KA-2025-000017 - [2025] EWHC 2311 (KB)

I now consider the legal effect on me of the decision in Candey, having received submissions about its ratio. On behalf of the respondent, it is submitted that Candey is binding on this court. I cannot think that there is much controversy about that. But it begs the essential question about the scope of its binding effect. That requires determination of its ratio.

The identification of the ratio of a decision can be made using the invaluable analysis of Leggatt LJ (as he then was) in R (Youngsam) v Parole Board [2019] EWCA Civ 229 (“Youngsam”) at paras 48-59. Working through the Youngsam rubric, it seems to me that the ruling of law (“rule of law”) is that for an enforceable DBA there must be recovery of a specified financial benefit from the opposing party. This is why mere retention was insufficient. In coming to that ruling of law, the Court of Appeal said in terms that there is no inconsistency between the Act and the Regulations. The Regulations define and delimit what payments are permissible. A retention does not fit the definition of payment in the Regulations.

There may be argument whether what the Court of Appeal said about the consistency of the Regulations with the statute are “part of the essential reasoning upon which the outcome depends” (Therium Litigation Funding AIC v Bugsby Property LLC [2023] EWHC 2627 (Comm) (“Therium”) at para 99, per Jacobs J). It seems to me likely that the consistency point is part and parcel of the Court of Appeal’s decision in Candey. But even if these observations are obiter, they follow full argument before a strong court. I find at the very least that they are highly persuasive, while likely to be binding. The difference is immaterial in these circumstances. There needs to be something that is recovered from the opposing party. The appellants recovered nothing from the respondent following the declaration of Green J. Not that the proposition needs further confirmation, but in Zuberi, Newey LJ reviewed key aspects of DBAs from para 56, beginning with the pre-DBA situation:

“56 When the House of Lords was invited to approve the 2010 Regulations on 25 March 2010, the minister speaking to them, Lord Bach, said:

“A damages-based agreement is a type of contingency or “no win, no fee” agreement, under which a representative agrees to act for a client in return for a percentage of any damages recovered by the client. If damages are not awarded, the representative is not paid. These agreements are of course different from conditional fee agreements, or CFAs. CFAs are typically used in court proceedings, and allow for an uplift or success fee on top of the representative's normal fee.

I emphasise that damages-based agreements are not permitted in court proceedings or litigation and that the regulations will not change this. They are, however, commonly used by solicitors and claims managers in proceedings before the employment tribunal. The Courts and Legal Services Act 1990, as amended, controls the use of damages-based agreements to claims that are capable of being heard by the employment tribunal . . .

57 In his Final Report, Sir Rupert Jackson recommended that lawyers should be permitted to enter into “contingency fee agreements” with their clients in relation to civil litigation. “Contingency fee” was defined in the glossary as “A lawyer’s fee calculated as a percentage of monies recovered, with no fee payable if the client loses”. Sir Rupert Jackson said this about contingency fees in the executive summary:

“3.2

Contingency fees (chapter 12)

A contingency fee agreement may be described as one under which the client’s lawyer is only paid if his or her client’s claim is successful, and then the lawyer is paid out of the settlement sum or damages awarded, usually as a percentage of that amount. Lawyers are not presently permitted to act on a contingency fee basis in “contentious” business.

3.3

It is my recommendation that lawyers should be able to enter into contingency fee agreements with clients for contentious business, provided that:

● the unsuccessful party in the proceedings, if ordered to pay the successful party’s costs, is only required to pay an amount for costs reflecting what would be a conventional amount, with any difference to be borne by the successful party; and

● the terms on which contingency fee agreements may be entered into are regulated, to safeguard the interests of clients.

Permitting the use of contingency fee agreements increases the types of litigation funding available to litigants, which should thereby increase access to justice.”

Sir Rupert Jackson explained in para 4.1 of chapter 12 that he had concluded that “both solicitors and counsel should be permitted to enter into contingency fee agreements with their clients on the Ontario model”. He also, however, considered that such arrangements should be “properly regulated”. He said in para 4.6 of chapter 12:

“The three matters identified by the MoJ in its consultation paper CP 10/9 are the principal matters which will require regulation. In my view the regulations which the MoJ is planning to introduce in respect of contingency fees in tribunal proceedings should be suitably adapted for the purpose of court proceedings. The regulations should (i) introduce a requirement that clear and transparent advice and information be provided to consumers on costs, other expenses and other methods of funding available; (ii) provide a maximum percentage of the damages that can be recovered in fees from the award; and (iii) control the use of unfair terms and conditions.”

I draw to a close my analysis of Issue 1 with a practicality. As the DBAs are drafted, and on the construction encouraged by the appellants, there can be no understanding of whether the solicitors’ charges calculated by the formula of “time x hourly rates” are limited by the percentage of the damages to which the solicitors are entitled. Until the financial benefit is determined, the amount payable to the solicitors cannot be ascertained. This presents obstacles for an inter partes costs assessment and indeed costs assessment between the client and solicitor. This is a practical consideration that points away from the validity of the contingent benefit argument. It seems to me that if such an arrangement were to be “permitted” under the Act and Regulations, it would have been spelled out. It carries with it significant uncertainty and one might expect mechanisms for valuation of contingency and at least an indication of the types of contingent benefit that might be permissible. As it stands, in vivid contrast to debt and damages, one must rely on speculation. Parliament had the opportunity in the Act, and especially in the fine-tuning of arrangements in the process of regulation approval, to authorise contingent benefits. It did not. Instead, I judge that Parliament set out its clear intention about what qualifies as a permitted DBA in the Regulations.

There are further difficulties when one reaches the “counsel’s fees as expenses” argument in Issue 2 that I must come to, with a potential breach of the 50 per cent limit in regulation 4(3) for non-personal injury cases.