Alerter by Thomas Samuels & Isha Shakir – Public non-access? A cautionary tale

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In Glaser & Anr v. Atay [2024] EWCA Civ 1111 the Court of Appeal (Nugee, Elizabeth Laing and Baker LJJ) considered the fairness of a payment term contained within a letter of engagement from public access counsel to their client.  The provision was held to be assessable for fairness and unfair under Part 2 of the Consumer Rights Act 2015 (the “CRA”), with there being no other basis for counsel to recover the outstanding fees. 

BACKGROUND

Mrs Atay was involved in “high-value and hard-fought” financial remedy proceedings in the Central Family Court. She engaged Mr Glaser K.C. and Ms Miller to represent her via the Public Access Scheme for a pre-trial review on 10^th July 2020 and a 10-day final hearing beginning on 21^st September 2020.  For that purpose counsel earmarked the two weeks before the final hearing for prep time.

Mrs Atay received materially identical letters of engagement for leading and junior counsel on 7^th July 2020 (the “Contract(s)”). They provided for fixed fees for the work: £90,000 plus VAT for leading counsel, and £45,000 plus VAT for the junior.  The fees were to be paid by way of four instalments on 6^th July, 10^th July, 31^st August and the date “28 days after receiving the final order.”

The disputed term in both Contracts (the “Payment Term”) was as follows:

For the avoidance of doubt, the fee covers the above mentioned work and therefore if the hearing concludes early or is adjourned to another date or does not go ahead for any reason beyond our control, then the full fee is still payable and another fee will be payable for any adjourned hearing.

The PTR took place and Mrs Atay paid the first two tranches of both counsel’s fees on 14^th and 31^st July 2020 respectively.

However, the final hearing was adjourned by the Court on 26^th August 2020 – 5 days before the third instalment fell due, and nearly two weeks before the window set aside by counsel for preparation. Four days later (31^st August) Mrs Atay emailed to inform counsel that she no longer wished to use their services and refused to pay the final two instalments.

THE LITIGATION

Mr Glaser and Ms Miller issued claims seeking payment of the balance of their fees. They relied on the Payment Term to argue that the full amount of the fees remained payable.  Alternatively, they claimed “lesser but similar sums” pursuant to an implied term or on a quantum meruit basis.

The issues at trial were: (1) whether the Payment Term was unfair and therefore not binding on Mrs Atay by virtue of ss.62(4) and 67 CRA, and (2) if so, what if any alternative sum was due.

Both HHJ Berkley at trial and Turner J. on appeal to the High Court held that the Payment Term was assessable for fairness under the CRA and unfair. However, they differed as to the consequences.  HHJ Berkley found that a quantum meruit claim was available and awarded counsel 70% of the outstanding fees.  Turner J. held it was not and overturned the judgment against Mrs Atay.

Mr Glaser and Ms Miller appealed to the Court of Appeal on the grounds that Turner J. had erred in holding: (1) the Contracts contained an entire obligation which had to be completed in full before any payment was due; (2) the Payment Term fell within §5 of the grey list; (3) the Payment Term did not fall within s.64(1)(b) CRA; (4) the Payment Term was unfair; and (5) if the Payment Term was struck out, counsel would not be entitled to payment on a quantum meruit

ISSUES 2 TO 4: UNFAIR TERMS

Beginning with the CRA issues ((2), (3) and (4)), Nugee LJ rejected that the Payment Term was within the “safe harbour” provision at s.64(1)(b) CRA, it not engaging an assessment of the “appropriateness of the price payable under the contract by comparison with the… services supplied under it.”
It was therefore assessable for fairness under s.62 CRA. He derived support for that conclusion from the “plain meaning of the statute” and the decision in Director-General of Fair Trading v First National Bank plc [2002] 1 A.C. 481. As Lord Bingham noted in First National, there is a distinction between terms which “express the substance of the bargain” versus other “incidental” but important terms.  Section 64(1)(b) was concerned only with the former.  Thus, in the present case ([48]):

…the Payment Term did not concern the adequacy of the fees earned by counsel… but is designed to ensure that their entitlement to their fees does not come to an end on the hearing being adjourned or otherwise not going ahead.  That is not a term which expresses the substance of the bargain…

Nugee LJ rejected the notion that the fees “purchased the exclusive use of the barristers’ time.” The Contracts said nothing to that effect. Instead, they were due for the barristers’ work which had been “identified in the contract as “preparation of and representation at” the two hearings” ([50]).

