A time for work and an hour for payment

Lawyers usually go to court on behalf of their clients to recover legal costs from the losing party. In our case, we had to become plaintiffs in order to recover a success fee from a client who refused to pay it and, on top of that, did not pay the full amount for legal representation. 

The client extended a loan to the debtor in the amount of 500,000 rubles. After the loan term expired, the debtor refused to repay the debt. The client went to court, collected the debt listed on the loan receipt, and presented the writ of execution for execution. Unfortunately, during the enforcement proceedings, the bailiffs did not find any property on the debtor. However, the debtor's property was found in joint ownership. It was registered to the spouse. It was a half of a residential building in the Ramonsky District of the Voronezh Region. 

G. turned to sole proprietor Valezhnikov S.V. for assistance in recovering the debt. In 2019, sole proprietor Valezhnikov S.V. and G. signed an agreement to provide legal services. The terms of the legal services agreement required sole proprietor Valezhnikov S.V. to foreclose on the debtor's share of the spouses' common property. In addition to paying for court representation services, the parties agreed to a success fee of 4% of the money received by the customer from the debtor. We successfully persuaded the debtor to pay the debt in favor of the customer. We discussed this in greater detail in one of our cases. 

However, as it turns out, customers can be ungrateful. The client paid half the success fee and stated, “That's enough for you.” We filed a lawsuit to recover the debt for legal services rendered (court appearances and additional payment of the agreed-upon success fee). The claims of sole proprietor Valezhnikov S.V. were partially satisfied by the Levoberezhny District Court of the city of Voronezh's decision dated July 24, 2023, which recovered the amount of legal services rendered from G. The success fee was denied. 

The Levoberezhny District Court's decision was upheld by an appellate ruling issued by the Voronezh Regional Court on November 9, 2023. 

The courts of two instances determined that the condition requiring payment of a success fee under the contract for the provision of legal services violated the consumer's rights and thus declared it invalid (although the defendant did not state this). 

Furthermore, the courts determined that the contract for the provision of services was executed in 2019, prior to the amendments to the Federal Law “On Advocacy and Advocacy Activity” (in 2020), and thus the terms of the success fee do not apply to the aforementioned legal relations. 

The previously issued court decisions were overturned by a panel of judges for civil cases of the First Cassation Court of General Jurisdiction on April 24, 2024, and the case was referred to the appellate court for review. At the same time, the cassation court stated that, based on the legal position of the Constitutional Court of the Russian Federation No. 1-P dated 23.01.2007, the success fee cannot be collected from the procedural opponent. However, the law does not prohibit establishing a success fee in terms of the customer-contractor agreement. When reconsidering the case, the appellate court noted that, under Article 421 of the Russian Federation's Civil Code, the parties are free to determine the terms of the contract at their discretion. 

In the case at hand, the contractor's final remuneration is specified in the contract as payment for services for interaction with bailiffs: enforcement officers for debt collection in favor of the customer of legal services. 

The court considered the Supreme Court of the Russian Federation's explanation in paragraph 5 of the Review of Judicial Practice No. 2 (2015), approved by the Presidium on 26.06.2015, that additional remuneration for the services of a representative in court, conditioned on the achievement of a positive procedural result for the customer, cannot be recovered as legal costs from the other party to the case. However, the final remuneration can be recovered from the customer who agreed to this contract condition and benefited from the contractor's actions as defined in the contract for the provision of services. The defendant did not challenge the condition of final remuneration during the court proceeding, and the contract clause was not declared invalid. As a result, the final remuneration is contingent on complete satisfaction, as well as the collection of debt for participation in court proceedings to represent the customer's interests. 

Thus, the claims were completely satisfied.