An agreement for fees with a Solicitor must be fair and reasonable per s.61(1) and s.57 Solicitors Act 1974. There is little recent judicial guidance however in Bolt Burdon Solicitors v Tariq  EWHC 811 (QB) the learned judge referred to the decision of the Court of Appeal in re Stuart, ex parte Cathcart  2 QB 201 (concerned with a similar provision in the Attorneys’ and Solicitors’ Act 1870) and which gave the following guidance on the proper approach under those statutory provisions:
“By s.9 the Court may enforce an agreement if it appears that it is in all respects fair and reasonable. With regard to the fairness of such an agreement, it appears to me that this refers to the mode of obtaining the agreement, and that if a solicitor makes an agreement with a client who fully understands and appreciates that agreement that satisfies the requirement as to fairness. But the agreement must also be reasonable, and in determining whether it is so the matters covered by the expression “fair” cannot be re-introduced. As to this part of the requirements of the statute, I am of opinion that the meaning is that when an agreement is challenged the solicitor must not only satisfy the Court that the agreement was absolutely fair with regard to the way in which it was obtained, but must also satisfy the Court that the terms of that agreement are reasonable.”
“If in the opinion of the Court they are not reasonable having regard to the kind of work the solicitor has to do under the agreement, the Court are bound to say that the solicitor, and an officer of the Court, has no right to an unreasonable payment for the work he has done and ought not to have made an agreement for remuneration in such a manner. On this question it is quite clear to me that we cannot arrive at any other conclusion than that arrived at by the Divisional Court. It is impossible to say that work which according to information given by the taxing master to the Divisional Court would be properly remunerated by a sum of £20 can be reasonably charged at £100. The decision of the Court below must be affirmed, and the appeal dismissed.”
How is Unfairness & Unreasonableness Determined by the Court?
The Court will likely consider the issues of fairness and reasonableness separately. Fairness relates principally to the manner in which the agreement came to be made. Reasonableness relates principally to the terms of the agreement.
So you can understand how this works – here is an example decision from a Judge in the case of Vilvarajah v West London Law Ltd  EWHC B23 (Costs) (19 May 2017):
- I was told in the course of the hearing that the business that the Claimant runs is a Londis shop and that it was that business which had given rise to the partnership dispute. There is no evidence that, at the time the conditional fee agreement was entered into, the Claimant was particularly sophisticated in legal matters or in the construction of documents, although he had been involved in litigation previously. Without hearing any evidence from him, it is difficult to reach a conclusion as to his level of understanding of English. However it is not in issue that English is not his first language and Miss Yarranton accepted that he required particular care when explaining things to him (2nd witness statement, para 23).
- For present purposes therefore I take the Claimant to be of average sophistication in relation to legal matters but requiring particular care when matters are explained to him in English. On that basis were the circumstances such that it can be said that the Defendant made an agreement with a client who fully understood and appreciated that agreement?
- The answer to that must be “no”. There is no correspondence between the Defendant and the Claimant about the conditional fee agreement. I would expect to see a letter from the Defendant to the Claimant in advance of the meeting on 7th January 2013 explaining the options clearly. I would expect that letter or a subsequent letter, still in advance of the meeting, to enclose a draft of the proposed conditional fee agreement and to explain its terms so that the Claimant would have an opportunity to consider it before the meeting and think about whether there was anything which required explanation. I would expect the solicitor to be able to produce an attendance note of the meeting at which the agreement was signed recording precisely what explanation she gave of it to the Claimant. I would then expect to see a letter sent to the Claimant after the agreement was signed enclosing a copy of the agreement and explaining the key points.
- I see many conditional fee agreements and by comparison with most this is a complicated agreement. On my first reading of it I did not pick up the distinction between success (when no success fee would be payable) and success plus an award of costs (when a success fee would be payable). Mr Mallalieu had to point that out to me.
- There is no suggestion that any risk assessment was carried out before the agreement was entered into and nothing to suggest that the Claimant was given any advice as to the prospects of success and thereby the likelihood that he would be liable to pay a substantial success fee on top of the primary rate.
- I cannot conclude that an explanation given in a 30 minute appointment, with no attempt at communication before or after, enabled the Claimant fully to understand and appreciate the terms of the agreement and in particular the liabilities that he was assuming.
- Accordingly in my opinion the agreement is unfair and should be set aside.
- I have absolutely no hesitation in concluding that the agreement was unreasonable.
- The Hodders Law claim was a straightforward action in the County Court concerning, at most, about £65,000 (£20,000 claimed by Hodders Law and £45,000 already paid by the Claimant). The path it took, a transfer to the Senior Courts Costs Office for assessment of the bills (with or without a stay of the County Court proceedings), was also straightforward. The hourly rates agreed in September 2012 (£350, £200 and £135) were not unreasonable as between solicitor and client; although the Grade A rate was high for Outer London. Given the straightforward nature of the case, one would expect most of the work to be done by the Grade B fee earner (as indeed it was).
- £420 is an unreasonable rate for any of the fee earners involved in this case, whether as between solicitor and client or as between the parties. That is the sort of rate I would expect to see for a Grade A fee earner based in the City or Central London doing complex, high value work. Obviously it is even more unreasonable for the junior fee earners. The guideline hourly rates for Grade B and D fee earners respectively in Outer London are £172-£229 and £121.
- Nor can the primary rate be justified by reference to the discounted rate payable in the event that success is not achieved. In my experience it is very rare for no sum to be disallowed on a solicitor and own client assessment, whether the assessment is under the 1974 Act or not. A failure to achieve “success” (as defined in the agreement) in the Hodders Law Claim would be highly unlikely. It was therefore highly unlikely that the discounted rate would ever be payable. Further, given that most of the work in this sort of case would be done by the junior fee earners, the discount represented by the discounted rate for the Grade B was modest (25% less than the originally agreed rate). For the Grade D fee earners the discounted rate was actually higher than the originally agreed rate.
- The calculation of the success fee, which would increase the Claimant’s liability for the work done by all fee earners to £690, is peculiar. It is based not on any assessment of risk, but on the proportion of the discounted rate to the primary rate. As these are arbitrary figures, neither of them reflecting the market rate, so the success fee is also arbitrary.
- Crucially there is nothing to suggest that the Defendant gave the Claimant any advice that the primary rate was unusual or that there was no prospect at all that he would recover these rates from his opponent in the Hodders Law claim in the event that he was awarded costs in that claim. There would have been no prospect at all that the Claimant would recover £420 for any of the three grades of fee earners. Given the nature of the case it is unlikely that, between the parties, the solicitors would be allowed rates much higher than the guideline rates for summary assessment.
- In my opinion the conditional fee agreement was unreasonable and should be set aside.
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