The High Court’s decision in Seladore Legal Limited v PGMBM Law Limited [2026] EWHC 1305 (Ch) concerned the enforceability of two discounted conditional fee agreements between law firms, turning on whether the agreements complied with the requirement in section 58(4)(b) of the Courts and Legal Services Act 1990 to state the percentage by which fees would be increased on success.
Background
Seladore Legal Limited (“Seladore”) and PGMBM Law Limited, trading as Pogust Goodhead (“PGMBM”), are both law firms. PGMBM is a claimant firm conducting major group litigation, most notably acting for over 600,000 claimants in proceedings arising from the collapse of the Fundão tailings dam in Brazil on 5 November 2015, as well as in NOx emissions litigation. In May 2023, the two firms entered into two retainers (“the Retainers”), both signed on 10 May 2023, under which Seladore provided legal services to PGMBM.
The Retainers were structured as discounted conditional fee agreements (“CFAs”). Under each Retainer, PGMBM agreed to pay Seladore at hourly rates below Seladore’s standard rates in any event, with the position on success being that PGMBM would pay Seladore’s full standard rates together with an uplift. The first Retainer related to a proposed claim by PGMBM based on an equitable lien, arising from attempts by defendants in the main litigation to settle claims directly with claimants in a manner that would have cut PGMBM out of any settlement and jeopardised its receipt of costs (“the Lien Retainer”). The second Retainer covered general litigation support in relation to the main claim (“the Litigation Support Retainer”).
Between 12 May 2023 and 2 October 2024, Seladore issued PGMBM with 20 interim invoices under the Retainers at the discounted fee rates, totalling £978,411.03 including VAT. PGMBM paid 15 of those 20 invoices in full, amounting to £886,048.23 including VAT. On 1 April 2025, Seladore issued Final Statute Bills in respect of both Retainers, totalling £3,095,874.63. The outstanding balance claimed by Seladore in these proceedings was £2,209,826.40.
PGMBM declined to pay the outstanding balance and raised a defence of unenforceability, contending that the Retainers failed to comply with section 58(4)(b) of the Courts and Legal Services Act 1990 (“the 1990 Act”) on the basis that they did not state the percentage by which fees were to be increased in the event of success. PGMBM also counterclaimed for the recovery of the £886,048.23 already paid. A further issue as to whether the contractual condition of “Success” had been satisfied was also raised, though that issue was accepted by both parties as being a matter for trial.
Seladore issued an application dated 6 August 2025, amended on 21 August 2025, for strike out and/or summary judgment in respect of certain paragraphs of PGMBM’s Amended Defence and Counterclaim, specifically targeting the enforceability issue. The application was heard by Master Pester on 29 January 2026, with judgment handed down on 1 June 2026.
Procedural Context
Although the application was expressed as being for “strike out and/or summary judgment”, Seladore’s counsel indicated that the matter was most conveniently considered under the rubric of summary judgment under CPR Part 24. The court therefore had to consider whether PGMBM had a real as opposed to fanciful prospect of defending the enforceability issue.
Master Pester applied the principles set out in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), emphasising in particular that where an application gives rise to a short point of law or construction, and the court is satisfied that it has before it all the evidence necessary for proper determination and the parties have had adequate opportunity to address it in argument, the court should grasp the nettle and decide it. If the respondent’s case is bad in law, he will have no real prospect of success.
Master Pester declined to place weight on evidence relating to the negotiation of the Retainers or PGMBM’s level of expertise in CFA matters. It would rarely, if ever, be appropriate on a summary judgment application for the court to spend time trying to determine the factual matrix. In any event, it was not necessary to consider the factual matrix, as the terms of the Retainers were clear. The question of compliance with the 1990 Act was a question of statutory construction.
Costs Issues Before the Court
The central issue before the court was whether the Retainers, as drafted, complied with the requirements of section 58(4)(b) of the 1990 Act, and if not, whether any departure from those requirements was material so as to render the Retainers unenforceable. The practical stakes were considerable: if the Retainers were unenforceable, not only would Seladore’s claim for the outstanding balance of approximately £2.2 million fall away, but PGMBM’s counterclaim for the recovery of the approximately £886,000 already paid would also become live.
The key provisions of the Retainers were found at clauses 5 and 6. Clause 5.3 contained a table setting out, for each of ten fee-earner grades, the Standard Fee Rate, the Discounted Fee Rate, and the Uplifted Fee Rate. Clause 6.3 provided that, in the event of success, PGMBM would be liable to pay at the Uplifted Fee Rates, and stated expressly that “The Uplifted Fee Rates represent 170% of the standard fee rates set out above (subject to rounding) and reflect an agreed risk assessment given the possibility that there may be no Success.”
