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Interpreting “subject to” with business common sense

Interpreting “subject to” with business common sense

Blog Post
04 July 2022
Author
Image of Godwin Tan
Godwin Tan

Associate

London

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BlackLion, a law firm, sued its former client, Amira, for breach of contract in relation to a retainer for a proposed bond issue. The High Court held that the words “subject to the completion of the Matter by 31 May 2017” in the retainer did not create a contingent fee arrangement. BlackLion was entitled to payment even though the bond issue did not complete.  

The retainer provided:

“We have agreed that the Firm will charge the Company a fixed fee of £300,000 ... for the Services plus disbursements ... in connection with this Matter, subject to the completion of the Matter by 31 May 2017.” (emphasis added)

Amira argued that the underlined words created a contingent fee arrangement: if the bond issue did not complete by the end of May, nothing would be payable to BlackLion.  

BlackLion contended that the underlined words only qualified the “fixed” nature of fees incurred until 31 May 2017. If the bond issue completed by that date, BlackLion would receive the fixed fee (and nothing more). If it did not complete on time, BlackLion would still receive the fixed fee, and any services provided after May would be charged separately. 

The court noted that the retainer was ambiguous. [Ed: some might say that it only takes two lawyers arguing the opposite to create an ambiguity].  Following the test in Rainy Sky, it examined the factual matrix to determine which interpretation was more consistent with business common sense.  

The court preferred BlackLion’s interpretation:

  1. There was no expectation that lawyers working on a New York bond issue would be paid on a wholly contingent basis. 
  2. The retainer was signed in early May, when it was already clear to all concerned that the bond issue would be difficult to complete by the end of May.
  3. BlackLion is a small firm; it is unlikely to commit a huge proportion of its human resources to a project that would only pay if it was successful. 
  4. By the end of April 2017, BlackLion had already recorded £385,000 worth of time on the matter. It made no commercial sense for it to agree to far less payment should the bond issue complete on time and no payment at all should the bond issue fail to complete or complete late.
  5. Amira would still be getting a “good deal” as it would only need to pay the fixed fee for services provided until the end of May. 

Judgment: BlackLion Law v Amira Nature

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