Key point

A liquidator can be held liable personally for obligations under a conditional fee arrangement.

The facts

Mr Hunt was the liquidator of a company who instructed Stevensdrake Limited (the "Solicitors") in relation to a misfeasance claim being brought against the company's former administrators.  A conditional fee agreement ("CFA") was entered into which provided that the liquidator would be "personally responsible for any payments that [he] may have to make under this agreement.  Those payments are not limited by reference to the funds available in the liquidation."  It further provided, "As with costs in general, [the liquidator] remains ultimately responsible for paying our success fee".

The misfeasance claim against the former administrators was settled on terms which meant that Stevensdrake's success fee under the CFA became payable.  However, one of the defendants failed to make payment under the settlement agreement and went bankrupt.  As a result there were insufficient funds in the liquidation of the company to pay the Solicitors' fees under the CFA.  The Solicitors' sued Mr Hunt for payment under the CFA and applied for summary judgment.  Mr Hunt argued that he was not personally liable under the CFA, and that references to him being responsible for fees were references to him in his capacity as liquidator only.

The decision

The Court ordered summary judgment against Mr Hunt.  The wording of the CFA was clear that personal liability was envisaged.

Comment

Even though post contractual correspondence indicated that the parties envisaged that liability under the CFA would be limited to funds available in the liquidation, the Court's decision was based on interpretation of the CFA terms themselves.  This highlights the need for IPs to ensure that CFA terms are clear both in relation to who has liability to make payment under the CFA.

Stevensdrake Limited v Stephen Hunt & Ors