Rosenblatt v Man Oil Group S.A

Where a solicitor’s retainer reserves a right to revisit a fixed fee if stated assumptions cease to apply, that right does not automatically convert the retainer to hourly charging. The solicitor must exercise the option and notify the client. The client must receive accurate information about costs incurred and reasonably anticipated, so that it has an informed opportunity to negotiate a replacement fee arrangement or cease instructing the solicitor. If no replacement arrangement is agreed and the client continues with full information, the contractual default charging basis may apply. Contractual terms are construed according to their language, while necessary procedural machinery may be implied where the agreement contains a gap.

The claimant solicitors appealed against the decision of Master Leonard concerning the defendant company’s liability for fees under a retainer relating to fundraising and a proposed AIM admission. The retainer provided for fixed fees based on stated assumptions, including that the transaction would proceed without additional complications and within specified dates. It also stated that, if an assumption proved incorrect, the claimant reserved the right to revisit its fees.

The master held that the assumptions had been superseded, but that the claimant had to notify the defendant and obtain authority before charging outside the fixed-fee structure. He limited recovery before 15 June 2012 to the fixed fee and allowed hourly-rate charging thereafter. The claimant challenged the construction of the proviso and an alternative limitation based on estimates.

1. Appeal dismissed. The master’s order was upheld.
2. The proviso was construed in accordance with the contractual language. It gave the claimant an option to cease being bound by the fixed-fee arrangement when the assumptions were superseded, but it did not provide that hourly rates would automatically replace the fixed fee. The fees would instead become open to determination on a new basis.
3. Procedural terms were properly implied into the retainer. The claimant had to notify the defendant that it was exercising the option and provide accurate information about fees incurred and the likely future costs. This was necessary because the defendant might negotiate a new hourly rate, agree a different fixed fee, continue on the hourly-rate basis, or cease instructing the claimant.
4. The implied requirement was consistent with commercial efficacy and the solicitor’s professional obligation to provide continuing information about fees. It did not require the defendant to agree a new fee structure. It required that the defendant have an informed opportunity to negotiate or withdraw. Once that opportunity had been provided, and the defendant continued instructing the claimant without agreeing a replacement fixed fee, liability for the contractual hourly rates crystallised.
5. The defendant did not receive sufficiently accurate information before 15 June 2012. The fees had therefore not been effectively revisited before that date. The master was entitled to limit recovery up to 15 June to the fixed fee and to allow hourly-rate charging thereafter.
6. The alternative conclusion that recovery should have been limited by the claimant’s estimates did not arise, but would also have been upheld. The master’s assessment was not plainly wrong, given the defendant’s desire for cost control, its reliance on the estimates, and the inadequacy of the information supplied.

The principles of contractual construction and implication of terms were considered by reference to Arnold v Britton [2015] UKSC 36; [2015] AC 1619 and Marks and Spencer plc v BNP Paribas [2015] UKSC 72; [2015] 3 WLR 72.

• High Court (Queen’s Bench Division): Appeal from the decision of Master Leonard. The appeal was dismissed.