Nugee: Payment term was unfair
The Court of Appeal has rejected a bid by two public access barristers to be paid nearly £125,000 in fees after the lower courts found a key term in their retainers unfair.
Lord Justice Nugee said it was not difficult to see why His Honour Judge Berkley at first instance and Mr Justice Turner on first appeal thought it was unfair under the Consumer Rights Act 2015.
The retainer contained a ‘payment term’ that the fixed fee was payable even if the hearing was adjourned for any reason.
Nugee LJ, giving the unanimous ruling of the appeal court, said: “The effect of the payment term therefore is that the client on the one hand has to pay the full fees even if she does not receive any services of any value to her, whereas counsel on the other hand not only receive the full fees but are free to pursue other opportunities and, if fortunate enough to obtain other work, can keep both sets of fees.
“The conclusion that such a one-sided arrangement ‘causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer’ seems to me to be one that was well open to the judges below.”
Katharine Atay instructed Michael Glaser KC and Victoria Miller of boutique London family set Fourteen in financial remedy proceedings against her wealthy former husband.
Mr Glaser said his fees for the pre-trial review hearing in July 2020 and 10-day final hearing in September 2020 would be £108,000 (including VAT).
It was to be paid in four instalments – the first two (totalling £25,100) before the pre-trial review, the bulk (£79,200) on 31 August, three weeks before the trial, and the final £3,700 within 28 days of the final order. Any additional work would be charged at £500 an hour.
Ms Miller’s terms were the same, including the payment term, save that her fees were 50% of Mr Glaser’s.
The first two payments were made but the husband then successfully applied to adjourn the trial and, on 31 August, Ms Atay disinstructed the barristers. They began proceedings to recover the balance of their fees of £124,350.
His Honour Judge Berkley held that the payment term fell foul of the 2015 Act, which says a term is unfair “if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer”.
But he ruled that Ms Atay should nevertheless pay 70% of what would otherwise be the contractual sum due by way of quantum meruit.
On appeal, Turner J agreed that the payment term was unfairness but overturned the decision on quantum meruit, saying it had the “potential to disincentivise traders from ensuring that the terms under which they contracted were fair”.
Nugee LJ said he “entirely” agreed with the earlier rulings on fairness. The hearing could have been ineffective for any number of reasons, some because of decisions made by Mrs Atay but other that had nothing to do with her, including, as here, the case being adjourned against her wishes.
“One can well see that counsel would expect to be paid for their work in preparing for a hearing if the case settles, or is adjourned, after they have done the work, and the client could scarcely complain of that; but it is nothing like as obvious that if the case goes off before counsel have carried out any substantive work, the client would accept that it was appropriate for counsel to be paid for preparation that they had not done and days in court they would not in fact undertake, particularly if she was not responsible for the hearing being ineffective.”
The possibility of a hearing not going ahead involved risks for both parties but the payment term “resolves these respective risks wholly in favour of counsel”.
Mr Glaser was in court for three of the days he had blocked out for Mrs Atay’s case. “If the payment term is valid, he would be able to keep the entirety of the fees from Mrs Atay as well as the fees payable by those other clients.
“There is no mechanism in the contract under which her liability for the fees can be abated to the extent that he was able to obtain other work.”
Nugee LJ said the question of good faith could not be satisfied “simply by showing that the contract term in question was negotiated by the consumer”.
She did not query the payment term but “the sort of matters referred to by Turner J – the presenting of the letter as a fait accompli, the lack of separate advice, the information asymmetries, the client being in a stressful, dependent and potentially vulnerable position – are highly relevant to the question, and I see no error of principle in his approach”.
The judge concluded by agreeing with HHJ Berkley’s comment that the contract was inadequate for the sort of case for which it was used.
“I do not mean to say that counsel can never stipulate for payment if a case goes off at a late stage: under the traditional model of brief fee and refreshers of course, an adjournment after briefs had been delivered would entitle counsel to payment of the brief fee but not the refreshers with, in complex cases, the possibility of the brief fee itself becoming due in stages.
“Nothing I have said is intended to prevent counsel from devising and agreeing with their clients contracts that fairly balance their own interests in not being left with gaps in their diaries with the interests of their clients in not paying for work that is not carried out.”
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