Barrister’s non-contractual fees “vest in trustee in bankruptcy”

Barristers: Fees case raised human rights issue

A barrister’s non-contractual fees are property for the purposes of insolvency law and vest in his trustee in bankruptcy, the Court of Appeal has ruled.

Overturning the High Court, Lord Justice Newey said the expectation of payment when fees were viewed as an honorarium was “not founded on mere hope or morality but reflects the unique nature of non-contractual barristers’ fees”.

Gwinnutt v George & Anor [2019] EWCA Civ 656 concerned barrister Nicholas George, who was adjudged bankrupt in March 2012.

This was before the Bar Council introduced the standard conditions of contract for barristers the following year. Until then, there was normally no contractual relationship between barrister and solicitor – indeed, it was not allowed until 1991.

Simon Gwinnutt, his trustee in bankruptcy, contended that sums “owed” to Mr George when he became bankrupt vested in him under section 306 of the Insolvency Act 1986.

The Act says a bankrupt’s estate encompasses “all property belonging to or vested in the bankrupt at the commencement of the bankruptcy”.

His Honour Judge Davis-White QC, sitting as a judge of the High Court, rejected that argument on the basis that, where a barrister has no contractual right to a fee, he can have no more than an expectation that he will receive it and that cannot amount to property for the purposes of the Act.

Newey LJ disagreed. “Non-contractual barristers’ fees were unique in nature,” he held. “A barrister had more than a mere moral claim to such fees and more than just a hope (or ‘spes’) that he would receive them. If needs be, the barrister could invoke the Bar Council’s ‘Withdrawal of Credit Scheme’, and a solicitor’s failure to pay a fee could potentially amount to professional misconduct.

“The highly unusual character of a barrister’s fee is also manifest in the client’s inability to revoke his solicitor’s authority to pay counsel and the solicitor’s right to reimbursement. The law recognised that, notwithstanding the absence of a contract, payment of an outstanding fee was not to be regarded as voluntary. In practice, a barrister would normally be paid.

“In the circumstances, it seems to me that a barrister’s fees, even when non-contractual, are ‘property’ for the purposes of the 1986 Act and so vest in a trustee in bankruptcy.”

The Act defined ‘property’ in a broad, inclusive way, Newey LJ continued, and it would be “entirely anomalous” if barristers’ fees were not viewed as property.

“Were any other professional to become bankrupt, his aged debt would vest in his trustee, and so should a barrister’s…

“Unpaid fees, regardless of whether they are contractual, are capable of realisation. The fact that something can be realised or turned to account does not invariably make it ‘property’, but it seems to me to point in that direction and, here, the expectation of payment is not founded on mere hope or morality but reflects the unique nature of non-contractual barristers’ fees.

“As I say, payment of such a fee was not to be regarded as voluntary.”

Lords Justice Singh and Baker agreed, although the former added that the case raised “a potentially important issue of human rights law” in relation to the right to peaceful enjoyment of possessions, which was analogous to ‘property’.

He rejected the suggestion that the concepts of property in the law of bankruptcy and in human rights law should be kept apart.

“It seems to me at least strongly arguable that a barrister’s aged debts before 2013 should be regarded as legitimate expectations even if there was strictly no legal right to them.

“The proposition can be tested in this way. Suppose the state had attempted before 2013 to deprive a barrister of his or her aged debts without compensation. I find it hard to believe that that would not raise a serious issue, to say the least, under the Human Rights Act.”

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