Section 58(4)(b) of the 1990 Act requires that a CFA providing for a success fee “must state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased.” PGMBM’s position was that the Retainers failed to satisfy this requirement for two reasons. First, it was said that the Retainers did not state the requisite percentage at all, because the Uplifted Fee Rates in the table were merely freestanding rates rather than rates derived from a stated percentage increase. Second, and in the alternative, it was argued that even if a percentage could be identified, the words “subject to rounding” meant that the effective uplift differed as between fee-earner grades when calculated to two decimal places, ranging from 70.06% to 70.21%, so that no single stated percentage governed the agreement.
A further question arose as to whether the materiality test established in Hollins v Russell [2003] 1 WLR 2487 applied to alleged breaches of section 58(4)(b) at all, or whether a failure to state the requisite percentage was inherently material and therefore automatically fatal to enforceability.
The Parties’ Positions
Seladore’s position
Seladore submitted that the Retainers complied with section 58(4)(b) of the 1990 Act. It argued that clause 6.3, read together with the table at clause 5.3, made the position entirely clear: the statement that the Uplifted Fee Rates “represent 170% of the standard fee rates” was functionally identical to stating that fees would be increased by 70% in the event of success. To hold otherwise, it was submitted, would be empty formalism.
Seladore further argued that the words “subject to rounding” did not undermine compliance. The rounding arose inevitably from the application of a 70% uplift to hourly rates ending in a figure of five pence, and would have arisen in any event at the billing stage even if those words had been omitted. The effect of rounding was minimal: on the figures in evidence, the total excess charged by reason of rounding amounted to approximately £1,678 on a total bill of approximately £2,076,044.
Seladore also relied on the materiality test in Hollins v Russell, submitting that even if there were a technical departure from the requirements of section 58(4)(b), it was not material. The Retainers spelt out the position with sufficient clarity that PGMBM would have had no doubt as to what it was required to pay in the event of success. There was no adverse effect on the protection afforded to PGMBM as a client, nor on the proper administration of justice.
Seladore additionally placed before the court evidence relating to the negotiation of the Retainers, including email exchanges, and sought to rely on PGMBM’s level of expertise in CFA matters and the fact that PGMBM had obtained a legal opinion from counsel (who was also counsel for PGMBM at the hearing) at an early stage in negotiations. However, the form of agreement on which that counsel was asked to advise was not a CFA at all, but a contentious business agreement, and he did not advise on the issue raised in the application. In any event, Seladore accepted that the factual matrix was not strictly necessary to the analysis, given that the terms of the Retainers were clear on their face.
PGMBM’s position
PGMBM submitted that the Retainers were unenforceable for failure to comply with section 58(4)(b). Its primary case was that the Retainers did not state the percentage increase at all, because the Uplifted Fee Rates in the table were freestanding rates with no governing percentage. Alternatively, PGMBM argued that the percentage was not capable of being ascertained as a single figure, because the amount by which fees were increased varied across fee-earner grades due to rounding.
PGMBM contended that the requirement to state the requisite percentage was a mandatory requirement contained in primary legislation, and therefore the test of materiality did not apply. In any event, and without prejudice to that contention, the breach was said to be material for the following reasons: PGMBM was entitled to be told the figure; the failure had the potential to have an adverse effect on the administration of justice as it may have led to unnecessary disputes; and it had the potential to obfuscate the amount by which Seladore’s fees were to be increased in the event of success and as such was adverse to the protection afforded to PGMBM. (Master Pester noted that PGMBM’s pleading referred to “protection afforded to [the Claimant]”, and observed in parentheses that “presumably what is meant is ‘protection afforded to the Defendant'”.)
PGMBM also relied on Jones v Caradon Catnic Limited [2005] EWCA Civ 1821, in which the Court of Appeal held that a breach of section 58(4) was material where a collective CFA provided for a success fee of 120% (in excess of the prescribed maximum of 100%), notwithstanding that elsewhere in the agreement there was a provision restricting the success fee to 100%. PGMBM submitted that the breach in the present case was similarly material.
The Statutory Framework and Legal Principles
Section 58 of the 1990 Act contains provisions regarding conditional fee agreements. By section 58(1), a CFA which satisfies all the conditions in section 58 “shall not be unenforceable by reason of it only being a conditional fee agreement”. Section 58(2)(a) defines a CFA as “an agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances.” Section 58(2)(b) provides that “a conditional fee agreement provides for a success fee if it provides for the amount of any fees to which it applies to be increased, in specified circumstances, above the amount which would be payable if it were not payable only in specified circumstances.”
