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Fosberry & Fosberry & BJ Rice & Associates v Revenue & Customs, High Court, 25 May 2007

14 March 2008
The issues

Conditional Fee Agreements Regulations 2000 Regulation 3; Regulation 4 – whether Conditional Fee Agreement enforceable.

The facts

The Appellants were Chartered Tax Advisors and Accountants who acted for the Fosberry’s and their Appeal to the VAT and Duties Tribunal against a refusal to register them for VAT purposes. They acted under a CFA with the Fosberry’s. The Revenue and Customs Commissioners withdrew from the Appeal and agreed to pay the Fosberry’s reasonable costs. The CFA provided for a standard charging rate and a capped sum if the Appeal was unsuccessful. If the Appeal was successful the agreement provided for a 55% uplift with no cap on the amount recoverable. At the Costs Hearing the Master found the CFA unenforceable. He found the agreement did not comply with Regulations 3(2)(c) or Regulation 4 of the Regulations.

The receiving party appealed.

The decision

The CFA was dated 14th June 2002. It was a two page document with a Schedule occupying two-thirds of a third page. It did not appear to have been drafted by a lawyer. On the basis of Hollins v Russell the Court had to consider whether any breaches were immaterial or whether they had some material effect on either consumer protection or the proper administration of justice. Minor and trivial breaches would not be significant. Garrett v Halton established that there could be a material breach of the statute or of the Regulations so as to render the agreement unenforceable, even in the absence of detriment to the client.

The agreement was deficient in two ways. The uplift referred to in the agreement failed to comply with Regulation 3(1)(b). The uplift purported to reflect time and delay risks that attached to the Appeal but failed to specify what element of the 55% applied to the delay.

Secondly, the wording of the agreement failed to make clear what would happen if the agreement terminated prematurely. This was contrary to Regulation 2(1)(c)(iii).

Looking at the failings of the CFA globally they had the effect of preventing substantial compliance. They had significant effects in terms of consumer protection and the delay compensation point also had significant administration of justice implications. They could not be characterised as slight matters. Taken in aggregate they represented an overall significant and important shortfall. If it mattered, the Court considered that the delay point was sufficient by itself to have brought the agreement down.

Appeal dismissed.

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