England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		The Royal Courts of Justice Strand London WC2A 2LL
		13 April 2016

1. JUSTICE ELISABETH LAING: This is an appeal from a decision of Master Leonard. Before we go any further in this judgment, we wish to pay tribute to the decision of the learned master. We both regard it as a tour de force. We will refer to the parties as they were below.
2. The dispute is about the terms of the defendant's retainer of the claimant. The master summarised his conclusions on the dispute at the end of his judgment, and we can do no better than to refer to that summary of his conclusions.
3. He said the terms of the retainer between the parties was set out in the claimant's letter of 7 March 2012 and those terms had been agreed on or shortly after 7 March 2012. Those terms governed all the work done on the substance of what the master referred to as "the transaction" since early January 2012.
4. The terms of the retainer incorporated hourly rates of charge for work done, a fixed fee structure, and a right for the claimant to depart from the fixed fee structure should the express assumptions upon which it was based be superseded. In such circumstances, the master said, subject to agreement to the contrary, the retainer provided for the claimant to charge for its work at the hourly rate specified.
5. There had been no waiver, the master held, of the claimant's right to depart from the fixed fee structure, nor was there any basis for saying that the claimant was estopped from doing so. That right, however, was subject to the claimant putting the defendant on notice of its intentions to depart from the fixed fee structure and obtaining authority to undertake work on that or on an agreed alternative basis.
6. The master went on to conclude that the fixed fee assumptions were superseded but that the claimant did not receive the requisite authority until a meeting with Mr Man, the defendant, on 15 June 2012. After that meeting, the defendant did not expressly agree to the new fee arrangement, but the claimant had given the defendant due notice of its intention to render further charges for its work. The defendant authorised the defendant to continue working, and the defendant declined the claimant's offer to agree an alternative to the hourly rate arrangement provided for in the retainer agreement.
7. It followed, the master held, that for the period to 15 June 2012, the claimant was not entitled to claim payment from the defendant for any sum greater than the lower fixed fee of £92,500 plus disbursements, but after that, the claimant was entitled, subject to assessment, to be paid for its work at the agreed hourly rates.
8. The master went on to say that if he had not reached that conclusion, he would have found it unreasonable for the defendant for the period to 15 June 2012 to be required to pay the claimant more than the maximum estimate of fees referred to in the retainer agreement of 7 March 2012.
9. The claimant appeals against paragraphs 1 and 2 of the order which the master made to give effect to the terms of his judgment. Paragraph 1 of the order says the claimant's fees before 15 June 2012 were to be limited to the fixed fees set out in the letter of 7 March, totalling £92,500 plus disbursements, and that such sums had already been paid by the defendant.
10. Paragraph 2 provided that the detailed assessment of the claimant's claim for the balance of any fees due for the period after 15 June 2012 should proceed on the indemnity basis by reference to the hourly rate terms set out in the letter of 7 March 2012. The master gave the claimant permission to appeal.
11. In short, the claimant contends that the master misconstrued the terms of the retainer. The crucial passage which it is contended was misconstrued by the master is the following sentence:

"Should any of these assumptions prove to be incorrect, we reserve the right to revisit our fees."

The background

12. We do not need to say much about the background. We take the background from the claimant's summary of the master's findings in the claimant's helpful skeleton argument, which, in turn, was based on the judgment. We have supplemented that summary to a certain extent.
13. The claimant is a firm of solicitors. The defendant is a company registered in Switzerland which specialises in technologies for the large scale treatment of oil sludge and oil contaminated soils. In December 2011, there were discussions between the parties about the claimant acting for the defendant in relation to fundraising for and the listing of the defendant on what was formally known as the alternative investment market ("the AIM").
14. The claimant drafted an engagement letter on 18 January 2012 and sent it to the defendant on 20 January 2012. It set out specified hourly rates for the claimant's fee earners, and it estimated costs at £75,000 plus VAT for the pre-IPO funding and £150,000 in relation to "the admissions and D listing and transfer". It also enclosed a standard terms of engagement.
15. On 26 January 2012, the claimant wrote to the defendant setting out the claimant's proposed role by listing the tasks it should perform in more detail. On 17 February 2012, the claimant emailed the defendant with an update of the 18 January fee estimate. It was noted that although the claimant had been working with the defendant for a month or so, it still did not exactly know what works would be expected and so the fee estimates were only estimates. The estimates were £35,000 to £65,000 for pre-IPO funding, and £150,000 to £175,000 for IPO funding. A further version of the engagement letter was sent on 7 March 2012, and in paragraph 41 of the judgment, the master referred to a paragraph which reads as follows:

"The primary purpose of this letter is to explain the basis upon which we will carry out your instructions. We are obliged by regulations of the Law Society formally to bring to your attention our terms of business and billing policy. Accordingly, I enclose this Firm's terms of engagement, which should be read in conjunction with this letter. Where the terms of engagement differ from the terms in this letter, the terms of this letter will apply."

