‘The Death Clause’ – can basic charges be recovered under a Conditional Fee Agreement in the event of a client’s death?
Simon Teasdale | 29 Oct 2019
On Thursday 24 October 2019, Mr Justice Pushpinder Saini handed down his judgment in Higgins & Co Lawyers Ltd v Evans  EWHC 2809 (QB), an appeal from a decision of Master McCloud sitting in the SCCO. Roger Mallalieu appeared for the successful Appellant. Simon Teasdale explains the facts, the court’s rulings and the implications of the decision.
The case of Higgins put the Law Society’s Model Form Conditional Fee Agreement (“the Model CFA”) under the spotlight – in particular, the clause which seeks to prescribe the consequences of a client dying before their claim to damages is concluded:
This agreement automatically ends if you die before your claim for damages is concluded. We will be entitled to recover our basic charges up to the date of your death from your estate.
If your personal representatives wish to continue your claim for damages, we may offer them a new conditional fee agreement, as long as they agree to pay the success fee on our basic charges from the beginning of the agreement with you.”
“the Death Clause”
The efficacy of the Death Clause was thrown into doubt by Master McCloud’s first instance decision in Higgins, which held that it was unenforceable for being an onerous and unusual clause which had not been brought reasonably and fairly to the attention of the client (per the principle in Interfoto Picture Library Limited v Stiletto Visual Programmes Limited  1 QB 433).
However, Saini J allowed the firm’s appeal. There were three key parts to his judgment:
- First, Saini J addressed the proper construction of the Death Clause, and other clauses providing for clients to be liable under the Model CFA in circumstances other than a ‘win’. The Death Clause does provide solicitors with an immediate right to basic charges upon the death of a client.
- Second, Saini J affirmed the importance of a document having been signed to the question of incorporation and the principle in Interfoto. In the circumstances (which were not particularly unusual), the Death Clause was validly incorporated into the client’s CFA, and could be relied upon by the firm.
- Finally, Saini J rejected the Respondent’s argument that the Death Clause was otherwise unenforceable under section 62 of the Consumer Rights Act 2015. The Death Clause did not create an unfair imbalance in the rights and obligations between solicitor and client.
The facts of Higgins & Co Lawyers Ltd v Evans
In early 2016, Mr Frank William Hughes (“Mr Hughes”) was diagnosed with asbestosis. Mr Hughes instructed Higgins & Co Lawyers Limited (“the Firm”) to pursue a claim on his behalf for damages for personal injuries in relation to that diagnosis and his exposure to asbestos during his employment.
In order to do so, Mr Hughes entered into a conditional fee agreement with the Firm (“the CFA”). The CFA attached and incorporated the “Law Society Conditions” section of the Model CFA, which includes the Death Clause. At the time of entering the CFA, Mr Hughes was 89.
There was no evidence that the Firm had explained to Mr Hughes what would happen under the agreement in the event of his death, prior to entering into the CFA or at all. In their pre-contractual communications, there had certainly been no suggestion that his estate might be liable for charges in those circumstances. The repeated emphasis was that it was to be a “no win no fee” retainer.
On the other hand, there was nothing to suggest that Mr Hughes had not read the CFA before signing it. He had legal capacity and had signed the CFA without any pressure being applied to him. He also had the opportunity to ask questions of the Firm’s agent, who had attended upon him in his home for around 1 hour at the time of signing the CFA.
Mr Hughes passed away on 30 April 2018, and the Firm sought to recover its basic charges from Mr Hughes’ estate.
A bill of costs was presented to the executor of the estate, Dr Evans. Dr Evans then commenced a solicitor-client assessment, and one issue in that assessment was whether the bill ought to be assessed at nil on the basis that the Death Clause could not be relied upon by the Firm.
The First Instance Decision of Master McCloud
Master McCloud held the Death Clause was unenforceable on the basis that it was, on the facts of the case, an onerous and unusual clause which had not been brought reasonably and fairly to the attention of the client.
At the heart of the Master’s reasoning was the context of Mr Hughes’ age and health. Mr Hughes was bringing a claim for damages in respect of a disease that was killing him. He was not at all in good health. He was 89, and so already past the average life expectancy. It was therefore far from unlikely (indeed, the Master considered it likely) that he might die before the conclusion of the litigation.
In the circumstances, the Master considered that the Firm ought to have taken steps to draw to Mr Hughes’ attention the fact that, in the event of his death, the consequences of the CFA for his estate were (or could be) fundamentally different from the “no win no fee” description he had been given. On the facts, the Master considered that they had not taken such steps, and certainly had not printed the clause “in red ink with a red hand pointing to it” as Lord Denning famously put it in Interfoto.
Based on her finding that the Firm could not rely upon the Death Clause, the Master assessed the bill of costs at nil (albeit leaving open the possibility that the Firm might find some other basis on which to claim costs from the estate). The Firm appealed.
Decision on Appeal to Saini J
Saini J allowed the Firm’s appeal.
What fees are chargeable under the Model CFA when there is neither a win nor a loss?
Saini J noted that where a solicitor and client contract on a CFA, the solicitor takes on a risk, not merely that the claim may not succeed (for which they are compensated by the success fee of claims which do) but also that there will be neither a win nor a loss during the currency of the CFA. The Model CFA expressly addresses a range of scenarios under the heading: ‘What happens when this agreement ends before your claim for damages ends’. One of those scenarios is the death of the client (the Death Clause).
Saini J considered the construction of the Death Clause to be unambiguous: the Firm was immediately entitled to recover its basic charges up to the date of Mr Hughes death from his estate. Consistently with the other clauses in that section of the Model CFA, there is provision for the effects of the Death Clause to be moderated. The personal representatives may be offered a new CFA on certain conditions and at the solicitor’s option. This admits of the possibility that the solicitor may agree to make its now accrued entitlement to fees further contingent on the success of the claim if the personal representatives choose to instruct it and agree to pay a success fee in the event of a ‘win’. Saini J considered that there was nothing inappropriate or unworkable in that.
