In Candey Limited -v- Bosheh & Salfiti [2022] EWCA Civ 1103 the Court of Appeal held that a client is not bound to consider their solicitor’s interests when settling a claim.
Background
In summary, Bosheh (the client, “C”) entered into a CFA with Candey Limited (the solicitor, “Sol”). The relevant term of the CFA was “…if… we obtain an order or agreement that our hourly rate costs… be paid by your opponent then we shall be entitled to recover those costs from your opponent, and you are always liable to pay these costs to us to the extent that we recover them from your Opponent. You will always seek to recover costs by order or agreement”. During the course of the primary litigation Sol received an offer from their opponent by which C would receive up to £1m, and that neither party would pay the other’s costs.
Sol advised C that any money paid to C under the terms of that settlement would go to Sol in payment of its legal fees. C did not accept that this was a correct interpretation of the CFA terms. The claim was ultimately settled on a drop hands basis.
Following settlement, Sol terminated its retainer with C and commenced proceedings alleging inter alia breach of its duty of good faith in failing to seek a settlement on terms that Sol would be paid.
Judgment
Finding for C, the High Court found that a retainer between a solicitor and client is not subject to a duty of good faith (para 84). This finding was upheld by the Court of Appeal which added “There is no authority that supports the proposition that, when retaining a solicitor to act for him or her, the client owed that solicitor a duty of good faith. The absence of authority is perhaps unsurprising: it is a startling concept. Many would say that, if a duty of good faith was applicable at all, it would arise the other way round and be owed by the solicitor to the client” The Court continued at paragraphs 53 – 54 that:–
- First, Mr Bompas’ answers demonstrate the potential conflict of interest that can arise under a CFA between the client and the solicitor where the terms are drafted in such a way that the solicitor’s costs recovery is itself dependent on the client recovering something – anything – from the proceedings… Such conflicts cannot be resolved by an implied duty owed by the client to consider the solicitor’s financial interests rather than his own; it is for the solicitor to ensure that such conflicts do not arise in the first place.
- Secondly, it is self-evident that, irrespective of any duty of good faith, the client cannot be in breach because he or she chooses a settlement which they perceive to be as good as or better for them than the one that obviously suits the solicitor. Any other conclusion would fundamentally alter the solicitor/client relationship. In the present case, the Boshehs were quite entitled to conclude that a ‘drop hands’ settlement was certainly not a substantially less advantageous (and arguably a better) deal than the earlier proposal made by the Sheikh.”
Summary
The judgment highlights the risks to solicitors acting under a CFA. Solicitors should check their client retainers to ensure that they minimise the risk that a client may settle the proceedings on terms that prevent them being paid. Whilst it is difficult to imagine wording which would provide complete protection, a clause within the CFA to the effect that if the claim is settled on terms where there is no specific provision for costs, the solicitor will be entitled to be paid their costs capped at a percentage of the settlement sum agreed.
Matthew Rose is a Solicitor in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.