16. The letter of 7 March 2012, which is the letter that included the term which is in dispute on this appeal, was a further version of the terms of engagement updated so as to address the terms of the transaction as they were then seen by the claimant to be. Under the heading "Scope of Work", it set out in detail the work that would be done by the claimant in two stages. Under the heading "Charges and Expenses", it said this:

"Our charges will be calculated by reference to the time spent in working on the transaction. Time spent on your affairs will include meetings with you, drafting documents, considering, preparing and working on papers, correspondence and making and receiving phone calls."

17. The hourly rates of the different people who were to work on the transaction were then set out. Under the heading "Fee Proposal", the letter said this:

"As I said, at this stage it is difficult to give you a definitive indication of the professional costs involved in this particular transaction, particularly when we have not yet commenced the detailed work and the structure of the pre-IPO Funding is not known. However, the fee proposal set out below is based on our experience of acting in relation to transactions similar to this, particularly on the multi-jurisdictional matters and our detailed discussions in relation to the appropriate fee basis ... I would estimate that our fees in relation to the IPO Fundraising and Admission would be between £150,000 and £175,000. You have stated that the company would prefer to agree a fixed fee. We have therefore discussed this with you and agree that our engagement should be on the following basis.

The fixed fee to cover Pre-IPO Funding and for the IPO Fundraising and Admission in the sum of £185,000. We have stated that we would agree such fee on the basis that 50 % payable within 7 days of the signing of this letter of engagement and the balance upon the admission of the company to the AIM list. Any out of pocket expenses and VAT would be payable in addition to the fixed fee. However, given the cash flow position of the company, we agree the payment of the initial sum of £92,500 may be deferred until 7 days after the first receipt of any funds raised by the company prior to the IPO by way of debt or equity finance. If the IPO should not proceed to completion, then our fees will be limited to £92,500, plus any out of pocket disbursements and VAT applicable which will be payable forthwith on the decision to stop the IPO process if it has not been paid prior to that date. Our fee proposal is based on the following assumptions:

(a) the transaction proceeds as anticipated without additional complications;

(b) we do not carry out any work other than that which is included in the scope of work set out in paragraph 1 above;

(c) all fees are quoted exclusively of VAT if applicable and disbursements which are payable in addition to the fees quoted;

(d) completion of the pre-IPO funding occurs before 31 March 2012 and admission occurs before 31 May 2012."

18. There then followed the contentious passage:

"Should any of these assumptions prove to be incorrect, we reserve the right to revisit our fees."

19. The letter finished by saying that the terms of engagement together with the letter collectively formed the firm's terms and conditions, and that the defendant's ongoing instructions on the matter would be taken as acceptance of those terms and conditions.
20. On 5 April 2012, the defendant emailed the claimant seeking revisions to the engagement letter of 7 March. The claimant's Mr Sampson emailed back saying that suggested amendments could not be accepted as the claimant had continued to work after the submission of its agreed terms without any objection from the defendant. He said:

"The scope of the work under the IPO has increased since the specifications set out in our terms of engagement. That would normally merit an increase in our charges but I agreed a fixed fee ... and I will honour that arrangement."

