Is it ever acceptable for surveyors to enter into a conditional fee agreement?
Historically, courts have disapproved of fee agreements in litigation that depend on the outcome of the client’s case: so-called success or contingency fees, more usually known as conditional fee agreements (CFAs). As Lord Denning said in Wallersteiner v Moir (No 2) [1975] 1 QB 373: “English law has never sanctioned an agreement by which a lawyer is remunerated on the basis of a ‘contingency fee’.”
In the 1990s, legislation allowed lawyers (but not other professionals) to charge CFAs, as a cheap alternative to legal aid. By 2007, however, Parliament had become concerned at the spiralling cost to business of CFAs. This concern has led to the introduction by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 of “damages-based agreements” (DBAs). These will in the future provide an alternative lawful means of funding civil litigation by allowing, subject to safeguards, the recovery of costs from the damages payable to the winning party.
Surveyors and CFAs
The legislative protection given to CFAs and in the future to DBAs is afforded only to lawyers. Does this mean that surveyors may not lawfully enter into CFAs?
The issue is important, because if CFAs are void, that will mean that any fee which the surveyor has contracted for will be unenforceable. The surveyor may also fail to recover on a quantum meruit for what may have been many hours of work (see Awwad v Geraghty & Co [2001] QB 570).
The resolution of this issue calls for an examination of the law against champerty.
Champerty
A champertous agreement is classically defined as the maintenance of an action in consideration of a promise to give the maintainer a share in the proceeds or subject matter of the action. Such agreements have long been regarded by the common law as void and the practical application of the rule today is principally confined to the outlawing of certain CFAs.
Surveyors should be particularly interested in: (a) whether champerty applies only to lawyers; and, if not, (b) whether champerty applies to any form of dispute resolution, rather than merely litigation; and, if so, (c) whether a CFA entered into by a surveyor at any pre-dispute stage is champertous and therefore unenforceable.
As to (a), it is difficult to see why the prohibition should apply only to lawyers. Indeed, there are authorities involving non-lawyers in which champerty was considered to be applicable in principle, although the agreements in question were held non-champertous. See, for example, Pickering v Sogex Services (UK) Ltd [1982] 1 EGLR 42, involving a surveyor-advocate, and Dal-Sterling Group plc v WSP South & West Ltd (unreported, 2001), concerning claims consultants.
As to (b), there are conflicting dicta. In Giles v Thompson [1993] 3 All ER 321, Steyn LJ said: “The head of public policy, which condemns champerty, has only done so in the context of civil litigation It would involve a radical new step to extend the doctrine to private consensual arbitration.”
Against that, in Bevan Ashford v Geoff Yeandle (Contractors) Ltd [1999] Ch 239, Sir Richard Scott V-C held that champerty did apply to arbitration. The reasoning that led to his decision may be susceptible to challenge, if only on the basis that the public policy grounds that underpin the rule have a less pressing role to play in the non-litigious sphere.
The core of the debate concerns (c): the stage at which the rule kicks in. Does it only prohibit CFAs entered into with a view to an actual or contemplated dispute? Or does it embrace all agreements where the subject matter of the fee may end up being disputed? What about an instruction to compile a schedule of dilapidations? To value an office floor with a view to serving a rent review trigger notice? To ascertain a property boundary, where the neighbour has put up a fence in place of a hedge?
Here, the only available dicta (beyond some apparent concessions in Dal-Sterling) suggest that the rule applies only where the CFA concerns actual litigation. Thus, in Re Trepca Mines Ltd (No 2) [1963] 1 Ch 199, the Court of Appeal said that the rule applied to fee agreements concerning “any contentious proceedings where property is in dispute”.
It has not been possible to discover any authority extending the scope of the rule to CFAs operating at any stage prior to that governed by the pre-action protocol, where litigation is not in prospect, and the scope of the CFA is directed at a result other than success in litigation (or other form of dispute resolution).
Is there any reason to suppose that the rule might yet be extended to embrace such CFAs? It is unlikely and, if anything, the public policy requirements in this area are contracting rather than expanding (see, for example, the remarks on this topic by Millett LJ in Thai Trading Co v Taylor [1998] QB 781). The public are surely entitled to expect that they will receive adequate protection in the shape of the ethical standards by which surveyors are already bound to conduct themselves.
Expert witnesses and CFAs
No discussion of CFAs and surveyors would be complete without a look at the rules applicable to expert witnesses. The current edition of the practice statement for surveyors acting as such rightly draws attention to the fact that: “Courts of law will only in exceptional circumstances accept evidence from an expert witness acting under a conditional fee arrangement.”
The Civil Justice Council protocol is rather more explicit on the subject: CFAs “must not be offered or accepted”. Although that protocol has the status of guidance, and is not mandatory, it clearly carries great weight. Moreover, as the current guidance note for surveyor expert witnesses states, the courts have repeatedly stressed that CFAs are not acceptable.
Accordingly, if the surveyor is being instructed to act as an expert in relation to an actual or contemplated dispute, the prudent advice should be to decline to enter into a CFA, at least where the dispute will involve contentious litigation.
Guy Fetherstonhaugh QC is a barrister at Falcon Chambers
