Rees & Anor v Gateley Wareing (a firm) & Anor

In this case, I am asked to decide various defined issues in relation to a contingency fee agreement entered into by a firm of solicitors with their clients. In summary, the issues relate to the interpretation and application of the agreement and its enforceability, having regard to section 58 of the Courts and Legal Services Act 1990, Rule 8 of the Solicitors’ Practice Rules 1990 and the common law rules as to champerty.

The Defendants in this case are Gateley Wareing (a firm) and Gateley LLP. On 1 September 2003, the practice of Gateley Wareing (a firm) was taken over by the LLP. The LLP was originally known as Gateley Wareing LLP and it changed its name, first, to HBJ Gateley Wareing LLP and then to its current name of Gateley LLP. Between around April 2002 and 1 September 2003, Gateley Wareing (a firm) and then, from 1 September 2003 to March 2007, the LLP acted as solicitors for Mr and Mrs Rees. No distinction has been made in these proceedings between Gateley Wareing (a firm) and Gateley LLP and I will refer to them both interchangeably as Gateley Wareing.

In these proceedings, issued in 2011, the Claimants, Mr and Mrs Rees, sued Gateley Wareing for damages for alleged negligence in relation to the advice given or not given by them to Mr and Mrs Rees. Gateley Wareing counterclaimed for fees which they said were due to them under agreements recorded in letters dated 23 May 2002 and 5 August 2002. On 18 September 2013, the parties settled the claim for damages but expressly agreed that the settlement did not deal with the Counterclaim. On 19 September 2013, Norris J gave directions for the trial of the Counterclaim. Although the Counterclaim was for an inquiry as to the fees payable and an order for payment of such fees, Gateley Wareing undertook that if it were determined that they were, in principle, entitled to fees under the above-mentioned agreements, then they would raise and deliver a bill of costs within the meaning of section 69 of the Solicitors Act 1974 in respect of any such entitlement and this would allow Mr and Mrs Rees to require an assessment of the fees claimed.

Accordingly, Norris J directed that the trial of the Counterclaim should be limited to the determination of a number of specified issues. I will set out those issues later in this judgment but first I will comment on the reliability of the witnesses who gave evidence before me and then make my findings as to the facts which are relevant to the matters which are to be determined.

Mr Randall QC and Mr Roberts appeared on behalf of Gateley Wareing and Mr Fenwick QC and Ms Colter appeared on behalf of Mr and Mrs Rees.

Before making my findings of fact in this case, I ought to comment on the evidence, in particular, the oral evidence which I was given. Most of the factual matters which are now relevant can be derived from the contemporaneous documents without there being much need to rely on oral evidence. However, I heard evidence from Mr Patel and Mr Wilson on behalf of the Defendants and from the Claimants, Mr and Mrs Rees.

Mr Patel was the principal witness for Gateley Wareing. He is a litigation solicitor. He was involved in the relevant matters from May 2002 to March 2007. He has since left Gateley Wareing and is now a member of another solicitors LLP. He gave evidence in accordance with a detailed witness statement which he signed in September 2013. Because the relevant events were many years earlier, Mr Patel obviously and properly relied on the contemporaneous documents which were available to him. Indeed, the witness statement of September 2013 says very little which is not set out in the contemporaneous documents. In the circumstances which I will explain later in this judgment, Mr Patel was recalled and for that purpose he signed a second witness statement (dated 28 October 2013). As it happens, the most material parts of his second witness statement referred to discussions he said he had with Mr and Mrs Rees which were not referred to in the contemporaneous documents. Indeed, if those conversations had taken place one would have expected that there would have been some reference to them in the contemporaneous documents.

Where Mr Patel’s evidence is supported by the documents, then there is no difficulty as to the reliability of his evidence. However, in relation to the matters in his second witness statement I must be more careful. I will discuss his evidence in his second witness statement in greater detail later in this judgment. As will be seen, I accept his evidence on those matters. I do this for a number of reasons. First, I found Mr Patel to be generally reliable; he answered the questions which were put to him in a way which was intended to be helpful and informative rather than defensive and evasive. Secondly, he is no longer with Gateley Wareing and he has no particular reason not to give his evidence to the best of his recollection. Thirdly, so far as his evidence in his second witness statement is concerned, there was no rebutting oral evidence and his evidence is not contradicted by any document. Fourthly, for a reason which I will later explain, I think it is inherently probable that Mr Patel did have the discussions with Mr and Mrs Rees which are described in his second witness statement.

Mr Wilson of Gateley Wareing is an insolvency lawyer. He had only limited evidence to give in relation to the Counterclaim. He was not involved before the relevant agreement as to fees was signed on 5 August 2002. His involvement began in October 2002. There was no significant challenge to Mr Wilson’s evidence.

Mr Rees made a lengthy witness statement. As with Mr Patel, Mr Rees quite properly described the events which were shown in the contemporaneous documents. When Mr Rees referred to something which was not revealed by the documents, he often said that he “did not recollect” or that he “did not remember” whether he had been told something. That evidence did not amount to an assertion that he had not been told that thing but only that he did not remember. This point is of particular importance in relation to the subject matter of Mr Patel’s second witness statement (which I will describe in detail later in this judgment). When that statement was put to Mr Rees, he said that he did not remember the matters described by Mr Patel. When Mr Rees’ evidence accurately referred to the contemporaneous documents, there is no issue as to its reliability. As to the matters which Mr Rees could not remember, I accept that he genuinely could not remember them. The result is that Mr Rees had very little evidence to give as to matters which were not recorded in the contemporaneous documents. If and insofar as Mr Rees did purport to give evidence as to matters which were not disclosed by the documents, then I am very cautious about accepting that evidence in view of the fact that Mr Rees genuinely could not really remember the same. Further, Mr Rees is a party to these proceedings and is significantly affected by the outcome of them. Further, he feels aggrieved (whether rightly or wrongly I need not decide) as to the service provided to him by Gateley Wareing and that has affected his attitude to this dispute and his readiness to make adverse comments about Gateley Wareing. In addition to these comments as to the reliability of Mr Rees’ evidence, I make these further findings about Mr Rees. When he went to Gateley Wareing in 2002 and for some time afterwards, Mr Rees felt under considerable pressure, financial and otherwise. Further, when he gave instructions to Gateley Wareing in 2002 about events which had happened in the 1990s, his instructions were sometimes wrong. That comment particularly applies to the instructions he gave about the ownership of the shares in a company called Neyland Properties Limited (“Neyland”). In 2002, he did not really understand what had happened in that respect and he gave misleading instructions as to the arrangements which had been made some years earlier.

Mrs Rees gave evidence in support of her husband’s evidence but without dealing with the detailed history. I do not think that her evidence needs to be separately assessed. My conclusions as to Mr Rees’ evidence generally apply to her also.

Before 1992, Mr and Mrs Rees owned about 100 acres of land known as Coton Farm South (“the land”). As the name suggests, the land was the southern part of Coton Farm which had originally been all one farm. The construction of the M6 motorway divided the land into two sections, north and south of the M6. Coton Farm was inherited by Mrs Rees from her father. Mr and Mrs Rees had always been farmers and they farmed Coton Farm together with other land. From the early 1970s, Mr and Mrs Rees became interested in exploiting the development potential of the land.

Neyland was incorporated on 8 November 1989 and was registered under the laws of the Isle of Man. At all material times, the shares in Neyland were held by nominees for the trustees of the Dummer Trust (to which I refer below). Until 1999, the registered shareholders were CT Nominees Ltd (20 shares) and Fiducia Trust Co Ltd (1980 shares) and from 1999 to 2007 were Mercator Trustees Ltd (20 shares) and Mercator Nominees Ltd (1980 shares).

The Dummer Trust was a discretionary trust established by a Declaration of Trust dated 21 December 1990. Initially, the sole specified beneficiary was a charity. Mr and Mrs Rees were not formally added to the class of discretionary beneficiaries until 2 May 2002. It was accepted before me that the Dummer Trust was set up by persons acting on behalf of Mr and Mrs Rees for the purpose of saving or avoiding tax in relation to any capital gain made as a result of the sale of the land for development. It was therefore considered to be important that the trustees were off-shore and that Mr and Mrs Rees did not have an interest in possession under the trust. Although the history of the matter was not investigated in detail at the trial, it was accepted that, at all material times, the trust property (the shares in Neyland) was held on the discretionary trusts as recorded in the Declaration of Trust. However, on 12 March 1992, for some reason which remains obscure, the then shareholders in Neyland declared that they held all the shares in Neyland on a bare trust for Mr and Mrs Rees. Further, in 1999, the then shareholders in Neyland also declared that they held 2 shares in Neyland on a bare trust for Mr and Mrs Rees. In 2002, it seems that Mr and Mrs Rees had in their possession the declarations of trust in their favour dated 12 March 1992 and, at least for some of the time, they acted on the basis that they were the beneficial owners of all of the shares in Neyland.

By an agreement dated 13 April 1992, Mrs Rees agreed to sell the land to Neyland. The signed copy of that agreement apparently has not survived, but I understand that the price was £2.1 million, that a deposit of £50,000 was payable on exchange, and that £450,000 was payable within 60 days thereafter (ie by mid-June 1992). The balance of £1.6 million was to be paid on the completion date, 1 December 1993. As will be seen, that agreement was later cancelled and replaced (on 13 ^th November 1992) with a further contract between Mrs Rees and Neyland.

Primlake Ltd (“Primlake”) was incorporated on 29 June 1990 and registered under the laws of Nevis. Until around November 2000, Mr Matthews was the sole beneficial owner of the shares in Primlake and thereafter, the shares were beneficially owned by Mr Matthews as to 75% and by Mr Rowe as to 25%. Mr Rowe was a director of Primlake and its sole director from around February 2000.

In November 1992, the contract for sale dated 13 April 1992 between Mrs Rees and Neyland was cancelled, and a new contract, also bearing the date of 13 April 1992, was entered into by those parties. On 13 November 1992, Mrs Rees executed a transfer of the land to Neyland. Also on 13 November 1992, Neyland contracted to sell the land to Primlake and the land was transferred to Primlake.

The purchase price in the new contract between Mrs Rees and Neyland was expressed to be £500,000, of which a deposit of £50,000 had already been paid. The balance of the purchase price was payable on completion, 13 November 1992. If Neyland were, within the period expiring on 1 December 1995, to obtain outline planning permission (for use classes B1, B2 and B8) then it would make (within one month thereafter) a further payment of £1,600,000 to Mrs Rees. Consequently the purchase price was £2.1 million if planning permission were obtained. This would have been a sale at a considerable undervalue on the figures then being discussed with potential purchasers. On 29 October 1992, Mr Vaughan, the solicitor then acting for Mr and Mrs Rees, advised them that he was concerned because the contract and transfer that Mrs Rees was then proposing to sign did not afford them the protection which they needed to secure the money due to them when planning permission was granted. He warned that after completion Mr and Mrs Rees would have no rights whatever in respect of the land. For the sake of completeness, I record that the contract between Mrs Rees and Neyland was subsequently varied on 22 October 1996.

The main provisions of the contract between Neyland and Primlake were as follows:

the first instalment of the purchase price was to be £500,000 payable on the Completion Date, 13 November 1992;

the second instalment was to be paid 26 days after, and conditional upon, the grant of outline planning permission and was to be the greater of £1.6 million or [(£200,000 – £85,000) x 80% x A] – £500,000, where “A” was that part of the property of which the purchaser required possession, being an area of not less than 20 acres;

subsequent payments would be payable in accordance with the same formula except that for £200,000 would be substituted “Market Value” and would be payable 26 working days after the purchaser had re-taken possession of the property or relevant part;

“Market Value” meant the average market value with outline planning permission for uses within Classes B1, B2 and B8 with vacant possession on which all infrastructure works and service media had been constructed;

the agreement recorded that the purchaser had paid a deposit of £80,000;

until the final instalment of the purchase price was paid, Neyland was to retain possession of the land as tenant;

Neyland waived its right to the unpaid vendor's lien.

On 23 May 1994, Primlake contracted to sell the land to Kyle Stewart (“the Kyle Stewart contract”). The principal terms of the Kyle Stewart contract were as follows:

a deposit of £1 million was payable on the date of the contract;

completion was to be the date ten working days following satisfaction of the conditions precedent, which were the exchange of a consortium agreement, the exchange of a planning agreement, the grant of satisfactory planning permission, and registration of Primlake's title with freehold title absolute;

within six months of the completion date Kyle Stewart would pay further consideration based on 82.5% of the land value minus the cost of infrastructure works (less the deposit), but the infrastructure works costs for this purpose were not to exceed 50% of 82.5% of the land value.

On 12 December 1997, the Kyle Stewart contract was varied by a Deed of Variation. The Deed made the following changes:

HBG Kyle Stewart Ltd was added as a surety;

a further deposit of £1.6 million was payable on the date of the deed and £400,000 would be payable on 30 June 1998;

the cap on infrastructure costs was to be removed;

a development account would be established, and no payments would be due while it showed a debit balance.

