Radford & Anor v Frade & Ors [2016] EWHC 1600 (QB)

Case No HQ010D02643Case No QB/2015/0550Case No QB/2016/0087[2016] EWHC 1600 (QB)IN THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONON APPEAL FROM THE SENIOR COURTS COSTS OFFICE(Master Haworth, Costs Judge)Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 08/07/2016
Before
MR JUSTICE WARBY
Between
(1) Michael RadfordClaimants/(2) The Michael Radford PartnershipRespondents(1) Alejendra FradeDefendants/(2) Bruce St ClairAppellants(4) Gheko Films SLAppellant(5) Gheko Films Sur SLAppellant
Benjamin Williams QC (instructed by Taylor Hampton) for Defendants/AppellantsAlexander Hutton QC (instructed by Simons Muirhead & Burton) for Claimants/RespondentsHearing Hearing date: 28-29 June 2016
Judgment
[1]These are two appeals against rulings made by Master Haworth (“the Costs Judge”), in proceedings for the detailed assessment of the defendants’ costs of the claimants’ claims against them. The main issues in the appeals concern the terms on which solicitors and Counsel were retained to act for the defendants. The appeals do not raise any issues concerning costs practice, so I have sat without an assessor.

Essential background

(a) Essential background

[2]This can be fairly shortly summarised.(1) The claimants and the defendants in this action were all involved in a project to make a Spanish film called La Mula (the Mule). The first claimant, a well-known screenplay writer and director, was retained to direct the film. The second claimant is a partnership through which he trades. The defendants were all involved in financing the production. A number of contracts were entered into. The project encountered difficulties. The parties fell out, the first claimant left the shoot and was replaced. The parties have been in dispute ever since.(2) In July 2010 the claimants sued three individuals and six companies, relying on various causes of action, including defamation and unlawful means conspiracy. In August 2010, on an application without notice, the claimants obtained injunctions. These were later continued at hearings on notice. The injunctions prohibited the defendants from using or publishing film footage shot by the first claimant, without his authority, and restrained some of the defendants from defaming him in relation to the film in certain specified ways.(3) From November 2010 onwards the first two defendants (“the individual defendants”) and the fourth and fifth defendant companies (“the corporate defendants”) were making representations to the court, disputing the jurisdiction of the English court and service of the proceedings. In particular, on 26-27 November 2010 Spanish lawyers acting for these defendants made written representations to the court on their behalf disputing jurisdiction and service. And on 18 February 2011 English solicitors then acting for the corporate defendants filed an application notice, challenging the court’s jurisdiction.(4) By an order of Master Kay QC time for service on the first five defendants was extended until 12 July 2011. Some weeks before that deadline expired the individual defendants instructed Taylor Hampton, solicitors (“TH”). TH instructed Augustus Ullstein QC (“AUQC”), who entered into a conditional fee agreement (“CFA”) with TH. In August 2011 TH entered into a CFA with the individual defendants and the corporate defendants, which are companies they owned and controlled. (References to “the defendants” from here on will be references to these defendants collectively, unless otherwise indicated).(5) The first task was to seek to set aside the injunctions, disputing the validity of service and the jurisdiction of the court. In February 2012 TH filed an application for those purposes on behalf of the defendants. The initial objective was substantially achieved by a consent order made by Tugendhat J on 23 May 2012. By that order the Judge declared that the claim form had not been served on the individual defendants; but that it had been served on the corporate defendants within the period of its validity; the injunctions were discharged; and the individual and corporate defendants all agreed to make no claim on the cross-undertaking as to damages which the claimants had given.(6) By this point the substantive proceedings against the individual defendants were over. But they continued against the corporate defendants. A Defence and Counterclaim was served, and default judgment entered on the counterclaim. Then, in March 2013, TH applied for summary judgment. In February 2014, Master Eyre granted that application, having concluded that the claims were hopeless. An application for permission to appeal against that decision was dismissed by Sir David Eady on 28 July 2014. The defendants became entitled to recover their costs of the claim (a counterclaim continues).(7) Master Eyre made an order for payment of £120,000 on account of costs, which was upheld by Sir David Eady. In the detailed assessment proceedings TH submitted a bill in the sum of £805,500. This was on the basis that all the work carried out by TH and AUQC was done pursuant to their CFAs, and they were entitled to recover success fees accordingly.(8) On 5 November 2015 the Costs Judge handed down a reserved judgment on certain preliminary issues in the assessment proceedings (“the November Ruling”). He determined that the work done by TH between the discharge of the injunction on 23 May 2012 and the end of the proceedings on 28 July 2014 was outside the scope of their CFA with the defendants, and that the defendants were not liable to pay for it. It is said that the effect is to disallow most of the defendants’ costs. The defendants now appeal against the November Ruling, with the permission of the Costs Judge. I shall call this “the Solicitors’ Costs Appeal.”(9) In a further ruling made on 20 January 2016 (“the January Ruling”) the Costs Judge decided two points concerning the recovery of Counsel’s fees. The Judge ruled that the defendants could not recover any fees for work done by AUQC after 23 May 2012, because Counsel’s CFA was made with TH, and the clients had no liability to pay TH. He also ruled that in any event no fees could be recovered for work done by Counsel in respect of the corporate defendants, who were not identified as Counsel’s clients in his CFA with TH. The overall effect is to limit the claimants’ liability to pay Counsel’s fees to those incurred by the individual defendants, prior to 23 May 2012. The defendants now appeal with the permission of the Costs Judge against his decisions on both these points, which I shall call “the retainer point” and “the scope point”. I shall call this appeal “the Counsel’s Fees Appeal.”

The Solicitors’ Costs Appeal

[3]There are two grounds of appeal:(1) that the Costs Judge misconstrued the CFA;(2) that he was wrong to find that the CFA was TH’s sole retainer. To put these issues in context it is necessary to describe the factual background in more detail. I can take most of this from the account given by the Cost Judge in the November Ruling. The definitions in brackets and bold text are interpolated by me, for ease of reference later.[4]The Costs

Judge began by setting out the initial stages of the relationship between the defendants and TH:

“13. Taylor Hampton were first instructed by the First and Second Defendants in June 2011. On 4 July 2011 Mr Daulby of Taylor Hampton wrote to the First and Second Defendants a client care letter [“the Retainer Letter”] in which he records the initial instructions he received from D1 and D2. He referred to those instructions in the following terms: “I am instructed to consider and advise you in relation to the defence of the claim against you by Michael Radford and the Michael Radford Partnership.” 14. He went on to say: “I am obliged to consider whether you are justified in defending the claim. You have little choice but to defend the claim although it is too early for me to carry out a full risk/benefit assessment. I am required to give you my initial assessment of any unusual level of risk for you in this matter. This is a substantial monetary claim and the Claimants’ costs are likely to be very substantial. You run the risk of bad publicity if the claim is not defeated. I also understand that there are concurrent proceedings in Spain which may be prejudiced by the continuance of these proceedings. I understand that Mark discussed funding options in brief when he spoke to you about the case. It is sometimes the case that parties can deal with litigation under a conditional fee agreement (CFA). In this case, the facts are simply too complicated to form an early assessment on the merits to allow us to undertake the type of risk assessment that is necessary when entering into a CFA.” 15. On 4 July 2011 Mr Daulby wrote a second letter to the First and Second Defendants [“the Advice Letter”] in which he said the following: “… I cannot form a view on the overall merits. Further, I understand that you will prefer the proceedings to be contested in the Spanish rather than the English courts. I have therefore focused on the procedural aspects. There are a number of important reasons for this. The contractual agreements reveal that both Spanish and English law govern aspects of the dispute. Under European law, the general rule matters relating to a contract will be dealt with by the courts for the place of performance of the obligation in question. If proceedings have been commenced in the wrong jurisdiction, the court may stay the proceedings. I also understand there are concurrent proceedings in Spain.” “I am instructed to consider and advise you in relation to the defence of the claim against you by Michael Radford and the Michael Radford Partnership.” “I am obliged to consider whether you are justified in defending the claim. You have little choice but to defend the claim although it is too early for me to carry out a full risk/benefit assessment. I am required to give you my initial assessment of any unusual level of risk for you in this matter. This is a substantial monetary claim and the Claimants’ costs are likely to be very substantial. You run the risk of bad publicity if the claim is not defeated. I also understand that there are concurrent proceedings in Spain which may be prejudiced by the continuance of these proceedings. I understand that Mark discussed funding options in brief when he spoke to you about the case. It is sometimes the case that parties can deal with litigation under a conditional fee agreement (CFA). In this case, the facts are simply too complicated to form an early assessment on the merits to allow us to undertake the type of risk assessment that is necessary when entering into a CFA.” “… I cannot form a view on the overall merits. Further, I understand that you will prefer the proceedings to be contested in the Spanish rather than the English courts. I have therefore focused on the procedural aspects. There are a number of important reasons for this. The contractual agreements reveal that both Spanish and English law govern aspects of the dispute. Under European law, the general rule matters relating to a contract will be dealt with by the courts for the place of performance of the obligation in question. If proceedings have been commenced in the wrong jurisdiction, the court may stay the proceedings. I also understand there are concurrent proceedings in Spain.”
[5]Three other features of the documentation are worth recording here: (1) The Retainer Letter spelled out what would be due to TH under the retainer. It emphasised that “whatever the outcome of the case, liability for our costs remains with you.” It dealt with TH’s charges, specifying a rate of £395 per hour for each of the two consultants who were to work on the case. Enclosed with the Retainer Letter was a document called “Information for Clients”. Under the heading “Fees”, this gave further details about TH’s charges, specifying the hourly rates for others who might work on the case. It went on:
“Payments we have to make to third parties on your behalf in the course of acting for you … such as counsel ... are called disbursements and will be included on our invoices. … We will give you the best information possible about the likely overall costs of a matter, broken down between fees, disbursements and VAT. … Our usual practice is to request a payment on account of costs and disbursements at the outset and to send interim bills on a regular basis…. Also, we reserve the right not to continue to work on your behalf until the invoice is paid”
The Retainer Letter recorded that the clients had already paid £3,408.04 on account. (2) The Advice Letter said, in addition to what is set out above:
“This is going to be a very expensive case to fight … As I have indicated, this will be hugely costly action to defend. I cannot at this stage give accurate estimates of the likely costs of each stage of the action. However, to mount a defence you must expect to commit very substantial sums in respect of our fees and for counsel.” (3) The Information for Clients said “… We will explore with you the availability of alternative ways of funding your case, including Conditional Fee Agreements (no win no fee).”
[6]On Friday 5 August 2011 Mr Daulby spoke to the individual defendants and discussed with them a form of CFA. Evidently, in this conversation, it was agreed that TH would act for the corporate defendants as well. The story is picked up in the November Ruling on the following Monday:
“16. On 8 August 2011 Mr Daulby wrote to the First and Second Defendants and enclosed with his letter [“the Covering Letter”]a revised CFA to include D3 and D4. In the letter he said this: “The retainer letter should be read as though it is addressed to them [The corporate defendants] as well.” 17. He went on to say: “Counsel and my role is to deal with the procedural position in England and not to consider your rights under the film contracts. For example, Alejandra says that the co-producers have breached the agreement. By clause 26 of the contract the Spanish courts have jurisdiction to deal with such claims so we cannot advise on them.”” “The retainer letter should be read as though it is addressed to them [The corporate defendants] as well.” “Counsel and my role is to deal with the procedural position in England and not to consider your rights under the film contracts. For example, Alejandra says that the co-producers have breached the agreement. By clause 26 of the contract the Spanish courts have jurisdiction to deal with such claims so we cannot advise on them.””
[7]The Costs Judge proceeded to refer to the contents of a witness statement made by Mr Daulby on 19 August 2015, giving an account of the factual context, and aspects of his thinking at the time:
“18. … Mr Daulby explained that he first became involved in this litigation on 30 June 2011. The injunctions that were already in place were a serious problem for the Defendants because the Claimants were using them to prevent the release of the film. The injunctions also prevented the Defendants from responding to media references by the Claimants. The Defendants were under enormous financial pressure because they had raised all the money that was required to fund their share of the production costs unlike the other co-producers. He had reviewed the papers supplied to him by the Defendants and in paragraph 9 of his witness statement he said this: “I thought that we had the makings of an application that: i) the claim form had not been properly served on each of the four defendants; ii) the renewals of the claim form be set aside; iii) the injunctions be dismissed by reason of the claimants’ failure to comply with their undertakings and orders of the court. This application was intended to be a tactical step that could lead to a number of possible orders. If we were able to establish that none of the claim forms had been served in time, that would cause the injunctions to be dismissed. If the claim form had not been properly served on D1 and D2, the defamation claims would be statute barred.” 19. In paragraph 10 of his witness statement, he went on to say: “I canvassed the possibility with Augustus Ullstein QC who supported my strategy … Although we perceived this to be a very risky litigation strategy of which the outcome was by no means certain, there appeared to be no real available alternative. I prepared a retainer letter in respect of the Defendants’ claim against them on 4 July 2011 that included the words: “In this case the facts are simply too complicated to form an early assessment on the merits to allow us to undertake the type of risk assessment that is necessary when entering to a CFA.”
I therefore had a retainer to act on the defence of the claim with aspects of it deal under a CFA.” 20. In paragraph 12 he said:
“In essence, I wanted an agreement that would not commit Counsel and I to fighting claims to a full trial of the action. The agreement did not cover any counterclaim that the Defendants wanted to pursue. It was intended to cover the type of applications that I had in mind referred to in paragraph 9 above, namely one that involved the dismissal of the injunctions and/or the claims without a full trial. I was concerned that the Claimants might seek to reissue the proceedings if the claims were successfully struck out so I wanted to include an application for an anti-suit injunction. If we secured the dismissal of the injunctions there might be a right of damages under the cross undertaking. It obviously made sense to include this as part of the CFA.” “I thought that we had the makings of an application that: i) the claim form had not been properly served on each of the four defendants; ii) the renewals of the claim form be set aside; iii) the injunctions be dismissed by reason of the claimants’ failure to comply with their undertakings and orders of the court. This application was intended to be a tactical step that could lead to a number of possible orders. If we were able to establish that none of the claim forms had been served in time, that would cause the injunctions to be dismissed. If the claim form had not been properly served on D1 and D2, the defamation claims would be statute barred.” “I canvassed the possibility with Augustus Ullstein QC who supported my strategy … Although we perceived this to be a very risky litigation strategy of which the outcome was by no means certain, there appeared to be no real available alternative. I prepared a retainer letter in respect of the Defendants’ claim against them on 4 July 2011 that included the words: “In this case the facts are simply too complicated to form an early assessment on the merits to allow us to undertake the type of risk assessment that is necessary when entering to a CFA.”