The next issue concerned the application of §5 of the ‘grey list’. Nugee LJ having rejected the application of s.64(1)(b) CRA, the issue did not strictly arise. Nonetheless, detailed obiter views were offered.

Nugee LJ considered that once it was understood that fees were payable for prep and attendance, rather than merely reserving counsel’s time, it was clear that the Payment Term did fall within §5. The provision refers to a term which:

has the object or effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum in compensation or for services which have not been supplied.

Further, despite having “received very limited submissions” on it, Nugee LJ suggested that the words “to conclude or perform” in §5 should be read broadly. Thus, §5 is “apt to apply to charges made in the event of a contract being cancelled” by the consumer.

On the substantive question of whether the Payment Term was unfair, Nugee LJ noted the Payment Term falling within the ‘grey list’ was suggestive, but not determinative, of unfairness. Whether any given term is actually unfair “must depend on all the circumstances.”

Here, however, Nugee LJ’s view was that the Payment Term was plainly unfair within the meaning of s.62(4) CRA. The section provides:

A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

As to “significant imbalance”, Nugee LJ held that both judges below had been right to hold that the Payment Term had such effect ([71]):

As HHJ Berkley perceptively identified, the difficulty with the payment term is that it potentially applies in many different situations, but does not allow for any nuanced assessment of what is appropriate in the circumstances of a particular case…

…One can well see why counsel would expect to be paid for their work in preparing for a hearing if the case settles, or is adjourned, after they have done the work, and the client could scarcely complain of that; but it is nothing like as obvious that if the case goes off before counsel have carried out any substantive work, the client would accept that it was appropriate for counsel to be paid for preparation that they had not done and days in court that they would not in fact undertake…

Nugee LJ acknowledged that some counsel may struggle to find alternative work if a case is adjourned. Whether that is the case would, however, depend on the timing of the adjournment and the nature of counsel’s practice.  In the round, however, the effect of the Payment Term was held to be as follows ([76]):

the client on the one hand has to pay the full fees even if she does not receive any services of value to her, whereas counsel on the other hand not only receive the full fees but are free to pursue other opportunities and, if fortunate enough to obtain other work, can keep both sets of fees.

Nugee LJ also considered approach to “significant imbalance” laid down by the Supreme Court in ParkingEye Ltd v Beavis [2016] A.C. 1172. Per Beavis the Payment Term significantly diverged from those legal rights which Mrs Atay would have otherwise had: at common law a trader cannot recover full payment for work which had not been done.

The fact that an agreement provides for staged payments upfront may or may not affect the analysis of comparative legal rights with and without the impugned term. In Mrs Atay’s case, however, considering the position as at the date the Contracts were made, there was the possibility that the final hearing could have become ineffective long before it did.  Thus, absent an express contractual provision, counsel could not claim instalments which had not even fallen as at the date the contract was discharged.  In particular, the Contracts did not end when Mrs Atay emailed on 31^st August, but were frustrated by the adjournment order made on 26^th August 2020.  The third tranche of prepayments had not fallen due as at that date.  Thus, the Payment Term did “significantly alter the parties’ rights and obligations from what they would have been without it.”

On the question of “good faith” under s.62(4) CRA, Nugee LJ referred again to First National and Beavis. Whether one considered the touchstones of “morality” and “good commercial practice” (per First National) or the more pragmatic question of whether the supplier could reasonably assume the consumer would have agreed to the term in a negotiation if properly advised (per Beavis), the answer was the same.