On 15 March 2000, there was a Deed of Release and Variation under which Kyle Stewart's obligations were undertaken by Coton Park Ltd, and were guaranteed by Grosvenor Developments Ltd, which by then had, it seems, taken over Kyle Stewart's interest in the development. At the hearing before me, the relevant party under these arrangements was referred to, by way of shorthand, as “Grosvenor”.

On 17 March 2000, outline planning permission was given by Rugby Borough Council for 79.8 acres of the land, to be part of the Coton Park Industrial Estate, conditional on a section 106 agreement which was executed on the same day.

By 2001, Mr and Mrs Rees were concerned on a number of fronts. Some of their concern stemmed from the fact that they did not know exactly what was happening in relation to payments being made for the land to Primlake and then by Primlake to Neyland. The payments to Primlake were to be made by Grosvenor. The sums due to Primlake were not agreed and indeed were very much in dispute. Further, sums due from Primlake to Neyland had not been paid. Mr and Mrs Rees apparently thought at an earlier time that they controlled Neyland and also Primlake and by 2002 it seemed that they did not control Primlake. Mr and Mrs Rees were deeply suspicious of the role played by Mr Matthews in some way or other. Mr and Mrs Rees thought that they or Neyland should have received far more money from the series of transactions than they had so far received. Mr and Mrs Rees also needed to raise funds in connection with land they wished to purchase in Canada.

Mr and Mrs Rees first turned to their family solicitor, a Mr Vaughan, who had acted for them on the sale to Neyland and who had warned them of the likely loss of control over the development. Mr Vaughan tried to get information about the events which had occurred and to resolve the difficulties which were stopping the flow of funds directly or indirectly to Mr and Mrs Rees. Although Mr Vaughan obtained some information which was helpful to Mr and Mrs Rees, he was not able to resolve all of the outstanding matters. During this period, the solicitors Wedlake Bell acted on behalf of Mercator Trust Company Ltd, which was effectively managing Neyland.

In around 2002, Mr and Mrs Rees turned for further help to a Mr Bradshaw whom they described as a “troubleshooter”. It was not clear precisely what arrangements they made with Mr Bradshaw nor when those arrangements were made. However, attached to a later document dated 5 August 2002, to which I will refer, there was a written agreement made between Mr and Mrs Rees and Mr Bradshaw which was in these terms:

Mr Bradshaw introduced Mr and Mrs Rees to Mr Craig Mitchell of Gateley Wareing. Mr Rees told me that he and Mrs Rees wanted their own firm of solicitors acting for them. They did not want to be reliant on Wedlake Bell, whom they saw as Mercator’s solicitors.

Mr Mitchell was a partner in Gateley Wareing, in the commercial and real estate department, and was the senior partner in the firm’s Leicester office. He attended a lengthy meeting with Mr and Mrs Rees and Mr Bradshaw on 23 April 2002 for the purpose of taking instructions from Mr and Mrs Rees. They told Mr Mitchell what they understood the position to be. They did not have a complete understanding of what that position truly was and it took some time after this meeting before Gateley Wareing could piece together the history of the matter and the rights and obligations of all parties. At this meeting, Mr and Mrs Rees told Mr Mitchell that they controlled the trustees of the Dummer Trust and they therefore controlled Neyland.

Mr Patel was a solicitor in Gateley Wareing’s litigation department in the Leicester office. On 2 May 2002, Gateley Wareing’s log shows that Mr Patel started reading into the paperwork he had been given (presumably by Mr Mitchell) in relation to Mr and Mrs Rees. On 16 May 2002, Mr Rees telephoned Mr Patel and asked if Gateley Wareing could act, otherwise Mr and Mrs Rees would have to go to other solicitors. Mr Patel told him that they should have a meeting to fill in gaps in the information provided to Gateley Wareing.

On 20 May 2002, Mr Mitchell (this time accompanied by Mr Patel) of Gateley Wareing had a further meeting with Mr and Mrs Rees and Mr Bradshaw. The discussion further explored the history of the matter and the various parties’ rights and obligations. The discussion included the position of Primlake and Mr Bradshaw suggested that Neyland should serve a statutory demand on Primlake for (presumably) the monies due to Neyland under its agreement with Primlake. It was known that Mercator administered Neyland and Wedlake Bell acted for Mercator. There was discussion as to how Mercator had “lost control” of Primlake. Mr Matthews’ position was considered. The obligation of Grosvenor to make further payments to Primlake was discussed.

On 21 May 2002, Mr Patel had a long conversation with Mr Vaughan in order to benefit from Mr Vaughan’s knowledge of the history of the matter. A note of the conversation refers to possible proceedings against Primlake and a possible application for a Mareva injunction against Primlake. On 23 May 2002, Mr Patel had a conversation with Mr Rees principally about the sums which might be due from Grosvenor to Primlake.

On 23 May 2002, Mr Patel drafted a letter to be sent to Mr and Mrs Rees dealing with the fees payable to Gateley Wareing. The firm’s log refers to the agreement as a “contingency agreement”. The log also records that Mr Patel asked an assistant solicitor in Gateley Wareing to “check position with Law Society”. The log does not record whether the assistant did then check with the Law Society nor whether she then reported back to Mr Patel. I think it is quite likely that she did check the position with the Law Society. However, there is no evidence as to the question which she might have asked nor as to the answer she might have been given by the Law Society. I add at this point that when Mr Wilson of Gateley Wareing became involved later, in October 2002, he asked Mr Patel if the firm was going to be paid for the work which was to be done. Mr Patel referred to the basis on which the firm was acting and said words to the effect that they had checked the position and that they could act on this basis because they would probably not be “litigating”. There was no suggestion that Mr Patel raised with Mr and Mrs Rees at this stage the ability of Gateley Wareing to act on the basis of a contingency agreement nor as to whether this type of agreement would place any limitations on the type of work which Gateley Wareing could undertake for Mr and Mrs Rees.

On 23 May 2002, Mr Patel wrote to Mr and Mrs Rees the following letter

It is not clear whether the conditions of business were attached to this letter. Although the letter invited Mr and Mrs Rees to sign and return a copy to confirm their acceptance of its terms, they did not do so. However, in their Particulars of Claim in these proceedings, Mr and Mrs Rees asserted that Gateley Wareing were retained by them on the terms set out in that letter.

On 23 or 24 May 2002, Mr Patel wrote to Rees & Freres, the solicitors for Primlake, to Mr Matthews and to Wedlake Bell seeking further information. On 31 May 2002, Rees & Freres wrote to Mr Patel stating that they (on behalf of Primlake) would continue to deal with Wedlake Bell in Guernsey on behalf of Mercator and Neyland. On 6 June 2002, Mr Patel wrote to Rees & Freres stating that the parties should try to avoid litigation. He went on to say that unless matters could be resolved shortly and amicably, he believed that there would be little option but to proceed by way of formal action. He trusted that this would not be necessary but to avoid it, it would be necessary to see co-operation from Mr Matthews and Primlake.

On 7 June 2002, Wedlake Bell faxed to Gateley Wareing a copy of a letter which, on 28 May 2002, Wedlake Bell’s London office had written to Wedlake Bell’s Guernsey office setting out their understanding of certain matters. This letter expressed the view that Neyland needed to be advanced into a position where it had direct control or a controlling influence over the situation with Grosvenor. The way to do that was to enforce or threaten to enforce Neyland’s rights against Primlake. Wedlake Bell’s London office asked for certain information and stated that if Primlake owed substantial sums to Neyland, then Neyland could apply pressure for payment, backed up with threats of proceedings or a winding up of Primlake and there could possibly be a need for injunctive relief. Mr Patel saw this letter on 10 June 2002 when he faxed it on to Mr Rees in Canada. Mr Rees then telephoned Mr Patel to discuss what Wedlake Bell had written. Mr Rees and Mr Patel agreed that Wedlake Bell’s plan of action was not clear.

On 17 June 2002, Mr Patel spoke to Mr Harry of Wedlake Bell’s Guernsey office. Mr Harry explained that he was thinking of an action for an account brought by Neyland against Primlake. Mr Patel told Mr Harry that he was coming under pressure from Mr and Mrs Rees to take some action against Mercator in relation to an alleged loss of control of Primlake.

On 18 June 2002, Mr Mitchell and Mr Patel had a further meeting with Mr and Mrs Rees and Mr Bradshaw. The meeting discussed the position in relation to Grosvenor, Primlake, Mr Matthews and Mercator. A note of the meeting stated that the approach should be to threaten a potential action against Mercator, unless it took action against Primlake and/or Mr Matthews. A potential claim against Mercator was considered in some detail. It was decided to arrange a meeting with Wedlake Bell to agree on a plan of action.

On 27 June 2002, Mr Mitchell and Mr Patel met Wedlake Bell. It was agreed that Wedlake Bell would make a formal demand on Primlake. Wedlake Bell would seek to find an insolvency practitioner who would act as liquidator on a conditional fee basis. Wedlake Bell would themselves act on that basis.

On 3 July 2002, Wedlake Bell wrote to Gateley Wareing stating that the directors of Neyland wished to instruct Wedlake Bell in connection with any application to be made by Neyland. Wedlake Bell had also arranged for an insolvency practitioner to take on the job of liquidator of Primlake on a conditional fee basis. On 4 July 2002, Mr Patel faxed this letter to Mr Rees and discussed it with him.

By 16 July 2002, Mr and Mrs Rees were concerned that no action had been taken by Wedlake Bell on behalf of Neyland against Primlake. They sought further advice from Gateley Wareing on the basis that the shareholders of Neyland had on 12 March 1992 declared that they held those shares on a bare trust for Mr and Mrs Rees. On this basis, Gateley Wareing drafted a letter which Mr and Mrs Rees then signed and sent to Mercator. The letter stated that Mr and Mrs Rees could direct Mercator as to who should act for Neyland. It went on to say that Mr and Mrs Rees wished Neyland to instruct Gateley Wareing to act on its behalf in relation to claims against Primlake.

On 19 July 2002, Mr Gill of Mercator suggested to Mr Patel that Mr and Mrs Rees had misunderstood the position as to the beneficial ownership of the shares in Neyland. On 23 July 2002, Mr Patel and lawyers from Gateley Wareing private client department met Mr and Mrs Rees to discuss, amongst other things, the Dummer Trust and the question of the beneficial ownership of the shares in Neyland. The matter was considered to be unclear and it was left that Mr Patel would chase up Wedlake Bell as to the action they were taking against Primlake.

On 24 July 2002, Mercator replied to Mr and Mrs Rees’ letter of 16 July 2002. Mercator suggested that the position as to beneficial ownership of the shares in Neyland needed to be investigated and that Mr and Mrs Rees should consider the tax consequences of their assertion that they were the beneficial owners. Mercator stated that Wedlake Bell were acting properly and quickly on behalf of Neyland. On 26 July 2002, Mr Patel discussed the position with Mr Rees. It was agreed that the position as to beneficial ownership would be reserved to see how quickly Wedlake Bell acted against Primlake. Mr Patel then contacted Mercator passing on Mr Rees’ decision to allow Mercator/Neyland to continue to act providing urgent action was taken.

On 29 July 2002, Wedlake Bell on behalf of Neyland wrote to Primlake demanding payment of £6,085,360 within 3 working days and threatening a petition to wind up Primlake.

Mr Patel gave evidence that in early August 2002, Mr and Mrs Rees informed him that they had previously agreed with Mr Bradshaw that he would receive “10% of any monies recovered” and they wished to limit the aggregate amount which would be payable to Gateley Wareing and Mr Bradshaw to “10% of such recoveries”. Mr and Mrs Rees told Mr Patel that they had agreed with Mr Bradshaw that his percentage would be reduced from 10% to 5% and they asked Gateley Wearing to reduce their percentage to 5% of net recoveries. Mr Patel agreed to this subject to a provision that Gateley Wareing’s percentage would be subject to review after 23 May 2003.

On 5 August 2002, Mr and Mrs Rees and Mr Bradshaw entered into a formal document called a Deed of Confirmation, which had been drafted by Gateley Wareing. The Deed recited that on or about 23 May 2002, Mr and Mrs Rees and Mr Bradshaw had entered into the agreement set out in schedule 1 to the Deed. The agreement was described as being:

The Deed also recited that Mr and Mrs Rees and Mr Bradshaw wished to “nullify” the Old Agreement and that Mr Rees and Mr Bradshaw had entered into a new fee agreement with Gateley Wareing “in connection with the recovery of monies relating to the sale of development land at Central Park/Coton Park Industrial Estate, Rugby”.

By clause 1 of the Deed, Mr and Mrs Rees (referred to as “DR and GR”) and Mr Bradshaw (referred to as “PB”) agreed that the Old Agreement was null and void. Clause 2 of the Deed provided:

Clause 4 of the Deed contained an acknowledgment that Gateley Wareing (which was not named as a party to the Deed) was entitled to enforce the terms of the Deed under what was described as the Third Party Rights Act 1999.

In Schedule 2 to the Deed was a letter dated 5 August 2002 which set out the Terms of Engagement between Mr and Mrs Rees and Gateley Wareing. Although the letter was dated 5 August 2002, the date of 12 July 2002 was written at the top of the second page of the letter.