I therefore had a retainer to act on the defence of the claim with aspects of it deal under a CFA.” “In essence, I wanted an agreement that would not commit Counsel and I to fighting claims to a full trial of the action. The agreement did not cover any counterclaim that the Defendants wanted to pursue. It was intended to cover the type of applications that I had in mind referred to in paragraph 9 above, namely one that involved the dismissal of the injunctions and/or the claims without a full trial. I was concerned that the Claimants might seek to reissue the proceedings if the claims were successfully struck out so I wanted to include an application for an anti-suit injunction. If we secured the dismissal of the injunctions there might be a right of damages under the cross undertaking. It obviously made sense to include this as part of the CFA.”[8]The Costs Judge continued by dealing with the CFA between TH and the defendants:- “21. Taylor Hampton entered into a conditional fee agreement (CFA) … in August 2011. The precise date remains unclear. The agreement was entered into by D1, D2, D4 and D5. The scope of the agreement is defined as follows: i) “What is covered by this agreement?”• Your claims against Michael Radford and the Michael Radford Partnership in claim number HQ103026433 to have the proceedings against you dismissed, to set aside the interim injunction, any assessment of damages under the cross undertaking, and any ancillary applications such as seeking an anti-suit order;• Any appeal by your opponent;• Any appeal you make against an interim or final order on our advice during the course of the case;• Any proceedings you take to enforce a judgment order or agreement;• Negotiations about and/or a court assessment of the costs of this claim (including detailed assessment proceedings and CPR part 8 proceedings between you and your opponent arising out of any costs order made in your favour in this matter to recover costs and/or any insurance premium).• All work undertaken in relation to initial interview and evaluation of the claim including all work of and incidental to the preparation of this agreement and the application for adverse costs insurance. ii) What is not covered by this agreement?• Any claim against you by your opponent or counterclaim by you to the claim as opposed to a claim for damages under the cross undertaking.• Any appeal you make against our advice. Paying us If you win your claim, you are liable to pay our basic charges and disbursements and a success fee. “Win” is defined as making any recovery from your opponent including obtaining an order that the extensions of time for service of the claim form are set aside, the dismissal of the proceedings and an order that your opponents pay damages under the cross undertaking damages. It also includes obtaining an anti-suit order and/or any order for costs.” 22. In the agreement the success fee was set at 67% if the case settled before Taylor Hampton were to make an application to court of any sort and thereafter 100% of basic charges. In a separate agreement attached to the CFA headed “What you need to know about a Conditional Fee Agreement (CFA)”, at paragraph 6 the success fee is stated as follows:
“Success Fee The success fee percentage set out in the agreement reflects the following: (a) The fact that if you lose we will not earn anything. (b) Our assessment of the risk in your case. (c) Any other appropriate matters; … The matters set out in paragraphs (b) and (c) above are set out in the attached risk assessment.” 23.The risk assessment referred to contain[s] the following statement: “The issues therefore are: i) What is the proper law of the contract? ii) Which courts are seized over the dispute? iii) Have the English proceedings been served on Spain? iv) If not, is the claim form now fully dead? v) If so, will the injunction be fully set aside? vi) And if so, what damage flows under the cross undertaking? It is also factually complicated. It involves complex conflict of law issues. There are issues concerning Spanish law, including procedural law regarding service of proceedings. There is financially a significant amount of money at stake.” 24. The risk assessment went on to say the following: “The clients’ aim is to have the injunction lifted, to bring an end to the English proceedings and to seek damages under the cross undertaking. Therefore success may be defined as having the injunction set aside and/or recovering damages. There will also be success if an anti-suit order can be sought and obtained. If the Claimants accept that the English proceedings have not been served and these proceedings are at an end then the prospects of making a recovery are around 60% which represents a 67% uplift. If the application is resisted for any of the reasons identified above, then the merits are 50/50 representing 100% uplift.”” i) “What is covered by this agreement?” • Your claims against Michael Radford and the Michael Radford Partnership in claim number HQ103026433 to have the proceedings against you dismissed, to set aside the interim injunction, any assessment of damages under the cross undertaking, and any ancillary applications such as seeking an anti-suit order; • Any appeal by your opponent; • Any appeal you make against an interim or final order on our advice during the course of the case; • Any proceedings you take to enforce a judgment order or agreement; • Negotiations about and/or a court assessment of the costs of this claim (including detailed assessment proceedings and CPR part 8 proceedings between you and your opponent arising out of any costs order made in your favour in this matter to recover costs and/or any insurance premium). • All work undertaken in relation to initial interview and evaluation of the claim including all work of and incidental to the preparation of this agreement and the application for adverse costs insurance. ii) What is not covered by this agreement? • Any claim against you by your opponent or counterclaim by you to the claim as opposed to a claim for damages under the cross undertaking. • Any appeal you make against our advice. Paying us If you win your claim, you are liable to pay our basic charges and disbursements and a success fee. “Win” is defined as making any recovery from your opponent including obtaining an order that the extensions of time for service of the claim form are set aside, the dismissal of the proceedings and an order that your opponents pay damages under the cross undertaking damages. It also includes obtaining an anti-suit order and/or any order for costs.” “Success Fee The success fee percentage set out in the agreement reflects the following: (a) The fact that if you lose we will not earn anything. (b) Our assessment of the risk in your case. (c) Any other appropriate matters; … The matters set out in paragraphs (b) and (c) above are set out in the attached risk assessment.” “The issues therefore are: i) What is the proper law of the contract? ii) Which courts are seized over the dispute? iii) Have the English proceedings been served on Spain? iv) If not, is the claim form now fully dead? v) If so, will the injunction be fully set aside? vi) And if so, what damage flows under the cross undertaking? It is also factually complicated. It involves complex conflict of law issues. There are issues concerning Spanish law, including procedural law regarding service of proceedings. There is financially a significant amount of money at stake.” “The clients’ aim is to have the injunction lifted, to bring an end to the English proceedings and to seek damages under the cross undertaking. Therefore success may be defined as having the injunction set aside and/or recovering damages. There will also be success if an anti-suit order can be sought and obtained. If the Claimants accept that the English proceedings have not been served and these proceedings are at an end then the prospects of making a recovery are around 60% which represents a 67% uplift. If the application is resisted for any of the reasons identified above, then the merits are 50/50 representing 100% uplift.””
[9]The CFA was based on a standard Law Society form designed for use by claimants’ lawyers in personal injury claims. The adaptations made to the form to tailor it to the present case were made by a costs professional engaged by TH. Mr Williams QC for the defendants points out that it contained the standard get-out clause, allowing TH to end the agreement “if we come to the conclusion that you are unlikely to win”. The construction issue[10]The Costs Judge dealt with the true construction of the CFA in paragraphs [35]-[40]. He started by reminding himself of the principles set out by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, 912, including the following:
“The principles may be summarised as follows: (1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. (2) The background was famously referred to by Lord Wilberforce as the “matrix of fact”, but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man. (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. … (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. …”
[11]The key features of the reasoning that follows in paragraphs [36]-[39] of the November Ruling can be fairly summarised as follows:-(1) This was a bespoke CFA, constructed by Mr Daulby to cater for the unusual circumstances of the case. Mr Daulby’s initial letters to the clients showed that he felt unable to carry out a merits assessment and was focusing on the procedural aspects of the case, for reasons he sets out in his letter.(2) Mr Daulby’s witness statement shows, at paragraphs 6, 9, 10 and 12, that he knew that the defendants’ Spanish lawyers intended to pursue claims in Spain and not the UK; that his focus was on the procedural issues; that he considered the factual situation too complex to form a view on the overall merits, such as would be necessary to allow “the type of risk assessment that is necessary when entering into a CFA”; and that he “wanted to enter into an agreement that would not commit counsel and his firm to fighting the claims to a full trial”.(3) “This focus on procedural issues is carried further” in the list of issues contained in the risk assessment attached to the CFA.(4) The defendants’ aim was to have the injunction lifted and “the whole focus of the proceedings at that time was in relation to procedural issues. … At the time the CFA was entered into, the overall merits of the claim had not been contemplated and were being left for the Defendants’ Spanish lawyers to deal with.”(5) The words “your claims”, when used to define the scope of the CFA can therefore only be construed as referring to “procedural issues relating to service, jurisdiction and the Defendants’ damages claim under the undertaking.”(6) The words in the CFA defining “what is not covered by the agreement” are entirely consistent with this view. The exclusion of “any claim against you by your opponent …” is “highly unusual wording where the clients were defendants to a claim”. That wording indicated that “No claim by the Claimants was contemplated by the CFA … All that was covered was the Defendants’ claim to have the proceedings against them dismissed.”(7) The words “to have the proceedings against you dismissed” were not to be construed broadly, so as to encompass the proceedings to strike out or for summary judgment that were “not issued until many months after disposal of the procedural issues” and “could not be foreseen”. Such a construction would “fly in the face of the entire purpose for which CFAs were put in place”, namely to reward the solicitor for risks he undertakes. It would allow the solicitor to be “compensated by up to 100% of his base costs for risks that were not even in his contemplation at the time that the agreement was entered into.” The risk assessment, which supports this view, cannot be divorced from the question of the scope of the CFA; it forms part of the agreement.[12]For these reasons the Costs

