Agreement: Court of Appeal upheld validity
A client who went to the Court of Appeal to challenge the damages-based agreement (DBA) she signed has admitted she alleged impropriety against her solicitors purely to escape payment.
London firm Lexlaw announced yesterday that the long-running case has now settled, with the claimant now “finally and fully” accepting liability in respect of the DBA.
Lexlaw acted for Shaista Zuberi on a dispute with her bank. Just over a year after signing the DBA, she sought to terminate the retainer but the firm did not accept that termination as bringing the agreement to an end.
The claim then settled and Lexlaw – which had agreed to take 10% plus VAT – sought payment under the DBA of £125,000.
Ms Zuberi tried to set aside the DBA because of misrepresentation and undue influence, and a preliminary point arose over whether the termination clause in the agreement – which made her liable to pay the costs and expenses incurred up to that point – was inconsistent with the 2013 DBA Regulations.
These provide that a DBA must not require an amount to be paid by the client other than what has been paid by another party.
Uncertainty over the consequences of termination was one of the reasons DBAs were little used after their introduction in 2013.
But in January 2021 – in the first decision at that level on DBAs – the Court of Appeal, upholding the first instance decision, ruled that the DBA was not unenforceable [1].
The decision did not determine the litigation, however, but in an agreed public statement [2] released by Lexlaw yesterday, it said the Zuberi family “now finally and fully accept liability in respect of the DBA and withdraw all allegations of impropriety set out in their pleadings and acknowledge these were made purely in an attempt to escape payment”.
It continued: “For the avoidance of any doubt, it is confirmed by Mrs Zuberi that: (1) the DBA was not procured by any actual or presumed undue influence; (2) she was not induced to sign the DBA by misrepresentations (and there were none); and (3) that Lexlaw and its officers correctly advised her of the true nature and consequences of the DBA.”
In the Court of Appeal, Lord Justice Coulson said that, to allow an interpretation of the regulations that would prevent a lawyer from recovering any of their own costs after termination would not only be “a commercial nonsense”, but it also would be contrary to the purpose of the underlying statute, “which was designed to encourage the use of DBAs, not make them commercial suicide for the lawyer”.