The first part of the letter dated 5 August 2002 was identical to the first part of the letter dated 23 May 2002, which I have quoted above. The second part of the letter was the subject of some limited amendments but I will set out the full text relating to the charges which would be made, as follows:

It can be seen that the references to fees of 6.25% and 7.5% in the letter of 23 May 2002 had been removed. Further, for some reason, the letter of 5 August 2002 did not repeat the statement in the letter of 23 May 2002 that Mr and Mrs Rees would be charged for disbursements and expenses which were incurred.

The letter of 5 August 2002 ended with the following words, below which Mr and Mrs Rees signed their names (and dated their signatures as at 5 August 2002):

Gateley Wareing’s conditions of business were attached to the letter dated 5 August 2002. Those conditions ran to 6 closely printed pages. The conditions stated that Gateley Wareing believed that it was important to establish a clear understanding of the basis upon which they provided their services. It was claimed that the conditions and any accompanying letter aimed to do just that. However, the conditions went on to state that there might be parts of the conditions which were not immediately relevant to the work in question. Under the heading “Instructions”, the conditions stated:

It is now necessary to summarise the various sets of proceedings and the other disputes which are relevant to the issues arising in the present case. In particular, I will summarise the position in relation to:

the proceedings to wind up Primlake;

Mr Matthews’ claim in the county court;

the claim against Mr Foreshew;

the claim against Mr Matthews;

the dispute with Grosvenor;

the termination of Gateley Wareing’s retainer;

the claim against Mercator/Mr Rowe;

the claim against Wedlake Bell; and

the claim against Gateley Wareing.

I referred earlier to the letter of demand dated 29 July 2002 sent by Wedlake Bell, as solicitors for Neyland, to Primlake. Primlake did not pay the sum demanded and on 9 August 2002, Neyland presented a petition in the Companies Court in London to wind up Primlake. The petition was heard on 2 October 2002 when Registrar Baister made an order that Primlake be wound up. Mr Cooper and Mr Squires of Kroll, later called Kroll Buchler Philips, were appointed liquidators with effect from 23 October 2002. These liquidators were later replaced by Mr Wild and Mr Carter-Kelly of Baker Tilly with effect from 9 June 2008.

On 4 April 2003, Mr Matthews suing in the name “Matthews Associates” brought proceedings in the Leicester County Court against Mr Rees claiming £4,940 as fees allegedly due from Mr Rees to Matthews Associates for professional services in relation to the sale of another area of farm land, Middle Poultney Farm, in accordance with a fee account dated 8 November 2001. Gateley Wareing acted for Mr Rees in relation to this claim. They settled a Defence on 28 April 2003. They acted for Mr Rees at a hearing before a deputy district judge in the county court on 14 August 2003. The judge awarded Mr Matthews £400 on a quantum meruit basis and costs of £200. Gateley Wareing also acted for Mr Rees on an appeal against this decision. The appeal was allowed by a circuit judge at a hearing on 13 November 2003 and an order for costs was made in favour of Mr Rees when his costs were summarily assessed in the sum of £1,536.26.

Gateley Wareing’s records show the detail of a considerable amount of work done by that firm, on behalf of Mr Rees, in relation to these county court proceedings, in the period from April to November 2003. Mr Patel stated in his witness statement that Gateley Wareing acted for Mr Rees in relation to these proceedings on the basis of a separate fee agreement but they had not been able to find a copy of that fee agreement. Mr Patel was cross-examined about this alleged fee agreement when he was re-called to give evidence (in the circumstances which I will later describe). He said that he thought that he would have written to Mr Rees setting out the terms on which Gateley Wareing were prepared to act for him. Although the documents included a detailed log of all time spent on these county court proceedings, Mr Patel was not able to identify in that log any reference to a letter of this kind about fees in relation to those proceedings. Gateley Wareing did prepare a statement of costs for the hearing on 14 August 2003 and a separate statement of costs for the hearing on 14 November 2003. The first statement came to a total of some £10,500 and the second came to a total of some £3,000. Both statements recorded that the costs therein set out did not exceed the costs which Mr Rees was liable to pay in respect of the work covered by the statement. Mr Matthews paid the sum of £1,536.26 which he was ordered to pay in relation to costs. I was not shown any bill from Gateley Wareing to Mr Rees in relation to the costs of these proceedings. They certainly did not ask Mr Rees to pay any costs in excess of the sum recovered from Mr Matthews.

Prima facie, the work done by Gateley Wareing in relation to the county court proceedings did not fall within the description of the work to be done pursuant to the agreement of 5 August 2002. The work done was not in relation to the development project concerning the land. It may well be that Mr Matthews brought the county court proceedings because he knew that proceedings might be brought against him in relation to the development project concerning the land and he thought that the county court proceedings would be tactically beneficial to him. Nonetheless, it does not seem to me that the work done by Gateley Wareing in relation to the county court proceedings can fairly be brought within the express terms of the agreement of 5 August 2002. Further, it is not easy to apply the agreement that Gateley Wareing would receive 5% of recoveries to a claim where Mr Rees was the defendant.

If it is necessary to make a finding as to the basis on which Gateley Wareing acted for Mr Rees in relation to the county court proceedings, I would hold as follows. The work done by Gateley Wareing in relation to those proceedings was not done pursuant to the agreement of 5 August 2002. It was not done pursuant to a conditional fee agreement of any kind, enforceable or unenforceable. It was done on the basis that in law Gateley Wareing were entitled to charge for their work but neither they nor Mr Rees expected that any charge in excess of any costs recovered from Mr Matthews would ever be made.

Mr Foreshew was a solicitor, trading as Tussauds solicitors, who acted for Primlake in relation to the Deed of Variation dated 12 December 1997, to which I earlier referred. Mr and Mrs Rees considered that in various respects Mr Foreshew had been negligent in relation to the advice he had given, or had failed to give, Primlake in relation to the entry into that Deed of Variation. They were very keen for proceedings for damages for professional negligence to be issued against him.

Mr and Mrs Rees pressed Gateley Wareing to bring about the issue of proceedings against Mr Foreshew. Such proceedings could be issued by Primlake acting through its liquidator or by Mr and Mrs Rees themselves, using Gateley Wareing as their solicitors, following an assignment by the liquidator to Mr and Mrs Rees of the alleged cause of action against Mr Foreshew.

In due course, the liquidator did assign to Mr and Mrs Rees the alleged cause of action against Mr Foreshew. Gateley Wareing dated the assignment the 27 February 2004, although in truth the assignment was not executed until a later date. On 27 February 2004, Gateley Wareing brought proceedings in the name of Mr and Mrs Rees claiming damages for negligence from Mr Foreshew and Tussauds and naming as a defendant another firm with which Mr Foreshew was connected.

In June 2004, Gateley Wareing instructed counsel to settle Particulars of Claim in the action against Mr Foreshew and there was a telephone conference with counsel on 18 June 2004. Counsel duly settled Particulars of Claim and the Claim Form and Particulars of Claim were served on the defendants on 23 June 2004.

On 7 September 2004, Mr Foreshew served a Defence asserting that he had in fact given the advice which it was alleged that he had failed to give. Thereafter, he applied for summary judgment dismissing the claim. The hearing of that application was fixed for 15 December 2004 but shortly before that date, Gateley Wareing on behalf of Mr and Mrs Rees discontinued the claim. In April 2005, Gateley Wareing agreed that the sum of £25,000 was payable to Mr Foreshew in settlement of his entitlement to costs.

An issue arose at the trial as to the basis on which Gateley Wareing were acting for Mr and Mrs Rees in relation to these proceedings against Mr Foreshew. Initially, it appeared to be accepted that Gateley Wareing were not acting under the agreement of 5 August 2002 but were acting under a separate conditional fee agreement (a “CFA”). Mr Patel said as much in his first witness statement. However, in the course of Mr Fenwick’s closing submissions, he submitted that Mr and Mrs Rees entered into a CFA on 24 August 2004 (and not before) so that the work which was done by Gateley Wareing before that date, in particular in and for the purpose of the proceedings which were begun on 27 February 2004, was not covered by the CFA but must have been done under the agreement of 5 August 2002. This submission, if I were to accept it, could have had a significant bearing on the overall result in this case, as will be seen when I later discuss the legal position.

Counsel for Gateley Wareing submitted that this submission was not open to Mr and Mrs Rees in view of the pleadings and more particularly the evidence which Mr and Mrs Rees had indicated that they would rely upon in accordance with the directions of Norris J. He submitted that I should give a ruling to that effect. Conversely, counsel for Mr and Mrs Rees submitted that not only was the point open to Mr and Mrs Rees but that I should decide the case on the basis of the evidence given up to that point and that I should refuse to permit Gateley Wareing to call further evidence as to the position. Having heard these submissions, I ruled that the point was open to Mr and Mrs Rees but that it would be unfair to Gateley Wareing to prevent them from calling further evidence to deal with the point. I stated that I would give my reasons for this ruling in my judgment on the case as a whole.

In the course of submissions on this procedural point, I was taken in detail to the pleadings, the order of Norris J (in which he directed the parties to identify which parts of the lengthy witness statements which had been served in relation to the combined claim and counterclaim were to be relied upon in relation to the trial of the counterclaim alone) and the resulting revised witness statements. I considered that the point being made on behalf of Mr and Mrs Rees was within their pleaded case and they had not done anything, in compliance with the directions of Norris J, which precluded them from taking the point, if it were otherwise available to them on the evidence at the trial. Mr and Mrs Rees were able to point to the fact that it was only at the trial that they received more detailed information from Gateley Wareing as to the work done by them in relation to the Foreshew claim, although it is also correct that the basic matters which allowed Mr and Mrs Rees to make the relevant submission had been disclosed at an earlier time. As to the application by Gateley Wareing to call further evidence, the point made by counsel for Mr and Mrs Rees in closing submissions had not been specifically identified earlier and had not been explored in the course of the evidence and I was asked to make findings of fact based on inference. Gateley Wareing submitted that they should be permitted to call evidence as to the true factual position so that the court did not have to draw inferences in the absence of such evidence. It seemed to me that as:

the point could be decisive;

it had not been explored in the evidence, through no fault of Gateley Wareing; and

it could be dealt with at a further short hearing;

I can now refer to the evidence and make my findings as to the matters which are relevant to the submission that the work done by Gateley Wareing before 24 August 2004, in relation to the proceedings against Mr Foreshew, was done under the agreement of 5 August 2002.

For this purpose, I start with the CFA dated 24 August 2004. This was a detailed written agreement running to some 14 pages. Mr and Mrs Rees saw a draft of this agreement for the first time when they went to Gateley Wareing’s offices on 24 August 2004, the day on which they signed the agreement. The agreement is a CFA in relation to the proceedings against Mr Foreshew. The CFA provided for a success fee of 100%. Gateley Wareing were entitled to be paid the basic fee and the success fee in the event that they won their case but irrespective of the amount of any award of damages and irrespective of whether they recovered any monies from the Defendants. The CFA only applied to work done from 24 August 2004. The agreement recited that Gateley Wareing had explained the agreement to Mr and Mrs Rees before they were asked to sign it.

It is clear that the CFA of 24 August 2004 did not deal with the basis on which Gateley Wareing acted in the Foreshew proceedings before that date. The question therefore arises as to the basis on which Gateley Wareing were acting in and for the purposes of those proceedings before that date. In particular, were they acting in accordance with the terms of the agreement of 5 August 2002?

Mr Patel’s first witness statement did not offer any explanation of the basis on which Gateley Wareing were acting in and for the purposes of the Foreshew proceedings before 24 August 2004. Mr Rees’ first witness statement, acknowledged that he and Mrs Rees had entered into a CFA in relation to those proceedings. He described the agreement as one: “which did not provide a percentage fee, and we only paid if we won”. This statement suggests that, at the time he signed his witness statement, Mr Rees understood the difference between the basis of the fees payable under the agreement of 5 August 2002 and the basis of the fees payable under the CFA.

Mr Patel’s second witness statement referred in detail to discussions which he alleges he had with Mr and Mrs Rees as to the possibility of the liquidator assigning to Mr and Mrs Rees Primlake’s cause of action against Mr Matthews and/or against Mr Foreshew, so that Gateley Wareing could act for Mr and Mrs Rees in proceedings against Mr Matthews and/or Mr Foreshew. Mr Patel’s second witness statement referred to the occasions when he expressly explained to Mr and Mrs Rees that if Mr and Mrs Rees could not fund those proceedings and in particular pay Gateley Wareing’s fees in respect of those proceedings, Gateley Wareing could not conduct the litigation under the agreement of 5 August 2002 but could, and would be prepared to, conduct the litigation on a CFA basis.

