The Consumer Rights Act 2015 applies to legal services provided by directly by counsel to their clients. In a recent judgment, the engagement of barristers on a direct access basis was deemed to fall under the purview of the Consumer Rights Act 2015. The case affirms that if the Court perceives a term in an agreement between two individuals (in this case a legal retainer) to be unfair it can refuse to enforce it (and even block equitable compensation).
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What is the Consumer Rights Act 2015?
The Consumer Rights Act 2015 sets out a framework that consolidates in one place key consumer rights covering contracts for goods, services, digital content and the law relating to unfair terms in consumer contracts. The Act mainly applies to consumer contracts for goods, digital content and services and unfair terms in agreements of a transactional nature.
The case of Glaser & Anor v Atay  EWHC 2539 (KB) bears substantial importance in understanding the implications of the Consumer Rights Act 2015 within the legal framework of a contractual retainer dispute between barristers and their client. In this case, Ms. Katharine Jane Atay directly contracted the legal services of Mr. Michael Glaser KC and Ms. Victoria Miller, public access barristers at 14 Grays Inn Square chambers. She engaged their services in family law financial remedy proceedings against her former husband. The barristers both agreed to provide legal representation in a direct access arrangement and later sued Ms Atay for unpaid legal fees.
What was the fee arrangement between Counsel and Client?
The arrangement stipulated that Mr. Glaser’s fees for preparing for an attending the pre-trial review hearing in July 2020 and the 10-day final hearing in September 2020 would amount to £108,000, including VAT. The fee was to be paid in four instalments, with the first two payments totaling £25,100 due before the pre-trial review, a bulk payment of £79,200 due on 31 August (three weeks before the trial), and the final instalment of £3,700 payable within 28 days of the final order. Any additional work would be charged at a rate of £500 per hour.
A critical term of the agreement, referred to as the “payment term,” specified that regardless of the trial’s outcome, including if it concluded early, was adjourned to another date, or did not proceed for any reason beyond the barristers’ control, the full fee would still be payable, and an additional fee would be payable for any adjourned hearing. The first two payments were made as scheduled.
However, the husband successfully applied to adjourn the trial, and on 31 August 2020, Ms. Atay withdrew her instructions, dis-instructing the barristers. This action by Ms. Atay led to legal proceedings initiated by the barristers to recover the balance of their fees, amounting to £124,350, as well as unpaid fees under further, unspecified contracts reached on 25 August 2020.
Ms. Atay argued that under the Consumer Rights Act 2015 the barristers were not entitled to their fees as the payment term of the agreement was unfair. She explained that, in the event of the trial not going ahead, the term was unfair as it had the effect of entitling the claimants to claim a very large sum of money for doing very little to nothing.
At first instance, His Honour Judge Berkley ruled that the “payment term” violated the Consumer Rights Act 2015 but held that Ms. Atay should pay 70% of what would otherwise be the contractual sum due by way of quantum meruit (an equitable remedy seeking to recover a reasonable sum in respect of services supplied equivalent to the amount deserved). As expected, Ms. Atay appealed this decision and it was presented before The Honourable Mr. Justice Turner.
What is an Unfair Term in a contract?
An unfair term in a contract is a provision that, when included in an agreement, significantly disadvantages one party, often to the benefit of the other. In the context of contract law in England and Wales, an unfair term in a contract, often referred to as an unfair contract term, is a provision within a contractual agreement that is deemed to be unjust or unreasonable because it significantly favours one party (typically the party drafting the contract) over the other party. These terms can create an imbalance of power and rights between the parties involved in the contract.
Unfair contract terms can take various forms and may include provisions that:
- Lack transparency: Terms that are hidden in the contract or written in complex language, making it difficult for the other party to understand their implications.
- Disproportionately benefit one party: Terms that give one party excessive rights or benefits at the expense of the other party, without reasonable justification.
- Limit or exclude liability: Clauses that attempt to exempt one party from liability for its own negligent or wrongful actions in a way that is unreasonable or unexpected.
- Impose penalties or excessive fees: Terms that impose penalties or fees on one party for minor breaches of the contract, which are not a genuine reflection of the other party’s losses.
- Are one-sided or unilateral: Provisions that grant one party the authority to make unilateral changes to the contract terms, without the consent or input of the other party.
- Lack the opportunity for negotiation: Terms that are presented on a “take it or leave it” basis, without allowing the other party to negotiate or make reasonable changes.
In the legal system of England and Wales, unfair contract terms may be considered unenforceable or void. Courts and regulatory authorities may declare such terms null and void, or they may amend the contract to make it fair and balanced.
It’s important for parties entering into contracts in England and Wales to carefully review and understand the terms and conditions and seek legal advice if necessary to identify and address any unfair or potentially problematic terms before entering into an agreement.
What was the High Court’s View?
Mr. Justice Turner considered the appeal, focusing on the fairness of the “payment term” and its compliance with the Consumer Rights Act 2015. He addressed the following issues:
- Unfair Payment Term: Turner J. concluded that the “payment term” created a significant imbalance in the rights and obligations of the parties under the contract. The financial risk of the trial not proceeding was entirely borne by Ms. Atay. Even if no work was performed, the barristers would still be entitled to their full fee. This term was considered unfair, as it allowed barristers to take on other remunerative work during the relevant period without reducing their liability to the client. Turner J. noted that it may be challenging for counsel to find work at short notice, but it is not impossible. The imbalance was clearly to the detriment of the consumer (Ms. Atay).