21. The master recorded in paragraph 55 of the judgment that the completion of the pre-IPO fundraising and the IPO fundraising and admission did not occur before 31 March and 31 May respectively; in fact the IPO did not complete at all. He recorded the claimant's argument that both dates, along with the assumption that the transaction would proceed as anticipated and without additional complications, were of particular significance because the estimates given and fixed fees agreed were all based on the transaction being completed within the given number of hours work and within that timeframe. If either was incorrect, the master said, more work was likely to be needed, and so it proved.
22. The claimant, the master recorded, according to Mr Lovitt, continued working until September 2012. The master found that when Mr Sampson sent the 5 April email, he did not know the full extent to which the defendant's instructions had changed. Shortly after that, he discussed with another solicitor what was going on and was shocked to learn of the changes and the amount of extra work that had been generated. He decided to raise that question with Mr Man, the defendant, and arranged to meet him for lunch on 10 May.
23. At that meeting, he discussed with Mr Man the fact that the transaction was proving far more complicated than had been anticipated in the 7 March 2012 letter and the fact that the claimant's fees would be substantially higher than the original estimate as a result. The master recorded in paragraph 57 of his judgment that according to Mr Sampson's evidence, Mr Man had accepted that, but Mr Man wished to proceed despite the increase in fees and accepted that he would have to pay the increased costs both of the claimant and another adviser, PwC.
24. Mr Man did however want certainty and asked Mr Sampson to limit the claimant's fees. Mr Sampson said he had reservations about that, given the extent to which the defendant's instructions tended to change and that he would not want to make any agreement to limit the additional fees payable by the defendant "until the April invoice had been paid".
25. The master in paragraph 60 of the judgment said that the correspondence which was exchanged between the parties at the time indicated unequivocally that the defendant was satisfied with the claimant's performance but was deeply and genuinely concerned at the fact that the claimant's costs were accruing on a very substantial scale not anticipated in the claimant's letters of January, February and March 2012. The master recorded that the bill dated 23 April 2012 and described as "an interim invoice on account" was for £92,500 plus disbursements and was first rendered in May 2012.
26. The defendant persuaded the claimant to keep working on the basis of assurances of payment which were not kept because the defendant did not want the process to be undermined by the claimant's stopping work on the transaction.
27. On 30 May 2012, Mr Sampson emailed Mr Man to say that the costs incurred so far were more than £200,000, and on the next day, he emailed Mr Man again to say that the correct total was £300,000. On 5 June 2012, Mr Man replied by email. He said he was astonished at the figures and he proposed a meeting on 15 June 2012.
28. There was a meeting between Mr Man and the claimant's representatives on 15 June 2012. Mr Man accepted that the fee of £92,500 was due and agreed to pay it within 14 days. He was told that the claimant had incurred time costs of over £400,000 and the total time costs of £600,000 were anticipated. The master in paragraph 67 of his judgment said:

"I accept that Mr Man complained about the substantial and unanticipated cost of which the defendant had not been kept informed. It would have been remarkable if he had not."

29. Mr Sampson then proposed a fixed fee of £300,000 but Mr Man left the meeting without taking that up.
30. In paragraph 70 of the judgment, the master said that Mr Lovitt of the claimant had said he had discussed with the defendant on a number of occasions before 15 June 2012 that the work being done by the claimant was outside the scope of work specified in the retainer of 7 March 2012 as a result of substantial changes in the scope of instructions "obvious to all concerned". The master recorded that Mr Lovett said that the defendant's representatives had evaded the subject, but the master went on:

"I have seen nothing to suggest before 10 May 2012 the defendant was put on specific notice that the claimant had decided that the fixed fee arrangement was no longer appropriate, or before 31 May 2012 on the scale which these had been incurred and it would appear even then the figures were understated. I will come to that."

31. On 21 June 2012, Mr Sampson emailed Mr Man referring to his failure to return to the discussion and confirming that the claimant would not work from a fixed fee if Mr Man was not willing to come to terms. On 19 July 2012, the claimant sent details to the defendant showing that the anticipated costs were over £600,000, as the master recorded in paragraph 78 of his judgment.
32. On 13 August 2012, Mr Bachar of the defendant emailed the claimant and said that the defendant's board was due to meet on 15 August 2012 to discuss the engagement letter in order to finalise it:

"However, I wish to inform you that it was agreed ... to resume the IPO process ... this issue will also show further work concerning your outstanding invoice which we are committed to execute as soon as possible."

33. As we have already said, the master found that the IPO did not proceed. The claimant's engagement letter was never signed and the April 2012 bill was not paid either. In March 2013, the claimant, having concluded that its retainer was at an end, sent the defendant a bill for £537,949.74, in addition to the bill of 23 April 2012. Neither bill was paid and so the claimant began recovery proceedings.

