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Jurisdictional Hurdle in Cost Recovery Under Conditional Fee Agreement

In the recent case of Ruhumatally v The State of Mauritius & Anor (JCPC 2020.0027), the Judicial Committee of the Privy Council (JCPC) addressed a contentious issue regarding the recoverability of costs under a “no win no fee” arrangement that was made abroad, but for contentious work principally carried out in London. The case was unusual in that it saw and the application of jurisdictional rules in costs recovery proceedings. 

Background

The appellant, Mr. Ruhumatally, successfully appealed to the JCPC and was awarded costs to be paid by the respondents. While most costs were agreed upon, a dispute arose over the fees of junior counsel, Mr. James Ramdhun. The crux of the disagreement centred on whether Mr. Ramdhun’s “no win no fee” arrangement complied with the legal requirements for enforceability under the Courts and Legal Services Act 1990 (the 1990 Act).

The Dispute Over Mr. Ramdhun’s Fees

The respondents challenged the recoverability of Mr. Ramdhun’s fees, arguing that the “no win no fee” arrangement constituted a CFA. Under the 1990 Act, CFAs must meet specific statutory requirements to be enforceable. If these requirements are not met, the agreement is unenforceable, and the opposing party is not liable to pay the costs claimed under it.

The appellant countered that the agreement was governed by Mauritian law, where no such statutory requirements exist. The appellant asserted that the agreement was made in Mauritius and that the 1990 Act, which applies to England and Wales, was irrelevant.

Key Legal Issues

  1. Nature of the Agreement: The respondents argued that the “no win no fee” arrangement was a CFA and therefore subject to the 1990 Act. The appellant contended that it was a simple contingency fee agreement governed by Mauritian law.
  2. Jurisdictional Application: The court had to determine whether the agreement fell under English law, given that Mr. Ramdhun’s work was primarily conducted in London, or Mauritian law, as the agreement was made in Mauritius.

The Court’s Decision

Costs Judge Rowley held that the agreement was subject to English law for the purposes of costs recovery. This conclusion was based on the following key points:

  • Practice Direction 8 of the JCPC Rules: This rule states that costs incurred outside the UK for work related to a JCPC appeal are treated as having been incurred in the UK. Since Mr. Ramdhun’s work was primarily conducted in London, the agreement was deemed to fall under English jurisdiction.
  • Unlawful CFA: The court found that the agreement did not comply with the 1990 Act, as it was not in writing and was used in criminal proceedings (which are prohibited under the Act). Consequently, the agreement was unenforceable, and the respondents were not liable to pay the claimed costs.

The decision reaffirms that CFAs must comply with statutory requirements to be enforceable. Oral agreements or those used in prohibited contexts (e.g. criminal proceedings) will be unenforceable when it comes to costs recovery.

Details

Jurisdictional Hurdle in Cost Recovery Under Conditional Fee Agreement

In the recent case of Ruhumatally v The State of Mauritius & Anor (JCPC 2020.0027), the Judicial Committee of the Privy Council (JCPC) addressed a contentious issue regarding the recoverability of costs under a “no win no fee” arrangement that was made abroad, but for contentious work principally carried out in London. The case was unusual in that it saw and the application of jurisdictional rules in costs recovery proceedings. 

Background

The appellant, Mr. Ruhumatally, successfully appealed to the JCPC and was awarded costs to be paid by the respondents. While most costs were agreed upon, a dispute arose over the fees of junior counsel, Mr. James Ramdhun. The crux of the disagreement centred on whether Mr. Ramdhun’s “no win no fee” arrangement complied with the legal requirements for enforceability under the Courts and Legal Services Act 1990 (the 1990 Act).

The Dispute Over Mr. Ramdhun’s Fees

The respondents challenged the recoverability of Mr. Ramdhun’s fees, arguing that the “no win no fee” arrangement constituted a CFA. Under the 1990 Act, CFAs must meet specific statutory requirements to be enforceable. If these requirements are not met, the agreement is unenforceable, and the opposing party is not liable to pay the costs claimed under it.

The appellant countered that the agreement was governed by Mauritian law, where no such statutory requirements exist. The appellant asserted that the agreement was made in Mauritius and that the 1990 Act, which applies to England and Wales, was irrelevant.

Key Legal Issues

  1. Nature of the Agreement: The respondents argued that the “no win no fee” arrangement was a CFA and therefore subject to the 1990 Act. The appellant contended that it was a simple contingency fee agreement governed by Mauritian law.
  2. Jurisdictional Application: The court had to determine whether the agreement fell under English law, given that Mr. Ramdhun’s work was primarily conducted in London, or Mauritian law, as the agreement was made in Mauritius.

The Court’s Decision

Costs Judge Rowley held that the agreement was subject to English law for the purposes of costs recovery. This conclusion was based on the following key points:

  • Practice Direction 8 of the JCPC Rules: This rule states that costs incurred outside the UK for work related to a JCPC appeal are treated as having been incurred in the UK. Since Mr. Ramdhun’s work was primarily conducted in London, the agreement was deemed to fall under English jurisdiction.
  • Unlawful CFA: The court found that the agreement did not comply with the 1990 Act, as it was not in writing and was used in criminal proceedings (which are prohibited under the Act). Consequently, the agreement was unenforceable, and the respondents were not liable to pay the claimed costs.

The decision reaffirms that CFAs must comply with statutory requirements to be enforceable. Oral agreements or those used in prohibited contexts (e.g. criminal proceedings) will be unenforceable when it comes to costs recovery.