Section 58(4) contains provisions which only apply to a CFA which provides for a success fee. By section 58(4)(b), the CFA “must state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased”.
Both parties relied on Hollins v Russell [2003] 1 WLR 2487, where the Court of Appeal heard six joined appeals concerning the enforceability of CFAs or whether the receiving party was obliged to disclose the CFA to the paying party. All of these cases raised (or may have raised) the issue of failure to comply with the applicable conditions in sections 58(3) and (4). After surveying the historical context of the legislation, its declared statutory objectives, the extensions to the CFA regime and the purposes of the regime in section 58 and the new regulations, the Court of Appeal indicated that Parliament could not have intended to render unenforceable a CFA which adequately meets the requirements which were designed to safeguard the administration of justice, protect the client, and acknowledge the legitimate interest of the other party to the litigation.
The Court of Appeal held that the question of “satisfying” something inevitably raises questions of degree. In deciding whether the statutory conditions have been sufficiently complied with, Costs Judges should ask themselves: “Has the particular departure from a regulation pursuant to s. 58(3)(c) of the 1990 Act or a requirement in section 58, either on its own or in conjunction with any other such departure in this case, had a materially adverse effect either upon the protection afforded to the client or upon the proper administration of justice?” If the answer to that question was “yes”, the conditions have not been satisfied. If the answer is “no”, then the departure is immaterial and (assuming that there is no other reason to conclude otherwise) the conditions have been satisfied. Sufficiency or materiality would depend on the facts of each case.
The Court of Appeal explicitly considered the application of the materiality test in the context of section 58(4)(b). One of the cases, Tichband v Hurdman, involved a CFA where the space in which the success fee was to be written in the CFA itself had been left blank. However, the accompanying risk assessment showed that the success fee was to be 45%, including 5% to compensate the solicitors for the postponement of payment to the end of the case. The paying party said that this was a breach of section 58(4)(b) of the 1990 Act. The Court of Appeal saw this as a breach, but held it to be “obviously” not a material one.
Master Pester also referred to Garrett v Halton Borough Council [2007] 1 WLR 554, another decision of the Court of Appeal. The Court of Appeal in Garrett v Halton stressed that the conditions stated in section 58(1) and (3) and the requirements prescribed in the 2000 Regulations were for the protection of solicitors’ clients. The only mitigation of this strict approach is that “the breach must be material in the sense described at para. 107” of Hollins v Russell. Therefore “literal but trivial and immaterial departures from the statutory requirements did not amount to a failure to satisfy the statutory conditions”. Moreover, the importance of Hollins v Russell is that it dealt a fatal blow to challenges that were being made by defendants’ insurers to the enforceability of CFAs on the ground of minor technical breaches of the statutory requirements. The court explained that Parliament did not intend that such breaches should render CFAs unenforceable. The breaches had to be material in the sense that they had a materially adverse effect on the protection afforded to the client or on the proper administration of justice.
In Jones v Caradon Catnic Limited [2005] EWCA Civ 1821, the Court of Appeal considered the position where a collective conditional fee agreement had provided for a success fee of 120% (in excess of the prescribed maximum of 100%). Elsewhere in the agreement, there was a provision that said that the success fee ought to be restricted to 100%. Brooke LJ said that there was a plain breach of the 1990 Act. Construing the CFA as a whole, the court held that there was no question that the client would ever have to pay a success fee of more than 100%. For that reason, “this was not a case in which our attention should be devoted to consumer protection or client protection”. Rather, it was a case in which the issue was “whether the breach was material or not, to the administration of justice”. The Court of Appeal held that the breach of section 58(4) of the 1990 Act was material and therefore the CFA was unenforceable. Brooke LJ said that the breach was material in that it was “on any showing, a more serious breach compared with the trivial breaches” in two of the cases in Hollins v Russell. Laws LJ said he could not characterise the breach as a “marginal” failure to respect the statute. To disregard the 100% limit was inimical to the administration of justice “even if in the result it could be shown that no one would be the loser”.
Master Pester held that he did not read anything in Jones v Caradon Catnic as establishing the proposition that any breach of section 58(4), regardless of seriousness, was inevitably material. That would be inconsistent with the reasoning in Hollins v Russell.
The Court’s Analysis
Master Pester began by noting that, viewed purely as a matter of contractual construction, the terms of the Retainers were clear. PGMBM’s witness did not say that he or his firm did not understand or were confused as to what they were being charged. The Retainers needed to be considered as a whole, without reading individual clauses in isolation.