The master's decision and reasons

34. As we have already indicated, the master held that by 10 May 2012 the fixed fee assumptions had been superseded. He rejected the defendant's submission that that was the claimant's fault (paragraph 148 of the judgment).
35. The master also decided, as we have already mentioned, that the terms of the retainer were to be found in 7 March letter. He made some findings about its effect in paragraphs to which we will now refer.
36. In paragraph 133, he said that the 7 March retainer was the final agreed and detailed retainer which superseded earlier versions, in particular by incorporating a qualified fixed fee arrangement. It had been agreed against the background of a great deal of work already done by the claimant on the defendant's instructions:

"... for which the claimant had a legitimate claim for payment at its specified hourly rates. It incorporated the same hourly rates and the claimant expressly reserves its position should the assumptions upon which those fixed fees were based be superseded."

37. He went on to say in paragraph 134 that it seemed to him to follow that there was no need for the 7 March 2012 letter to be expressly retrospective. What it achieved was the final agreement of all the terms upon which work already done and work still to be done would be paid for. For those reasons, his view was the terms of the retainer agreed in March 2012 applied to all work done on the substance of the transaction since January 2012.
38. In paragraph 136 of the judgment, the master said that the terms of the retainer provided for a fixed fee and that the fee payable if the IPO did not complete was £92,500 plus disbursements, but qualified that by reference to the fixed fee assumptions. It provided that if those assumptions were superseded, then the claimant was at liberty to depart from the agreed fixed fee structure.
39. In paragraph 137, the master said that of necessity, the terms of the retainer were broadly defined, although the claimant did limit its responsibility to the matters set out under the heading "scope of works". In so far as the claimant subsequently accepted instructions outside that scope, then under the terms of the letter of 7 March 2012, in particular fixed fee assumption (b), the claimant had a right to "revisit our fees".
40. He went on to say in paragraph 138 that on the evidence, the defendant did give instructions outside the original scope of works and it became necessary for the claimant to do such work, in particular because the transaction became much more complex than had originally been anticipated. The claimant, he said, attempted to address that from May 2012 within the broader issue of whether fixed fee assumptions (a), (b) and (d) had been superseded.
41. At paragraph 141, under the heading "If any varied terms or fee structure applies, what were the varied terms and from when and to what did they apply?" the master said:

"Again, the question seems to me not to be whether the varied terms applied but the basis upon which the claimant was entitled to charge the defendant for its work should the fixed fee assumptions be superseded."

42. He then said this in paragraph 142:

"The fixed fee arrangement capped on those assumptions the hourly charges included in the 7 March letter and on the basis of which the claimant had been instructed from an early stage. It follows that in the event of the assumptions being superseded, the claimant's claim for payment (subject to the usual principles governing costs between solicitor and client) would be based on the work undertaken by the claimant at the agreed hourly rates. Evidentially, the agreement left room for discussing the terms of the arrangement on a commercial basis, but the claimant was entitled to fall back on the hourly rates expressly provided for in its contract of retainer."

43. Paragraph 143:

"That is subject to an important proviso. In the 7 March 2012 letter, the claimant committed to working on a fixed fee basis and reserved the right to revisit that if the fixed fee assumptions were superseded. It must follow that the claimant could not claim to be authorised by the defendant to undertake any work to be charged outside the fixed fee structure without first notifying the defendant to the effect that the fixed fee assumptions had now been superseded, but the claimant now proposed to exercise its option to charge additional fees and what those fees would be. If the defendant did not wish to accept that, the defendant could cease instructing the claimant and remain liable only for the appropriate fixed fee."

44. In paragraphs 155 to 163 of the judgment, the master considered whether the defendant was entitled to be notified of any applicable trigger, and if so whether and if so when the defendant was so notified. He referred to his conclusion in paragraph 143 that the claimant was required to notify the defendant. His view expressed in paragraph 155 was that the defendant was not given any notice until the meeting on 12 May 2012. In paragraph 156 of the judgment, he said this:

"I have also concluded that contractually, the claimant was entitled to charge by reference to its stated hourly rates should the fixed fee assumptions be superseded, but that it was incumbent upon the claimant to notify the defendant that it was exercising its option to revisit its fees and to obtain prior authority to undertake work at those hourly rates or whatever alternative basis might have been agreed. Without that, in our view, there was no proper basis for claiming costs against the defendant beyond the fixed fee structure."