It is clear from all of the evidence, and from the documents specifically relied upon by Mr Patel, that Mr and Mrs Rees were not in a position to fund the litigation against Mr Matthews or Mr Foreshew on a conventional basis and it was further clear that Mr and Mrs Rees knew that if Wedlake Bell were to act for the liquidators of Primlake in proceedings brought by it against Mr Matthews or Mr Foreshew, it would be on a CFA basis. Mr Patel states that he explained Gateley Wareing’s position to Mr and Mrs Rees at meetings on 8 April 2003, 19 or 22 December 2003 and 23 December 2003. Mr Patel was not able to point to a document from around this time which recorded a discussion with Mr and Mrs Rees in which he explained: (1) that Gateley Wareing could not conduct litigation against Mr Matthews or Mr Foreshew under the agreement of 5 August 2002; and (2) that Gateley Wareing could, and would be prepared to, conduct such litigation on a CFA basis. Conversely, there is no document which contradicts Mr Patel’s evidence as to what was discussed.

Mr Patel sought to explain why there was delay in Gateley Wareing asking Mr and Mrs Rees to sign a CFA. He referred to the perceived urgency of issuing proceedings against Mr Foreshew, the fact that Gateley Wareing did not have the documents which were relevant to those proceedings, the need to obtain those documents and to instruct counsel and to serve the proceedings. Their log of the work done shows that immediately after the claim form was served on Mr Foreshew, Mr Patel’s assistant (on 24 June 2004) began drafting a CFA. Not much happened until Mr Patel began to consider the terms of a CFA on 30 July 2004 and Mr and Mrs Rees signed a CFA on 24 August 2004.

Following this further evidence given by Mr Patel, Mr Rees also gave evidence. He stated that he was not really able to comment on Mr Patel’s second witness statement. He said that he had some recollection of the assignment of the cause of action against Mr Foreshew but “none at all” in relation to the CFA of August 2004. He then suggested that he had not understood until a few days earlier that there was a difference between the agreement of 5 August 2002 and a CFA. That suggestion is contrary to what he had said in his first witness statement when referring to the CFA of 24 August 2004. Mrs Rees also prepared a further witness statement in which she said that she did not remember much about the CFA of 24 August 2004 and in particular she could not remember signing it. She was not cross-examined on this further statement.

I am concerned that Mr Patel’s account of the discussions he had with Mr and Mrs Rees is not directly supported by anything in the detailed log of the work done, nor in the other contemporaneous documents. It seems to me that an explanation as to why Gateley Wareing could not act in litigation on the basis of the agreement of 5 August 2002 would have been an important matter that I would have expected to see referred to in a contemporaneous document. Further, when he gave his evidence Mr Patel explained that if the liquidator of Primlake sued Mr Matthews or Mr Foreshew and instructed Wedlake Bell on a CFA for that purpose, Mr and Mrs Rees would end up being worse off, as compared with the cause of action being assigned to Mr and Mrs Rees who could instruct Gateley Wareing to act on a CFA in the ensuing litigation. Mr and Mrs Rees would be worse off because Gateley Wareing could charge 5% of the recoveries in the first case but not in the second. If that had been explained to Mr and Mrs Rees, then I consider that matter would have been of importance to them and it is surprising that it was not referred to in any contemporaneous document.

Having considered Mr Patel’s evidence with some scepticism, I am nonetheless prepared to accept what he told me. I found Mr Patel to be an honest witness genuinely doing his best to remember the events, even though they were a long time ago; it is relevant that he is no longer employed by Gateley Wareing. Further, I accept Mr Patel’s evidence that he knew that Gateley Wareing could not act on behalf of Mr and Mrs Rees in litigation in which Mr and Mrs Rees were parties on the terms of the agreement of 5 August 2002; this makes it inherently probable that Mr Patel would have explained to Mr and Mrs Rees that fact. I do not consider that the fact that the relevant discussions are not referred to in contemporaneous documents is so powerful that it would justify me in rejecting Mr Patel’s specific evidence as to the same.

These findings of fact do not justify a finding that the work done by Gateley Wareing before 24 August 2004 was done under an enforceable CFA. However, I consider that my findings do justify the different finding that it was agreed between Mr and Mrs Rees and Gateley Wareing, before the commencement of the proceedings against Mr Foreshew, that the work which was to be done by them in and for the purposes of those proceedings was not being done under the agreement of 5 August 2002.

On 11 December 2003, Primlake acting through its liquidator brought proceedings against Mr Matthews, Mrs Matthews and Matthews Associates. For convenience, I will refer to this litigation as if it had been against Mr Matthews alone. The proceedings were served on 12 April 2004 and were defended. The claim was tried by Lawrence Collins J (as he then was) over 16 days in January and February 2006 and the judge gave a lengthy judgment on 26 May 2006. The neutral citation of the judgment is [2006] EWHC 1227 (Ch) and it is reported at [2007] 1 BCLC 666. In view of the fact that the judgment is readily available, I consider that I need not set out the detail of all of the allegations made by Primlake and the judge’s findings. In summary, the judge held that Mr Matthews was liable to pay to Primlake the sum of £836,500 (which he had wrongly taken from Primlake), together with compound interest.

Although Primlake was successful in obtaining judgment against Mr Matthews it was less successful in recovering from him the sums adjudged to be due to it. Mr Matthews was adjudicated bankrupt and Primlake made only modest recoveries (about £260,000) pursuant to the judgment in its favour.

Indeed, Primlake’s litigation against Mr Matthews was not productive overall. This was principally due to the fact that Primlake was liable for substantial fees payable to its lawyers. Primlake had retained Wedlake Bell on a CFA. Under the CFA, Primlake was liable to pay Wedlake Bell a basic fee and a success fee of 100%. Wedlake Bell submitted a bill to Primlake for a sum in excess of £1 million. On 20 August 2009, Wedlake Bell agreed with Primlake to accept the sum of £800,000 in settlement of its bill. In addition, Wedlake Bell were to be entitled to a further sum of about £4,000 held in its client account. The terms of settlement as recorded in a letter of 20 August 2009 were expressly subject to a reservation of the right of the liquidator of Primlake to bring an action against Wedlake Bell for negligence or breach of contract; in turn, that letter recorded that Wedlake Bell denied any such allegation. If one drew a line at that point and compared Primlake’s recoveries from Mr Matthews with the fees of £800,000 (plus some £4,000) payable to Wedlake Bell and all other fees and disbursements by Primlake, Primlake’s net position was that it was worse off to the tune of £734,476.23 as a result of the litigation against Mr Matthews. I take this figure from the letter dated 3 October 2013 from Mr and Mrs Rees’ solicitors to the solicitors for Gateley Wareing and from footnote 54 of the skeleton argument of counsel for Gateley Wareing.

There is an issue as to whether to draw the line at 20 August 2009. Gateley Wareing submit that the line should not be drawn at that date. They submit that one needs to see what happened later. I will describe in more detail later in this judgment the proceedings which Primlake subsequently brought against Wedlake Bell. In summary, at this point in the judgment, I refer to the fact that following the issue of proceedings by Primlake against Wedlake Bell the claim was settled on 4 September 2012 (subject to the sanction of the court, which was later given) on terms that Wedlake Bell would pay Primlake the sum of £900,000 plus costs to be assessed on the standard basis. Primlake incurred certain irrecoverable costs in these proceedings so that the net benefit of this settlement to Primlake was £700,000. Accordingly, if one draws the line as at the date of this settlement in 2012, the overall outcome of the Matthews’ litigation taking account of both the sums payable to Wedlake Bell under the agreement of 20 August 2009 and the sums payable by Wedlake Bell under the 2012 settlement was negative in the sum of £34,476.23.

The documents disclose much as to the work which Gateley Wareing did in connection with the Matthews litigation. Mr Patel also gave evidence as to the work done. I will now summarise the more important parts of that evidence.

Primlake’s claim against Mr Matthews was conducted by Wedlake Bell on a CFA. However, in other respects Mr and Mrs Rees funded that litigation. They did so because they considered that they would be, indirectly, the primary beneficiaries in relation to any recoveries from that litigation. On 8 April 2004, Mr and Mrs Rees agreed to indemnify the liquidator of Primlake against any adverse costs and gave initial security of £10,000 in respect of that indemnity. On 23 August 2004, Mr Matthews applied for security for costs. Wedlake Bell explained to Gateley Wareing that the court was likely to consider Mr and Mrs Rees as potential funders of the litigation. Mr and Mrs Rees’ instructions were that they were not in a position to fund the claim. Gateley Wareing took instructions from Mr and Mrs Rees and prepared witness statements setting out their financial position. The security for costs application was heard on 24 February 2005 and Primlake was ordered to give security in the amount of £75,000. Mr and Mrs Rees decided to provide the security by way of procuring a bank guarantee. Accordingly, Gateley Wareing acted for Mr and Mrs Rees and advised them in relation to these matters as to the funding of the Matthews litigation.

In addition, Mr and Mrs Rees wanted Gateley Wareing to oversee Wedlake Bell’s conduct of the claim against Mr Matthews and Gateley Wareing did so in a number of ways. They sought to shadow what Wedlake Bell were doing, to make sure that Mr and Mrs Rees were informed of the various steps being taken and to advise them on those matters. Mr and Mrs Rees also wanted Gateley Wareing to keep pressure on Wedlake Bell and to make sure that Wedlake Bell conducted the litigation in the way that Mr and Mrs Rees wanted it to be conducted.

In August 2004, Gateley Wareing discussed with Mr and Mrs Rees the Defence and Counterclaim served by Mr Matthews. On 13 August 2004, Wedlake Bell wrote to Gateley Wareing referring to discussions which had taken place as to Gateley Wareing carrying out some of the solicitors’ work in relation to the Matthews litigation. Wedlake Bell suggested the possibility of an agreement under which Gateley Wareing would act as agent for Wedlake Bell. The suggestion was that such work might be done on a conditional fee basis. That would have the advantage that the costs could then be claimed against Mr Matthews if an order for costs were made against him. In the event, Wedlake Bell did not appoint Gateley Wareing as their agent and Gateley Wareing did not enter into a CFA with Primlake. It must follow that they continued to do the work they did in relation to the Matthews litigation on the basis of their fee agreement with Mr and Mrs Rees.

In late August 2004, Mr and Mrs Rees were expecting to attend a conference with counsel acting for Primlake in the Matthews litigation. In order to assist counsel, Gateley Wareing prepared statements on behalf of Mr and Mrs Rees dealing with the issues of fact in that litigation. They also selected correspondence which they suggested would be helpful to counsel. On 31 August 2004, they sent the statements and the selected correspondence to Wedlake Bell.

In May 2005, Wedlake Bell asked Gateley Wareing to assist in collating Mr and Mrs Rees’ documents for the purposes of disclosure in the Matthews litigation and they did so.

In October 2005, Gateley Wareing prepared instructions to leading counsel to advise in relation to the Matthews litigation. The instructions bore the heading of the Primlake claim against Mr Matthews. The instructions enclosed a set of the contractual documents, the pleadings and various witness statements (although none from Mr and Mrs Rees). The instructions stated that Gateley Wareing’s clients were Mr and Mrs Rees and counsel was asked to advise them in conference on 19 October 2005, with Mr Rees and Mr Patel in attendance. The instructions referred to the possibility of leading counsel being instructed on behalf of Primlake at the forthcoming trial. This conference with leading counsel duly took place. Gateley Wareing then pressed Wedlake Bell to instruct counsel chosen by Mr and Mrs Rees and Wedlake Bell ultimately did so.

Primlake was in dispute with Grosvenor for a substantial period as to the amount payable by Grosvenor to Primlake under the various contractual documents between those parties. I was given very little information as to how that dispute was handled because the treatment of the outcome of that dispute is essentially agreed for the purposes of the Counterclaim. It is agreed that the dispute was settled, in or around March 2008, on terms that Grosvenor was to pay Primlake £1.7 million which, after Primlake paid its costs of £118,633.80 of dealing with that dispute, left Primlake with £1,581,366.20. It is also agreed, in the terms of the Second Issue that a causal link of the requisite scope and nature (if any causal link is requisite) is established in relation to Gateley Wareing’s entitlement to include this sum as an ingredient in the recoveries by Mr and Mrs Rees for the purposes of the fee agreement of 5 August 2002. The settlement with Grosvenor came after the termination of Gateley Wareing’s retainer, to which I later refer. It is also agreed that the dispute between Primlake and Grosvenor did not involve the issue of any proceedings by Primlake or anyone else.

On 29 January 2007, Mr Patel of Gateley Wareing met Mr and Mrs Rees to discuss matters generally. There was due to be a further meeting between them on 1 March 2007 but Mr and Mrs Rees cancelled that meeting. At around this time, Mr and Mrs Rees consulted new solicitors, K & L Gates, and this firm wrote to Gateley Wareing on 19 March 2007. It is accepted that this letter effectively terminated Mr and Mrs Rees’ retainer of Gateley Wareing.

After the termination of Gateley Wareing’s retainer, Primlake and its liquidator brought proceedings against Mercator and Mr Rowe. Gateley Wareing played no part in relation to those proceedings. However, Gateley Wareing rely upon certain facts as to their involvement before March 2007 which I will now describe.

