CA upholds third party's oral agreement to pay solicitor's fees

Flaux: Whether contract is guarantee is question of law

A solicitor who had an oral agreement with the son-in-law of a client that he would cover the legal fees did not fall foul of the 1677 Statute of Frauds, the Court of Appeal has ruled.

Section 4 of the Statute of Frauds requires that a guarantee must be in writing.

In 2018, His Honour Judge Russen QC, sitting as a High Court judge, found it was “implausible” that London firm Richard Slade & Co would have taken on the case if he did not have a guarantee of payment.

Mr Slade sued Deepak Abbhi for the £333,000 costs incurred in acting for his father-in-law, Balmohinder Singh, in an ultimately unsuccessful case brought against one of Mr Singh’s sons.

HHJ Russen concluded that Mr Abbhi’s obligation under the oral agreement was a primary one and so not a guarantee. As a result, it fell outside section 4.

He added that, had he concluded otherwise, the emails relied upon by Mr Slade were not sufficient to constitute the “memorandum or note” required to satisfy section 4.

In Abbhi v Slade (t/a Richard Slade And Company) [2019] EWCA Civ 2175, Lord Justice Flaux, giving the ruling of the appeal court, said that while the terms of the contract were a question of fact, whether it was a contract of guarantee was a question of law.

HHJ Russen found that the terms of the oral agreement included that Mr Singh was unable to pay the legal fees, and Flaux LJ said “this was a promise to put Mr Slade in funds in any event”. This made it a primary, rather than secondary, liability.

It did not matter that the fees were funnelled through Mr Singh: “The obligation of Mr Abbhi under the oral agreement arose before there could be any default on the part of Mr Singh. His obligation was to put Mr Singh in funds for any particular bill… the obligation of Mr Abbhi was not coterminous with the obligation of Mr Singh.

“If Mr Abbhi did not put Mr Singh in funds before the due date… then he would be in breach of the oral agreement. That breach would occur prior to and independently of any default by Mr Singh.”

Flaux LJ added that the mere fact that Mr Abbhi’s liability was defined by reference to the liability of Mr Singh to Mr Slade under the retainer “does not mean without more that the oral agreement is a guarantee”.

In a subsequent ruling, HHJ Russen found that the Solicitors Act assessment process was not available to Mr Abbhi as he was not the “party chargeable with the bills”. This decision was not appealed.

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