45. The master held that Mr Man had agreed in the meeting of 12 May that additional costs would be payable. That was a proper recognition that the assumptions had been superseded, but at that stage Mr Man had no idea of the extra work done or on the basis which the claimant proposed to charge for it (see paragraph 158 of the judgment). Mr Man was prepared to agree a revised fixed fee in principle, but there was at that stage no binding agreement to that effect (see paragraph 158 also).
46. Mr Man on the master's findings did not get a clear indication of current costs until 30th and 31 May. The figures given then were £200,000 and £300,000 respectively, although as the master recorded, the correct figure on 31 May was £380,000 (see paragraph 159 of the judgment). The 15 June meeting was held to agree the basis on which the claimant would charge the defendant. Up to then, the master said, the defendant had only authorised the fixed fee but needed now to agree a new basis for charges (see paragraph 160 of the judgment).
47. What the master said was this:

"The meeting of 15 June 2012 was held in order to reach agreement on the basis for which the claimant would now charge for its work. To that point, in our view, the defendant had authorised nothing new on the fixed fee but it was now incumbent on the defendant to come to an agreement as to how additional costs were to be accounted for. The claimant's position was evident that its hourly rates as specified in the retainer letter could be charged. That was the basis of the reported current cost level of £400,000, albeit understating its fees by about £94,000, and the revised total cost estimate of £600,000 against which Mr Rosenblatt offered a £300,000 cap."

48. In paragraph 161 of the judgment, the master found that Mr Man left the meeting without reaching agreement and did not return. The master said this:

"I can understand he was shocked by the figures put to him. It appears that £300,000 was beyond anything the defendant was willing to agree. It is certainly on the defendant's evidence beyond what the defendant could afford. I have concluded that in all the circumstances, the defendant decided that the only option was to keep working with the claimant and to hope for the best."

49. The master went on to say in paragraph 162 that that left the claimant, which did continue to pursue an agreed alternative with little other option but to rely on its agreed hourly rate which, the master said, it was contractually entitled to do.
50. We should also read a paragraph from the section under the heading "What effect should any estimates of costs provided by the claimant to the defendant have on the assessment of any costs otherwise payable?" In this section of the judgment, the master dealt with the defendant's alternative case. He recorded in paragraph 166 that the defendant's primary case was that he was not obliged to pay the claimant anything but the lower fixed fee already accounted for. The alternative case put forward by the defendant was that the estimates given by the claimant, in particular in March 2012, could be treated as a yardstick against which one could identify the amount that it was reasonable for the defendant to pay.
51. In paragraph 167 of the judgment, the master said that it was clear to him from the evidence of both sides that the defendant did seek from the outset to control its exposure to the claimant's costs, that the claimant not only wanted, but needed, to understand what that exposure was likely to be, and that the defendant properly relied on the claimant to supply that information.
52. In paragraph 168, he referred to his conclusion that the claimant had been justified in departing from the fixed fee arrangements. The same logic, he said, applied to its early estimates which were also clearly superseded. At paragraph 169, he said this:

"However, the defendant was not put on notice of that until 10 May 2012 and not in any precise terms until 30 May 2012. I accept Mr Man's evidence that by the time he was informed his accrued costs was £300,000, it was already too late for the defendant to exercise any cost control. The claimant's failure to keep the defendant informed as to accruing costs put him in an almost impossible position. The contractual rights aside, it cannot be reasonable for a client, particularly a client who had agreed a fixed costs structure, to be required to pay costs amounting to hundreds of thousands of pounds in excess of the estimates where the client has been given no notice of those costs or any chance to control them."

53. In paragraph 170, the master referred to Mr Cawley's evidence that the costs information given to the claimant from 30 May 2012 was "consistently and substantially understated". The master went on to say that he could see that the claimant was at the relevant time paying insufficient attention to accruing costs, hence Mr Sampson's misjudged confirmation on 5 April to the effect that the claimant would stick to the fixed fee arrangement; and he was shocked on learning afterwards the true position.
54. At paragraph 171 of the judgment, the master said that had he not concluded that the claimant was not entitled to recover more than a fixed fee for the period to 15 June 2012, he would have concluded that the amount reasonably payable to the claimant by the defendant for that period should be limited to a maximum estimate of costs set out in the 7 March 2012 letter. In paragraph 172, he said this:

"The fact that the specific costs information given to the defendant from time to time after 30 May 2012 was substantially understated has in my view no bearing on the claimant's right to recover its fees for the works undertaken after 15 June 2012. The defendant, already faced with costs it could not afford to pay, decided to carry on instructing the claimant. It would not have acted differently if the reported figures had been higher."