Gateley Wareing gave advice to Mr and Mrs Rees on a number of occasions, from May 2002 onwards, as to the potential liability of Mercator and Mr Rowe. Later, Gateley Wareing instructed leading counsel to advise Mr and Mrs Rees as to the claims which they might have against Mercator. Further, Gateley Wareing attended conferences on the same subject matter with the junior counsel who acted for Primlake in the Matthews litigation. These conferences were on 7 November 2005 and 1 August 2006. Between 1 August 2006 and the end of that year, Gateley Wareing advised Mr and Mrs Rees on a number of further occasions as to possible claims against Mercator and Mr Rowe. At that time, Mr Rees was either unwilling or unable (due to lack of funds) to litigate against Mercator and Mr Rowe. That remained the position until the termination of Gateley Wareings’ retainer.

On 18 October 2007, the Companies Court gave permission to the then liquidator of Primlake to bring misfeasance proceedings against Mercator and Mr Rowe in respect of the monies which Mr Matthews had taken from Primlake, and the removal of the cap on infrastructure costs, and also negligence proceedings against Mercator for failure to supervise or monitor the affairs of Primlake so as to ensure that it did not make payments to Mr Matthews that it was not legally obliged to make. On 9 June 2008, the original liquidator of Primlake was replaced by a new liquidator and on 17 October 2008, the Companies Court gave the new liquidator permission to bring misfeasance proceedings against Mercator and Mr Rowe for, amongst other things, failing to ensure there was an express term governing the apportionment of the costs of the infrastructure works and negligence proceedings against Mercator for failure to supervise or monitor the affairs of Primlake so as to ensure that it did not enter into contracts that were contrary to its interests.

Primlake and its liquidator duly brought proceedings against Mercator and Mr Rowe but, following a mediation, the claims were settled on 13 November 2009 (subject to the sanction of the court, which was later obtained) on terms that Mercator would pay Primlake £2.3 million and Mr Rowe would pay Primlake £250,000. After allowing for costs of £443,477.99, Primlake received the net figure of £2,106,522.01.

I referred earlier to the fact that Wedlake Bell acted for Primlake in the litigation against Mr Matthews and that on 20 August 2009, Primlake agreed the amount of the fees payable to Wedlake Bell, subject to reserving its right to sue Wedlake Bell for negligence or breach of contract. On 21 July 2009, Primlake did sue Wedlake Bell for damages for negligence. Primlake alleged that Wedlake Bell had a conflict of interest in advising it and acting for it at a time when Wedlake Bell owned one-third of the shares in Mercator. Primlake further alleged that Wedlake Bell had failed to advise Primlake as to the proceedings which it should have issued in relation to recovery of the monies which Mr Matthews had taken from Primlake; in this respect, it was alleged that Wedlake Bell should have advised Primlake to take proceedings against Mercator and Mr Rowe and others and that those proceedings should have included claims arising out of the removal of the cap on infrastructure costs by the Deed of Variation of 12 December 1997.

I referred earlier to the fact that these proceedings against Wedlake Bell were settled on terms that Wedlake Bell would pay Primlake the sum of £900,000 plus costs to be assessed on the standard basis and that, after allowing for certain irrecoverable costs, the net benefit of this settlement to Primlake was £700,000.

In 2011, Mr and Mrs Rees issued the present proceedings in which they claimed damages for negligence from Gateley Wareing. The Particulars of Claim pleaded that Mr and Mrs Rees had retained Gateley Wareing to monitor the activities of the liquidator of Primlake and to supervise the activities of Wedlake Bell. It was alleged that Gateley Wareing had not given Mr and Mrs Rees proper advice in relation to the agreement as to fees contained in the letters of 23 May 2002 and 5 August 2002. There were further allegations of negligence which included contentions which were broadly similar to the allegations which Mr and Mrs Rees had made in the proceedings against Wedlake Bell.

On 18 September 2013, Mr and Mrs Rees’ claim against Gateley Wareing was settled on terms that Gateley Wareing were to pay the sum of £1.65 million. It was expressly agreed that this settlement did not dispose of the Counterclaim which is now the subject of this judgment.

By his order of 19 November 2013, Norris J directed that the trial of the Counterclaim should be limited to the determination of five issues as defined in the order. It is convenient to set out and then consider those five issues in a slightly different sequence to that set out in the order. In the revised sequence, and with some minor textual re-arrangement to reflect the different sequence, but otherwise as ordered by the judge, the issues are:

Norris J directed the parties to serve pleadings to elucidate the claim made by Gateley Wareing and Mr and Mrs Rees’ response to it. The parties duly complied with those directions. In connection with the Fifth Issue, Norris J directed Gateley Wareing to serve their best estimate of the likely amount of their bill of costs if it were held that they were entitled to charge for the work they did by reference to their hourly rates and also as to the likely amount of their bill if they were entitled to charge by reference to the value of their services on a quantum meruit.

The case put forward by Gateley Wareing referred to the phrase “any monies recovered on your behalf” in the letter of 5 August 2002. They then referred to the sums which Primlake received from Grosvenor, the negative return from the Matthews litigation and the sums which Primlake received as a result of the settlement of the Mercator/Rowe and the Wedlake Bell litigation. It was said that all these matters should be combined to assess the monies recovered on behalf of Mr and Mrs Rees. Gateley Wareing recognised, and asserted, that the letter of 5 August 2002 did not refer to monies recovered by Primlake, but to monies recovered on behalf of Mr and Mrs Rees. However, the net recoveries by Primlake allowed the liquidator of Primlake to pay a dividend to Primlake’s creditors and Neyland was the only or principal creditor. Monies received by Neyland would be available to be paid by way of dividend to its shareholders and, in this way, the dividend so paid would be received by the trustees of the Dummer Trust. Those trustees would be expected to remit the monies received to Mr and Mrs Rees or otherwise act in accordance with the wishes of Mr and Mrs Rees as to the use of those monies. In this way, Gateley Wareing contended that the net sums which came into Primlake in the way described above were to be equated with “any monies recovered on your behalf” (i.e on behalf of Mr and Mrs Rees) in the letter of 5 August 2002. Gateley Wareing contend that the agreement of 5 August 2002 is an enforceable non-contentious business agreement and it is not rendered unenforceable by the provisions which deal with conditional or contingency fees, nor by the common law.

In accordance with the direction that Gateley Wareing provide best estimates of their bill on the basis of an hourly rate and on the basis of a quantum meruit, Gateley Wareing served a detailed breakdown of costs on both bases. On the hourly rate basis, the total figure is £229,750 and on a quantum meruit basis the total figure is £206,775. It should be noted that Gateley Wareing’s case based on the agreement of 5 August 2002 would result in a bill for a lower figure. Gateley Wareing accept that they if they wish to pursue recovery of their fees they are obliged to raise and deliver a bill of costs under section 69 of the Solicitors Act 1974 and that Mr and Mrs Rees are entitled to seek an assessment of those fees.

Mr and Mrs Rees’ case accepted part of the reasoning relied upon by Gateley Wareing. It was accepted that the monies received by Primlake from Grosvenor could be taken into account when considering the monies recovered on behalf of Mr and Mrs Rees. It was also asserted that the negative return from the Matthews litigation should be taken into account. To calculate this negative return, Mr and Mrs Rees contended that one took into account the recoveries from Mr Matthews and all the fees and charges in relation to the Matthews litigation and in particular the sum payable to Wedlake Bell pursuant to the fees settlement agreement of 20 August 2009. It was said that one left out of account the sum payable by Wedlake Bell to Primlake pursuant to the settlement of 4 September 2012. It was further contended that the sums received by Primlake as a result of the settlement of the Mercator/Rowe and Wedlake Bell litigation were not relevant to the computation of “any sums recovered on your behalf” in the letter of 5 August 2002. Finally, Mr and Mrs Rees contended that the costs of Crowe Morgan, who had managed and administered Neyland and the Dummer Trust since the replacement of Mercator, represented a cost which should be deducted from the sum which would otherwise be within “any monies recovered on your behalf”. These costs amounted to £45,750.32. Gateley Wareing dispute this suggested deduction.

Apart from Mr and Mrs Rees’ contentions as to the true interpretation of the agreement of 5 August 2002 and its application to the events which have happened, they also submit that this agreement is not a non-contentious business agreement and it is rendered unenforceable by the provisions which deal with conditional or contingency fees or by the common law. If these further submissions for Mr and Mrs Rees were correct, then it would follow that Gateley Wareing are not entitled to any sum under that agreement. However, Mr and Mrs Rees have carried out a calculation of what might be due to Gateley Wareing on the basis of their primary case as to how the agreement applies to the events concerning Grosvenor and Wedlake Bell. They have calculated that the sum payable to Gateley Wareing on that basis is approximately £37,350. On 9 October 2013, Mr and Mrs Rees’ solicitors sent to Gateley Wareing’s solicitors a cheque for this sum. Gateley Wareing were to be permitted to accept this cheque unconditionally; they were not required to give up their larger claim as a condition of acceptance. Gateley Wareing have banked the cheque but have continued with their larger claim. If I were to accept the case for Mr and Mrs Rees that the agreement of 5 August 2002 was unenforceable, then they will not seek to recover their payment of £37,350.

It is convenient to discuss together the many points raised by the First and Second Issues, before considering the questions of enforceability raised by the Third and Fourth Issues. Although these issues as drafted refer to the agreements of 23 May 2002 and 5 August 2002, it is accepted that the agreement of 5 August 2002 replaced the earlier set of terms and so the matter is governed by the terms of the agreement of 5 August 2002 alone.

The First and Second Issues raise questions as to the true interpretation of the agreement of 5 August 2002 and its application in the events which have happened. Before addressing the disputed matters which arise in relation to the First and Second Issues, it is convenient to consider how much of Gateley Wareing’s claim can be dealt with on the basis of the common ground between the parties.

Mr and Mrs Rees accept that the sum of £1,581,366.20 payable by Grosvenor to Primlake should be taken into account. Both sides accept that the negative return in relation to the Matthews litigation should be taken into account to reduce the amount of monies which are considered as having been recovered. This gives rise to a discrete question: what is that negative amount and, in particular, does one draw a line as at 20 August 2009 or as at 4 September 2012?

Mr and Mrs Rees contend that at the end of the Matthews litigation, they were seriously out of pocket. They were to receive modest recoveries from Mr Matthews and they would have a substantial bill for fees from Wedlake Bell. Those fees were payable because Mr and Mrs Rees had “won” the Matthews litigation, irrespective of whether they recovered anything from Mr Matthews. It is said that the fees payable to Wedlake Bell were quantified by the settlement agreement of 20 August 2009. That allowed one to calculate the amount of the negative return from the Matthews litigation. Whilst it is true that Primlake later sued Wedlake Bell and settled the damages payable by Wedlake Bell on 4 September 2012, that settlement was only produced by a fresh round of proceedings and Gateley Wareing played no part in those further proceedings.

Gateley Wareing contend that there is no reason to draw a line as at 20 August 2009. Before Gateley Wareing’s retainer was determined in March 2007, Primlake had obtained judgment against Mr Matthews and had instructed Wedlake Bell on a CFA. When the retainer was determined in March 2007, there remained a number of steps to be taken to determine the overall outcome for Primlake and for Mr and Mrs Rees of the Matthews litigation. The fact that those matters were only resolved after March 2007 is not material. Mr and Mrs Rees accept that one can have regard to the later settlement as to fees on 20 August 2009. There is no reason to have regard to that settlement but to disregard the settlement of 4 September 2012. They point to the fact that the settlement of 20 August 2009 expressly reserved Primlake’s right to sue Wedlake Bell for damages for negligence in relation to the way they had advised and acted for Primlake in relation to the litigation which they handled. Primlake did in the event sue Wedlake Bell and received a sum in respect of the damages claimed. If Primlake had not settled the amount of the fees (subject to the possibility of a further claim) on 20 August 2009 but Wedlake Bell had sued for their fees and Primlake had counterclaimed damages for negligence, the overall result would have been the same as was produced by the net effect of the two settlements taken together. Primlake’s claim to damages from Wedlake Bell was a true equitable set off available to reduce the amount of fees payable to Wedlake Bell; it was not an independent cross-claim.

I consider that Gateley Wareing are right as to the correct approach to this point essentially for the reasons which they put forward and which I have summarised above in my own words. It seems to me that it does not matter that the working out of the financial consequences of the Matthews litigation took place after the determination of the Gateley Wareing retainer; this consideration applies to both the settlement of 20 August 2009 and that of 4 September 2012. It is not a relevant consideration that Gateley Wareing did not act in any way in relation to the matter after their retainer was terminated in March 2007. It is true that they did no work in relation to the settlement of 20 August 2009 when the fees were negotiated downwards to £800,000 from a sum in excess of £1 million, but nobody says that the relevant figure is the higher figure. I consider that similar reasoning must apply to the later proceedings which quantified the amount of what was in law a set off against the fees liability. I hold that the amount of the negative return from the Matthews litigation is £34,476.23 and not £734,476.23.

