Viewpoints: Success fees – an anomaly

The last 12 months have seen a surprisingly large number of claims for augmented solicitors' fees reach the courts, particularly in England. Most would be void and unenforceable at common law, as pacta de quota litis (contracts under which solicitors are to receive an agreed portion of clients' litigated winnings). 

However, the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018, s 2 has legalised such “success fee” agreements, which nowadays are usually enveloped in lengthy letters of engagement.

Of course, success fees are inherently something of an anomaly, seeing that solicitors routinely strive for their clients' success. What distinguishes success fees from other augmented fees was lucidly set out by Lord Doherty in A & E Investments v Levy & McRae [2020] CSOH 14: “The success fee elements are not conditional fee arrangements. They do not provide that a certain fee will be paid in the event of success. They are contingency fees. The amount payable varies depending not just upon success but also upon the amount recovered. They are not speculative fee arrangements. At common law such fee arrangements involve no fee being due if the litigation does not succeed, but payment of an ordinary fee in the event of success. By contrast, here the amount of the success fee varies not merely according to whether the litigation is successful, but in proportion to how successful it is.” 

Cabot Financial (UK) v Weir [2021] CSIH 64 concerned the success fee element in the defender's solicitors' letter of engagement, and whether an award of expenses on an agent/client, client paying, basis could include a success fee. The letter provided that, if the client should win, she would have to pay the stipulated success fee, and further, that “win” meant “any resolution to the litigation that results in an agreement or a court award which reduces your liability to the pursuers..., whether this be partial or full… The Court, through the Auditor… will decide how much you can recover... If the amount… does not cover all our work, you pay the difference.” In my view the most intense inequity resides in the word “partial”. 

Holding that the award of expenses did not include the success fee, the court stated: “The 'success fee' in this case is not an expense which is part of, or directly related to, the process. It is a private arrangement between solicitor and client which is outwith the boundaries of the process; it is an extrajudicial item. It is a form of incentive to the agent to represent the client in the litigation. It is not related to the work which the solicitor does in carrying out that task.” 

One can only wonder that a principle so well entrenched in both English and Scots law was taken all the way to the Inner House – probably propelled by the involvement of the auditor. The sum unsuccessfully sued for was £7,277.52. The auditor originally allowed a success fee of 70% of the recoverable taxed fees against the pursuers, or £3,942.40. However, the court held that in terms of the letter of engagement, the success fee was limited to 25% of the sum sued for, or (indulge me) “only” £1.819.38. 

Hence, the defender cannot recover her solicitors' success fee from the pursuers. To further embitter matters, she failed to obtain sanction for the employment of her senior counsel.

All in all, surely rather more of a Cadmean than a Pyrrhic victory.

George Lawrence Allen, Edinburgh