- Lack of Fair Dealing: The terms of the agreement were found to be presented as a fait accompli, and Ms. Atay, as a lay client, was not separately legally advised. The risk of a trial being rendered ineffective was more familiar to lawyers than to lay clients. While the barristers may have considered Ms. Atay a demanding client, it did not redress the imbalance in the professional-client relationship.
- Ruling on Quantum Meruit: Turner J. overturned HHJ Berkley’s ruling on quantum meruit, as allowing it would disincentivise traders (barristers) from ensuring the fairness of their contracts. He noted that barristers could incorporate unfair terms with the hope that they would not be challenged, knowing that there would be a safety net providing for the payment of a reasonable sum if challenged.
Download the Judgment Here
Unfair Contract Terms and Application of the Consumer Rights Act
The Glaser v Atay case serves as a compelling illustration of the far-reaching influence of the Consumer Rights Act on contractual fairness. In this legal dispute, the two barristers initiated legal proceedings against their former client, seeking payment under a contract that included a contentious payment provision. The court found the term unfair, rendering it unenforceable, and overturned the previous quantum meruit ruling. The court’s decision to declare this term unfair and unenforceable underscores the profound impact of the Consumer Rights Act in challenging unfair contractual terms.
Unfair contract terms and the Consumer Rights Act are critical components of the legal framework in England. These provisions serve to protect consumers from unfair treatment in contracts and ensure that businesses engage in fair and transparent commercial practices. In this discussion, we will delve into the concept of unfair contract terms, explore their implications for consumers, and examine how the Consumer Rights Act 2015 reinforces these protections.
Unfair Contract Terms:
Unfair contract terms refer to clauses in a contract that create an imbalance in the rights and obligations of the parties involved, where one party, typically the business, gains a significant advantage at the expense of the other, the consumer. The Unfair Contract Terms Act 1977 (UCTA) and the Consumer Rights Act 2015 provide the legal framework for addressing such terms in the UK.
Key provisions of the Unfair Contract Terms Act 1977 include:
- Exclusion Clauses: Businesses cannot exclude or limit liability for death or personal injury caused by their negligence. This ensures that essential protections are in place for consumers in cases of serious harm.
- Reasonableness Test: UCTA applies a reasonableness test to assess the fairness of contract terms. If a term is found to be unfair, it can be declared void.
- Notice and Transparency: Contract terms that are written in small print or hidden within lengthy agreements may not be binding on the consumer. Transparency and clarity are essential to ensure consumers can fully understand the terms to which they are agreeing.
Consumer Rights Act 2015:
The Consumer Rights Act 2015 is a comprehensive piece of legislation that consolidates and enhances various aspects of consumer protection in England & Wales, including those related to unfair contract terms. The Act places significant emphasis on the rights of consumers when dealing with businesses and aims to simplify the law in this area.
Key features of the Consumer Rights Act 2015 pertaining to unfair contract terms include:
- Unfair Terms: This Act continues the protection against unfair terms, as outlined in the UCTA. It provides consumers with the right to challenge terms that are considered unfair or unclear.
- Implied Terms: The Consumer Rights Act introduces new provisions regarding implied terms. It sets out certain terms that are automatically implied into consumer contracts, such as the requirement for goods to be of satisfactory quality and services to be performed with reasonable care and skill.
- Remedies and Compensation: The Act grants consumers the right to remedies, including the right to request a repair, replacement, or refund, depending on the nature of the consumer’s complaint. In cases of unfair terms, consumers may also be entitled to compensation for losses suffered.
- Transparency and Information: The Act reinforces the importance of transparency and information provision by businesses to consumers. This includes the duty to provide clear and comprehensible terms and conditions before the consumer enters into a contract.
In conclusion, unfair contract terms and the application of the Consumer Rights Act play a pivotal role in safeguarding the interests of consumers in England & Wales. These legal provisions work together to ensure that consumers are not subjected to unfair or exploitative contract terms, and they promote fairness and transparency in commercial dealings. Businesses are expected to comply with these regulations to protect consumer rights and maintain ethical business practices.
Claims against Direct Access Counsel
In the circumstances, any direct access barrister client who:
- Is a consumer for the purposes of the Act
- has fallen foul of such direct access fixed fee provisions
- suffered such events in the past six years,
May wish to consider legal action against direct access counsel to recover those fees. In order to consider such action, it is best to instruct us in the early stages of a dispute when we can give advice when it matters the most on setting up the right strategy. Using our extensive litigation experience we provide our clients with as much strategic, practical as well as carefully considered legal advice in order to ensure minimum risk and optimal compensation.
Where appropriate we encourage the use of alternative dispute resolution (such as mediation and without prejudice negotiation) and our lawyer’s negotiation skills are first class. If early settlement at advantageous terms is not possible, we are extremely experienced and capable at navigating our clients through the litigation process.
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