Implied terms and umbrella agreements don’t shelter clients from CFAs

In Stevensdrake v Hunt, the Court of Appeal has provided yet another reminder of the stringency of the test for implied terms affirmed by the Supreme Court in Marks and Spencer v BNP Paribas. It also held that an apparent “umbrella agreement” could not govern or impact the terms of a subsequent Conditional Fee Agreement (CFA), which was found comprehensively to govern the agreement between the parties.

Mr Hunt hired Stevensdrake Solicitors to help him in an administration. In 2006 the parties agreed that “in the event of there being no realisations I [Mr Hunt], as Liquidator, will not be in a position to pay your fees, nor will I accept personal liability for those fees.” Nearly two years later, Stevensdrake and Mr Hunt entered into a CFA. This stated “If you win your claim, you pay our [Stevendrake’s] ...fees” and later “You are personally responsible for any payments that you may have to make under this Agreement; those payments are not limited by reference to the funds available in the liquidation.”

The case settled and Stevensdrake claimed payment of their fees in full. Mr Hunt argued that the 2006 correspondence governed the parties’ relationship alongside the CFA so that Stevensdrake’s fees were only payable out of realisations received. As no realisations had been received, no fees were due.

The High Court found in favour of Mr Hunt, stating that the agreement reflected in the 2006 correspondence was an implied term of the CFA. The Court of Appeal disagreed. The term implied by HHJ Barker QC contradicted an express term of the CFA. As Lord Neuberger noted in Marks and Spencer, “it is a cardinal rule that no term can be implied into a contract if it contradicts an express term.” The Court of Appeal also found that the term was neither necessary to give business efficacy to the CFA nor was it so obvious that it went without saying (precisely because it contradicted an express term of the CFA). However strong contemporaneous evidence was, it could not result in the implication of a term contrary to principle and authority.

In any event, on a proper analysis, Mr Hunt's argument on appeal was not one of implied terms, but rather that the 2006 correspondence, being an “umbrella agreement”, governed all subsequent correspondence and prevailed in the event of inconsistency. This argument too was dismissed. The CFA purported to be a complete, self-contained contract. It worked effectively without need for any further terms, it neither referred nor purported to incorporate any other terms and it represented a markedly different basis for payment than that provided in the 2006 correspondence. This latter reason also contradicted Mr Hunt’s argument that the two documents could be interpreted consistently.

Accordingly, the court held that there was no contractual justification for going outside the terms of the CFA.