Literal compliance with section 58(4)(b)
Master Pester held that the requirement in section 58(4)(b) was satisfied. When the Retainers stated that the Uplifted Fee Rates “represent 170% of the standard fee rates set out above”, this was functionally identical to stating that the fees would be increased by 70% of the normal fees. To hold otherwise would be empty formalism. There was a need to read the relevant provisions as a whole: clause 6.3 had to be read together with the figures in the table at clause 5.3. The provision that the Uplifted Fee Rates “represent 170% of the standard fee rates (subject to rounding)” made it clear to the client how the Uplifted Fee Rates had been calculated, and how much more than normal fees the client had to pay in the event of success.
As to the words “subject to rounding”, Master Pester held that these did not render the Retainers unenforceable. PGMBM’s own evidence showed that it was able to identify precisely the increase in terms of pounds and pence. The effect of a 70% increase would always be to round up, as opposed to rounding down, because a 70% uplift would inevitably generate a figure with fifty pence when applied to a figure ending in a “5” (which was the case for all the grades, apart from the Of Counsel rate). There was inevitably going to be a degree of rounding involved once one came to the billing phase. If the words “subject to rounding” had been omitted, a 70% increase on the Standard Fee Rates would still lead to an element of rounding when one came to assessment.
Master Pester rejected PGMBM’s submission that the uplift was not fixed by reference to a percentage but by figures in a table. That was not right as a matter of contractual construction because the figures in the table needed to be read as subject to what was said in clause 6.4. (It appears that this is a typographical error in the judgment: clause 6.3 is the operative provision on uplifted rates; clause 6.4 defines “Success”.) Master Pester saw no requirement under the 1990 Act for there to be a single identical rate for each grade of fee earner in any given retainer. His conclusion was that there had been literal compliance with the requirement of section 58(4)(b) of the 1990 Act.
Materiality
Master Pester went on to hold that, even if his conclusion on literal compliance was wrong, there was no material breach of the legislation. One needed to be clear exactly what the departure from the requirements of the 1990 Act was. The Retainers did state the percentage increase. On PGMBM’s case, the departure was the failure in the Retainers to state in relation to each individual fee earner precisely what the increase was taking into effect the rounding element. PGMBM complained that it was being charged “impermissible elements”, namely, 50p per hour for each and every hour. Using the totals at the end of Mr Bushell’s spreadsheet, with a total of £2,076,044 being charged, Seladore had charged £1,678 more than it would have charged had the percentage increase been exactly 70.00% in relation to every fee earner (without rounding). On the figures, the excess, even if not de minimis, was not material.
Master Pester rejected PGMBM’s primary case that the test of materiality did not apply to alleged breaches of section 58(4)(b). Hollins v Russell called for such a result. The test of materiality could apply. It was always going to be a factual matter and as such a question of degree. For example, if the CFA itself failed to state the increase, but it was clear from the surrounding extraneous material (a letter, a risk assessment), then although there was a breach of the legislation it might not (depending of course on all the circumstances) be material. That seemed plainly consistent with the Court of Appeal’s approach in Tichband v Hurdman, one of the cases in Hollins v Russell.
Master Pester distinguished Jones v Caradon Catnic. He did not read anything in that case as establishing the proposition that any breach of section 58(4), regardless of seriousness, was inevitably material. That would be inconsistent with the reasoning in Hollins v Russell.
Master Pester rejected PGMBM’s submissions that the breach was material. PGMBM had said that the failure could have led to an easily avoidable dispute about the indemnity principle, which would have a materially adverse effect on the proper administration of justice, and that one could not tell what was the base rate and what was the uplift. This was not right. The table indicated what the position was. In any event, the mere ability to raise bad or weak points did not endanger the administration of justice. PGMBM also said that Seladore’s true fees had been “obscured”. Again, this was not a good point. One arrived at the Uplifted Fee Rates by multiplying the base fee by 70%, together with the express reference to rounding. The inclusion of the table provided additional clarity. PGMBM submitted that there was a potential dispute about whether the fees that were payable upon success were (i) the Standard Fee Rates plus 70% or (ii) the Uplifted Fee Rates. When the Retainers were read as a whole, and not taking clause 6.3 in isolation, there was no basis for such a dispute.
The Retainers spelt out the position with sufficient clarity so that PGMBM would have no doubt what it was required to pay. This was something which the Court of Appeal in Hollins v Russell considered of paramount importance. There were no breaches which had a materially adverse effect on the protection afforded to PGMBM or on the proper administration of justice.
Conclusion
Master Pester concluded that there was literal compliance with the 1990 Act, and therefore no breach. If he was wrong on that, then the breach was not material. The application therefore succeeded. PGMBM’s counsel indicated that it was accepted that if the application succeeded on the enforceability issue, then that aspect of the counterclaim “falls away”, but there were still arguments as to the fees reasonably charged by Seladore more generally.
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