Judge concluded as follows at paragraph [40]:

“I am satisfied that on a true construction of the scope of this CFA … its scope was meant to cover only procedural issues such as service and jurisdiction and if the Defendants won on either of those issues, the Defendants’ damages under the cross undertaking. The scope of the agreement has to be construed narrowly in that way. The consequence of my finding is that the Defendants had obtained a win as defined by the agreement by 23 May 2012. By that date the scope of the agreement had come to an end and accordingly the Defendants are unable to recover costs from the Claimants under the terms of the CFA from that date.”
[13]For the defendants, Mr Williams QC argues that the Costs Judge’s approach to the scope of the CFA is untenable and wrong in principle. He submits as follows. The essential meaning of the words “your claims … to have the proceedings against you dismissed” is beyond dispute. The wording covers steps taken by the defendants to dispose of the proceedings at an interlocutory stage, rather than the substantive defence of the proceedings. That includes the later application for summary judgment. The Costs Judge’s approach was to conclude that the “literal words” of the CFA were narrowed by a combination of(1) the parties’ subjective intentions when the CFA was entered, when a striking out application was not referred to; and(2) the terms of the risk assessment document. He was wrong on both counts.[14]Mr Williams submits that the Costs Judge appears to have approached its construction as a search for the subjective intention of TH when creating what he calls “extraneous documents”: the covering letter and the risk assessment. This is criticised on the basis that what the Costs Judge needed to do was “to determine the effect of the CFA itself, not extraneous documents”, and that this required the determination of its objective meaning. That meaning was clear.[15]The fact that a striking out application was not referred to, and might not have been envisaged, when the CFA was entered into, is neither here nor there, argues Mr Williams. The fact remains that the wording used covered applications to have proceedings dismissed, with no limitation as to the type of application. It is wrong to focus on what the parties had in their contemplation at the time of a CFA. Litigation is dynamic and hard to predict. A party may begin by seeking one remedy and end up claiming another, or by expecting to sue opponent X and end up suing opponent Y. Mr Williams submits:
“It would be extraordinary, in such circumstances, to conclude that work done by a solicitor conducting such cases was outside the scope of his retainer, because the ultimate developments were not foreseen when he was first retained. But that is the conclusion which the costs judge reached.”
[16]Mr Williams criticises the Costs Judge’s “use of the risk assessment” as misconceived. He submits that the document has only one purpose: to explain the solicitors’ reasons for setting the success fee. Its function is not “to amend the operative parts of the CFA.” The fact that it focussed on the risks as they were perceived at the relevant time does not mean that its contractual effect was “to curtail the ambit of the CFA so that it did not apply to work which the risk assessment did not contemplate.” It was wrong to treat as overriding or altering the terms of the CFA itself. This approach has great dangers, says Mr Williams, because a CFA risk assessment is usually made at the start of a dispute, when relatively little is known about the case; and litigation will very often develop in ways that are not contemplated at that time.[17]Mr Williams urges that the correct analysis is the one that he advanced before the Costs Judge, which is this:(1) The CFA reflected TH’s intention to limit its scope. It covered interim applications to dismiss the claim without a trial. Hence, the “what is covered” section of the CFA stated that the CFA applied to “Your claims… to have the proceedings against you dismissed…”. However, the CFA did not otherwise apply to the defence of the substantive proceedings. Hence, the “what is not covered” section stated that the CFA did not otherwise apply to the “… claim against you by your opponent…”.(2) Despite this limitation in scope, the CFA in fact covered the vast majority of the steps which had occurred in the proceedings. It was common ground that it governed the work done to 23 May 2012, which related to the attempts to set-aside the injunction, and have the proceedings dismissed for non-service. But the CFA no less applied to the subsequent application to strike out the claim, and then the defendants’ appeal to Sir David Eady when that application succeeded. That too was an application “to have the proceedings against you dismissed…” in the language of the CFA; and appeals by opponents were also expressly included in the “what is covered” section of the agreement.[18]Mr Williams has failed to persuade me that the Costs Judge erred in his construction of the CFA. His analysis of the Judge’s reasoning is flawed, in my view. The Judge did not start with an interpretation of the contractual words, and then treat that meaning as cut down by the parties’ subjective intentions or the risk assessment document or letter. He loyally followed the principles identified by Lord Hoffmann in the Investors Compensation case, by construing the contractual wording in its factual context. The Judge had ample justification for concluding that a reasonable person in the factual situation that obtained at the time the CFA was entered into would understand the words “your claims … to have the proceedings against you dismissed” to refer and to refer only to procedural applications of a kind that existed, had already been identified by the defendants and notified to the court, formally or informally: those that were in the parties’ contemplation at the time of the agreement.[19]The context in which the phrase “your claims ... to have the proceedings against you dismissed” was one in which, unusually, the solicitors had gone out of their way to cut down the scope of the work which they were to undertake on a CFA. They had made clear to their clients(a) that they were willing to undertake work on a CFA if they could make an assessment of the risks involved; but(b) that they were unable to make an assessment of the substantive merits of the claim. The parties expressly excluded any work in relation to “any claim against [the defendants] by your opponent”. Plainly, the parties were deliberately excluding any obligation to do any work defending the claim on its merits.[20]The words “Your claims …” seem to be standard Law Society wording. They are not particularly suitable as a description of interim applications. Nonetheless, they were not altered in the process of drafting this agreement. The most important point about them is that they indicate something in existence, or at least contemplated at the time. The words “Your claims” are followed by a list of specific issues which had in fact been notified to the court by the defendants as matters they wished to pursue, and/or discussed with TH. The list of specific topics, although it is inclusive not exhaustive in form, indicates that the “claims” referred to have a narrow and specific scope, limited to “claims” that have been considered, or matters similar to, and allied or ancillary to those claims. As Mr Hutton QC puts it, they are “a shorthand way of identifying something in existence at the time.”[21]I do not accept that it was an error to have regard to the risk assessment. On the contrary, it would have been wrong to ignore it. The document not only forms part of the factual matrix, it forms part of the contractual documentation. It therefore cannot properly be described as “extraneous”. It is a fundamental principle of contractual interpretation that regard must be had to the entire contract. In Jones v Wrexham Borough Council [2008] 1 WLR 1599 the Court of Appeal applied that principle to the construction of a CFA. Waller LJ said at [27]:
“I can see no reason why the court should not look at the whole package produced by the solicitor, the CFA agreement, the rule 15 letter explaining to the client the effect of the agreement, and indeed the insurance policy recommended by the solicitor…”
[22]The issue in Jones was whether the CFA was one within Regulation 3A of the Conditional Fee Agreement (Miscellaneous Amendments) Regulations 2003 under which “the client is liable to pay his legal representative's fees and expenses only to the extent that the sums are recovered in respect of the relevant proceedings” (known as a “CFA lite”). But the exercise was one of construing the agreement. In my judgment the risk assessment was part of the “whole package” in this case. Its contents were of legitimate concern to the clients, not least because they formed the justification for imposing on the clients a substantial costs liability in the event of success.[23]Again, Mr Williams’ criticism of the Judge seems to me to involve a mistaken analysis of his reasoning. The Judge did not start with a contractual interpretation and treat the risk assessment as “amending” or “curtailing” it, or as overriding or altering that interpretation. He treated the risk assessment as one factor in arriving at a single conclusion on the true construction of the key CFA wording. He was clearly justified in that approach. The risk assessment does serve the purpose of explaining the solicitors’ reasons for setting the success fee at the chosen level. But it is also a contemporaneous statement by the solicitors to their clients, identifying their understanding of the clients’ aim, the issues with which they would be dealing, the nature of the risks they were taking on in doing so, and what would amount to success. It is therefore objective evidence as to the scope of the work for which the parties intended to contract. It supports the narrow interpretation of the words “your claims…” which the Costs Judge adopted.[24]As for the Covering Letter. this is an “extraneous” document in that, unlike the risk assessment, it does not form part of the contractual documentation. But in a broader sense it is part of the “package”. It is part of the factual matrix, as Mr Williams accepted in the course of argument. The Judge was not wrong to take account of it. As it happens, it is not obvious to me that he placed great weight on this document. But he was entitled to regard it as a communication between the contracting parties which could have “affected the way in which the language of the document would have been understood by a reasonable man.” It is proper, in construing the CFA, to give weight to the fact that the Covering Letter identifies the role of TH and Counsel as “to deal with the procedural position in England”. These were words of limitation, distinguishing the procedural issues from the substantive merits of the claim.[25]Although the Costs Judge’s citation of passages from Mr Daulby’s witness statement might appear, if viewed in isolation, to place some reliance on the subjective intentions of TH, I do not believe that is a fair reading when regard is had to the context in which those citations appear. Mr Williams made clear that he was not suggesting that the Costs Judge had made impermissible use of the evidence filed by his clients, and rightly so in my view. The Costs Judge was well aware that the exercise calls for an objective assessment. Much of what Mr Daulby said was evidence of the factual matrix at the time, though it did not really add to what was evident from the documents of which the parties had shared knowledge. If, and to the extent that, the passages cited went beyond that, the Costs Judge was in my judgment doing no more than underlining the fact that his objective interpretation of the contractual wording was consistent with what Mr Daulby says were his subjective aims and intentions.[26]The Judge’s reliance on what the parties contemplated at the time was not wrong. He did not treat this as a principle of interpretation. He treated it as an element of the factual matrix in which the parties used the words about “your claims …”. He was right to do so. It is of course open to the parties to a CFA to define the work covered by the agreement in such a way that it extends to work involving claims and/or defendants other than those in contemplation at the time of the agreement. This is often done, and examples were provided in the course of argument. The question here however is whether that is what these parties did, by the particular wording they used in this CFA. I consider the Costs Judge was right to conclude that they did not.[27]The way the reasonable person would have seen this at the time is, put bluntly, that TH did not want to risk working without reward on anything other than the procedural applications challenging service and jurisdiction which were in the contemplation of the parties at the time of the CFA. They were unwilling to do work under a CFA which involved addressing the merits. It is not a good enough answer to point, as Mr Williams does, to the get-out clause. That would have allowed TH to end the agreement if they thought the clients were “unlikely to win”. But it by no means follows that they were happy to take on work of wider scope. The perceived merits of the client’s position are not the only factor that can influence a lawyer’s decision on whether or not to undertake work on a CFA. The lawyer will normally consider the scale as well as the degree of risk. On the wider interpretation, the CFA would have obliged TH to work on a merits-based application to dismiss, provided it was “likely” to succeed, whatever the scale of the commitment involved. TH themselves had made quite clear that they saw the task of assessing the merits as a huge one, and the case as a vastly expensive one to fight.[28]I do not accept Mr Williams’ further submission, that the “narrow” interpretation is at odds with the principle that the court should lean towards a construction of a solicitor’s retainer that favours the client. The meaning of these words in their context is in my view clear enough to make that principle redundant in this case. Nor do I think it obvious that the interpretation advocated by the defendants is one that favours them. By choosing to enter into a CFA that covered any application to dismiss, of whatever kind, they would have exposed themselves to an additional liability to TH of uncertain scope, which was potentially very substantial. At the time the agreement was made that was a contingent liability, and the defendants might have thought it would be met by their opponents if it matured. Nonetheless, as this was not a “CFA-lite” the defendants’ liability would have attached whether or not there was any recovery from the claimants.[29]For the reasons given above I reject the contention that the Costs Judge was wrong in his construction of the CFA. In my judgment he applied the right principles, and arrived at the correct interpretation. In the end, one comes back to the meaning of the words used, in their context. The work for which the parties contracted under the CFA was limited to the pursuit of procedural points which had already been identified, on the basis of which the defendants were to seek to get rid of the claim and obtain damages under the cross-undertaking and possibly an anti-suit injunction. That work came to an end on the making of the consent order of 23 May 2012. It is common ground that the CFA did not extend to work on the defence of the claim, or the counterclaim. It did not, on its true construction, extend to work on the much later application to strike out or for summary judgment.

