The High Court has allowed for trial of a preliminary issue in a case concerning the limits of a damages based agreement (DBA).
London firm Lexlaw Ltd made the agreement in April 2014 with a client acting against two banks for alleged mis-selling interest rate hedging products.
In Lexlaw Ltd v Zuberi, the firm is claiming in reference to non-payment of an invoice for £125,000 in July 2015. The defendant, Shaista Zuberi, disputes her liability to pay this amount, alleging the DBA was procured through ‘undue influence’ of the firm’s principal, Mohammed Akram, and that she was ‘induced’ to sign the DBA by misrepresentations.
Zuberi further alleges that the firm ‘failed to advise her of the true nature and consequences’ of the DBA, and that the agreement is unenforceable because it fails to comply with the Courts and Legal Services Act 1990, which sets out the rules over such funding arrangements.
Lexlaw denies lack of compliance with the regulations and insists the agreement is enforceable.
Zuberi accepts that she is liable to pay the firm reasonable costs on a time-costs basis for the period from April 2014 to May 2015. But she sought a trial of the preliminary issue in relation to a clause in the DBA which holds her liable for the costs and expenses incurred up to the point of any termination.
In his ruling granting a trial, Master Clark discussed repeated warnings from the Court of Appeal over the risks of delay and increased costs resulting from trial of preliminary issues. But Clark accepted the defendant’s submission that determination of the enforceability issue was likely to save cost and time and potentially reduce the need for such extensive work on other defences raised.
Lexlaw had argued the issue could not be determined on agreed facts and a factual enquiry would be necessary, on matters for which the firm had not pleaded its position.
Clark rejected this submission and ordered a trial of the preliminary issue, adding: ‘I accept the defendant’s submission that a preliminary trial of the issue is capable of saving substantial time, effort and costs. This is a consideration which comes first and foremost in reaching my decision.’