Introduction

Glaser & Anor v Atay ([2024] EWCA Civ 1111) is a landmark case adjudicated by the England and Wales Court of Appeal (Civil Division) on October 3, 2024. This case delves into the fairness of contractual terms under the Public Access scheme, specifically scrutinizing whether certain payment clauses in legal contracts with lay clients are deemed unfair under Part 2 of the Consumer Rights Act 2015.

The dispute arose between Mrs. Katharine Atay, the Defendant, and the Claimants, Mr. Michael Glaser KC and Ms. Victoria Miller, acting as leading and junior counsel respectively. Mrs. Atay had engaged their services for financial remedy proceedings against her ex-husband. Central to the case was the legality of a fixed fee in the contracts that required payment irrespective of whether the final hearing proceeded or was adjourned.

Summary of the Judgment

Initially, the County Court at Winchester found the payment term unfair but allowed a quantum meruit basis of 70% for the outstanding fees. Upon appeal, the High Court dismissed the counsel's cross-appeal and sided with Mrs. Atay, stating there was no contractual or quantum meruit basis for further payment.

The matter escalated to the Court of Appeal, where after comprehensive deliberation, the appeal by Mr. Glaser and Ms. Miller was dismissed. The Court upheld that the specific payment term in question was indeed unfair under Part 2 of the Consumer Rights Act 2015. Consequently, the fixed fee clause mandating payment regardless of the hearing's execution was rendered unenforceable, relieving Mrs. Atay of the obligation to fulfil those specific payment terms.

Analysis

Precedents Cited

The judgment extensively referenced pivotal cases and legislative provisions that shape the interpretation of fairness in consumer contracts:

• Director-General of Fair Trading v First National Bank plc [2001] UKHL 52: Addressed the scope of fairness under the 1994 and 1999 Regulations, emphasizing that not all terms on the grey list are inherently unfair.
• Aziz v Caixa d'Estalvis de Catalunya, Tarragona y Manresa (Case C-415/11) [2013] All ER (EC) 770 ("Aziz"): Provided foundational principles on significant imbalance and good faith in determining the fairness of contractual terms.
• Parkingeye Ltd v Beavis [2015] UKSC 67: Explored the application of the "significant imbalance" test and the objective nature of good faith, reinforcing the consumer protection intent of the Directive.
• Chitty on Contracts: Referenced multiple sections for general contractual principles, particularly in the context of frustration and entire obligations.
• Lords Bingham, Steyn, and Millett in First National: Elaborated on the criteria for assessing fairness and good faith in contractual terms.

Legal Reasoning

The Court's legal reasoning hinged on several key points derived from statutory interpretation and established case law:

• Applicability of the Consumer Rights Act 2015: The contracts between counsel and Mrs. Atay were classified as consumer contracts, making them subject to Part 2 of the Act concerning unfair terms.
• Assessment of Fairness: The Payment Term was evaluated against Section 62(4) of the Act, which mandates that a term is unfair if it causes a significant imbalance in the parties' rights and obligations, to the detriment of the consumer and contrary to the requirement of good faith.
• Significant Imbalance: The term disproportionately favored counsel, mandating full payment even when services were not rendered, thereby placing undue financial risk solely on the consumer.
• Good Faith Requirement: The term was found to be contrary to the requirement of good faith as it did not reflect fair and open dealing, nor did it account for the consumer's potential vulnerabilities and lack of bargaining power.
• Impact of Precedents: The Court aligned its findings with established principles from cases like First National and ParkingEye, ensuring consistency in interpreting what constitutes unfair terms.
• Doctrine of Frustration: The Court acknowledged that the contract was effectively frustrated due to the adjournment of the hearing, further negating the enforceability of the fixed Payment Term.

Impact

This judgment sets a significant precedent in the realm of legal service contracts under the Public Access scheme. Key impacts include:

• Reaffirmation of Consumer Protection: Strengthens consumer safeguards against unfair terms in contracts with professionals, ensuring that clients are not unduly burdened by rigid payment structures.
• Guidance for Legal Practitioners: Advises barristers and other legal professionals to draft contracts that balance their financial interests with fairness to clients, avoiding clauses that could be deemed excessively one-sided.
• Influence on Future Contract Drafting: Encourages the inclusion of more flexible and equitable terms in legal contracts, potentially leading to more nuanced payment arrangements that account for various contingencies.
• Judicial Approach to Unfair Terms: Reinforces the courts' thorough approach in evaluating contractual fairness, emphasizing the need for terms to be transparent, reasonable, and balanced.

Complex Concepts Simplified

Conclusion

The ruling in Glaser & Anor v Atay elucidates the judiciary's commitment to upholding consumer protections within contractual agreements, particularly in the legal services sector. By deeming the fixed Payment Term as unfair, the Court emphasized the necessity for contracts to embody fairness, transparency, and balanced obligations. This decision not only shields consumers from potentially exploitative terms but also guides legal practitioners in crafting equitable agreements. Moving forward, this judgment serves as a crucial reference point for both the drafting of contracts and the adjudication of similar disputes, reinforcing the overarching principles of fairness and good faith enshrined in the Consumer Rights Act 2015.

Ultimately, this case underscores the delicate balance between professional interests and consumer rights, steering the legal landscape towards more just and reasonable contractual relationships.