issues

Costs – Conditional Fee Agreement – Regulation 3 Conditional Fee Agreement Regulations 2000 – Regulation 4 Conditional Fee Agreement Regulations 2000 – Whether Agreement Failed to Comply And If So, Whether Breach Had Any Materially Adverse Effect.

The facts

The Claimant brought an action for libel. The Trial took place in March 2003 following which the Defendants were ordered to pay the Claimant’s costs. The Claimant’s solicitors, Peter Carter-Ruck & Partners acted under a Conditional Fee Agreement dated 4th February 2002 providing for a success fee of 100%. A copy of the risk assessment was filed in the Supreme Court Costs Office. A Bill was served with a Notice of Commencement claiming 1.3 million pounds including a success fee of over Ω million pounds.

The Defendants in Points of Dispute raised issues as to the validity of the CFA and whether there had been compliance with the indemnity principal. Although three issues were raised only two were pursued namely: –

1. Whether the CFA failed to comply with Regulation 3(2)(c) of the Conditional Fee Agreements Regulations 2000.

2. Whether the CFA failed to comply with Regulations 4(3) and (5) of the Regulations. The Law Society was given permission to make submissions on the basis that the passage in the Claimant’s CFA was identical to the equivalent passage in the Law Society’s July 2000 model CFA.

The decision

1. Regulation 3(2)(b) was solely concerned with the percentage increase. It provided that where the Court did not apply the level of the success fee in the CFA on the grounds that it was set at a level which was unreasonable in view of the facts which were or should have been known to the legal representative, then the reduced level only was payable unless the Court was satisfied that the full success fee was payable as between solicitor and client.

2. Regulation 3(2)(c) contained a provision for the Court to permit a greater sum to be recovered between solicitor and client than had been the subject of the agreement. The issue between the parties was whether the element of costs which could be further recovered was limited to the unrecovered part of a success fee as argued by the Claimant and the Law Society or whether it was the unrecovered base costs as well as the unrecovered part of the success fee as argued by the Defendant.

3. The words “those fees” in the context of “the amount payable under the Conditional Fee Agreement” could only refer back to base costs and the success fee. The Claimant’s CFA did not comply with Regulation 3(2)(c).

4. As to the Regulation 4 issue, the Defendants admitted that Clause 4 did not adequately explain the client’s position when the Claimant won. It was clear that the wording did not comply with the Regulation to the extent that it did not make clear to the Claimant that he did not have to pay the shortfall in base costs as well as the shortfall on the success fee where there had been an agreement on costs.

5. However, there had been no materially adverse effect upon the protection accorded to the client or upon the proper administration of justice. The effect of the ruling was that the effect of these decisions was that the Claimant was in a better position because any unrecovered amount of his base costs could only be recovered if the Court was satisfied that the full amount should continue to be payable under the CFA. The solicitors had to apply to the Court if they wished to recover from their client any shortfall in base costs and success fee where there had been a settlement on costs.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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