Nugee LJ rejected arguments that the test of unfairness in the CRA was confined to terms that had not been individually negotiated and that “good faith” is to be viewed from the supplier’s perspective. It is a broad question, to be assessed objectively by reference to all relevant circumstances.  Turner J. was therefore right to note that a litigant engaging counsel under the Public Access Scheme is likely to be in a stressful situation, heavily dependent on counsel for assistance and potentially vulnerable.

In those circumstances, presenting Mrs Atay with the Payment Terms within the Contracts as a fait accompli was contrary to the requirement of “good faith”.

ISSUES 1 & 5: THE CONSEQUENCES

Nugee LJ turned to consider the remaining issues ((1) and (5)) touching upon what (if anything) further counsel could recover from Mrs Atay. He held that Turner J. had been correct to find that there was no scope for a contractual (cf. unjust enrichment) quantum meruit claim because the Contracts agreed a fixed fee for the services to be provided. He noted that that position was further reflected by s.51 CRA.

The question was therefore whether the Contracts provided for an entire obligation, such that each of the four staged payments stood or fell together. In that regard Nugee LJ distinguished between a non-refundable deposit and mere prepayment:

1. A non-refundable deposit, once paid by the consumer, could not be recovered even if the service was never provided.
2. Prepayments, by contrast, would be recoverable from the Mrs Atay if “unconditional”. Absent an express term defining the prepayments as such, they would be “unconditional” only if counsel’s obligations meant they were “bound to incur expenses before completing performance” or they had, in fact, “incurred expenses before the time of discharge” for the purpose of the contract.[1]

The staged payments were held to be conditional (as opposed to unconditional) prepayments. The fact that counsel had booked time out of their diaries when accepting the instruction did not matter.  By the date of the third instalment (31^st August), the final hearing had already been adjourned and the Contracts thereby discharged.  The analysis would have been different if either (i) the Contracts had included a term dealing with the consequences of the event (i.e. the adjournment), or (ii) the hearing had been adjourned after some or all of the prep had been done.  However, as a result of the finding of unfairness they included no such term and, by the date of the adjournment (26^th August), neither counsel had commenced their preparatory work.

The Court therefore dismissed the appeal.

COMMENT

The decision has significant implications for businesses in the service industry, which rely upon prepayment terms with consumer clients.

In the context of the Bar Public Access Scheme, Nugee LJ concluded by observing “how right” HHJ Berkley had been “when he said that the contract was inadequate for the sort of case for which it was used” ([148]). The Court of Appeal’s concern was plainly that Mrs Atay was being asked to pay further substantial fees for work which was not done.  Further, because the Contracts expressly provided that counsel were under no obligation to accept instructions for any listings other than those in July and September 2020, it was work which would never need to be done.

Indeed, what at first sight perhaps appears an unusual application of the doctrine of frustration, apparently followed both from the precise chronology of events and that the Contracts obliged counsel to act only in relation to the specific listing in September 2020. The adjournment meant that that part of the Contracts could not be performed: there was no such hearing for counsel to prep or attend.

As Nugee LJ emphasised, however, there is “nothing to prevent counsel from devising and agreeing with their clients contracts that fairly balance their own interests… with the interests of their clients in not paying for work that is not carried out.”

At the time of writing the Bar Standards Board, which has oversight of the Public Access Scheme, has yet to make any public comment on the decision. However, the BSB’s recent announcement (4^th October 2024) on its compliance with the Legal Service Board’s “Statement of policy on empowering consumers”, foreshadows the likely approach.

Thomas Samuels specialises in consumer and financial services issues.  He was junior counsel for the respondent (ParkingEye Ltd) in the Supreme Court in ParkingEye v Beavis.

Isha Shakir has a broad commercial practice, including experience of consumer issues under the CRA.

Thomas Samuels
Isha Shakir
15 October 2024

This alerter is available to download as a PDF below. 

[1] This approach was said to reconcile two conflicting strands of authority on the issue, deriving from (i) Dies v British and International Mining and Finance Corporation [1939] 1 K.B. 724, and (ii) Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 W.L.R. 1129.

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