Law Report: Contract to share fees could not be enforced

Law REPORT: 27 march 1998

Mohamed v Alaga & Co; Chancery Division (Mr Justice Lightman) 25 March 1998

AN AGREEMENT whereby a third party introduced clients to a solicitor for the payment of a share of the solicitor's fees was not enforceable.

The court allowed the appeal of the defendant firm of solicitors against a decision under Order 14A of the Rules of the Supreme Court.

The plaintiff assisted Somali refugees with their applications for asylum and for residence. He claimed to have entered into an oral contract with the defendant, the terms of which were that he would introduce Somali refugees to the defendant, who would apply for legal aid and represent the refugees on their asylum applications; that he would help the defendant in preparing and presenting the applications; and that the defendant would pay him commission equivalent to half the fees received by it from the Legal Aid Board.

The plaintiff claimed that pursuant to that contract he had introduced 243 clients to the defendant, and that although the defendant had already paid him pounds 18,887.18, further sums were outstanding, of which he sought payment. The question whether an agreement such as that which the plaintiff claimed to exist between himself and the defendant was legally enforceable was ordered to be decided as a question of law pursuant to RSC Order 14A.

Gerwyn Samuel (Jansons) for the plaintiff; Sir Godfray Le Quesne QC and Paschal Welsh (Alaga & Co) for the defendant.

Mr Justice Lightman said that Order 14A was not apt for determining a question of fact. There were two issues of fact in the present case: whether the agreement alleged by the plaintiff had ever been made, and whether the plaintiff had been aware, when he entered into it, of the prohibition on a solicitor entering into such agreements contained in the Solicitors Practice Rules, made under section 31 of the Solicitors Act 1974. The court had been invited for the purposes of the present proceedings to assume in favour of the plaintiff on both those questions of fact.

Rule 3 of the Solicitors Practice Rules prohibited solicitors from paying for introductions by way of commission or otherwise, and rule 7(1) provided, with exceptions which were not relevant to the present case, that a solicitor should not share or agree to share his or her professional fees with any person. The rules had the effect of subordinate legislation.

The plaintiff's case was that there was nothing illegal or inherently wrong in a solicitor's agreeing to share his fees or to pay an introduction fee for work: the rules were designed to regulate the professional conduct of solicitors, and, in the event of breach, to give rise to disciplinary offences, but not to penalise innocent third parties nor to enable solicitors to retain at the expense of the third parties the benefit of services rendered without paying anything for them.

The court would not, however, enforce a contract which was expressly or impliedly prohibited by statute or subordinate legislation. Rule 7 expressly prohibited a solicitor both from entering into a contract for the sharing of fees and from making any payment in performance of such a contract, and the contact was likewise prohibted by rule 3 as an agreement to reward the plaintiff for the introduction of clients.

It was highly blameworthy for a solicitor to enter into such a contract, and the more so if he failed to warn a party with whom he dealt of the provisions of the rules. If, as the court was bound to assume, the plaintiff had been ignorant of rules 3 and 7, and if that ignorance was prevalent, it was to be hoped that the judgment in the present case would dissipate that ignorance, so that a claim and plea of ignorance such as the plaintiff's would not be made again, and so that any current practice of rewarding introductions, sharing fees and paying commissions would be brought to an immediate and summary end.

Kate O'Hanlon, Barrister