Damages-based agreements (DBAs) used by a law firm in a probate dispute concerning a multi-million pound estate are unenforceable because they do not comply with DBA rules, the High Court ruled last week.

In Reeves v Frain and McKinnon, Costs Judge Brown found the DBAs did not meet requirements under the Damages-Based Agreements Regulations 2013.

In a probate dispute relating to an estate worth around £100m, the claimant had sought a declaration on the validity of a 2014 will made by her late father. The London Litigation Partnership Ltd (trading as LLP Solicitors) successfully acted for the second and fourth defendants, the son and grandson of the deceased, and in 2022, a judge ruled that the 2014 will was invalid and ordered the claimant to pay 70% of the defendants’ costs.

The defendants had funded their case partly through DBAs, with their bills of costs split into parts reflecting an initial private retainer, the costs incurred under the DBA, and a part for a subsequent ‘new’ private retainer that was entered into after ‘success’.

After Costs Judge Brown found there was a genuine question as to whether the costs claim was enforceable at an earlier costs hearing in January 2024, the law firm opted to disclose the relevant DBAs and retainer documentation. The claimant challenged the retainers on a number of fronts.

Costs Judge Brown agreed with the claimant that the DBAs were unenforceable because they did not provide for ‘payment out of sums recovered’, as specified under the DBA regulations. No sums had in fact been recovered or even sought, as the claim had simply been for a ‘declaration’ over the validity of a will.

The judge also accepted the claimant’s argument that, unlike in the employment field, in civil litigation, payment under a DBA must include counsel’s fees. The DBAs in question therefore breached the rules because they charged counsel’s fees as expenses; leading the claimant’s costs counsel Robert Marven to suggest that the firm had ‘inappropriately’ used an employment DBA for litigation.

Once judgment had been handed down in the probate dispute, the law firm had written to the defendants informing them that its work in relation to the DBA was ‘complete’, and any further work was chargeable at a rate of £500 per hour. The firm asserted that this had created ‘fresh retainers’; while the claimant argued that it had wrongly terminated the DBA.

While noting that he had already concluded that the DBA was not valid, Costs Judge Brown said: ‘It appears that on 16 February 2022 a ‘win’ as defined in the DBAs had been achieved… But winning the case and completing the obligations under the retainer agreement are not the same thing. In general, a conditional fee agreement does not end immediately upon a “win”; otherwise there would always need to be a post judgment conventional retainer after a conditional fee agreement or damages-based agreement.’

He added: ‘It seems to be plain that if the DBA covered the claim it covered ancillary matters. However, I do not agree that LLP’s representations amounted to a repudiation of the DBAs. It seems to me that… LLP wrongly told the defendants that work under the DBAs was complete. There was no suggestion that they would not in fact complete the obligations under the agreements. They were going to do the work required and, as I understand it, did it.’

The judge found that the law firm’s claim for costs based on a private retainer relating to work that was ‘plainly covered by the DBA’ must therefore fail. However, he noted that there was ‘no problem assuming a private retainer for work not covered by the DBA’.

Ben Chowdhury, managing associate at costs lawyers Kain Knight which acted for the claimant in the costs proceedings, said the ruling ‘underscores the importance of ensuring that DBAs are drafted and implemented in full compliance with the relevant regulations’.