Lawyers today welcomed a Court of Appeal judgment on the payment of solicitors’ fees that could become a landmark moment for the adoption of damages-based agreements (DBAs).
Lord Justice Lewison, Lord Justice Newey and Lord Justice Coulson dismissed the appeal in Zuberi v Lexlaw Limited and said that London firm Lexlaw should be paid around £125,000 costs for work on a claim against a bank. Its client, Shaista Zuberi, had sought to terminate the DBA before the case concluded, withholding any payment on the basis it was unenforceable.
The High Court held that the DBA was not unenforceable as that would be wholly inconsistent with the parliament’s intent when it extended the scope of these agreements to civil litigation in 2013. The Court of Appeal made clear that termination fees are not caught by the DBA regulations, in a ruling that could open the way for many more cases to be funded through this method.
Karim Oualnan, a solicitor and partner with Lexlaw, said ‘It is common knowledge within the profession that the DBA regs put in place by the Ministry of Justice have a number of gaps and are not user-friendly. However, it is wholly disingenuous for a client to terminate a funding agreement with a solicitor (after that solicitor has taken the risk of funding the claim to conclusion and obtained a successful outcome) and expect no liability to the solicitor: that is clearly not parliament’s intention when it enacted the DBA regs.
‘The Court of Appeal has clarified some of these uncertainties and provides the opportunity for DBAs to flourish and enhance access to justice as intended.’
Flaws with the drafting of DBA regulations have caused most lawyers to be reluctant to offer them, as there was a risk that agreements would not be enforceable. As Lord Justice Coulson put it in the judgment, ‘nobody can pretend that these regulations represent the draftsman’s finest hour’.
Greg Cox and Ed Stansfield of national firm Simpson Millar, who acted for the Bar Council in Zuberi, said the ruling sends a clear message that DBAs are there to be used and that the courts will strive to make them work – and not, as Coulson put it, to make them ‘commercial suicide for the lawyer’.
They added: ‘This judgment, especially as it is the first case about a DBA to go to the Court of Appeal, feels at least to us like a watershed moment.’