The High Court has found that agreements between two direct access barristers and their client which included a non-refundable advance fee were unfair under the Consumer Rights Act 2015 (CRA 2015). The High Court also ruled that the barristers had no common law quantum meruit claim (meaning a claim for “the amount one deserves”) for recovering their fees.
The two barristers, the claimants, and a former client, the defendant, were in dispute over payment of outstanding fees under the terms of a written agreement entered into between the claimants and the defendant under the Public Access Scheme. The case was appealed and cross-appealed from a county court decision in December 2022.
The defendant was pursuing a financial remedy in proceedings against her former husband. One of the barristers applied to adjourn the trial at issue and was successful. Shortly after, on the day upon which the bulk of counsels' fees became due, the defendant sent an email to the claimants' clerk indicating that she no longer wished to instruct them. She had made two payments but refused to pay any more. The claimants duly commenced proceedings against the defendant seeking recovery of the balance of their fees.
The court had to decide:
•the extent, if any, to which the provisions of CRA 2015 prevented the claimants from relying upon one of the central terms of their agreement relating to payment, and
•the consequences which were to follow if CRA 2015 so operated.
The defendant's argument was that the CRA 2015 meant that the claimants were entitled to nothing. The claimants argued that CRA 2015 did not apply and, even if it did, they were nevertheless entitled to payment in full. It was common ground that the parties were traders and consumers respectively.
The key term in the dispute was:
“For the avoidance of doubt, the fee covers the above-mentioned work and therefore if the hearing concludes early or is adjourned to another date or does not go ahead for any reason beyond our control, then the full fee is still payable and another fee will be payable for any adjourned hearing.”
The defendant said that this was unfair because if a trial did not go ahead, the barristers could potentially claim a lot of money for doing not very much.
The first instance court had held that CRA 2015 did indeed prevent the claimants from relying on the contractual term relating to payment but that the defendant should nevertheless pay 70% of what would otherwise be the contractual sum due by way of quantum meruit.
The High Court ruled that the payment term requiring advance payment agreement was unfair under the CRA 2015 and that no fees were recoverable on a quantum meruit basis. It was found that the term requiring advance payment fell within the grey list of potentially unfair terms in the CRA. Specifically as it had "the … effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum … for services which have not been supplied" – essentially, the term amounted to a 100% non-refundable deposit with all of the financial risk of the trial not proceeding being placed on the defendant, which created a significant imbalance between the parties to the defendant’s detriment. Because the payment term was grey-listed, the CRA "safe harbour" exemption from the fairness test (for terms dealing with the main subject of a contract or the appropriateness of the price) was not available. Therefore, as the payment term had been unfair under section 62 of the CRA 2015, which meant that the contract had to be treated as if the entirety of the payment term had never existed and the barristers were not entitled to recover their fees. In addition, the High Court ruled that no fees were recoverable on a quantum meruit basis as this would disincentivise traders to use fair terms.
Consumer law cases are relatively rare and it's interesting to get one! This illustrates that traders may not use terms that place all the risk of a transaction not proceeding on consumers and non-refundable advance fees are likely to be unfair. This has been made clear in OFT and CMA guidance over the years, which says a term which makes any substantial prepayment entirely non-refundable, whatever the circumstances, potentially allows the trader to make an unjustified windfall gain and also makes clear that requirements which can operate so as to force consumers to pay for services they have not received can also be unfair.