In the ‘Explanation of words used’ section of the Model CFA, “basic charges” are defined as:
Our charges for the legal work we do on your claim for damages as set out in Schedule 2.”
Schedule 2, in turn, refers to a cap on basic charges measured as (a) costs recovered from the opponent(s) (the defendant(s) in the substantive claim); plus (b) 25% of damages received.
On that basis, the Respondent argued that even if the Death Clause was prima facie enforceable, the amount of the liability was zero. Saini J had no hesitation in rejecting this argument, holding that the cap only operates if the client wins, and not if the client is liable in other circumstances. To apply the contrary interpretation would make a nonsense of the clear provisions providing for liabilities in circumstances other than a ‘win’.
For those reasons, Saini J found that the Master was correct to assume a construction of the Death Clause which had the effect of providing the Firm with an immediate entitlement to basic charges upon the death of Mr Hughes.
Applying the Interfoto principle to a signed document
Saini J then turned to consider the Master’s application of the ‘Interfoto principle’.
Goodlife Foods Ltd v Hall Fire Protections Ltd  EWCA Civ 1371 has provided a recent and authoritative review of the modern case law, and restated the relevant principle as follows (at ):
“It is a well-established principle of common law that, even if A knows that there are standard conditions provided as part of B’s tender, a condition which is “particularly onerous or unusual” will not be incorporated into the contract, unless it has been fairly and reasonably brought to A’s attention.”
As per Bingham LJ’s dictum in Interfoto, the more outlandish the clause the greater the notice which must in all fairness be given. However, “onerous or unusual” is a high standard (see Saini J in Higgins at ).
Saini J reminded us that the principle of Interfoto is one of whether a clause has been properly incorporated into an agreement between the parties, not a general common law doctrine of unfairness. In that regard, it is crucial to have regard to the authorities (which the Master had not been referred to) which establish the principle that a party who signs a document knowing that it is intended to have legal effect will generally be treated as being bound by its terms and will be taken to have read them and be on notice of them – at least absent the case being an extreme one where there is cogent evidence of the signature being obtained under pressure or by some other improper conduct (Higgins ).
On that basis, without even needing to decide whether the term was “onerous or unusual”, Saini J concluded that the Interfoto principle did not apply to exclude the Death Clause from incorporation into the CFA. There was no principle of common law that the Firm’s agent was obliged to drawn the Death Clause specifically to Mr Hughes’ attention in circumstances where he had signed the CFA having been warned by its terms that it was a binding document. The attention or notice requirement was amply satisfied.
Obiter, Saini J concluded that the Death Clause was not in fact “onerous or unusual” either – though, again, this was largely based on matters which were not canvassed before the Master.
The Death Clause was not unusual because Saini J found that, insofar as there is an ‘industry standard’, it is that:
- All CFAs terminate automatically on death.
- There is always a liability on the estate of the deceased to pay basic charges and expenses (disbursements).
- But, in some cases, the firm is obliged (if the personal representatives so wish) to offer a new CFA to continue the claim and in other cases there is no obligation on the firm but merely the opportunity for the firm and personal representatives to make a new CFA if they wish.
Further, the Death Clause could not properly be described as “onerous” because, even if (on one view) it might operate harshly in some circumstances, it reflects a sensible and fair allocation of risks where the client is essentially receiving professional services for free on the basis of the solicitor’s expectation that a claim will be successful at trial or earlier settlement for damages.
Unfairness under the Consumer Rights Act 2015
The Respondent’s Notice also argued that the Death Clause was unenforceable, in any event, under section 62 of the Consumer Rights Act 2015 (“the CRA 2015”).
Pursuant to section 62(1), an unfair term of a consumer contract is not binding on the consumer. Pursuant to section 62(4), 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.
In this regard, the Respondent placed reliance on (among other things):
- The alleged unfairness and imbalance in enabling the Firm to claim costs without having brought the claim to its conclusion, compounded by the likelihood that the Death Clause would be engaged.
- The pre-contractual literature given to Mr Hughes, which was said to be capable of lulling Mr Hughes into thinking that no costs were payable until the claim had concluded (and concluded by way of a ‘win’), even promising “no hidden, nasty surprises”.
Saini J had no hesitation in rejecting these arguments either, and for reasons which substantially overlapped with his conclusion that the Death Clause was not “onerous”. Saini J did not consider the clause to be “hidden” and noted that would there would not be any “nasty surprises” if the CFA was read, as it said on its face that it should be. Further, the purpose served by the clause was entirely fair and transparent, as with the other clauses which governed the consequences of ending the CFA before the claim for damages was concluded.
What’s more, it was common ground that even if the Death Clause violated the CRA 2015 that would simply make the clause (alone) unenforceable. The balance of the CFA would remain in force and it was agreed that there would remain an obligation on Mr Hughes’ estate to pay reasonable fees or some form of quantum meruit. Saini J noted that any basic charges payable under the Death Clause are also subject to the requirement of being reasonable under the Solicitors Act 1974. In the circumstances, inclusion of the Death Clause did not create a significant imbalance in the parties’ rights and obligations to the detriment of the consumer and contrary to the requirement of good faith.
Accordingly, the Death Cause did not fall foul of the CRA 2015 and the appeal was allowed – doubtless to the relief of many firms acting on similar or materially identical CFAs across the county.
© Simon Teasdale. The author assumes no responsibility to any party in respect of this article. Specific legal advice tailored to specific problems should always be obtained.