Can you enforce payment of your fees after a home meeting? – You might well be prevented!

 In Practice Management

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Cancellation of contractsCancellation of Contracts made in a Consumer’s Home or Place of Work etc Regs 2008 – Howes Percival LLP v Page [2013] EWHC 4104 (Ch)

Although this case concerns a litigation matter and its funding it shows just how careful you need to be in having meetings or discussions at a client’s home or place of business and the client then signs your retainer letter.  Careful consideration needs to be given as to whether the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2008 (the 08 Regs) will apply and so the client care letter drafted accordingly.

The facts

Howes Percival LLP (HP) brought a claim for over £500,000 in unpaid fees for advice and legal services it had provided to husband and wife Nick and Sarah Page between Aug 2009 and Oct 2011 with regard to a dispute over a purchase of their jointly held shares in a family company by Nick’s parents.

The advice had been given by HP and the litigation conducted by HP with Nick and Sarah entering into a conditional fee arrangement (CFA) with them.  Nick and Sarah also took out after the event insurance (ATE) to protect themselves against costs being awarded to Nick’s parents in the litigation.

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Due to the protracted and acrimonious proceedings by 1 March 2011 HP estimated its costs including the 60% success fee in the CFA and the ATE premium to be in the region of £820,000. Negotiations took place with Nick’s parents concerning their purchase of Nick and Sarah’s shares and HP became concerned that Nick and Sarah were negotiating a secret settlement with Nick’s parents so would not honour the terms of the CFA.

In early July 2011 HP wrote to Nick and Sarah alleging breach of the CFA and suggested they obtain independent legal advice.  Nick and Sarah consulted other solicitors and then alleged in reply that the CFA was unenforceable as a result of a number of breaches including breach of the 08 Regs.  On 2 Nov 2011 agreement was reached by Nick and Sarah with Nick’s parents over the sale of the shares and as part of this each side agreed to pay their own costs.

HP accepted that if the 08 Regs applied then their claim for costs would fail as the CFA would be unenforceable due to it not including a cancellation period notice.  The main issue was therefore whether the CFA was made during a visit by HP to Nick and Sarah’s home or after an offer made by Nick or Sarah during such a visit.

The history of meetings

The first meeting took place in August 2009 when Nick sought advice from a partner at HP with overall responsibility for the matter and this was held at HP’s offices.  Up until Dec 2009 there were then a succession of meetings all of which were held at HP’s offices, phone calls, emails and letters between HP and Nick and Sarah concerning the sale of the family shares and discussing the CFA.

A meeting was then arranged for 17 Dec 2009 for the HP solicitor with conduct of the matter to meet Nick and Sarah to go through the history of the matter and for the CFA to be reviewed and signed.  As the solicitor was going to work from home on 17 Dec it was arranged that the meeting would take place at Nick and Sarah’s home.  A first draft of the CFA, an explanation of its terms and the firm’s terms of business were sent to Nick by email on 16 Dec 2009.  Nick claimed that he phoned the partner immediately that evening on receiving the CFA as it stated an incorrect successful outcome figure for an agreed sale of the shares of £20,000 rather than £1.48m.  The partner had no recollection or record of that call concerning Nick’s definition of ‘success’ in the CFA.

At the meeting at their home on 17 Dec 2009, Nick pointed out further errors in the CFA being that the defendants were stated to be “the estate and beneficiaries of Mrs Jones” and the claim was stated as being “litigation…against the Defendant…in relation to your mother’s Will”.  The inference was taken that a precedent CFA was used which was not correctly tailored. The CFA was therefore not signed at that meeting as it needed amending. The solicitor prepared a detailed file note of the meeting at the Page’s but only a small part of it concerned the CFA.

On 7 Jan 2010 the amended CFA and terms of business were emailed to Nick together with an explanation and on 8 Jan Nick returned both documents duly signed. On 13 Jan the ATE quotation was sent to Nick and the Pages signed and returned it that day.  ATE insurance was in place by 18 Jan.

The law

The Cancellation of Contracts made in a Consumer’s Home or Place of Work etc Regulations 2008

“Scope of application

This sectionnoteType=Explanatory Memorandum has no associated

5.  These Regulations apply to a contract, …, between a consumer and a trader which is for the supply of goods or services to the consumer by a trader and which is made—

(a) during a visit by the trader to the consumer’s home or place of work, or to the home of another individual;

(b) during an excursion organised by the trader away from his business premises; or

(c) after an offer made by the consumer during such a visit or excursion.”