The Sole Retainer Issue

[30]The Costs Judge dealt with the second issue (“the Sole Retainer Issue”) at paragraph [41] of the November Ruling as follows:
“The second question is whether the Defendants can recover costs from the 23rd May 2012 pursuant to a retainer entered into with the First and Second Defendants on 4 July 2011 and with the Fourth and Fifth Defendants on 8 August 2011. To my mind there is no doubt that the letter of 4 July 2011 creates a liability that whatever the outcome of the case, a liability for costs remains with the Defendants. The letter of 8 August 2011 must also be read as though it applies to the Fourth and Fifth Defendants as well. Mr Williams submitted that the Defendants therefore remain contractually obliged to pay for the work done albeit without a success fee pursuant to the principles stated in Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495. The CFA entered into by the Defendants in August 2011 supersedes that retainer. In my judgment, entry by the Defendants into the CFA brings the earlier retainer to an end. There is no evidence before the court to the effect that the Defendants were ever advised that were the CFA to be rendered unenforceable or to subsist in relation to only part of the proceedings, that the earlier retainer with their lawyers would continue as before. The reasonable expectations of the Defendants based on the evidence that I have considered leads me to the conclusion that the Defendants would not expect to have to pay their lawyers for work done in those circumstances. For those reasons I reject the submissions of Mr Williams and prefer the arguments advanced by Mr Hutton in that regard.”
[31]Mr Williams advances two main criticisms of this analysis. First, whilst accepting that there is no difficulty in the conclusion that the CFA superseded the original retainer in respect of the work to which the CFA related, he submits that there was no basis for concluding that the CFA also revoked the retainer in respect of work which the CFA specifically excluded. Why, he asks rhetorically, would the CFA revoke the prior retainer in respect of work to which the CFA did not apply? The proper analysis is that work outside the scope of the CFA remained covered by the terms of the Retainer Letter. In support of this argument he points to the fact that the Retainer Letter was reissued at the same time as the CFA was sent to the clients for acceptance, and the retainer described in that letter is broad, encompassing the defence of the claim.[32]As Mr Hutton concedes, this last point has some superficial attraction. It is however substantially met by the answer he offers. The Retainer Letter served a number of purposes, not all of which were met by the CFA. One of these is compliance. I believe I can take judicial notice of the existence of regulatory requirements for the provision of client care letters. But regardless of that, the Retainer Letter and its accompanying “Information for Clients” document contain a range of provisions regulating the overall relationship between solicitor and client, which are not to be found reflected in the CFA. These are provisions which any prudent solicitor would wish to ensure were in place between him and his client. These include provisions as to conflict of interest, the responsibilities of the parties, confidentiality, limitation of liability, and a host of other matters. For these reasons it made complete sense for TH to send a Retainer letter to their new clients, the corporate defendants, even if the intention was for them to enter into a CFA. Furthermore, it remained at this point for the clients to decide whether they wished to enter into the CFA. It was at that stage an offer, not a contract. For these reasons the reissue of the Retainer Letter does not in my view serve to contradict or undermine the Costs Judge’s conclusion.[33]The question remains of whether the Costs Judge was wrong to conclude that the CFA revoked the extant “traditional” retainer in its entirety. This is again a question of what the parties meant by their agreements, objectively assessed. The last sentence of Mr Daulby’s paragraph 10 (see [19] of the November Ruling) was either his after-the-event analysis of the situation, or evidence of his subjective intentions. Either way, it is inadmissible as an aid to the resolution of this issue. I do not consider it to represent the true position, objectively assessed. Analytically, it seems to me, the Costs Judge’s conclusion amounts to a finding that the parties agreed, upon entering into the CFA, to discharge the existing retainer and replace it with that agreement. In my judgment that is a proper interpretation of their conduct at the time. The reasonable person, looking at the Covering Letter, the CFA and the other enclosures against the background of the previous exchanges between TH and the defendants, would conclude that the CFA was being offered as one of the “alternative ways of funding your case” referred to in the Information for Clients document. The offer to the clients, which they accepted, was to substitute the traditional retainer with a more limited CFA.[34]Significant factors in reaching that conclusion are TH’s advice to the clients that the case would be hugely expensive to defend (see [5] above); and the fact that, as TH well knew, the clients were quite unable to fund the litigation from their own resources. This second point is reflected in paragraph [18] of the November Ruling. But it is spelled out most emphatically in another passage in Mr Daulby’s witness statement where he says:
“It was simply inconceivable that the Defendants would be able to afford to fund the trial of an action of all the issues raised in the Particulars of Claim”
. Granted, the substitution of the CFA for the “traditional” retainer left open what would happen if the procedural applications failed or, as happened in the event, were only partially successful. But it is clear that the parties were focussing exclusively on the jurisdiction and service points at this stage, and that they were fairly optimistic as to the prospects of success of the procedural applications.[35]Mr Williams’ second submission is that there was no basis, evidential or otherwise, for the Costs Judge’s finding as to the “reasonable expectations” of the defendants. The defendants, who are commercial clients, agreed to a CFA which they knew was limited in scope. They then instructed TH to perform work which was, and which on any view they must have known to be, outside its scope. That work included, on any view, drafting the defence and counterclaim. If the Costs Judge was right on the construction issue, it also included the application to strike out or for summary judgment. Even if the CFA served to revoke the original retainer, there would be no basis for concluding that the defendants had any expectation that work outside the scope of the CFA would be carried out for nothing.[36]In support of this second criticism, Mr Williams relies on the common law principle that where a solicitor is acting with the knowledge and approval of a client, then (at least for the purpose of satisfying the indemnity principle inter partes) the client will be assumed to be liable to pay for the solicitors’ services unless the solicitor has agreed to work gratuitously. The principle is referred to not only in the decision cited by the Costs Judge, Adams v London Improved Motor Coach Builders Ltd, but also in more recent decisions. In Kellar v Williams [2004] UKPC 40 [18] Lord Carswell, giving the advice of the Privy Council, said this:
“… the original arrangement between the respondent and his attorneys was an informal one, such as is commonly encountered, that they would undertake the litigation for him, without entering into any contentious business agreement by which the rates of charge were governed. As such it was inherent in the agreement that it was not intended to be gratuitous, but the hourly rates or other charges were not discussed or agreed. In these circumstances the law will imply an agreement to pay a reasonable rate, on the basis set out by Lord Atkin in Way v Latilla [1937] 3 All ER 759 at 763: “But, while there is, therefore, no concluded contract as to the remuneration, it is plain that there existed between the parties a contract of employment under which Mr Way was engaged to do work for Mr Latilla in circumstances which clearly indicated that the work was not to be gratuitous. Mr Way therefore is entitled to a reasonable remuneration on the implied contract to pay him quantum meruit.” “But, while there is, therefore, no concluded contract as to the remuneration, it is plain that there existed between the parties a contract of employment under which Mr Way was engaged to do work for Mr Latilla in circumstances which clearly indicated that the work was not to be gratuitous. Mr Way therefore is entitled to a reasonable remuneration on the implied contract to pay him quantum meruit.”
