Wednesday Law Report: Fee-sharing agreement was unenforceable

14 July 1999 Mohammed v Alaga & Co (a firm) Court of Appeal (Lord Bingham of Cornhill, Chief Justice, Lord Justice Otton and Lord Justice Robert Walker) 30 June 1999.

ALTHOUGH A fee-sharing agreement made with a solicitor could not be enforced by the other party, since such agreements were prohibited by rule 7 of the Solicitors' Practice Rules 1990, a claim for restitution for services rendered might succeed.

The Court of Appeal allowed in part the appeal of the plaintiff against a decision to strike out his claim for sums allegedly owed to him by the defendant firm of solicitors.

The plaintiff, a leading member of the Somali community in the United Kingdom, claimed to have entered into an oral agreement with the defendant, by which it was agreed that the plaintiff would introduce to the defendant clients seeking advice and representation on immigration and asylum matters, and would assist the defendant with translation and other preparation and presentation of the clients' cases, and that the defendant would pay to the plaintiff a sum equivalent to half of any fees received by it from the Legal Aid Board in respect of those clients.

The plaintiff claimed that, in breach of the agreement, he had not been paid half of all those sums received by the defendant from the Legal Aid Board in respect of clients introduced by him. He claimed those sums under the terms of the contract; or, alternatively, a reasonable price for the work carried out at the defendant's request.

The defendant, whilst denying that the agreement had been made as claimed, averred that if it had been made, both the making and performance of such an agreement was contrary to rule 7 of the Solicitors' Practice Rules 1990, made under section 31 of the Solicitors Act 1974, which prohibited a solicitor from making an agreement to share his fee, and was therefore unenforceable.

The deputy master ordered the determination of a preliminary issue, namely whether the plaintiff's claim was bound to fail because of the pleaded unlawfulness of the contract, and decided that issue in the plaintiff's favour. The defendant appealed successfully to the judge, who held that the plaintiff's claim in contract was unenforceable as being expressly prohibited by rule 7. He further held that the plaintiff's claim in restitution was barred. Accordingly, the judge struck out the plaintiff's claim, and the plaintiff appealed. He also applied for leave to amend his statement of claim by adding a claim in negligence.

Richard McCombe QC and Gerwyn Samuel (Jansons) for the plaintiff; Sir Godfray le Quesne and Howard Stevens (Alaga & Co) for the defendant.

Lord Bingham CJ said that section 31 of the Solicitors Act 1974 conferred power on the Law Society to make subordinate legislation to regulate the actions of solicitors. In so doing it was acting in the public interest and not in the narrow interest of solicitors.

By rule 3 of the Solicitors Practice Rules 1990, solicitors were permitted to accept referrals or introductions only if they were made for no reward. Rule 7 prohibited the sharing of solicitors' fees or agreements for fee sharing. Although that was a prohibition on solicitors, a contract required the agreement of two or more parties, and the effect of the prohibition was thus that the contract was unenforceable.

It would defeat the public interest if a non-solicitor could enforce against a solicitor a contract which the solicitor was prohibited from making. Accordingly, the judge had been correct in holding that the contract between the plaintiff and the defendant was unenforceable.

In his claim for restitution the plaintiff sought to recover not under the contract but simply as a reasonable reward for professional services rendered. It was of particular importance that the parties in the instant case were not equally blameworthy: the defendant was in disregard of the rules of conduct of his profession, whereas the plaintiff was ignorant of any reason why the agreement should not have been made. Accordingly, the plaintiff's claim for quantum meruit would be restored. Further, leave to amend his statement of claim to include a claim in negligence would be granted.