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Can a solicitor recover directly from the liquidator their profit costs or fees under a conditional fee agreement (CFA) for legal services? Following the Court of Appeal’s decision in Stevensdrake v Hunt, Hugh Sims QC and Simon Passfield, barristers at Guildhall Chambers, say that insolvency practitioners (IPs) would be well advised not to rely on informal arrangements with solicitors but instead should ensure that any arrangements are formalised and fall within the remit of the CFA. In addition Anton Smith, partner at Ashton Bond Gigg, considers the wider implications for funding these types of cases with CFAs.
Stevensdrake Ltd (trading as Stevensdrake Solicitors) v Hunt (Liquidator of Sunbow Ltd)  EWCA Civ 1173,  All ER (D) 34 (Aug)
In what has proved to be a pyrrhic victory, the Court of Appeal has partially allowed an appeal by a firm of solicitors. The judge below held that those solicitors could not claim from the liquidator personally their profit costs under a CFA for legal services provided in relation to a liquidation of an insolvent company of which Mr Hunt was the liquidator. The trial judge decided that the liquidator was not liable as a matter of contract. The Court of Appeal has overturned this ruling saying that there is no justification for going outside the terms of the CFA and making it subject to contrary terms founded upon other agreements which may have been made. However the Court of Appeal has upheld the finding below that there was an estoppel by convention which based upon all the facts found by the judge was unimpeachable. The result is that the solicitors cannot recover from the liquidator their profit costs or claimed success fees.
Hugh Sims QC and Simon Passfield (HS & SP): Stevensdrake sought recovery of legal fees due under a CFA dated
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Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.
Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.
0330 161 1234