Are retrospective success fees recoverable?

This was the question dealt with in the case of J N Dairies Ltd v Johal Dairies Ltd & Anor  [2011] EWHC 90211 (Costs), or more specifically “Whether the Claimant should recover success fees charged by its solicitors and counsel in respect of work done before the conditional fee agreements which created the liability to pay such fees were entered into”.

Both the Claimant and the First Defendant were wholesale dairy companies. The Second Defendant was a driver employed by the Claimant until November 2008. The Claimant’s case was that, shortly after his employment had been terminated, the Second Defendant returned to the Claimant’s warehouse in Wolverhampton and took a number of invoices. These gave details of the Claimant’s customers, their orders and the prices that they paid. The Defendants then used that information to seek to solicit the Claimant’s customers.

The Claimant succeeded in its claim and was awarded costs. The Defendant appealed against the decision on grounds of unfair trial and lost.  Shortly before the appeal hearing, the Claimant entered into a Conditional Fee Agreement with his solicitors due to cash flow issues. The CFA was intended to have retrospective effect. A CFA in similar terms was entered into with Counsel.

On assessment, it was deemed that the success fees on work done before the conditional fee agreements were entered into are not allowed, on the ground that they were not reasonably incurred. That applies to work done by both solicitors and counsel.