It is also convenient to deal at this point with the suggested deduction of £45,750.32 for Crowe Morgan’s fees. I was told very little about these fees. They are described as fees in relation to the management and administration of Neyland and the Dummer Trust. They are fees which arise because Neyland and the Dummer Trust existed and needed to be managed and administered. It is not said that the fees were higher because Primlake received monies which would allow it to pay a dividend to a creditor like Neyland or that Neyland would declare a dividend which it would pay to the Dummer Trust or that the Dummer Trust would pay a sum to Mr and Mrs Rees as discretionary beneficiaries. On that basis, I do not consider that this expense is to be set off against the monies which would otherwise flow from Primlake to Mr and Mrs Rees for the purposes of the agreement of 5 August 2002.

Having reached the above conclusions, it follows that the only sum in dispute so far as the First and Second Issues are concerned is the sum payable to Primlake under the Mercator/Rowe settlement of 13 November 2009, a net figure of £2,106,522.01.

In relation to the Mercator/Rowe settlement, the issue was as to whether Gateley Wareing had to show that their involvement on behalf of Mr and Mrs Rees prior to March 2007 had some causal connection with Primlake’s recovery pursuant to that settlement and, if they did have to show that, whether they could do so. Gateley Wareing submitted that they did not have to show any causal connection but if they did have to show one, they could. Mr and Mrs Rees submitted that Gateley Wareing did have to show a causal connection and that they had failed to do so. These submissions require me to interpret the agreement of 5 August 2002 and to apply that interpretation of the agreement to the facts.

As regards the interpretation of the agreement of 5 August 2002, Gateley Wareing submitted that the agreement did not, expressly or by implication, required a causal connection between their involvement on behalf of Mr and Mrs Rees and the recovery from Mercator/Rowe. It was submitted that the relevant recovery was the recovery by Mr and Mrs Rees. They would recover if the trustees of the Dummer Trust chose to make a payment to Mr and Mrs Rees or otherwise to hold monies in accordance with their wishes. The trustees would be in a position to do so if Neyland paid a dividend to its shareholders. Neyland would be in a position to do so if it recovered money from Primlake. Neyland’s contractual rights against Primlake were not in dispute. They were set out in the relevant contract between those parties dated 13 November 1992. The letter of demand dated 29 July 2002 had identified the sum to which Neyland was contractually entitled as £6,085,360. Therefore, whether Neyland received anything from Primlake and whether ultimately there was a recovery by Mr and Mrs Rees all depended on whether Primlake was in a position to pay something towards its debts. It might become able to pay something towards its debts by pursuing Grosvenor or Mr Matthews or by bringing other claims. But ultimately, it did not matter how it found itself in that position. All that mattered was whether it could or could not pay something towards its debt to Neyland. This could be illustrated by an example, even an improbable one, such as where Primlake won money on the lottery. It would then be in funds and any monies that flowed to Mr and Mrs Rees through Neyland and the Dummer Trust would be a recovery by Mr and Mrs Rees.

Gateley Wareing made the following further submissions. The agreement of 5 August 2002 referred to the fact of recovery on behalf of Mr and Mrs Rees but not how that recovery came about. What Gateley Wareing was required to do under that agreement was to look after the interests of Mr and Mrs Rees. Their position was as beneficiaries under the Dummer Trust or possibly (it was wrongly thought) as beneficial owners of the shares in Neyland. As at 5 August 2002, Neyland was represented by Wedlake Bell and not by Gateley Wareing. If it were possible to advance Neyland’s position so that it could put forward claims available to Primlake (for example by putting Primlake into liquidation) it was not necessarily (to say the least) going to be the case that Gateley Wareing would be handling those claims. Other solicitors might be handling those claims. Therefore, it was not sensible to limit Gateley Wareing’s right to be paid for its work to recoveries which it had directly brought about by acting as solicitors for the party bringing the claim. Further, as the agreement of 5 August 2002 made clear, it was uncertain at that date just what might be involved in assisting with recoveries for Mr and Mrs Rees. Gateley Wareing were taking on considerable commercial risk; they were obliged under the agreement to do what was reasonably required to represent the interests of Mr and Mrs Rees at a time when it was not possible to predict the work which would be required. Further, it was not possible to predict the amount of the recoveries and what the resulting 5% would turn out to be. The conditions of business expressly provided that Gateley Wareing would be entitled to its fees upon the occurrence of the specified event, whether Gateley Wareing were still acting when the event occurred. It was not right to imply a term that Gateley Wareing had to be “the effective cause” of the recovery. Such a term did not fit with the fact that other solicitors might be acting for the party making the claim which led to the recovery. For several reasons, this agreement was not like a retainer of an estate agent to sell a property. Further, any other implied term requiring a causal link between Gateley Wareing’s activities and the recovery was unworkable.

If there had to be a causal link between Gateley Wareing’s activities and the recovery pursuant to the Mercator/Rowe settlement, then Gateley Wareing submitted that they had done enough to provide that link. Gateley Wareing gave advice to Mr and Mrs Rees on numerous occasions, right from May 2002 onwards as to the potential liability of Mercator and Mr Rowe. This advice was given even before the agreement of 5 August 2002 was entered into. Later, Gateley Wareing instructed leading counsel to advise Mr and Mrs Rees as to the claims they might have against Mercator and she gave that advice. Further, Gateley Wareing attended conferences with junior counsel, who acted for Primlake in the Matthews litigation. These conferences were both before and after the trial, being on 7 November 2005 and 1 August 2006. Counsel was asked to advise on possible claims against Mercator and Mr Rowe and he did so. Between 1 August 2006 and the end of that year, Gateley Wareing advised Mr and Mrs Rees on a number of occasions as to possible claims against Mercator and Mr Rowe. At that time, Mr Rees was either unwilling or unable (due to lack of funds) to litigate against Mercator and Mr Rowe. That remained the position until the termination of Gateley Wareings’ retainer. Gateley Wareing did everything that was required of them in looking after the interests of Mr and Mrs Rees in relation to possible claims against Mercator and Mr Rowe.

In their opening written submissions, counsel for Mr and Mrs Rees put the case on causation in a number of different ways. It was said that the case was analogous to the case of an estate agent instructed to sell a property on commission terms. The agent had to be the effective cause of the sale. It would be unfair and unreasonable to impose on Mr and Mrs Rees a liability to pay 5% of a recovery where Gateley Wareing had not been the effective cause of that recovery. It was also said that Gateley Wareing had to be “linked” to the recovery. It was said that if Gateley Wareing did what it was required to do in respect of the recovery then it would be entitled to its 5%. As to the point that it was at least possible that other solicitors would be acting for the party claiming the recovery, it was said that Gateley Wareing had to work for its fees by representing the interests of Mr and Mrs Rees and facilitating the recovery. It was said that the agreement of 5 August 2002 expressly required that the recovery be “by” Gateley Wareing. It could not have been intended that Gateley Wareing would recover 5% of a recovery where they had done no work, or even ineffective or damaging work, in connection with the recovery. If no causal link were required, then the agreement was not an agreement for a fee but was an investment in the claims. It was added orally that the agreement was with a solicitor not a bookmaker. Finally, it was said that Gateley Wareing’s contentions as to its rights were objectionable. I note that these different submissions might produce conflicting answers. In particular, Gateley Wareing might have done all that was required of them but yet had no causal connection with the recovery.

In closing submissions, it was said that the recovery had to be a recovery made “by” Gateley Wareing. Mr and Mrs Rees relied on evidence said to have been given by Mr Patel when cross-examined which (it was said) accepted that the recovery had to be “by” Gateley Wareing and that that was how Mr Patel had explained matters to Mr and Mrs Rees at the time of the agreement. Further it was said that whatever the required causal link, it was not established on the evidence.

I find that this question of causation a difficult one. There are parts of each side’s submissions which I am unable to accept. I am not attracted by the suggestion that Gateley Wareing had to be the effective cause of the recovery. The circumstances of this case are too different from the typical estate agent’s commission case to make that type of case any sort of helpful analogy. This is particularly so where it was foreseeable at the date of the agreement that the work required of Gateley Wareing was to look after the interests of Mr and Mrs Rees in circumstances where a relevant recovery might come about as a result of proceedings brought by another party and handled by another firm of solicitors. In those circumstances, it cannot have been envisaged that the advice given by Gateley Wareing had to be the effective cause of the recovery. Further in circumstances where there might be a large number of factors which combined to bring about a recovery I find it difficult to define what the parties must have envisaged would be a sufficient causal connection between Gateley Wareing’s advice and the recovery.

Whilst the argument is not an impossible one, I am resistant to the idea that if Primlake had a lottery win and paid Neyland, that would be a relevant recovery for the purposes of the fee agreement. With the lottery win, the reason that Mr and Mrs Rees would recover monies would be because of the pre-existing contractual entitlement of Neyland under the agreement with Primlake. That was more or less clear before the agreement of 5 August 2002 was entered into. Gateley Wareing did not have to do anything or give any advice in relation to the existence of that entitlement.

As is usually the case, it is best to start with the language of the agreement itself. The agreement between Gateley Wareing and Mr and Mrs Rees was entered into as part of a composite transaction, which also involved Mr Bradshaw. Gateley Wareing drafted the agreement to be entered into between Mr and Mrs Rees and Mr Bradshaw. As drafted by them, Gateley Wareing were to be entitled to enforce that agreement. I consider that the terms of the agreement with Mr Bradshaw are part of the background which is admissible as an aid to the construction of the agreement between Gateley Wareing and Mr and Mrs Rees. Counsel for Gateley Wareing argued otherwise. He drew attention to clause 2.1 of the Bradshaw agreement which stated that the Gateley Wareing agreement had been entered into on 12 July 2002 before the date of the Bradshaw agreement. It was submitted that the Gateley Wareing agreement had to be construed as if it had been entered into on 12 July 2002 and at a time when the Bradshaw agreement of 5 August 2002 did not exist so that it could not be used as aid to the construction of the Gateley Wareing agreement. I am not able to accept that argument. The real position is that the Bradshaw agreement and the Gateley Wareing agreement were entered into at the same time as part of the same transaction. The two agreements were linked because the percentage agreed to be paid to Gateley Wareing was influenced by the percentage to be paid to Mr Bradshaw. The date of 12 July 2002 in clause 2.1 of the Bradshaw agreement and at the top of the second page of the letter recording the Gateley Wareing agreement has no real significance. That date was inserted because the agreements which were executed on 5 August 2002 had been drafted earlier and, in particular, the letter of 5 August 2002 probably existed in some terms or other, as a draft, on 12 July 2002.

Clause 2.2 of the Bradshaw agreement refers to “any monies ….recovered by PB and/or Gateley Wareing …”. The Gateley Wareing agreement of 5 August 2002 refers to “any monies recovered on your behalf”. The words of these two provisions are different. It is possible that the two formulations mean different things or it is possible they were considered to be two different ways of expressing the same idea. The Gateley Wareing agreement uses the words “on your behalf”. Those words indicate that someone is to act on behalf of Mr and Mrs Rees in connection with the relevant recovery. In context, it is obvious that the letter is meant to refer to Gateley Wareing as the person acting on behalf of Mr and Mrs Rees. Therefore the reference to “recovered on your behalf” appears to be referring to a recovery as a result of, or by or through, Gateley Wareing acting on behalf of Mr and Mrs Rees, rather than a recovery by some third party on their behalf. That does not however provide an immediate answer to the question: what is to be regarded as a recovery “by” Gateley Wareing (for the purposes of either the Bradshaw agreement or the Gateley Wareing agreement) or as a result of Gateley Wareing having acted for Mr and Mrs Rees? The difficulty in answering this question is increased in a case where it was contemplated that the recovery might come about as a result of proceedings brought by another party and handled by another firm of solicitors.

Before reaching a final view on the application of the agreement of 5 August 2002 to the Mercator/Rowe recovery, I will see if any light is thrown on the question by considering how the agreement was meant to operate in other respects. Some matters are reasonably clear. Gateley Wareing were obliged under the agreement to give the advice which would be reasonably expected of a competent solicitor in relation to the interests of Mr and Mrs Rees in, directly or indirectly, obtaining recoveries from the series of transactions entered into in relation to the land. That obligation might be more or less burdensome. It was difficult to predict at the outset how burdensome it would turn out to be. It was not open to Gateley Wareing to terminate the agreement on the grounds that it was proving too time consuming for them.

I do not think that Mr and Mrs Rees were obliged under the agreement to take any action even when advised to do so by Gateley Wareing. There is no express term to that effect. Gateley Wareing might be concerned if Mr and Mrs Rees failed to take reasonable steps to achieve a recovery and, as a result, Gateley Wareing would not receive 5% of such a recovery. However, I do not think that it would be right to imply a term into the agreement obliging Mr and Mrs Rees to take action when advised to do so by Gateley Wareing. It was known at the outset that Mr and Mrs Rees were in some financial difficulties and would have difficulty funding litigation. Gateley Wareing might advise on action which Mr and Mrs Rees were simply unable on financial grounds to pursue. Thus Gateley Wareing might do a considerable amount of work and get nothing for it even where there were reasonable prospects of recovery if only they were pursued. On the facts of this case, I consider that it cannot be said that Mr and Mrs Rees were in breach of an obligation owed to Gateley Wareing for failing to take proceedings against Mercator and Mr Rowe before the retainer was determined in March 2007.

