A litigation firm has lost a bid to enforce a damages-based agreement (DBA) in relation to shares retained by a defendant after settling a claim, which the Court of Appeal today described as ‘heads I win, tails you lose’.

Candey acted for Edward Wojakovski in a complex legal dispute with his parents-in-law Arthur and Renata Matyas and companies in the Tonstate Group, a property investment business.

The firm signed a DBA under which Wojakovski agreed to provide 25% – later 29% – of any ‘proceeds’ from the various claims, defined as ‘any damages, monies, costs incurred by your previous lawyers, other sums and/or … any benefits’.

After Wojakovski settled a claim brought by the Matyases and agreed to transfer 75% of his shares in Tonstate Group Limited (TGL), Candey argued that the remaining 25% represented ‘a benefit derived in or arising out of the proceedings’ and sought a charge over them.

But Mr Justice Zacaroli ruled that the firm was only entitled to payment if Wojakovski recovered ‘something in or as a consequence of the proceedings’ and that the DBA was unenforceable.

Candey went to the Court of Appeal which rejected its case in May, taking less than five minutes to discuss submissions made at the hearing before dismissing the appeal.

In a ruling yesterday, Lady Justice Andrews said: ‘An agreement between a defendant and his solicitors which makes provision for payment to the latter of a percentage of any sum (or of the value of any asset) which is claimed from him, and which in consequence of the outcome of the litigation he does not have to pay or transfer to the opposing party, is not a [lawful or enforceable] “damages-based agreement”.’

Lord Justice Males agreed, saying that ‘an agreement between a non-counterclaiming defendant and his solicitors is not capable of being a lawful “damages-based agreement”’.

He added: ‘To my mind’ the submissions made on behalf of the solicitors in this case are a variant of “heads I win, tails you lose”. They mean that a client who loses his case must pay the sum claimed to the claimant, but if he wins, he must still pay up to half the sum claimed to his solicitors.

‘There is, therefore, no good outcome for a client who enters into such an agreement. Win or lose, he faces financial disaster. It is not surprising that legislation aimed at promoting access to justice should not permit such agreements.’

 

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