In fraud litigation where both the claimant (C) and certain defendants (D) claimed a proprietary interest in monies held in court, the Commercial Court has allowed D a limited payment out for legal fees. The judgment illustrates that the court will not allow a defendant’s fee arrangements to dictate its decision in this context. Foxton J balanced the competing interests by adopting an approach that reduced the risk of the funds being exhausted by payments of legal fees which exceeded those reasonably incurred to date.
D’s legal team were retained on a “whole case fee” basis. An agreed total discounted base fee was payable for representation for the entire trial. This became due on signature of a CFA, which contained rights of termination for non-payment. Leading counsel informed the court that D’s legal team would exercise these rights.
Applying Marino v FM Capital Partners [2016] EWCA Civ 130 and Kea Investments Ltd v Watson [2020] EWHC 473 (Ch), Foxton J observed that the court had to ascertain whether D had access to other assets to meet legal fees and, if not, weigh the apparent injustice of releasing the funds against the possible injustice to D of not doing so. D currently had access to no other assets, but certain assets (not subject to legal restraint) might be liquidated over the next 18 months.
Foxton J declined to order payment out of the entire sum due under the CFA, as this would immediately be consumed, regardless of the reasonable value of the work done to date. One of D’s investments was maturing in January 2021. The judge therefore ordered payment out of a sum to cover certain outstanding fees and incurred costs, plus the estimated legal costs to be incurred under the CFA, calculated on a conventional charging basis, up to 31 January 2021. He also allowed the sum D sought for disbursements outside the CFA. Matters would be reviewed in late January 2021.
Although the judge did not know what effect his order would have on D’s legal team’s willingness to continue under the CFA, that did not lead him to conclude that the balance of interests he had struck was unfair. D’s CFA was “an unconventional mechanism to funding High Court litigation” and the contractual terms agreed between D and their lawyers could not be allowed to trump the court’s decision.
Case: Skatteforvaltningen v Solo Capital Partners LLP and others [2020] EWHC 2161 (Comm) (6 August 2020) (Foxton J).
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