The arguments

55. The defendant does not challenge the master's decision. The claimant argues that the master misconstrued the proviso in the letter of 7 March 2012. The claimant argues that the master erred in holding (a) that before the claimant could "revisit" the fees, it had to notify what the additional fees would be, and (b) in paragraph 143 in not holding that the right to revisit depended on agreement, but then imposing an implied requirement of agreement, because on 12 June 2012 the defendant had agreed to keep working with the claimant.
56. The claimant also challenges the master's alternative conclusion in paragraph 171 of the judgment that if the master had not found that the claimant was only entitled to charge the fixed fees set out in the 7 March letter up to 15 June 2012, he would have held that the claimant was only entitled to charge fees up to the limit of £175,000 down to 15 June 2012.

Discussion

57. Ground 1: both sides now accept that the first ground of appeal raises a question of law. That question is what the proviso meant. We were referred to the decision of the Supreme Court in Arnold v Britton [2015] UKSC 36; [2015] AC 1619. As appears from the headnote, the question is what did the parties mean when they used the language which they used and as understood by a reasonable reader? Save in a very unusual case, the court derives the meaning of a contract from the language that has been used by the parties. The courts are cautioned by the Supreme Court against departing from the natural meaning of the words used by the parties. We of course accept that if on its natural meaning the proviso is clear, we cannot ignore that clear meaning.
58. We were not referred to Marks and Spencer plc v BNP Paribas [2015] UKSC 72; [2015] 3WLR 72, which is also relevant. In that case, the Supreme Court repeated the familiar law that a term will not be implied into a detailed commercial contract unless that term is necessary to give the contract business efficacy or so obvious as to go without saying.
59. The court is concerned with what notional reasonable people in the position of the parties would agree. It is necessary but not sufficient that the implied term be fair, that all but the court considered that the parties would have accepted the term if it had been suggested to them.
60. We consider that what the master did in this case was first to construe the language of the proviso and then to imply four terms into it. He did not expressly say that that was what he was doing, but that in our judgment is clearly what he did do. We consider that the master was right to imply terms into the proviso. This is because the proviso only tells the reader that if the assumptions are superseded, the claimant reserves the right to revisit the fees or "pull the trigger", as it was put in argument. Revisiting the fees as a matter of construction means that the solicitor can choose no longer to be bound by the fee agreement.
61. The proviso does not say however how the claimant is to revisit the fee; in other words, what procedure the claimant must adopt in order to revisit the fee. Nor does the proviso say what the consequence of revisiting the fee is to be. That is, what fee will replace the fixed fee if the solicitor says that he is no longer bound by it. We reject the suggestion that the effect of the proviso is that the hourly rate is automatically to replace the fixed fee for the work already done and to be done.
62. All that has been agreed is that the hourly rates set out are the hourly rates which will apply if the fee is to be assessed by reference to hourly rates. The agreement does not say that if the trigger is pulled, hourly rates will automatically replace the fixed fee as the basis for assessing the fee due, and it would have been very easy to say that if that had been the parties' intention. Instead, the proviso does not say what the consequence of pulling the trigger is to be for the basis of charging once the claimant has exercised the option no longer to be bound by the agreed fixed fee.
63. So all that the express language of the proviso tells us is that if the trigger is pulled, the solicitor is no longer bound by the fixed fee and the fees are at large.
64. The claimant argues that there is no justification for the information requirement which the master effectively imposed on the claimant as one of the implied terms. We disagree. We consider that there is ample reasoning in support of justification for imposing such a requirement in the reasoning which the master expressed in the section of the judgment beginning at paragraph 165, and in particular the material which we have read from paragraph 169.
65. The claimant's argument it seems to us assumes that once the assumptions have been falsified and the claimant opts to pull the trigger, there is only one alterative, ie reverting to hourly rates as the basis of charging. But in our judgment, there are at least four possibilities which to an extent reflect what the claimant in fact is trying to do. Those are broadly (1) the negotiation of a new hourly rate; (2) the negotiation of a different fixed fee which would be a better reflection of the costs incurred and estimated fee incurred; (3) all work done on the original hourly rate basis assessment; and (4) the defendant walks away.
66. Of those, Mr Innes accepted in his oral submissions that revisiting could result in the negotiation of a different hourly rate. Once it is accepted that there is more than one option as a result of pulling the trigger, it seems clear to us that the term implied by the master meets the test for the implication of a term in a commercial contract.
