Facts

Solicitors, Stevensdrake, sought payment of costs from insolvency practitioner, Hunt. As liquidator, Hunt took action against two former administrators of an estate, and retained Stevensdrake for assistance. Early in their relationship, the parties agreed that Hunt would not be liable if there were no recoveries, and that the solicitors would be paid when there was a recovery from any source. The parties later entered a conditional fee agreement (CFA) with an express term stipulating that Hunt would be personally liable for unpaid fees.

The claims against the administrators were compromised, but one administrator did not pay. Hunt did not pay Stevensdrake. Stevensdrake claimed personally against Hunt for costs, including counsel’s fees, disbursements, and the firm’s basic fees and CFA uplift. Summary judgment had been entered requiring Hunt to pay counsel’s fees, and Hunt had conceded liability for disbursements. The remaining question was whether Hunt was liable for the firm’s basic and uplift fees.

Held

There was no established ‘practice’ that solicitors agreed to be paid only on the basis of actual recoveries made from estates with limited assets. However, in this case, there was an implied term that payment was contingent on actual recoveries made. The full terms of the CFA were not to be ascertained from the CFA alone, but understood in the context of the earlier agreement. By this agreement and by overwhelming evidence, the court found there to be necessary, implicit terms in the CFA that: (i) the firm’s fees would only be paid out of actual realisations; and (ii) the insolvency practitioner was not personally liable for fees.

If there were no implied term, the court would still have found for Hunt by estoppel by convention; the parties shared an assumption consistent with the implied term. The court added a postscript regarding whether the case offends the indemnity principle. While the indemnity principle was the law, there was public interest in insolvency practitioners being able to retain the lawyers in recovering in nil asset estate cases.