[37]Here, submits Mr Williams, TH were acting in the course of business, for commercial clients engaged in a commercial dispute. There is no finding nor is there any suggestion that TH agreed to work for nothing. So the defendants are liable in any event to pay a reasonable sum for the work done by TH which was outside the scope of the CFA.[38]These too are beguilingly attractive submissions. One instinctively recoils from the notion that clients can instruct lawyers to defend a claim, and to make an interim application for its dismissal and then, when the lawyers have succeeded in doing what they were asked to do, refuse to pay them at all. The notion that the clients could have a “reasonable expectation” of getting something for nothing under those circumstances is deeply unattractive. But I have concluded that this argument involves a mis-reading of paragraph [41] of the November Ruling. The Judge’s reference to the “reasonable expectations” of the defendants reflected his objective assessment of their state of mind at the time. Importantly, he was not suggesting that they would have expected to get something for nothing, come what may. He was not saying that there was an expectation that services would be provided on a pro bono or other gratuitous basis. There was no evidence that any such arrangement had ever been discussed or contemplated. His conclusion, properly understood, was that the defendants would not expect to have to pay for their lawyers’ services win or lose. Put another way, they would not consider that the lawyers were on a conventional retainer.[39]Mr Hutton’s opening argument on this issue was that the evidence demonstrates that until very recently TH have consistently maintained the opposite of their present case. Their case has been that all the work after 23 May 2012 was done on a conditional fee basis. This is indeed how they put their case, as most clearly shown by the bill of costs presented for assessment after the event, and the Reply submitted in the assessment proceedings. But it is not how the Costs Judge reasoned, nor is it in my view a legitimate approach in law. The parties’ contractual intentions in and after May 2012 are not to be determined by reference to their post-contractual conduct: James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Limited [1970] AC 583. I accept, however, Mr Hutton’s ultimate submission: that in substance what the Judge was saying is that a reasonable person in the position of the defendants would have thought that work outside the scope of the CFA of August 2011 was being done on a conditional fee basis.[40]That submission is consistent with a point made by Mr Williams in argument on the scope point. He submits that in any other context that issue would be easy to resolve: the court would conclude that the parties had by their conduct agreed to vary their existing CFA by extending its scope; but that this could not be the answer here because the law requires a CFA to be in writing. I see the force of that line of argument, and in my judgment it applies in the present context. It reflects the reality as the Costs Judge rightly saw it: the conduct of these parties does suggest an implied retainer, but not one of the conventional variety; it clearly indicates an unwritten retainer on a conditional fee basis. A reasonable person with all the knowledge these parties possessed would conclude that the common intention of the parties after 23 May 2012 was that the lawyers should be paid (and entitled to a success fee) if they won, but not otherwise.[41]I note in parenthesis that Mr Hutton appears to be right in his submission that the parties did not take any of the steps that one would expect if the retainer had continued on a “conventional” basis after 23 May 2012, such as (on TH’s side) rendering interim bills and seeking payments on account. But I do not rely on that in reaching my conclusions. It was not something relied on by the Costs Judge, is not raised by way of a Respondent’s Notice, and there was little argument on its relevance.[42]There has been much debate between Counsel about a line of authority that evidences a “relaxed” or “attenuated” approach to the implication of a liability to pay, where the context is a dispute between the successful party and the paying party, rather than between solicitor and client. Mr Williams points to a summary of the jurisprudence in Thornley v Lang [2003] EWCA Civ 1484, [2004] 1 WLR 378 [5]-[9]. At [6] Lord Phillips MR, giving the judgment of the court, referred to cases where litigants are funded by third parties such as trade unions, and summarised the position in this way:
“When defeated by such a litigant, unsuccessful parties have, on occasion, invoked the indemnity principle in an attempt to avoid paying costs. The argument advanced has been that the successful litigant is not liable for his costs and, therefore, has no right to recover them. The courts have had no truck with such arguments. They have defeated them by finding that, in the circumstances under consideration, the litigant comes under an independent obligation, albeit one that is unlikely to be enforced, to pay the fees of the solicitor who is acting for him”
[43]The line of authority includes the Adams case cited by the Costs Judge,Davies v Taylor (No 2) [1974] AC 225, 230, Lewis v Averay (No 2) [1973] 1 WLR 510, CA, and Kitchen v Burwell Reed & Kinghorn [2005] EWHC 1771 (QB), [2006] 1 Costs LR 82 (Gray J). Mr Williams accepts that these authorities, all concerned with third party funding, do not strictly cover the present situation. But he submits that they are illustrative of a policy by which the courts seek (as Gray J put it in Kitchen at [31]) “if they properly can, to avoid a construction of an agreement which will involve a breach of the indemnity principle because of the unfairness consequent upon such a conclusion”. The unfairness is of course the windfall for the paying party, at the expense of the successful litigant’s lawyers. Secondly, Mr Williams submits that these principles reinforce the conclusion that the Costs Judge was wrong. That is because in the absence of a conclusion that the defendants were at least impliedly liable to pay for the work done, the claimants will avoid paying for work which has unquestionably been performed by TH, from which the defendants have unquestionably benefitted, and which the conduct of the claimants themselves unquestionably necessitated.[44]It is easy in the abstract to see the force of this line of argument, and the attractions of the approach reflected at [18] of Kellar v Williams. But that attraction fades, once the true position as identified in the November Ruling is appreciated. On a proper analysis the reason that TH are not entitled to recover for work done after the August 2011 CFA had been exhausted by the “win” achieved on 23 May 2012 is not that the court has taken an unduly strict approach, and declined to imply an agreement to pay. The reason is that the implied agreement to pay is a CFA, and TH failed to take the precaution of ensuring that this CFA was reduced to writing so as to satisfy s 58(3)(a) of the Courts and Legal Services Act 1990.[45]A related issue which has been debated on these appeals is the extent to which the paying party is entitled to be treated as standing “in the shoes” of the successful party, when it comes to taking points about the rights of that party’s lawyers to be remunerated for their work. The paying party has, submits Mr Williams, “a smaller footprint” when stepping into the client’s shoes. He points out that if the court allows the paying party full rein it may end up giving effect to unattractive points that are not, and would not be taken, by the client. Mr Williams cites, albeit in another context, an example of the court declining to permit this. In Forde v Birmingham City Council [2009] EWHC 12 (QB), [2009] 1 WLR 2732 Christopher Clarke J upheld the validity of a retrospective CFA (“CFA 2”), entered into between solicitor and client on the eve of a settlement, in the knowledge that the existing arrangement (“CFA 1”) might be vulnerable to challenge. The paying party alleged undue influence. Christopher Clarke J rejected the challenge, holding at [106] that the client, Ms Forde, had been “prepared to assist her solicitors recover their fees despite the challenge to the validity of CFA 1”, and that it would be “entirely understandable for her not to seek to rely on the unattractive contention that [the solicitors] should get nothing at all for what they had done …”[46]The observations of Christopher Clarke J were however made in a specific context. They fall a long way short of a decision that the paying party’s freedom to take points about the recoverability of fees is constrained by some criterion of reasonableness. In any event, in the present context the ultimate bars to recovery are an unexceptionable approach to the assessment of the parties’ contractual intentions, coupled with a statutory provision disabling a lawyer from recovering under an unwritten CFA. There is no room for a finding that the point at issue here is one lacking in broad merit that is not properly open to the paying party.

