The determination by the parties in the contract on the provision of legal assistance of the procedure for calculating the fee as a percentage of a certain amount of money corresponds to such a form of fee calculation as a fixed amount.
The fact that the calculation of the "success fee" is connected with the occurrence of a certain event is justified and logical in view of the very essence of the success fee, the possibility of calculating which depends exclusively on certain events – the results achieved by the lawyer and stipulated in the contract during the provision of legal services help
This was pointed out by the Commercial Court of Cassation as part of the Supreme Court in the decision of July 28, 2022 in case No. 903/781/21 .
The circumstances of the case
The bar association and the farm concluded an agreement on the provision of legal assistance. According to this contract, among other things, the bar association undertook to represent the client in a legal dispute regarding the collection of debts from the latter.
One of the clauses of the contract provided for the payment of a "success fee" — 20% of the amount by which the court will reduce the client's debt. This part of the fee was to be paid by the client within three working days from the moment the court decision entered into force.
According to the results of the review of the dispute by the appellate court, the decision of which has entered into force, the amount of recovery was reduced and the recovery from the client was refused 5,767,562.24 hryvnias.
The client signed the act of rendered services, but subsequently did not pay UAH 1,153,512.44.
In connection with this, the bar association appealed to the commercial court with a claim against the farm for recovery of the specified amount.
Previous court decisions
The local commercial court, whose decision was upheld by the appellate court, refused to grant the claim.
Courts motivated such a refusal as follows:
- the provided additional attorney's fee is not the price of the contract (payment for services rendered) in the sense of Articles 632, 903 of the Civil Code of Ukraine and Article 30 of the Law of Ukraine "On Advocacy and Advocacy" (Law on Advocacy), but is in its essence a success fee;
- the parties did not determine the size of the "success fee", because they did not clearly define the procedure for its calculation – a fixed amount or an hourly payment, did not establish the procedure for its payment, and the stipulated amount of the fee is not determined in a fixed monetary amount, but is related to the occurrence of a certain event;
- there are no grounds for charging a fee, since the appellate court did not reduce the amount owed, but only refused to collect it from the client.
Conclusions of the Supreme Court
The KGS of the Supreme Court agreed with the conclusion of the courts that the remuneration provided for in the contract is an additional remuneration of the lawyer, payment for the result achieved by the lawyer and is, in its essence, a so-called success fee, the calculation and payment of which depends on the occurrence of a certain event.
However, the Supreme Court did not agree with the position of the courts and made the following conclusions:
- the norms of the Law on Advocacy and the rules of lawyer ethics do not provide for such types of remuneration (fee) as basic, additional or "success fee", which indicates that the concept of "fee" is general, it is understood as both basic and additional rewards;
- "success fee", agreed by the parties in the relevant subsection of the contract under a suspensive condition, is a component of the attorney's fee;
- this is also consistent with the conclusion of the Supreme Court of Justice, set forth in the resolution of May 12, 2020 in case No. 904/4507/18, according to which the relevant amount stipulated by the parties to be paid in a fixed amount under a suspensive condition (“success fee”) is a component attorney's fees;
- The Supreme Court believes that such an essential condition of the contract as the price was determined by the parties in the relevant clause of the contract;
- determination by the parties in the contract on the provision of legal assistance of the procedure for calculating the fee as a percentage of a certain amount of money corresponds to such a form of fee calculation as a fixed amount;
- according to this procedure of calculating the fee, the actual amount of time spent by the lawyer on providing services to the client is irrelevant, and as a result, a clear fixed amount of money is determined.
"The fact that the calculation of the success fee is related to the occurrence of a certain event, which was noted by the courts of previous instances, is justified and logical due to the very essence of the success fee, the possibility of calculating which depends exclusively on certain events – the results achieved by the lawyer and stipulated in the contract in the provision of legal aid services," concluded the KGS of the Supreme Court.
The result of the dispute
The KGS of the Supreme Court canceled the previous decisions in the case and adopted a new decision on the satisfaction of the claim.