Seladore Legal Limited v PGMBM Law Limited

A conditional fee agreement complies with the statutory requirement to state the percentage increase in fees where it makes clear that uplifted rates represent a stated percentage of standard rates. Reading the agreement as a whole is essential. Rounding the resulting hourly rates does not necessarily create a separate or unstated success fee.

The materiality test applies to alleged breaches of Courts and Legal Services Act 1990, s 58(4)(b). Whether a departure is material is fact-sensitive and depends on its effect on client protection and the proper administration of justice. A clear agreement between commercial parties was literally compliant and, alternatively, any rounding-related departure was immaterial.

The claimant law firm sought summary judgment on the enforceability of two discounted conditional fee agreements made with the defendant law firm. The agreements provided for discounted hourly rates initially and uplifted rates on Success. The uplifted rates were stated to represent 170% of standard rates, subject to rounding.

The defendant contended that the agreements failed to state the percentage increase required by s 58(4)(b) of the Courts and Legal Services Act 1990, and counterclaimed for sums already paid. The separate issue whether Success had occurred remained for trial. The central issues were whether the agreements complied with the statutory requirement and, if not, whether any breach was material.

1. The application for summary judgment succeeded on enforceability. The court applied the summary judgment test stated in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch). The enforceability issue was a short point of statutory construction suitable for determination without resolving disputed evidence about expertise or negotiations.

2. The Retainers were to be construed as a whole. Clause 6.3 stated that the uplifted rates represented 170% of the standard rates. That was functionally equivalent to stating that fees would be increased by 70%. The agreement therefore satisfied s 58(4)(b) of the Courts and Legal Services Act 1990. The statutory requirement did not demand one identical effective percentage for every grade of fee-earner.

3. The words subject to rounding did not make the agreements unenforceable. The tables, read with clause 6.3, made clear how the uplifted rates were calculated and what was payable on Success. The rounding produced only small differences from an exact 70% increase and did not create an impermissible success fee.

4. Alternatively, any failure to state the precise rounded increase for each fee-earner was immaterial. Following Hollins v Russell [2003] 1 WLR 2487, materiality depended on whether the departure had a materially adverse effect on client protection or the proper administration of justice. The agreement gave the defendant sufficient clarity and did not create such an adverse effect.

5. Jones v Caradon Catnic Limited [2005] EWCA Civ 1821 did not establish that every breach of s 58(4) was necessarily material. The enforceability issue was determined in the claimant’s favour. The defendant accepted that the enforceability aspect of its counterclaim fell away, subject to consequential issues concerning fees reasonably charged.