CABOT FINANCIAL (UK) LTD AGAINST CATHERINE WEIR

Factual and Procedural Background

The pursuers are a debt purchase company who claimed to have purchased a debt of £7,277.52 owed by the defender to a banking group. The defender disputed the debt's validity. Initially self-represented, the defender engaged solicitors in January 2018 and accepted a speculative fee agreement including a success fee payable upon success. The pursuers failed to provide necessary documentation and abandoned the action on the morning of a second proof diet. The sheriff awarded expenses to the defender on a party and party basis up to a certain date, and on an agent and client, client paying, basis thereafter. The defender sought reimbursement of a success fee from the pursuers, which the Auditor allowed. The sheriff and the Sheriff Appeal Court considered the nature and limits of recoverable expenses, particularly regarding the success fee, and made determinations on the proper calculation and recoverability of such fees.

Legal Issues Presented

1. Whether a "success fee" payable under an agreement between a party and her solicitor in the event of success can be recovered from the unsuccessful party under an agent and client, client paying, expenses award.
2. The proper construction of the agreement concerning the amount of the success fee payable.

Arguments of the Parties

Defender's Arguments

• A third party paying the expenses on either client paying or third party paying bases must indemnify the client fully, including all charges the client is liable for.
• The sheriff erred in limiting recoverable expenses to only "expenses of process"; the phrase should be given a broader meaning to include all reasonable expenses incurred in conducting the cause, including a success fee if agreed.
• The success fee clause should not be capped as it only applies where damages or settlement are obtained, which did not occur in this case; therefore, the Auditor's allowance of the full success fee was correct.

Pursuers' Arguments

• The sheriff and Sheriff Appeal Court were correct in rejecting that a client paying basis provides full indemnity to the payee.
• There are two limitations on recoverable expenses: they must be reasonable and must relate to the process of conducting the case, excluding extrajudicial expenses.
• The "process rule" limits recoverable expenses to those incurred in conducting the litigation; success fees are extrajudicial and not recoverable from the opponent.
• The success fee is a statutory creature and a risk bonus, distinct from fees for conducting the cause and subject to a cap of 25% of the sum won.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the distinction between client accounts (payable by the client to the solicitor) and judicial accounts (payable by a third party, usually the opponent). Judicial accounts are limited by the "process rule" to expenses properly incurred in conducting the litigation. The court reiterated that success fees are not expenses of process but extrajudicial costs representing a risk bonus or incentive between solicitor and client. Although an agent and client, client paying basis is more generous than party and party taxation, it remains subject to the process rule and reasonableness constraints.

The court examined the terms of the speculative fee agreement, noting the success fee was capped at 25% of the damages or settlement "won". Since the defender achieved a full defense (absolvitor), that amount was taken as the "win" for calculating the cap. The Auditor's allowance of a 70% uplift on the entire solicitor/client fees was therefore excessive.

The court rejected the defender's argument that a client paying award indemnifies the solicitor fully, holding that the award remains limited to reasonable expenses of process. The court relied on established case law and statutory provisions to confirm that success fees are not recoverable from the unsuccessful party under an agent and client, client paying, award.

Holding and Implications

The appeal was REFUSED.

The court held that a success fee payable under an agreement between a party and her solicitor is an extrajudicial expense and cannot be recovered from the unsuccessful party under an agent and client, client paying, expenses award. The success fee is subject to a cap defined by the terms of the agreement, here limited to 25% of the amount "won" by the client, which in this case was the sum sued for as the defender successfully resisted the claim. This decision clarifies the limits on recoverable expenses in litigation, reinforcing the process rule and ensuring that indemnity awards do not extend to private agreements between solicitor and client. No new legal precedent was established beyond affirming existing principles.