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Court of Appeal Upholds Retrospective Effect of Conditional Fee Agreement in Costs Dispute

In a significant judgment delivered on 14 March 2025, the Court of Appeal dismissed an appeal concerning the retrospective effect of a Conditional Fee Agreement (CFA) entered into between a liquidator and his solicitors. The case, Singh & Ors v. David Ingram (In his capacity as liquidator of MSD Cash and Carry PLC) (In Liquidation), centred on whether the CFA, dated 24 March 2015, applied retrospectively to work carried out by the solicitors prior to its execution. The court upheld the decisions of both the Costs Judge and Lavender J, finding that the CFA was indeed of retrospective effect.

Background

The dispute arose from litigation initiated by the respondent, David Ingram, in his capacity as liquidator of MSD Cash and Carry PLC, against the appellants, former directors of the company. The trial judge, HHJ Hodge KC, found the appellants liable for dishonest conduct and ordered them to pay the respondent’s costs on an indemnity basis. The appellants subsequently contested the costs assessment, particularly the retrospectivity of the CFA, which they argued should not cover work done by the solicitors, Boyes Turner LLP (BT), prior to 24 March 2015 (when the CFA was entered into).

The Conditional Fee Agreement

The CFA in question included clauses defining the scope of work covered and the payment terms. Clause 2.1 defined the "Claim" as the respondent’s application against the appellants, in respect of which BT had been engaged since 30 March 2012. Clause 4.1 stipulated that the respondent would be liable to pay BT’s basic charges, success fee, and disbursements if the claim succeeded, with payment contingent on the realisation of funds from the defendants.

The appellants argued that the CFA lacked clear and unambiguous language to support its retrospective application.

Issues on Appeal

The appellants raised five grounds of appeal, challenging the lower courts’ findings on the following key issues:

1.    Whether the CFA was expressly retrospective.

2.    Whether the combination of terms in the CFA amounted to an express term on retrospectivity.

3.    Whether the definition of "the Claim" in the CFA was sufficiently clear to establish retrospectivity.

4.    Whether the factual matrix (including the absence of a commercial imperative for a retrospective CFA) was properly considered.

5.    Whether BT’s alleged failure to explain the retrospective effect of the CFA constituted a breach of regulatory duties, rendering the CFA unenforceable.

Court’s Decision

Lord Justice Coulson, delivering the lead judgment, rejected all grounds of appeal. The court applied established principles of contractual interpretation, emphasising that the words of the CFA, read in their contractual and factual context, clearly indicated its retrospective effect. The definition of "the Claim" explicitly referenced work done by BT since 30 March 2012, and the CFA made no distinction between past and future work. This, coupled with the factual findings of the Costs Judge, supported the conclusion that the CFA was intended to cover all work done on the claim from its inception.

The court also dismissed the appellants’ arguments regarding the factual matrix and alleged regulatory breaches. It held that the respondent’s understanding of the CFA’s retrospectivity, based on prior dealings with BT, was consistent with the agreement’s terms. Furthermore, any alleged breach of BT’s regulatory duties did not affect the validity or interpretation of the CFA, as such breaches would, at most, give rise to disciplinary proceedings rather than invalidate the agreement.

Outcome

The Court of Appeal’s decision reinforces the principle that the retrospective effect of a CFA depends on its proper construction, with no requirement for explicit use of the term "retrospective." The judgment also highlights the distinction between contractual interpretation and regulatory compliance, affirming that breaches of professional duties do not automatically undermine the enforceability of a CFA.

Details

Court of Appeal Upholds Retrospective Effect of Conditional Fee Agreement in Costs Dispute

In a significant judgment delivered on 14 March 2025, the Court of Appeal dismissed an appeal concerning the retrospective effect of a Conditional Fee Agreement (CFA) entered into between a liquidator and his solicitors. The case, Singh & Ors v. David Ingram (In his capacity as liquidator of MSD Cash and Carry PLC) (In Liquidation), centred on whether the CFA, dated 24 March 2015, applied retrospectively to work carried out by the solicitors prior to its execution. The court upheld the decisions of both the Costs Judge and Lavender J, finding that the CFA was indeed of retrospective effect.

Background

The dispute arose from litigation initiated by the respondent, David Ingram, in his capacity as liquidator of MSD Cash and Carry PLC, against the appellants, former directors of the company. The trial judge, HHJ Hodge KC, found the appellants liable for dishonest conduct and ordered them to pay the respondent’s costs on an indemnity basis. The appellants subsequently contested the costs assessment, particularly the retrospectivity of the CFA, which they argued should not cover work done by the solicitors, Boyes Turner LLP (BT), prior to 24 March 2015 (when the CFA was entered into).

The Conditional Fee Agreement

The CFA in question included clauses defining the scope of work covered and the payment terms. Clause 2.1 defined the "Claim" as the respondent’s application against the appellants, in respect of which BT had been engaged since 30 March 2012. Clause 4.1 stipulated that the respondent would be liable to pay BT’s basic charges, success fee, and disbursements if the claim succeeded, with payment contingent on the realisation of funds from the defendants.

The appellants argued that the CFA lacked clear and unambiguous language to support its retrospective application.

Issues on Appeal

The appellants raised five grounds of appeal, challenging the lower courts’ findings on the following key issues:

1.    Whether the CFA was expressly retrospective.

2.    Whether the combination of terms in the CFA amounted to an express term on retrospectivity.

3.    Whether the definition of "the Claim" in the CFA was sufficiently clear to establish retrospectivity.

4.    Whether the factual matrix (including the absence of a commercial imperative for a retrospective CFA) was properly considered.

5.    Whether BT’s alleged failure to explain the retrospective effect of the CFA constituted a breach of regulatory duties, rendering the CFA unenforceable.

Court’s Decision

Lord Justice Coulson, delivering the lead judgment, rejected all grounds of appeal. The court applied established principles of contractual interpretation, emphasising that the words of the CFA, read in their contractual and factual context, clearly indicated its retrospective effect. The definition of "the Claim" explicitly referenced work done by BT since 30 March 2012, and the CFA made no distinction between past and future work. This, coupled with the factual findings of the Costs Judge, supported the conclusion that the CFA was intended to cover all work done on the claim from its inception.

The court also dismissed the appellants’ arguments regarding the factual matrix and alleged regulatory breaches. It held that the respondent’s understanding of the CFA’s retrospectivity, based on prior dealings with BT, was consistent with the agreement’s terms. Furthermore, any alleged breach of BT’s regulatory duties did not affect the validity or interpretation of the CFA, as such breaches would, at most, give rise to disciplinary proceedings rather than invalidate the agreement.

Outcome

The Court of Appeal’s decision reinforces the principle that the retrospective effect of a CFA depends on its proper construction, with no requirement for explicit use of the term "retrospective." The judgment also highlights the distinction between contractual interpretation and regulatory compliance, affirming that breaches of professional duties do not automatically undermine the enforceability of a CFA.