Mr and Mrs Rees were entitled to terminate the retainer at any time and for any reason. They were entitled to go to other solicitors and retain those other solicitors to look after their interests. Those other solicitors might take action which had never been contemplated by Gateley Wareing or even action which Gateley Wareing had advised should not be taken. That action might yield a recovery for Mr and Mrs Rees. It is not obvious that Gateley Wareing should receive 5% of such a recovery.

I return to the point that the agreement of 5 August 2002 seems to be limited to monies recovered by Gateley Wareing or as a result of Gateley Wareing acting for Mr and Mrs Rees. I reject the argument that Gateley Wareing had to be the effective cause of the recovery. I also reject the rival argument that Gateley Wareing is entitled to its percentage even in a case where it played no part of any kind in relation to the recovery. The requirement that the recovery is “by” Gateley Wareing, or as a result of their acting on behalf of Mr and Mrs Rees cannot extend to such a case. I find it very difficult to define more precisely what is required and what will suffice. It may be easier to answer the question in any individual case rather than to attempt a comprehensive definition which will cover all cases contemplated and not contemplated.

Approaching the matter in that way, I ask whether the Mercator/Rowe recoveries were monies recovered by Gateley Wareing or as a result of their acting on behalf of Mr and Mrs Rees. Prima facie they were not. All the work done towards the recovery was done after the termination of their retainer and by other solicitors. It is not suggested that the evidence would allow me to find that the advice given by Gateley Wareing to Mr and Mrs Rees on the subject of Mercator and Mr Rowe had any part to play in the subsequent action taken by the new solicitors. It is true that Gateley Wareing did advise Mr and Mrs Rees on the subject of Mercator and Mr Rowe while they were acting but Mr and Mrs Rees did not then bring or fund proceedings. They were not obliged to do so and they were entitled to terminate the retainer when they did. I do not consider that it can properly be said that the Mercator/Rowe recoveries come within the agreement of 5 August 2002.

In support of their submissions on this question, Mr and Mrs Rees relied on evidence given by Mr Patel. I have reached my conclusion in favour of Mr and Mrs Rees without taking into account that evidence. If I do take account of that evidence, it seems that my conclusion is not different from Mr Patel’s understanding of how the agreement of 5 August 2002 was to work. In those circumstances, it is not necessary to consider whether Mr Patel’s evidence is admissible for the purpose of determining the intended operation of the fee agreement made by Mr and Mrs Rees with Gateley Wareing. I can say however that the position would seem to be that Mr Patel’s evidence would not be admissible as a suggested aid to the construction of the letter of 5 August 2002 but would be admissible if it were said that the fee agreement was partly written and partly oral and that Mr Patel’s evidence established what was said at the time by Mr Patel to Mr and Mrs Rees as to the extent of their liability.

I was referred to the Solicitors’ Costs Information and Client Care Code 1999 which identifies the relevant professional standard for solicitors to follow when giving costs information to their clients. Paragraph 3(b) requires such costs information to be given clearly and in a way and at a level which is appropriate to the particular client. If the agreement of 5 August 2002 had the meaning contended for by Gateley Wareing, then I consider that they did not explain to Mr and Mrs Rees, clearly or otherwise, that that was the effect of the agreement. However, it is not necessary to determine whether this consideration could provide further support for the conclusion which I have reached in any event.

Before parting with the First and Second Issues, I will express my findings on other matters which were considered to be important by counsel for the parties. I was asked to make findings about what was in the reasonable contemplation of the parties as regards litigation on and after 5 August 2002. I was separately asked to rule on whether (apart from any statute or practice rule or rule of law rendering the agreement unenforceable) Gateley Wareing were required to carry out litigation within that agreement.

As regards the contemplation of the parties as to litigation on or after 5 August 2002, I find that the parties considered that the future was uncertain in that respect. They thought that it might just be possible to make progress without any litigation. They considered that litigation might well be necessary. By 5 August 2002, it looked likely that, in particular, a winding up petition would have to be issued by Neyland in relation to Primlake. It was not clear one way or the other whether Gateley Wareing would conduct litigation on behalf of Mr and Mrs Rees or on behalf of Neyland or a liquidator of Primlake, or not at all. It was quite likely that any litigation by Neyland or by a liquidator would not be conducted by Gateley Wareing.

I am also asked to decide whether the agreement of 5 August 2002 imposed on Gateley Wareing an obligation to conduct litigation on behalf of Mr and Mrs Rees or on behalf of Neyland or a liquidator, if that opportunity or if that need should arise. Mr and Mrs Rees contend that the agreement obliged Gateley Wareing to give the advice which would be reasonably expected of a competent solicitor in relation to the interests of Mr and Mrs Rees in, directly or indirectly, obtaining recoveries from the series of transactions entered into in relation to the land. I agree. It is then said that there is no express term which excludes the commencement of litigation. Accordingly, it is argued, if a competent solicitor would have advised that Mr and Mrs Rees should litigate, possibly having taken an assignment of a relevant cause of action, and Mr and Mrs Rees accepted that advice, Gateley Wareing were obliged to conduct the litigation accordingly. It is said that although the agreement stated that Mr Patel was “trying to resolve matters on a commercial basis, without the need for formal proceedings to be taken”, the agreement did not say that Gateley Wareing’s obligations were restricted to dealing with the matter without litigation; the reference was to what Mr Patel would try to do in the first instance.

I accept Mr Patel’s evidence that at the date of the agreement he knew that the effect of the rules about conditional or contingency fees was that Gateley Wareing could not conduct litigation on the terms of the agreement of 5 August 2002. However, I also find that he did not tell Mr and Mrs Rees that fact. I find that the first time that Mr Patel told Mr and Mrs Rees that litigation would have to be conducted under a different agreement was when he discussed with them acting as solicitors in relation to litigation against Mr Matthews or Mr Foreshew. Accordingly, the agreement of 5 August 2002 does not fall to be construed against the background of any such communication.

Nonetheless, I should construe the agreement against the background of the general law. The parties are taken to know the general law even though I am quite sure that Mr and Mrs Rees did not know the relevant law as to litigation and conditional fee agreements. However, if I take account of the general law at the time of the agreement, I am assisted thereby to construe the agreement as not obliging Gateley Wareing to litigate under that agreement because so to do would be unlawful and would render the agreement unenforceable.

I have now discussed all of the matters which seem to me to arise in relation to the First and Second Issues. The result of the foregoing is that, on the true construction of the agreement of 5 August 2002, Gateley Wareing are entitled to deliver a bill of costs for a sum in excess of what they have so far been paid. Therefore it becomes necessary to consider the further issues.

In substance, the Third Issue raises the question whether the agreement of 5 August 2002 was unenforceable by reason of the statutory provisions and rules and regulations as to conditional or contingency fee agreements. The Third Issue as drafted refers to Practice Rule 8 but the argument before me also referred to section 58 of the Courts and Legal Services Act 1990, so that it is necessary to consider that provision also. I will therefore now set out certain provisions of the Solicitors Act 1974, of the Courts and Legal Services Act 1990 and of the Solicitors’ Practice Rules.

Sections 57, 59 and 87 of the Solicitors Act 1974, as amended, provide:

Sections 58 and 119 of the Courts and Legal Services Act 1990, as amended, provide:

Rules 8 and 18 of the Solicitors’ Practice Rules 1990 provide:

The Solicitors’ Practice Rules 1990 (as in force at all material times until 2007) were made by the Council of the Law Society under powers afforded to it under the Solicitors Act 1974, section 31 and the Administration of Justice Act 1985, section 9. The Solicitors’ Practice Rules have the force of statute as a form of delegated legislation: see Swain v The Law Society [1983] 1 AC 598 at 621G-622B per Lord Brightman; Hughes v Kingston upon Hull City Council [1999] QB 1193 at 1199B-1201F (declining to follow dicta to the contrary in Thai Trading, as per incuriam in light of the House of Lords’ decision in Swain); Awwad v Geraghty & Co [2001] QB 570 at 582H-587F per Schiemann LJ, 598E-G per May LJ, and 600F-B per Lord Bingham of Cornhill CJ). A fee agreement entered into in breach of the Practice Rules is unenforceable, solely by virtue of it being in breach of those rules (whether or not it would otherwise be unenforceable at law) (Awwad at 598H).

Taking those sections and rules in turn, the following questions arise:

was the agreement of 5 August 2002 a conditional fee agreement within section 58(2)(a) of the 1990 Act and, in particular, was the agreement with a person providing advocacy or litigation services as defined in section 119 of the 1990 Act?

was the agreement an agreement to which section 57 of the 1974 Act applied so as to come within section 58(5) of the 1990 Act?

were Gateley Wareing retained or employed to prosecute or defend any action, suit or other contentious proceeding within Practice Rule 8(1)?

if the answer to (3) is “yes”, was the agreement permitted under statute or by the common law?

Section 58(2)(a) and section 119 of the 1990 Act were analysed in detail in the decision of the Court of Appeal in R (Factortame Ltd) v Transport Secretary (No. 8) [2003] QB 381, in particular at [49] – [62]. This case did not concern services provided by solicitors. In a number of places, in summarising the operation of the statutory provisions, the court stated that they were restricted to persons “conducting the litigation”: see at [56], [57], [59], [60] and [61]. I have considered how to apply the approach of the court in a case, unlike Factortame itself, where the person with whom the agreement is made is a solicitor, who has “a right to conduct litigation”, but who is not conducting the litigation. I consider that the relevant distinction made in the judgments is between a person who is conducting litigation and a person who is not. The second category should apply equally to a solicitor and to a non-lawyer, where neither is conducting the litigation, even though the solicitor has a right to conduct litigation. In such a case, the solicitor who is advising a non-party and who is not conducting the litigation is not “exercising, or contemplating exercising, a right to conduct litigation” within section 119.

The statutory provisions were considered in relation to a solicitor, in a different context, by the Court of Appeal in Gaynor v Central West London Buses Ltd [2007] 1 WLR 1045 where Dyson LJ (with whom the other two members of the court agreed) said at [13] and [17]:

The next step is to apply section 58 of the 1990 Act, as construed as described above, to the litigation which is relevant in this case. I will take the litigation in chronological order. In relation to the winding up proceedings in respect of Primlake, Gateley Wareing did not conduct the litigation and did not provide litigation services within section 119. In relation to the Matthews county court proceedings, Gateley Wareing did conduct litigation and did provide litigation services within section 119 but that work was not done pursuant to the agreement of 5 August 2002. In relation to the claim against Mr Foreshew, Gateley Wareing did conduct litigation and did provide litigation services within section 119 but, again, that work was not done pursuant to the agreement of 5 August 2002. In relation to the claim against Mr Matthews, Gateley Wareing did not conduct the litigation and did not provide litigation services within section 119. It follows that the agreement of 5 August 2002 was not a conditional fee agreement within section 58(2)(a) and was not rendered unenforceable by section 58(1) of the 1990 Act.

This conclusion means that it is not strictly necessary to consider section 58(5) of the 1990 Act, which refers to an agreement which is a non-contentious business agreement between solicitor and client within section 57 of the 1974 Act; such an agreement (even if it is a conditional fee agreement within section 58(2)(a) of the 1990 Act) is not unenforceable. However, I will comment on this issue and then indicate the course which I will take.

I do not think that there is any real issue in this respect in relation to the Matthews county court litigation and the claim against Mr Foreshew. As to both of these, the agreement of 5 August 2002 was not an agreement as to remuneration in respect of that business, for the reasons which I gave earlier. So that litigation did not make the agreement of 5 August 2002 a contentious business agreement. More difficulty arises in relation to the claim against Mr Matthews and to a lesser extent the winding up petition against Primlake.

The claim against Mr Matthews was brought by Primlake, not by Mr and Mrs Rees. Further, the litigation was conducted by Wedlake Bell as solicitors for Primlake and not by Gateley Wareing. However, Gateley Wareing acting on behalf of Mr and Mrs Rees gave advice and acted in a number of ways in connection with that litigation; I have made my findings in that respect earlier in this judgment.

Whether the agreement of 5 August 2002 was throughout a non-contentious business agreement or whether it was, or became at some point, a contentious business agreement by reason of the work done in connection with the claim against Mr Matthews, in particular, depends on the application of the definitions of “contentious business” and “non-contentious business” in Section 87 of the 1974 Act. The agreement of 5 August 2002 will have been a non-contentious business agreement providing that it was not in relation to contentious business which is defined as:

Counsel for Gateley Wareing submits that because the litigation was not brought by Mr and Mrs Rees and was not conducted by Gateley Wareing, the work done by Gateley Wareing which was in some way referable to that litigation was not done “in or for the purposes of” that litigation. Counsel for Mr and Mrs Rees points out that that the definition of “contentious business” is not expressly limited to a case where the solicitor’s client is a party to the proceedings. He submitted that the relevant question is whether the work done by Gateley Wareing was “for the purposes of” the proceedings brought by Primlake. He submits that there was no other purpose which could be ascribed to that work. The work was done directly to assist the presentation of Primlake’s claim. The reason that Mr and Mrs Rees’s solicitors did that work was that Mr and Mrs Rees well understood that the litigation was intended to be for Mr and Mrs Rees’ benefit. After all, Mr and Mrs Rees were funding that litigation, at least to some extent. Similar submissions would be made in relation to the winding up petition in relation to Primlake, save that Gateley Wareing did less work in connection with that matter.

