Client challenges to bills of costs

Challenges under the Solicitors Act 1974, by former clients in relation to their bills, have been the subject of a number of recent decisions with informed consent being a key issue.

Detail required in bill

In Devonshires Solicitors LLP v Elbishlawi and another, a High Court judge considered the situation where a solicitor sued for costs and the client then challenged the bills.

An issue arose concerning the requirements of section 69 of the Solicitors Act 1974 that the bill must contain sufficient information to enable the client to know what he is being charged for, failing which it is not a statute bill and cannot be sued upon.

In Ralph Hume Garry v Gwillim, the Court of Appeal held that information already in the possession of the client would be taken into account in assessing whether an invoice is a statute bill.

A bill delivered in accordance with section 69(2A) and (2C) is presumed, until the contrary is shown, to be a genuine bill complying with the Act (section 69(2E)).

As non-compliance had not been pleaded, this point could not now be taken.

However, even if valid statute bills have been issued and no challenge made under the Solicitors Act 1974, a client may still challenge the sums claimed.

A claim by a solicitor for unpaid sums is an unliquidated claim for payment of a reasonable charge and if the reasonableness is challenged, it is for the solicitor to show that the charge is reasonable: see the Court of Appeal in Turner v Palomo, applying In re Park, Cole v Park; Jones and Son v Whitehouse and Thomas Watts and Co. v Smith.

In Turner v Palomo, the Court of Appeal considered there to be a difference on a summary judgment application between a case in which a gross sum bill had been broken down in a way which allows it to be seen not only what work has been done, but also how much time has been spent, and the rates charged, and a case where such detail has not been given.

Where detail is given, there would need to be a specific challenge to particular items to avoid summary judgment. If so, the client could have those items assessed, but not the whole bill.

If no detail is provided, meaning that all that the client can do is to challenge the reasonableness of the total sum claimed, then there should be an assessment of the whole bill, albeit not one pursuant to section 70 of the Solicitors Act 1974.

The court in Devonshires cited, with approval, the note to the White Book 2020: Civil Procedure, at paragraph 24.6.3:

“On a claim by a solicitor against their former client for non-payment of costs, the court may, if there is no real prospect of defending the claim, give summary judgment for a sum to be determined by means of a detailed assessment. … Such an order can be made even if the former client has lost the opportunity to apply for a detailed assessment of the solicitor’s bill under Part III of the Solicitors Act 1974.”

Here, on the facts, the court entered summary judgment for specific sums in relation to two invoices where detail had been provided, and, in relation to four other invoices, entered summary judgment for a sum to be determined on detailed assessment by a costs judge.

A twist in the tale is that the court held that the solicitors’ firm, Devonshires LLP could not claim for fees due to Devonshires Solicitors prior to the incorporation of the limited liability partnership.

That will come as a shock to any firm unwise enough to have become an LLP.

Informed consent

Informed consent has become a buzz phrase following the decisions in Herbert v HH Law, and Belsner v Cam Legal Services Ltd.

There is evidence that the courts are now having second thoughts. In Mr H TV Ltd v Archerfield Partners LLP, the claimant had objected to the solicitors deducting £3.6 million in costs from his £8.6 million settlement from litigation with ITV2, maintaining that he had not given informed consent.

A High Court judge, rejecting permission to appeal, said that there was no chance of the client being able to appeal against the Master’s rejection of his submission.

The costs figure had been clearly mentioned as a component part of the overall settlement figure and the claimant fully understood what was happening.

In Carmen Chevalier-Firescu v Ashfords LLP, a Circuit Judge overturned a decision that a clause in the solicitor-client retainer allowed the solicitor to claim indemnity costs for suing the client for costs, even though the claim was in the small claims track where costs are not normally awarded.

The retainer contained the provision:

“We may charge you an administration fee of £75 plus VAT and our legal costs on an indemnity basis for any overdue invoices which are referred to our Asset Recovery Department.”

The solicitors sued for £6,779.30, but the District Judge, critical of the level of service, reduced this to £3,848.30, although also held that the contractual provision overrode the small claims track position.

On appeal the Circuit Judge held that such an unusual clause should have been brought specifically to the client’s attention and it was not, so the clause was unfair.

Although the judge does not use the term, it is in fact another case determined by the lack of informed consent.

In Masters v Charles Fussell & Co LLP, the issue was whether a number of bills issued by the solicitors were statute bills resulting in the time limit for challenge by the claimant under the Solicitors Act 1974 having passed.

The first retainer was an hourly rate one, with invoices delivered monthly and the court accepted that they contained sufficient information to be assessable.

However, the client would have had to challenge them while the litigation continued and the court here held that the client had not been given sufficient information at the outset about the time limits in the Solicitors Act 1974 and deemed the bills to be “akin to requests for payments on account.”

The second retainer was a discounted conditional fee agreement (CFA), meaning that only the discounted amount was billed monthly, with the balance to be paid if and when the claim succeeded.

Here, the court followed the decision in Sprey v Rawlison Butler LLP that, by definition, a discounted bill was not a final self-contained bill for the work done during the relevant period.

The third retainer was a return to an hourly rate charge, the CFA having been ended by the solicitors. The court held that there was no retainer. The ending of the CFA did not revive the original retainer and there was no right to render interim statute bills.

The seventy-seventh and final invoice would serve as a final statute bill, rendering all of the invoices Chamberlain bills within the meaning of Bartlett Beardslee Chamberlain III v Boodle and King (sued as a firm). And as the Solicitors Act 1974 proceedings were brought within one month of that invoice, they were in time.

Given that finding, the court did not need to deal with the issue of special circumstances, but said that it would have found special circumstances given the lack of estimates, the size of the bills, and the difficulty in clients bringing proceedings on a monthly basis against solicitors in ongoing proceedings.

In Murray and another v Richard Slade and Company Ltd, the Master held that the conditional fee retainer had been terminated by the defendant solicitor without good reason and consequently the solicitor was not entitled to any costs.

The court also held that the solicitor was not entitled to recover counsel’s fees from the client as the solicitor had not confirmed the terms in writing and had not warned the client that counsel’s fees were of an unusual nature and amount. In a key statement, the court quoted with approval from Cook on Costs:

“Where there is a dispute between a solicitor and his client about the terms of an oral retainer, the word of the client is to be preferred to the word of the solicitor, or, at least, more weight is to be given to it.”

Here, the court held that the claimant had not given informed consent to the additional costs of instructing different counsel, and that it was a disbursement of an unusual nature and amount, and CPR 46.9(3) had not been complied with. MacDougall and others v Boote Edgar Esterkin, determined by a High Court Judge, remains good law, albeit ruling on the old Order 62, Rule 15.2, now largely replaced by CPR 46.9(3):

“To rely on the applicant’s approval, the solicitor must satisfy me that it was secured following a full and fair exposition of the factors relevant to it so that the applicants, lay persons as they are, can be reasonably bound by it.”

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