The wife approached lead and junior counsel to act on her behalf in litigation against her former husband. Counsels’ proposed terms included lead counsel’s fee of £90,000 plus VAT and junior counsel’s fee of £45,000 plus VAT, covering preparation for and attendance at a pre-trial review and a ten-day hearing in the family court. That fee was payable in instalments, most of them due before the date listed for trial. A “payment term” stipulated that if the hearing concluded early or was adjourned to another date, or did not go ahead for any reason beyond counsels’ control, the full fee would still be payable and another fee would be payable for any adjourned hearing. The wife, who was not separately legally advised, accepted the terms. The husband succeeded in an application to adjourn the trial. The wife disinstructed counsel and refused to pay their fees on the basis that, pursuant to section 62 of the Consumer Rights Act 2015, the payment term was unfair and not binding. Her case was that the payment term did not fall within the “safe harbour” exclusions from the assessment of fairness in section 64 of the 2015 Act in respect of terms which specified the main subject matter of the contract, or where the assessment of fairness would concern the appropriateness of the price payable under the contract by comparison with the services supplied under it, but instead fell within the exceptions to section 64 set out in, inter alia, paragraph 5 of the “grey list” in Schedule 2 to the Act, because it entitled the claimants to claim a disproportionately high sum in compensation or for services which had not been supplied. In that regard, the claimant contended that the terms as to the level of fees and the timing of the payment had to stand or fall together. The judge held that the operation of the 2015 Act precluded the claimants from relying on the payment term but that the wife was nevertheless to pay, by way of a quantum meruit, 70% of what would otherwise be the contractual sum due.
On appeal by the wife, and on cross-appeal by counsel—
Held, appeal allowed and cross-appeal dismissed. (1) In applying paragraph 5 of Schedule 2 to the Consumer Rights Act 2015 the interpretative emphasis was not on the rigid categorisation of a liability as debt or damages for breach at common law but on the practical effect. In the present case, the payment term fell within the parameters of paragraph 5 since the contract period for the performance of counsel’s services, as at the date of the agreement, was liable (and indeed likely) to extend to the expected date of conclusion of the trial and the bulk of the fees were to be paid weeks in advance of the expected conclusion of the performance of the services to which they related, therefore comprising, in substantial effect, a non-refundable 100% deposit. While that did not mean that the term was automatically unfair, it did mean that it fell outwith the safe harbour exclusions in section 64 of the 2015 Act and therefore the fairness of its payment terms had to be assessed (paras 36, 43–45, 52 , 91(i)).
(2) Taking into account the matters referred to in section 62(5) of the 2015 Act, the payment term as to timing of payment and the consequences of the trial not going ahead created a significant imbalance in the parties’ rights and obligations under the contract, the entire financial risk of the trial not proceeding being borne by the consumer. The terms were not the product of individual negotiation and, as was the case in most litigation and particularly family proceedings, the lay client was almost inevitably placed in a stressful, dependant and potentially vulnerable position. While the relevant term was clear and had been brought openly to the attention of the wife, that feature was not sufficient, of itself, to establish that the requirement of good faith had been fulfilled. Overall, on an objective appraisal, the relevant term went significantly beyond what would have been consistent with good faith in the context of the aims and intentions of the statutory framework. The term being unfair, it had to be removed in its entirety, and not just the unfair aspects of it. Accordingly, once counsel were precluded from relying on the payment term, the contract fell to be treated as providing for a lump sum payment for the services of preparation and appearance at trial, placing an entire obligation upon counsel which included attendance at the trial. Once the trial had been adjourned that obligation was incapable of being fulfilled and it followed that counsel had no contractual right to payment of the agreed price at any time (paras 59–65, 74, 91(iii)–(vi)).
(3) Even if it were otherwise permissible to apply a quantum meruit approach at common law, it would be precluded on the facts of the present case by the operation of the statutory regime, given that a quantum meruit would have the potential to disincentivise traders from ensuring that the terms under which they contracted were fair. It followed that it had not been permissible for the judge to award counsel’s fees on a quantum meruit basis (paras 76, 77, 91(vii), 92).
Paul Mitchell KC (instructed directly) for the claimants.
Jacqueline Perry KC and Alexander Bunzl (instructed directly) for the defendant.