Agreements for legal fees based solely on success are unlawful under the Legal Profession Act, rendering them void and unenforceable.

JUDGMENT

Akhtar Tahir J:

Introduction

[1] There are a number of interlocutory applications filed in this case and 2 of this interlocutory applications are inter related and therefore will be dealt with under this grounds.

[2] The Plaintiff filed encl 10 to apply for summary judgment for part of the claim to the amount of RM60,000 which is the balance of the retainer sum of the RM100,000 which remained unpaid by the Defendants.

[3] The Defendants by way of encl 32 applied to strike out the Plaintiff's claim under O 18 r 19 of the Rules of 2012 ("the Rules").

The Brief Facts

[4] The Plaintiff are a law firm which were retained by the Defendants to act in a civil matter in Court. The 1st Defendant is a limited liability company whereas the 2nd to 6th Defendants are the directors and shareholders whom the Plaintiff claim are personally liable for the debt of the 1st Defendant.

[5] By a letter of retainer dated 18 February 2020 the Defendants agreed to pay the Plaintiff a retainer of RM100,000 and a professional fees of 20% conditional on the amount successfully claimed.

[6] As agreed a sum of RM40,000 was paid upfront leaving a balance of RM60,000. However, at the very initial stages before the remaining sum of RM60,000 could be paid the Plaintiff discharged themselves.

[7] The Defendants case was subsequently handled by another law firm based on the pleadings which were prepared by the Plaintiff wherein the total claim was for a sum of RM14,020,601.56. The Plaintiff later found out that the claim was withdrawn and the claim was settled out of Court.

[8] The Plaintiff therefore now claims for the balance retainer sum and 20% of the amount of claimed which according to the Plaintiff's calculation which amounts to RM2,804,120.31.

The Issue

[9] After perusing the pleadings and the interlocutory application the Court views the main issue in this case is the validity and performance of the agreement between the Plaintiff and the Defendants which is contained in the letter of retainer dated 18 February 2020

The Validity Of The Agreement

[10] In this case the legal fees agreed upon as stated in the letter of retainer is as follows:

(4) Our professional fees SHALL be 20% of the amount recovered in this matter payable on an immediate basis upon recovery"

(5) The professional Fee mentioned in para 4 above is STIRCTLY on SUCCESS BASIS and SHALL be paid fully to us at any stage of recovery (ie, NOD stage, filing of writ of summons stage, interlocutory application hearing stage, mediation, trial, etc).

[11] The law which governs the payment of legal fees is the Legal Profession Act 1976 . The relevant provision for the purpose of this case is s 112(1)(b) which stipulates as follows:

(1) Except as expressly provided in any written law, or by rules made under this Act, no advocate and solicitor shall:

(a) purchase or agree to purchase either directly or indirectly an interest or any part of the interest which is the subject matter of his client or that of the other party in the same suit, action or other contentious proceeding brought or to be brought or maintained; or

(b)enter into any agreement by which he is retained or employed to prosecute any suit or action or other contentious proceeding which stipulates for or contemplates payment only in the event of success in such suit, action or proceeding.

[12] The above provision clearly makes it unlawful for the lawyer to make an agreement with the client which envisages payment of legal fees only on success of the claim. In this case as the 20% legal fees which is payable on success of the suit therefore is unlawful as it breaches the above provision.

[13] The validity of an unlawful agreement is defined under the Contracts Act 1950 more specifically in ss 24 and 25. Section 24 states as follows:

The consideration or object of an agreement is lawful, unless:

(a) it is forbidden by a law;

(b) it is of such a nature that, if permitted, it would defeat any law;

(c) it is fraudulent;

(d) it involves or implies injury to the