Key point

  • Liquidator not personally liable under conditional fee agreement where incontrovertible evidence to the contrary

The liquidator of a company brought proceedings against its former administrators for misfeasance. The proceedings were ultimately settled, which satisfied the definition of success under the conditional fee agreement (the “CFA“) the liquidator had entered into with his solicitors, but the administrators did not pay the full settlement sum. There were therefore insufficient funds in the estate to pay the liquidator’s solicitors and they claimed the shortfall from the liquidator personally.

The decision

The liquidator was not personally liable to pay his solicitor’s fees. While the CFA provided that the liquidator should be personally liable, this was overridden by subsequent agreement and dealings between the parties, where the solicitors had agreed to payment depending on recoveries. From the evidence, this was the incontrovertible basis on which the parties had been acting.

While this decision may be met with enthusiasm by Insolvency Practitioners, the Court will not readily override the terms of a CFA which provides for personal liability; here, there was a wealth of specific evidence over three years that fees were to be paid from recoveries in the liquidation. Parties should therefore still exercise caution, and take proper advice, when entering into CFAs.

Stevensdrake Ltd (t/a Stevensdrake Solicitors) v Hunt (as Liquidator of Sunbow Ltd) [2016] EWHC 342 (Ch)