If the 08 Regs apply any contract must contain a cancellation period of 7 days and written notice of this right to cancel must be given at the time the contract is made or (in the case of a contract made after an offer made by the consumer during a visit by the trader to his home) when the offer is made. During the 7 day cancellation period the client can cancel the contract by serving a written notice stating that they wish to do this.

The 08 Regs provide that it is an offence to fail to comply with the 08 Regs.  If the 08 Regs are not complied with Reg 7(6) provides:

“A contract to which these Regulations apply shall not be enforceable against the consumer unless the trader has given the consumer a notice of the right to cancel and the information required in accordance with this regulation.”

So payment of fees by the client is not enforceable if the 08 Regs apply and are not complied with.

The decision

Behrens J was critical of the draft CFA being sent with obvious errors in it but found the partner to be an honest witness and found the solicitor to have been meticulous (she was not responsible for the CFA).  He did not find Nick to be a satisfactory witness and found some of his ‘recollections’ of events to be at odds with contemporaneous file notes. His evidence was to be treated “with considerable caution”.

In deciding on the principal issue of whether the 08 Regs applied, Behrens J found that they did not.  He made a number of points concerning this:

None of the early discussions or meetings Aug – Nov 2009 took place at Nick and Sarah’s home.  All the meetings had taken place at HP’s offices and there had been phone calls and emails in this period between the parties.

It was only by chance that the 17 Dec 2009 meeting took place at Nick and Sarah’s home.  It had originally been arranged for HP’s offices but was rescheduled for their home to suit the solicitor who was working from her home on that day.

The main purpose of the 17 Dec 2009 meeting was so the solicitor could obtain details of the dispute with Nick’s parents and only a very small part was concerned with the CFA.  The solicitor had neither drafted the CFA nor was responsible for it.

No contract was concluded on 17 Dec 2009 so Nick and Sarah could only succeed if the contract was made after an offer made at the home visit.

Nick argued that at the 17 Dec meeting he had said “we would sign the [CFA] once it had been corrected.”  This was an offer so had the consequence that the 08 Regs applied.  Behrens J did not accept this argument as:

The solicitor who was an impressive witness, had no recollection of him making this statement, nor was it in her detailed file notes. The judge would have expected it to be in those notes if it had been said.

The judge viewed Nick’s “evidence with caution” and did not find that on the balance of probabilities Nick had established that he had made the statement at all.

Nick had alleged that he had raised a query regarding the definition of ‘success’ in the CFA with the partner during a phone conversation the night before the meeting but again the judge did not believe him.

Even if Nick had made the alleged statement at the 17 Dec 2009 meeting the judge was not satisfied that it would constitute an offer. His words did not make clear what amendments he wanted and he signed the CFA in Jan 2010 without the definition of ‘success’ being amended to what he later said he had wanted it to be amended to.

The parties agreed that there must be a causal link between the offer Nick had made and the contract that was subsequently signed.  The judge held that “the offer has to be a legal offer in accordance with the law of contract”  and that the contract has to be made substantially on the terms of the offer.  As the 08 Regs impose a criminal sanction they should not be construed in a wide manner.

The 08 Regs did not apply so had not been breached.  The CFA was therefore enforceable against the Pages and HP were entitled to damages for the breach in the amount of their fees discounted by 5%.  The judge added “I have to confess I am not sorry to reach this conclusion. It seems to me that the facts of this case are about as far from what is contemplated by the [08] Regulations as it is possible to imagine. Nick is an experienced businessman. Both he and Sarah permitted HP to act for them under the CFA for over 18 months during which time a large amount of work was carried out. In my view the existence of a cooling off period would have made no difference to the position. Nick and Sarah would not have availed themselves of it. I do not accept the suggestion …that they were particularly vulnerable.”

Practice points

  1. If meetings held before your client care letter is signed are not all conducted at your office consider whether the 08 Regs will apply and draft your client care letter with care including the cancellation notice and other requirements within it if necessary.
  2. If in doubt as to whether the 08 Regs apply, consider complying with them in any event.  It is better to have a client cancel their instructions within 7 days than for recovery of your fees to turn out to be unenforceable at a later stage.
  3. If the matter is urgent, ask the client to confirm that they wish you to commence work before the end of the 7 day cancellation period.  You will then be able to recover your costs for that initial work even if the contract is subsequently cancelled by the client within that 7 day cancellation period.
  4. Good contemporaneous file notes are vital in showing matters agreed with clients and may help with any later dispute.
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