Court rules client must pay firm after terminating DBA early

The Law Gazette

13 July 2020

Lawyers working on a damages-based agreement are entitled to be paid when the client has terminated early, the High Court has ruled.

Lawyers working on a damages-based agreement are entitled to be paid when the client has terminated early, the High Court has ruled.

London-based litigation firm Lexlaw Solicitors & Barristers had brought the claim against ex-client Shaista Zuberi in respect of her non-payment of fees. The firm sought around £125,000, arguing that Zuberi had wanted the agreement because she could not otherwise afford to pay her solicitors to pursue banks over the alleged mis-selling of derivative products.

Zuberi sought to terminate her retainer with the firm in May 2015 and accepted a settlement offer from the banks in July 2015. The firm then issued its invoice which was the subject of this ruling in Lexlaw Ltd v Zuberi.

Victory for the firm has been hailed as welcome clarity on the issue of DBAs and a signal that more firms will feel confident offering them in future.

A clause in the agreement between the parties had stated that the client could terminate it at any time, but she would then be liable to pay the costs and expenses incurred up to that point.

The client argued in court that the clear intention of parliament in making the DBA regulations in 2013 was to protect them from having to make any payment to lawyers other than those allowed, and that the clause ran directly contrary to that intention. The firm said the regulations were about applying a ‘light regulatory touch’ and legislating only for where the proceeds of a dispute were to be shared between representative and client.

Finding for the firm, His Honour Judge Parfitt said the defendant had not explained why legislators would have wanted to disallow recovery of costs for work done

He added: ‘It is an obvious consequence of preventing representatives getting their time costs on a client termination that those representatives would be reluctant to enter into damages based agreements and that would be contrary to the purpose of making such agreements lawful so as to facilitate access to justice.’

This would have the knock-on effect of creating less choice for clients wanting to bring general civil litigation claims. Allowing the firm to recover costs would not stop clients’ right not to change representative in future, he added.

Speaking after the ruling, Lexlaw partner Karim Oualnan said: ‘I hope this will go some way in putting DBAs back on the agenda as a means of promoting and furthering individual access to justice.’ He added that DBAs regulations should now be reformed, as recommended by the Civil Justice Council.

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