The Counsel’s Fees Appeal

[47]The effect of my conclusion on the Sole Retainer Issue is to uphold the Master’s finding that, as I read him, TH had no enforceable retainer after 23 May 2012. It remains to consider Mr Williams’ contentions that the Costs Judge was wrong to find(1) that it follows that Counsel has no right as against the defendants to recover his fees for work done thereafter;(2) that Counsel has no right in any event to be paid for any work he did for the corporate claimants.[48]There are some additional matters of factual background that need to be brought into consideration:(1) As is usual, Counsel’s CFA was an agreement between Counsel and the solicitors. Counsel’s CFA was undated, but it is agreed that it was made on or about 6 July 2011. That was just a couple of days after TH sent the Retainer Letter and Advice Letter to the individual defendants. So Counsel’s CFA was made at a time when TH’s own retainer was a conventional one, in which the clients would pay them win or lose.(2) Counsel’s CFA named all of the defendants as parties to the action, but it did not name all of the defendants as his clients. Those named as clients were only the first three defendants (although the third defendant ended up playing no part in the proceedings). The corporate defendants were not named. That is unsurprising, as TH had no retainer from the corporate defendants at that time.(3) It was not until about a month later that TH offered a CFA, and the question arose of extending the scope of TH’s retainer to encompass the corporate defendants. The earliest that can be shown to have been in contemplation is Friday 5 August 2011 when, according to the Covering Letter, Mr Daulby discussed the CFA with the individual defendants. It appears that in that conversation it was agreed that TH would be retained by the corporate defendants as well. The CFA and the reissued retainer letter which Mr Daulby sent on Monday 8 August 2011 included the names of the corporate defendants.(4) Counsel’s CFA covered the entire case. That is unsurprising, as TH’s retainer was itself unlimited in scope at the time. That retainer was, as set out in the Retainer Letter, “to consider and advise you in relation to the defence of the claim against you by Michael Radford and the Michael Radford Partnership.”(5) The definition of “win” in Counsel’s CFA was however in the same terms as those that later appeared in the solicitors’ CFA (see the November Ruling [21], at paragraph 9 above). This is consistent with the evidence of Mr Daulby, that he and AUQC had discussed a strategy of bringing the proceedings to an end via procedural challenges to jurisdiction and service, rather than fighting the whole action: see the November Ruling [18]-[19], paragraph 8 above). Evidently, TH decided to use the same definition of “win” in their CFA, when that came to be drafted.(6) Counsel continued to act even after the claim against the individual defendants failed for want of service. He settled the Defence and Counterclaim of the corporate defendants, and acted for them in their application to strike out or for summary judgment.(7) On 30 July 2015, having been alerted to the potential problem that Counsel’s CFA did not name the corporate defendants as his clients, Counsel and TH executed a deed of rectification (“the Deed”). This varied the terms of the CFA so that it expressly named the corporate defendants as Counsel’s clients, as well as the individual defendants. This was during the currency of the assessment proceedings and, of course, well after the orders giving rise to the right to costs.(8) Before the Costs Judge the defendants maintained that the Deed gave effect to the original intention, that Counsel would represent all of the defendants. Their case was that the failure to name the corporate defendants was merely oversight. It was pointed out that, in the event, Counsel did indeed act for all of the defendants.

The retainer point

[49]The Costs Judge’s determination was that “Counsel’s fees may not be recovered after 23 May 2012, given the court’s prior ruling that the Defendants’ solicitors had no valid retainer after that date.” Mr Williams argues that on a true analysis recovery of Counsel’s fees was never conditional, as between TH and the defendants. His fees for work done after the CFA came to an end are charges which the defendants are contractually obliged to defray pursuant to that agreement. Under the terms of TH’s CFA, he submits, Counsel’s fees were payable win or lose.[50]Clause 10 of the CFA made provision for “Payment for Advocacy”. It said that advocacy by TH “forms part of our basic charges”. Two scenarios for payment of Counsel were provided for: one for “Barristers who have a Conditional Fee Agreement with us”, and one in which Counsel was not acting under a CFA with TH. In the latter scenario the CFA provided that “these fees are treated as a disbursement” payable win or lose, and normally recoverable from the opponent in the event of a win. In the former scenario, the clause said:
“If you win, you are normally entitled to recover [the Barrister’s] fee and success fee from your opponent. The Barrister’s success fee is shown in the separate Conditional Fee Agreement we make with the Barrister … We will discuss the Barrister’s success fee with you before we instruct him or her. If you lose, you pay the Barrister nothing.”
[51]Mr Williams submits that the effect of these provisions is to oblige the defendants to pay TH whenever TH was liable to pay Counsel, and that liability to reimburse TH did not end with the CFA. I do not agree. The obligation to pay Counsel’s fees arose only in the event of a win and, more importantly, only in respect of work done within the scope of the defendants’ CFA with TH.[52]The language quoted above is somewhat opaque, when it comes to the client’s obligations to pay Counsel’s fees in the event of a win. But it is unequivocal in stating that the client has no obligation in respect of Counsel’s fees “if you lose”. “Lose” must refer to failure as defined in the defendants’ CFA with TH. The implication is that where Counsel is on a CFA the client will have a liability in respect of Counsel’s fees if, but only if, “success” as defined in the client/solicitor CFA is achieved. Clause 10 ties the obligation to pay Counsel to the definition of success in the solicitors’ CFA with the client.[53]There can however be no obligation to pay Counsel in respect of work that the solicitors were not authorised to instruct Counsel to undertake. This was an agreement for the provision of legal services of a defined scope, governed by the sections of the CFA headed “What is covered …” and “What is not covered …” The agreement permits the solicitors to incur liabilities to third parties and to claim an indemnity from the client in respect of those liabilities, but there is nothing in the CFA that confers authority to incur liabilities that are not related to work within its scope. It seems to me that fees that(a) become due from TH to Counsel acting under a CFA with TH and(b) are payable by the clients pursuant to clause 10 of TH’s CFA are properly understood as disbursements within the meaning of the CFA. Clause 13(f) defines “Our disbursements” as “payments we make on your behalf such as … Barrister’s fees”. This is underlined by the wording of the Retainer Letter defining disbursements as “Payments we have to make to third parties on your behalf in the course of acting for you”. (The emphasis is mine in each case).[54]It was open to TH to engage Counsel on a CFA to carry out work beyond the scope of their own CFA with their clients. But the CFA gave them no right to require their clients to indemnify them for liabilities incurred as a result.

