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CA upholds firm’s costs entitlement after terminating CFA

Court of Appeal: Rejects narrow interpretation

A law firm which stopped acting for a client after she refused to heed its advice to accept an offer to settle her case is entitled to recover the £240,000 in costs due from her under a conditional fee agreement (CFA), the Court of Appeal has ruled.

It upheld the decision of Mr Justice Turner [1] that clause 7(b)(iii) in the Law Society’s pro forma CFA conditions that allow solicitors to end the agreement “if you reject our opinion about making a settlement with your opponent” covered advice about making a settlement offer.

In Butler v Bankside Commercial Ltd [2020] EWCA Civ 203 [2], Bankside’s client rejected an offer of €90,000, but after a failed mediation and with an arbitration imminent, it advised her “in strong and very detailed terms” to make a counter-offer of €90,000 plus 50% of costs. She rejected this advice and Bankside terminated its retainer pursuant to clause 7(b)(iii).

Ms Butler argued before the court that the reference to “making a settlement” meant causing a settlement to be made – it did not refer to making an offer which might or might not lead to a settlement.

Lord Justice Lewison rejected this narrow interpretation on several grounds. “If (b)(iii) were limited to the acceptance of an offer already made, the clause would have said so,” he said.

The fact that the CFA dealt with the refusal of a part 36 offer showed the drafter was aware of the possibility of accepting an offer already made, and the phrase “advice about making a settlement” was a much looser expression, he added.

Further, the client won her claim – although for less than the offer Bankside had recommended she make – and so “the outcome respects the underlying bargain”.

Lewison LJ continued: “There is no ambiguity in the words of the contract. The clause is not confined to ‘making’ a settlement. It extends to advice ‘about’ making a settlement. That is wider than [the client’s] argument would allow.

“As a matter of ordinary English, advice ‘about’ making a settlement includes advice to the client about making an offer of their own calculated to lead to a settlement. The words are clear, even though the result may expose the client to a greater liability than they might have expected.

“It is not necessary for the purposes of this appeal to attempt to delineate the outer reaches of that expression.”