67. It also makes commercial sense in this context where, absent a fixed fee agreement, a solicitor is under professional obligations to give clients full information about fees on an ongoing basis. The client is not in any position to decide whether to walk away, whether to negotiate a replacement fixed fee, or whether to accept hourly rates, without accurate information about the fees which have actually been incurred so far and without an accurate up-to-date estimate of the fees which fall to be incurred in the future.
68. The claimant also argues that the master wrongly imposed a requirement for the defendant to agree the new fee structure. That is not what the master did. The master instead imposed a requirement not that the defendant agreed the new fee structure, but the defendant have an informed opportunity to agree a new basis of charging or to bail out of the transaction.
69. The defendant did neither of those things, and so once the defendant had been given proper information, it was fixed with the liability to pay fees on the default basis set out in the retainer. But the defendant could only be fixed with that liability once he had been given an informed opportunity either to negotiate something else, or, as we say, to bail out altogether.
70. Once the position was that no new fixed fee had been agreed and once the defendant had decided to continue with the relationship on a fully informed basis, the obligation to pay fees at the hourly rate set out in the retainer letter crystallised. This again in our judgment makes commercial sense in the context of the relationship between a solicitor and his client.
71. The implication of the terms which the master held were to be implied into this retainer is not in any way inconsistent with the express language of the proviso. The proviso does not expressly say that the claimant can charge an hourly rate or over what period such a rate is to be charged if the assumptions are superseded. All it says is that the claimant "reserves the right to revisit our fees". This gives the claimant an option to revisit fees but it does not say that the fees automatically revert to the hourly rate.
72. Since the claimant has an option, it must exercise that option for any new fees basis to apply. It must also follow that the claimant must notify the defendant that it is exercising that option, because otherwise the defendant could continue thinking that the fixed fee arrangement applied in circumstances where the claimant considered that it did not. It would not be right for the claimant to be able to exercise the option in secret and then sue the defendant for hundreds of thousands of pounds when the defendant has no idea that it is incurring any such liability.
73. Mr Innes, we think, accepts that, though he does not accept the outcome of the process of the implication in which the master engaged. But on any view, it is clear that the proviso has a gap because the proviso does not refer to any notification requirement. It is therefore clear that something must be implied into the agreement.
74. It also seems to us to follow that once it is accepted something must be implied into the agreement that (because of the four possibilities to which we have already referred), the defendant must be in an informed position in order to decide what to do next, and the defendant cannot do that until he has accurate fee information.
75. We consider that the master was right to hold that the defendant was not in that position until the 5 June meeting. It is clear from the master's finding that before that date, the fee information was inaccurate and insufficient to enable the defendant to make an informed decision about what to do next.
76. We reject the submission that paragraphs 142 and 143 of the master's judgment are inconsistent. They have to be read together, since the master made it clear in paragraph 143 that that paragraph qualifies paragraph 142. It follows that we also reject the submission that "the fees were successfully revisited" on 10 May or at any time before 15 June. It is telling in our view that Mr Innes in his oral submissions accepted that on 10 May, the parties left over the question whether a different fixed fee might have been agreed. It was only, in our judgment, on 15 June that the defendant was given remotely accurate information about these so as to enable the defendant to decide what to do next.
77. The defendant was also offered a revised fixed fee on that date. The defendant chose to carry on instructing the claimant with full information, and that is why the defendant is liable from that date to pay the hourly rate for all the work done. It follows that we must dismiss ground 1 of the grounds of appeal.
78. Ground 2 does not arise if our conclusion about ground 1 is right, so we say very little about it. In short, we accept Mr Mallalieu's submission that this ground does not really raise the question of law; it is rather a disagreement with an assessment of the master of what was reasonable in the circumstances. As to that, we would defer to the master's view unless that view was plainly wrong.
79. We have already set out the paragraphs in which the master addressed this issue. In short, we accept Mr Mallalieu's suggestion that the master was right for four basic reasons. Firstly, it was clear that the defendant wanted costs control; secondly, the defendant relied on the claimant's estimates; thirdly, the initial estimates were inadequate; and fourthly, the later estimates were inadequate until 15 June, and even then they were still not entirely accurate.
80. We do not consider in those circumstances that it would be right to interfere with the master's conclusion on the alternative argument which the defendant relies on. For those reasons, if it arose, we would have dismissed ground 2 of the grounds of appeal.
81. It follows that we must dismiss the appeal. Before we do so, we would thank both counsel for their very helpful and lucid oral and written submissions.