The scope point

[55]The Costs Judge dealt with the scope point in paragraphs [18]-[35] of the January Ruling. This was a detailed and careful analysis, but his overall conclusions can fairly be summarised in this way:(1) The defendants had not shown that Counsel was entitled to rectification of his CFA. To establish such a case there had to be “convincing proof” that the parties “had a common continuing intention, there was an outward expression of accord and the intention continued at the time of the contract but the contract did not reflect that common intention”: Chartbrook v Persimmon Homes [2009] UKHL 38 and Swainland Builders v Freehold Properties Ltd [2002] 2 EGLR 71. There was no such convincing proof. The corporate defendants were not clients of TH at the time that Counsel’s CFA was entered into. It was not until 8 August 2011 that the corporate defendants were added to the list of TH clients. They were not, the Costs Judge found, contemplated as clients at the time of Counsel’s CFA. There could not therefore have been any outward expression of accord at the relevant time. Their omission at that time was not merely a mistake.(2) Nor could the Deed be relied upon to make good the earlier omission. The variation occurred ex post facto, after the defendants had been awarded their costs. It would be wrong in law to allow a claim for costs to be increased by a variation agreed after the order relied on as creating the liability.(3) For those reasons Counsel’s costs could not be recovered “in relation to work carried out specifically for [the corporate defendants] in relation to the Bill of Costs the subject of detailed assessment.” (It is clear from paragraph [36] of the January Ruling that the Costs Judge’s intention was to limit the bar on recovery to costs that related “purely to” or “solely to” the corporate defendants.)[56]Mr Williams identifies what he says are three errors in the Costs Judge’s approach to this issue. First, he submits the Judge was wrong to proceed on the basis that the costs of representing the corporate defendants could only be recovered by the corporate defendants themselves. The individual defendants are entitled to recover those costs. It is not in dispute that the individual defendants were parties to the CFA with Counsel. That CFA covered the whole of the action brought by the claimants. Counsel was instructed to act for the corporate defendants, under the CFA. The individual defendants are liable to pay for that, and can recover the costs of doing so. Since the corporate defendants are owned and controlled by the individual defendants, there is nothing surprising or wrong in that.[57]This is not an argument that was expressly addressed in the January Ruling, but Mr Hutton accepts that it was argued below, and is open to the defendants on this appeal. The argument does not involve any piercing of the corporate veil. It concerns the true interpretation of AUQC’s retainer by TH on behalf of the individual defendants. The submission is that AUQC was retained on behalf of those two defendants to defend the claims against the corporate defendants. This is an ingenious argument, and there is no reason in principle why such an arrangement should not be made. But in my judgment that is not the agreement that was entered into.[58]Mr Hutton submits that Mr Williams’ argument cannot stand with the Costs Judge’s findings. Rejecting the notion that Counsel was entitled to rectification of the CFA he said this:
“32 … At the time that counsel’s CFA was entered into it was not in the contemplation of Mr. Daulby that the fourth and fifth defendants were his clients. … I am not persuaded that at the time the agreement was entered into that Mr. Daulby had considered the fourth and fifth defendants and their position. I say so on the basis that it was not until August 2011 he realised and revised his own CFA to join in the fourth and fifth defendants into his CFA. … 34 … It is clear to me, from looking at the facts of this case, that it was not in the contemplation of counsel and solicitors in July 2011 that they were acting for the fourth and fifth defendants.”
[59]Mr Williams does not challenge those conclusions, but he is right in my judgment to say that his argument raises a short question of construction that cannot be rejected on the basis of findings as to the subjective intentions of the contracting parties. However, on an objective assessment of the words used by TH and AUQC on or about 6 July 2011 in the factual context disclosed by the evidence, I do not think the parties can be taken to have had a common intention to engage AUQC to act in the defence of the corporate defendants. The Retainer Letter and Advice Letter were both sent to the individual defendants. The Advice Letter considered their position, and referred to the fourth and fifth defendants’ position in a way that militates against the view that TH considered at that time that they were to work on their defence. There is no, or no adequate, evidence that the position of the fourth and fifth defendants was considered prior to 5 August 2011, when their addition as clients of TH was discussed.[60]Mr Williams submits that if Counsel’s CFA did not cover the work he did in relation to proceedings against the corporate defendants, that work must have been done pursuant to a conventional retainer. The argument is on the same lines as Mr Williams’ argument on the Single Retainer Issue: Counsel was instructed to act, and there was no agreement to act pro bono. If the work was outside the scope of the CFA the conclusion can only be that there was an implied retainer under which Counsel was entitled to a reasonable fee. The end point of this alternative submission is that the Costs Judge should have found that Counsel’s basic fees (but no success fee) were recoverable in respect of work done defending the corporate defendants.[61]Mr Hutton responds that this submission could only succeed, if at all, as against TH. It could not succeed as against the clients, whose liability is governed by their agreement with TH. That is a partial answer. As I have already found, the August 2011 CFA with TH does not impose a liability for Counsel’s fees for work done outside the defined scope of that CFA. But some of the work done by Counsel for the corporate defendants was within the scope of the August 2011 CFA. He represented the corporate defendants in relation to the jurisdiction and service applications. In relation to that work the problem is that if, as I would be inclined to accept, TH impliedly retained Counsel to represent the corporate defendants, the implied retainer was a CFA which cannot be enforced because it was not in writing.[62]Mr Williams’ final submission is that the Judge was wrong to conclude that the Deed could not be relied on. He does not seek to challenge the Judge’s conclusion that a claim to rectification would have failed, for the reasons given by the Judge. He argues, however, that it was an error of approach to treat the corporate defendants’ liability as dependent on whether Counsel could have secured rectification in a contested action. The parties to the CFA did not contest that issue. The Deed is an agreement between those parties, which is binding upon them. It imposes an obligation on the corporate defendants. The question for the Costs Judge was, submits Mr Williams, whether that agreement was reasonable. If it was, the obligation which it imposed can be relied on as a basis for recovering reasonable costs from the claimants. For similar reasons, Mr Williams argues, it was an error to treat the timing of the agreement as fatal to the claim for costs. “Whether the [Deed] cures a challenge under the indemnity principle does not depend on the punctum temporis at which the deed was executed. It depends on whether the agreement embodied by the deed was reasonable – as the defendants contend it was.”[63]In its developed form the argument is that the Deed, although purporting to be a rectification of the original CFA amounted to a consensual variation of the original retainer. Because the variation involves the addition of two entirely new parties, the substance of Mr Williams’ position is that the parties entered into an entirely fresh agreement. Mr Williams relies on Forde v Birmingham City Council (above) as authority that there is nothing wrong in principle with a retrospective CFA. I accept that the decision of Christopher Clarke J is authority for that proposition. However, CFA 2 in that case was made before the point in time at which costs became payable. Mr Hutton submits, and I accept, that this is a critical distinction, and that a party may not claim costs in reliance on a retrospective agreement entered into after the making of the costs order which it is sought to enforce.[64]The leading authority is the Privy Council’s decision in Kellar v Williams (above). This was an appeal from the Court of Appeal of the Turks & Caicos Islands. The respondent, Williams, had been successful in litigation. Costs orders were made in his favour in 1993 and 1995. The Privy Council found, as reflected in the passage cited above, that the original retainer was an implied one which entitled Williams’ lawyers to recover a reasonable fee. When first submitting bills for taxation in 1996 the lawyers quantified their costs on the basis of hourly rates plus brief fees. The Chief Justice ruled in another matter that this could not properly be done, if it involved double-charging. The lawyers then agreed with Williams a varied method of calculating costs. Revised bills were submitted in 2000, stripping out the brief fees, and revising the hourly charges. The Court of Appeal and the Board had to consider the effect of the variation. The key passages in the Board’s advice are these:
“13. … The Chief Justice held, first, that the variation of the charging basis agreed in April 2000 was ineffective as against the paying party, because it had been made after the order for costs had been made and so should be disregarded. … 14. The appellants appealed to the Court of Appeal, which affirmed the decision of the Chief Justice, though on differing grounds. … 20. Their Lordships are not satisfied that the arrangement proposed in the letter of 6 October 2000 between the attorneys, if it had been accepted by the respondent and the firm acting for him, constituted any change of substance in the fee paying agreement between them. … If, however, it were likely to produce a larger costs bill than the original framework, an amalgam of hourly rates and brief fees (which appears to be unlikely from the terms of the letter), the appellants’ attorneys would be entitled simply to refuse to accept the amended basis and require the respondent to revert to the original framework. They could do so on the ground, as the Chief Justice correctly held, that that amendment had come into existence subsequent to the making of the costs [order] and so could be disregarded by the paying party if he wished.”
[65]In Oyston v The Royal Bank of Scotland plc [2006] EWHC 90053 (Costs) Senior Costs Judge Hurst followed Kellar v Williams. The client and his solicitor had entered into a CFA in 2002 which provided for a success fee of 100% of reasonable costs, plus £50,000 if the claimant recovered damages in excess of £1m. This was a champertous agreement at common law which failed to comply with s 58 of the 1990 Act. In July 2005 the claimant obtained a costs order. Thereafter he and his solicitors entered into a Deed of Variation which omitted all reference to the £50,000. Had the agreement been in this form from the outset it would have complied with s 58 and been enforceable. The Judge held the Deed was “ineffective to rectify the situation as against the paying party.” He explained:
“Following the decision of the Privy Council in Kellar it cannot be right that a Deed of Variation can be used to impose a greater burden on the paying party than existed before judgment. The fact that the client is in agreement is of no assistance. If the position were otherwise it would be open to solicitors and their successful client to, for example, alter the level of success fee late in the day.”
[66]Mr Williams submits that the reasoning in Kellar is opaque. Forde shows that a retrospective CFA can be made, and there is no discernible reason in principle why the right to make and enforce such an agreement should turn on whether it is made before or after the costs order. The enforcement of such an agreement does not offend the indemnity principle, and the paying party is always and sufficiently protected by the fact that only reasonable costs can be recovered.[67]I accept of course that the key point about the indemnity principle is to ensure that costs awards are no more than compensatory. I agree that the enforcement of such a retrospective agreement would not of itself offend the principle. The costs claimed would remain costs due from the client to the lawyer. The amount payable could still be controlled through the assessment process. But Mr Williams’ argument overlooks the question of what it is that a party is entitled to be compensated for. That, as I see it, is the point that underlies what the Privy Council said in Kellar. The underlying rationale is in my judgment that the effect of a costs order is to create a liability to pay, subject to assessment, those costs which a party has paid or is liable to pay at the time the order is made. The liability to pay costs crystallises at that point and, although its quantum will remain to be worked out, that process must be governed by the liabilities of the receiving party as they stand at that time. To allow enforcement of a retrospective agreement which increases those liabilities would be to alter retrospectively the effect of the court’s order.[68]This seems to me to be a rational and principled basis on which to justify drawing the line in the way approved by the Privy Council. It has the additional benefit of being pragmatic, as it obviates manoeuvres of the kind described by Senior Costs Judge Hurst. It may be open to parties by a post-judgment agreement to reduce the amount the client owes the lawyers, in which case the paying party would obtain the benefit. But it is not permissible to increase the amount due under a costs order by using an agreement entered into after the order was made. Here, at the time of the costs orders nothing was recoverable under the implied CFA, which was unenforceable. As in Oyston, it was too late to rectify the position after the costs orders were made.

Conclusions

[69]The Costs Judge was right for the reasons he gave. The further points that have been advanced on these appeals have not persuaded me that any different outcome would be warranted. The Solicitors’ Costs Appeal and the Counsel’s Fees Appeal are both dismissed.