City law firm Charles Russell Speechlys (CRS) is facing a retrial of a £50,000 claim for fees it thought it had won because it did not properly plead the existence of an implied retainer.
Mr Justice Cotter said  the alternative to the case as pleaded caught the defendant “by surprise”.
He went on: “That simply should not have happened.”
Beneficial House (Birmingham) Regeneration LLP acted as a vehicle for members to fund the development of a property in Birmingham.
The LLP consisted of investor and designated members, with the LLP agreement providing that the latter did not have authority on their own to bind it.
One of the designated members sought advice from CRS in February 2016 on issues that arisen with the development. But it was only in November that year – ahead of the designated members being replaced – that a retainer was signed.
Soon after, CRS billed the LLP £49,000, which it refused to pay.
Though at first instance CRS’s pleaded case was that the written retainer covered the work done to that point, His Honour Judge Sephton in Manchester instead found that there was an implied retainer covering that period, a possibility which had come up during submissions as a secondary argument.
William Stockler – a solicitor member of the LLP who represented it before HHJ Sephton as a litigant in person – argued that the pleading did not enable a secondary case to be run and reserved the LLP’s position until it saw the amended case.
“Notwithstanding the importance of resolving this issue, and determining the limits of the claim, the judge moved to the evidence without having made any ruling, leaving both sides unsure as to what his view was,” Cotter J noted on appeal.
Paragraph 7.5 of CPR practice direction 16 provides that, “where a claim is based upon an agreement by conduct, the particulars of claim must specify the conduct relied on and state by whom, when and where the acts constituting the conduct were done”.
Cotter J noted that the pleading “not only failed to comply with paragraph 7.5 as regards the material facts, it did not mention an implied retainer at all”.
He went on: “Pleadings are meant to set matters out clearly; they should not contain hidden arguments within generalised averments.”
It was clear and “entirely understandable” that Mr Stockler had not expected to face an alternative argument of an implied retainer.
Cotter J went on: “That is because the pleading gave him no adequate notice. He was caught by surprise and was unprepared for the alternative case. That simply should not have happened.”
The judge said HHJ Sephton “fell into error by proceeding on the basis that the pleading adequately raised the issue of an implied retainer”.
He should instead have put CRS to an election of either applying to amend or accepting that an alternative case based on an implied retainer was not properly before the court.
Cotter J rejected CRS’s argument that, even if Mr Stockler had been fully aware of the argument, the outcome would inevitably have been the same.
Whilst there was “force” in this, the judge said there was “potential prejudice in the inability to properly test and explore this aspect of the case”.
The LLP argued that, as a result, judgment should be given in its favour, as the primary plank of CRS’s case had failed before HHJ Sephton.
However, Cotter J said that, as the judge’s error in relation to the pleadings influenced the law firm not to apply to amend, “the proper course” was to remit the case for a re-trial before a different judge.
“The application to amend can be determined on its merits and, if permitted, [CRS’s] case can be fairly challenged.”
Theo Barclay, instructed by Lewis Silkin, represented the LLP, with Charles Raffin, instructed by Goldsmith Bowers, for CRS.