A costs judge has upheld Addleshaw Goddard’s (AG) claim for £12.7m in unpaid fees from the administrators of the estate of Boris Berezovsky and ordered that the firm rank as a secured creditor.
Master Campbell said: “The fees were hard earned on AG’s part and without the firm’s exertions, the creditors could usefully reflect that there would have been no fund over which they can now lay claim.”
Though best known for its work on Mr Berezovsky’s failed action against Roman Abramovich, AG was also retained in an action to claim 50% of a joint venture with the late Arkadi Patarkatsishvili, and more than 30 other matters, including two “relatively substantial” actions in the Chancery Division.
The terms of AG’s retainer were that it would receive 50% of its fees in the event of losing, but two tranches of 100% success fees if the actions succeeded.
It was paid all but £1.4m of its first £5.6m invoice rendered in 2012 after the ‘level 1 success fee’ was triggered, but none of the £11.3m it billed the administrators (Mr Berezovsky having died in 2013) in 2014 when the level 2 success fee fell due.
The outstanding sum was contested on various grounds, but AG won on every point before Master Campbell, sitting in the Senior Court Costs Office in April shortly before his retirement from the bench.
The lengthy ruling , published yesterday, showed that Master Campbell found on the facts that the retainer was a contentious business agreement (CBA) under the Solicitors Act 1974, rather than a discounted conditional fee agreement. This meant it could be enforced under section 61 of the Act.
He went on to reject an alternative argument that the CBA was not properly explained to Mr Beresovsky, citing evidence from the Abramovich case that the one-time oligarch had “a team working for him including lawyers, whose brief included the task of providing advice about legal documents”.
He took a similar line over a challenge to the 100% success fee. It was complex litigation where “the risks of AG going part-paid were high”.
Master Campbell continued: “Not only that, the sheer size of the litigation across all the actions would have tied up many of AG’s fee-earners for significant periods with the possibility that at the end of it all (as proved to be the case in the Abramovich action), the firm would have had to be satisfied with the Reduced Fee and nothing else.
“Next, it must be remembered that this was a business agreement between people whose work was business and the supply of business services, in which Mr Berezovsky did not have the financial luxury and ability of being able to meet his legal bills as and when they fell due. The commercial solution to that problem was to enter into a retainer which had elements of ‘give and take’ on both sides.
“For Mr Berezovsky, the CBA gave him the ability to finance the litigation without all the fees having to be paid “up front”. For AG, the firm took the risk that if the litigation failed, millions of pounds worth of work would have to be written off, but the quid pro quo for that was that if the actions succeeded, the firm would receive a bonus.”
Master Campbell also rejected a call to look into the number of hours AG worked to ensure they were not excessive, saying it was clear that Mr Berezovsky’s team had approved the charges.
As a result, the judge found that AG had a charge over the funds held by the administrators under section 73 of the Act until the fees were paid. He said that upon settlement in the litigation being reached, “AG acquired a chose in action which crystallised upon the agreement and not upon the payment of the money. In doing so, the lien that thereby arose attached to a fund which, although not in AG’s possession, was ‘in sight’, so the firm’s right to it arose before Mr Berezovsky’s death and subsequent insolvency”.
Finally, Master Campbell refused to grant a stay. “The outcome of the application is that upon the grant of a charge, AG will rank as a secured creditor whose right arose before Mr Berezovsky’s insolvency and accordingly is unaffected by it,” he ruled.
“Accordingly, the charge will not be avoided and no validation order will be required and it follows that I see no reason why the money should not be paid out now. The fees were hard earned on AG’s part and without the firm’s exertions, the creditors could usefully reflect that there would have been no fund over which they can now lay claim.
“Given too, that but for his death, the money would long since have been paid to AG, I consider it is only just that the firm’s bills should be cleared without further delay. The application for a stay is refused.”
AG instructed Nick Bacon QC and Daniel Saoul of 4 New Square, together with John Briggs of South Square, while Stephen Atherton QC of 20 Essex Street and Robert Marven of 4 New Square, instructed by Holman Fenwick Willan, represented the administrators.