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 High Court has ruled.
Mr Justice Turner said 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  EWHC 510 (QB) , London firm Bankside Commercial acted for Helene Butler, a commercial agent, in her claim against Nikon Metrology NV.
Nikon offered to settle for €90,000. Ms Butler did not accept it and an unsuccessful mediation followed.
Turner J recorded: “Time was running out. The matter was now heading towards an imminent arbitration hearing and [Bankside] was clearly and understandably concerned that [Ms Butler] would be very well advised to make an urgent and realistic counter-offer.”
Bankside advised her “in strong and very detailed terms” to make a counter-offer of €90,000 plus 50% of costs.
Ms Butler rejected this advice and Bankside terminated its retainer pursuant to clause 7(b)(iii).
The arbitration resulted in “a pyrrhic victory” in which Ms Butler was awarded £40,636, “and the costs order was not entirely in her favour”, the judge said.
Bankside later sued her for the costs alleged to be recoverable under the terms of their retainer and obtained summary judgment of £238,527.
Master Yoxall noted that the substantive award to Ms Butler “explodes any argument” that Bankside was trying to force her to settle at an undervalue.
She appealed on the interpretation of clause 7(b)(iii), arguing that advice about making an offer was not the same as advice about “making a settlement”.
Turner J rejected this. “I am satisfied that the suggestion that any opinion about ‘making a settlement’ is to be construed as being limited to the consideration of the acceptance any offers made by the opponent is inconsistent with the language of the clause and would, in any event, lead to procedural distinctions devoid of either logical justification or practical coherence.
“Indeed, there may commonly arise circumstances in which it would be commercially foolhardy for a claimant to make no offer to settle.”
In the absence of a CFA, the client’s “privilege” of ignoring her solicitors’ advice, so long as they can continue to act within the boundaries of their professional duties, was “preserved intact”.
Turner J continued: “Where, however, there is a CFA under which the solicitors, themselves, face significant economic risks in the event of an adverse result at trial, one would not expect the level of protection which they are afforded against the whims of the unreasonably optimistic client to turn upon the random happenstance of whether or not the other side has made an approach which can be categorised as a contractual offer capable of acceptance.
“For such solicitors to be required to wait, like Vladimir and Estragon, for an offer from the other side which might never come rather than, where appropriate, to take the initiative in negotiations would impose artificial and unjustifiable limits on their ability to protect their own legitimate interests.”
He said a “true construction” of clause 7(b)(iii) could include a solicitor’s opinion about making an offer: “A settlement is an end point but the making of one is a process.”
“Furthermore, if it had been intended that the opinion of a solicitor would only fall within clause 7(b)(iii) when it came to the consideration of an offer made by the other side, then it would have been simplicity itself to draft a clause which achieved this unattractive object.”
The judge rejected too the “spectre of unscrupulous solicitors who wilfully undersell their client’s case in order to serve their own financial interests in costs”.
He pointed out that unscrupulous solicitors could still be tempted to give unduly pessimistic advice on accepting a low offer made by the other side and fall “comfortably” within the parameters of clause 7(b) (iii), “but those advising upon the making of a realistic higher counter-offer would not”.
Further, such solicitors could face disciplinary consequences and reputational damage, as well as a possible negligence claim.