There is very little help in the authorities as to the meaning of “in or for the purposes of proceedings” in the definition of contentious business. I was referred to Bilkus v Stockler Brunton [2010] 1 WLR 2526 where Stanley Burnton LJ said at [44]:

The actual question in Bilkus was different from the question in the present case. In Bilkus, the question was when proceedings should be regarded as having come to an end, so that work done after the completion of proceedings was not done for the purpose of the proceedings. On that question the reasoning of Stanley Burnton LJ was slightly different from the reasoning of the other members of the court (Longmore and Ward LJJ) but nothing turns on that for present purposes.

There is a curious feature of the definition of “contentious business” when it is taken up and used in sections 57 and 59 of the 1974 Act, dealing with non-contentious business agreements and contentious business agreements respectively. Such agreements may be entered into before any proceedings are begun. It is long established that if no proceedings are ultimately begun, then the agreement in question can only be a non-contentious business agreement: see In re Simpkin Marshall Ltd [1959] Ch 229 at 233 and 235. Thus if solicitors are instructed, for example, to bring a claim for an alleged debt and they take advice from counsel, write a letter before action and prepare draft proceedings but the intended defendant settles the claim before the proceedings are issued (i.e. “begun”), then the work done by the solicitors is non-contentious business and an earlier agreement with the client under which the solicitors were to conduct the contemplated proceedings is a non-contentious business agreement. Conversely, if the solicitors do issue proceedings and settle the claim the next day then proceedings having been “begun”, all of the work I have described carried out before the proceedings is contentious business and the earlier agreement is at all times to be considered as a contentious business agreement. This example indicates that one cannot place much weight on the words “contentious” or “non-contentious” when seeking to apply the statutory definitions in any given case.

The words “for the purposes of” in the definition of “contentious business” are capable of being given a wider or a narrower application. It seems to me that any decision as to the width of the words “for the purposes of” might be influenced by a consideration of the purposes of the relevant statutory provisions. I consider that the relevant provisions are those contained in the 1974 Act rather than in later Acts, for example, the 1990 Act, even though section 58(5) of the 1990 Act cross-refers to section 57 of the 1974 Act. The relevant provisions of the 1974 Act are Part III of that Act (sections 56 - 75). The distinction between contentious and non-contentious business is for the purposes of determining the remuneration to which the solicitor is entitled. Although I have considered the relevant sections and the decisions relating to them, I fear that I can find very little guidance from the statutory purpose as to the intended width of the words “for the purposes of” in the definition of “contentious business”.

It seems to me that a ruling as to the meaning of the words “for the purposes of” in the definition of “contentious business” could have significant implications for other cases. In particular, such a ruling would have implications for funders of litigation, where the funder is not a party and has its own solicitors. With respect to counsel in the present case, this question was argued somewhat briefly. Before deciding it, I would like to be able to consider more widely the implications of my decision. In view of those possible implications and in view of the fact that a decision on the point is not necessary in order to determine the five issues identified earlier, I consider it more appropriate to leave that decision to a case in which the point arises for decision where there will be an opportunity for the point to be examined in greater detail than was the case in the submissions before me.

Although a decision as to whether the agreement of 5 August 2002 is a non-contentious business agreement is not necessary for me to determine the five issues I have been asked to determine, it is possible that the distinction will be relevant as to the determination, or assessment, of the amount ultimately payable by Mr and Mrs Rees. If so, the matter will have to determined but if I am asked to determine it, I would welcome further submissions as to the wider implications of such a determination.

I next need to consider the possible application of Practice Rule 8. This rule refers to a solicitor “being retained or employed to prosecute or defend any action, suit or other contentious proceeding” and “contentious proceeding” is (by rule 18(2)) to be construed in accordance with the definition of “contentious business” in section 87 of the 1974 Act. There is room for argument as to how to expand rule 8 to bring in that definition. Should rule 8 be taken to refer to a solicitor “being retained or employed to prosecute or defend any action, suit or other business done … in for the purposes of proceedings begun before a court or before an arbitrator”? Or should rule 8 be taken to refer to a solicitor “being retained or employed to prosecute or defend any action, suit or other proceedings begun before a court or before an arbitrator”? I consider that the second reading is the right one. It is natural to refer to a solicitor being retained to prosecute an action, a suit or another proceeding; it is not natural to refer to a solicitor being retained to prosecute or defend “other business”.

I can now apply Practice Rule 8, as so construed, to the litigation in this case. In relation to the Matthews county court litigation and the claim against Mr Foreshew, Gateley Wareing were retained to prosecute or defend a contentious proceeding but the agreement of 5 August 2002 did not provide for a fee in relation to that litigation. In relation to the winding up petition against Primlake and the claim against Mr Matthews, Gateley Wareing were not retained to prosecute or defend those proceedings.

Accordingly, Gateley Wareing did not infringe Practice Rule 8. It is therefore not necessary to consider whether that agreement was in any event “permitted under statute or the common law”. My earlier conclusion was that the agreement was not a conditional fee agreement within section 58 of the 1990 Act and was therefore “not unenforceable”. That may well mean that the agreement was “permitted under statute”. As I have held that rule 8 was not contravened, I will not go on to consider whether “permitted” under statute requires anything more than not being rendered unenforceable by a statute.

Further, it is not necessary to consider whether the agreement of 5 August 2002 was in any event validated by section 57 of the 1974 Act. It will be remembered that section 57(2) of the 1974 Act provided that a non-contentious business agreement may provide for the remuneration of a solicitor to be by reference to “a percentage”, or indeed “otherwise”. That suggests that if the agreement were a non-contentious business agreement, then it would be lawful, being authorised by section 57(2) of the 1974 Act.

It was in Gateley Wareing’s interest to take this point, if it was a good one. After all they contended that the agreement was a non-contentious business agreement. However, counsel for Gateley Wareing conceded that he could not so argue. He based this concession on the statements in Thai Trading at 785F and Awwad at 587F and 588A to the effect that section 59(2) of the 1974 Act neither validated nor invalidated a conditional fee agreement. Both of those cases concerned contentious business agreements rather than non-contentious agreements. The courts in those cases only had to consider section 59 and did not consider section 57. The language of section 59 seems to me to be significantly different from section 57 and I would not regard those cases as any authority as to the operation of section 57(2). Further, in Kel-Ta Talk Ltd v Revenue & Customs Commissioners [2011] STC 497, the Senior Costs Judge held in terms that section 57 made lawful a conditional fee agreement contained in a non-contentious business agreement. This point does not require further consideration in view of my earlier findings on the Third Issue. As will be seen, the point also does not need to be considered in relation to the Fourth Issue, as to whether the agreement was champertous. However, if the point had been material to my decision, I would not have accepted counsel’s concession and would have required the point to be argued.

Whether the contingency fee agreement (if it had been contrary to Practice Rule 8) would have been saved by being permitted at common law is a question which falls to be considered under the Fourth Issue.

My conclusion in relation to the Third Issue is that the agreement of 5 August 2002 is not unenforceable by reason of either section 58(1) of the 1990 Act or Practice Rule 8.

The Fourth Issue raises the question whether the agreement of 5 August 2002 was champertous and unenforceable at common law. I received detailed submissions as to what was involved in maintenance and champerty and as to whether the particular arrangements made in this case were champertous.

The parties cited to me the leading cases on maintenance and champerty, in particular, the decisions in Pittman v Prudential Deposit Bank Ltd (1896) 13 TLR 110, In re Trepca Mines Ltd (No. 2) [1963 Ch 199, Wallersteiner v Moir (No. 2) [1975] QB 373, Trendtex Trading Corp v Credit Suisse [1982] AC 679, Giles v Thompson [1994] 1 AC 142, Thai Trading Co v Taylor [1998] QB 781, Awwad v Geraghty & Co [2001] QB 570 and R (Factortame Ltd) v Transport Secretary (No. 8) [2003] QB 381. I have also considered Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd [2002] 2 Ll L Rep 692 and Sibthorpe v Southwark LBC [2011] 1 WLR 2111, which were not cited.

“Maintenance” was defined in the Law Commission Report on Proposals for the Reform of the Law relating to Maintenance and Champerty as “the giving of assistance or encouragement to one of the parties to an action by a person who has neither an interest in the action nor any other motive recognized by the law as justifying his interference”: see paragraph 3. The same report defined “champerty” as “a particular kind of maintenance, namely maintenance of an action in consideration of a promise to give to the maintainer a share in the subject-matter or proceeds thereof, if the action succeeds”: see paragraph 4. This reference to “a particular kind of maintenance” does not mean that in order for there to be champerty the relevant maintenance must be unlawful. The position was described by Millett LJ in Thai Trading[1998] QB 781 at 786D in this way:

The decision of the Court of Appeal in Factortame (No. 8) is of particular assistance in relation to this issue. In that case, the Court of Appeal held that a contingency fee agreement under which a non-lawyer was to give assistance to a party in the conduct of litigation was not champertous. A similar question arose in Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd [2002] 2 Ll L Rep 692 and the court gave a similar answer. The judgment of Cresswell J in Papera, at [43], contains a helpful summary of the law drawn from the judgment in Factortame as follows:

Factortame was also considered by the Court of Appeal in Sibthorpe v Southwark LBC [2011] 1 WLR 2111. This case concerned a CFA between claimants and their solicitors. The CFA contained a term under which the solicitors agreed to indemnify their clients against the risk of an order to pay the defendants’ costs if the claims were to be dismissed. It was argued that this term made the agreement champertous. The argument was rejected. The case is helpful not so much for the decision itself but because the reasoning in it builds on the distinction, made in Factortame and applied in Papera, between a person who conducts litigation on behalf of a party and a person who does not conduct that litigation but performs some other role in relation to the litigation. In the case of the person conducting the litigation, the law of champerty applies in accordance with certain established rules. Those rules are stricter than the rules which apply to a person who is not conducting the litigation. In the latter case, the correct approach is to look at the case in the round and to decide, on a case by case basis, whether the agreement would undermine the purity of justice or corrupt public justice. This can be seen in the judgment of Lord Neuberger of Abbotsbury at [35] – [41]. It will suffice to quote certain passages only from [35] – [37], as follows:

The work done by Gateley Wareing in relation to the winding up petition against Primlake and the claim against Mr Matthews was work done under the agreement of 5 August 2002. Mr and Mrs Rees were not parties to either of those proceedings and Gateley Wareing did not conduct them. The solicitor who did conduct those proceedings on behalf of Neyland or Primlake (as the case may be) was Wedlake Bell who was not a party to the agreement of 5 August 2002.

In relation to the claim against Mr Matthews, in particular, that claim was maintained by Mr and Mrs Rees but that maintenance was lawful as their interest in the outcome gave them a lawful excuse for their maintenance. Gateley Wareing gave legal advice and assistance to Mr and Mr Rees and that supported the maintenance by Mr and Mrs Rees.

When considering whether the agreement of 5 August 2002 was champertous, it is highly material that the litigation in question was conducted for a party other than Gateley Wareing’s client by solicitors who were independent of Gateley Wareing. Further, the present case is different from a more typical “division of the spoils”. Mr and Mrs Rees and Gateley Wareing did not directly take a share of the spoils. What Mr and Mrs Rees would receive was what the trustees of the Dummer Trust paid to them. That would depend on what Neyland could pay to the trustees by way of a dividend. Neyland’s right to receive payment from Primlake depended on Neyland’s pre-existing contract with Primlake. Primlake’s ability to pay Neyland what was contractually due to Neyland depended on what Primlake recovered from Mr Matthews i.e. “the spoils”. Of course, in economic terms, there was an undoubted link between “the spoils” and a receipt by Mr and Mrs Rees and from them a receipt by Gateley Wareing. For that reason, I do not regard this consideration as conclusive against a finding of champerty but it is a factor which deserves to be given some weight.

Approaching this case on the basis identified in Factortame and the cases which have followed it, principally because the relevant litigation was at all times conducted by other solicitors on behalf of persons other than Mr and Mrs Rees, and was not conducted by Gateley Wareing, I do not consider that the agreement of 5 August 2002 would tend to undermine the purity of justice or corrupt public justice. I reach this conclusion whether or not I give weight to the point in the last paragraph about “the division of the spoils”. I do not consider that the agreement was champertous.

In these circumstances, it is not necessary to consider whether the agreement of 5 August 2002 was, in any event, validated by section 57 of the 1974 Act, a question to which I referred earlier in this judgment.

On the basis of my answers to the other questions, this issue does not arise and I do not consider it.

I have now determined the position in relation to each of the Five Issues which I have been asked to determine. Counsel should prepare a minute of order in accordance with this judgment.

I have not decided whether the fee agreement of 5 August 2002 was a non-contentious business agreement or a contentious business agreement. If that issue is relevant to the question of recovery of the agreed fee, or the assessment of the fee, then it will need to be further considered.