Personal liability of liquidators for charges under CFA (Stevensdrake v Hunt)

Personal liability of liquidators for charges under CFA (Stevensdrake v Hunt)

Nick Oliver, a director and head of the insolvency & business turnaround team at Verisona Law, examines the decision in Stevensdrake Ltd v Hunt and it’s practical implications.

Original news

Stevensdrake Ltd (trading as stevensdrake solicitors) v Hunt and another [2016] EWHC 342 (Ch), [2016] All ER (D) 258 (Feb)

The Chancery Division held, among other things, that the defendant liquidator was not liable to the claimant firm of solicitors (the firm) for its charges, basic costs and uplift or for interest on unpaid or late payment of disbursements in respect of work done, pursuant to a conditional fee agreement (CFA), in respect of the liquidation of a company. A letter sent to the firm by the liquidator and its acceptance by the firm’s principal, had had the effect of importing into the CFA that recovery of assets into the estate was a precondition to the firm rendering an invoice to the liquidator for work done by the firm.

What was the background to the judgment?

At a generic level, this was a case that concerned an exception to the parol evidence rule—a rule which would normally prevent a party to a written contract presenting additional evidence that adds to or varies the terms of a written contract that appears unambiguous.

However, the case is of particular interest to those undertaking work in the insolvency sector. The detailed evidence and legal issues referred to in the judgment relate to the contractual relationship between an insolvency practitioner, acting as liquidator of a company, and solicitors that he had instructed to act for him on a CFA basis in relation to a claim brought by the liquidator against a third party.

CFAs are commonly used by solicitors conducting litigation for liquidators and trustees in bankruptcy but, unlike most personal injury litigation, the defendants to such claims are often not insured and a judgment or settlement will

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