“I know my rights” is an oft-used expression when someone is being pushed around, whether that be in a public place, or at home, when a perceived victim is espousing such a view during a television drama. When it comes to rights under the Solicitors Act 1974 (the Act), however, do clients have any idea what rights, if any, they have against the firms of solicitors they instruct when it comes to the hefty fees they are often charged for conducting litigation?
The answer to that is likely to be “only if you tell them”, since the Act is such an arcane and outdated piece of legislation that the man on the Clapham Omnibus (see judgment of Greer LJ in Hall v Brooklands Auto Racing Club) or indeed his opposite gender counterpart and, most likely, any director of the company which retained the firm, will have little or no idea unless they have encountered the Act in a previous incarnation.
Since the Act has 90 sections, plainly a solicitor cannot reasonably be expected to explain all of them, and in terms of what clients should be made aware of in the context of what they ought to be told, section 70 is likely to be the most useful. This is the section which deals with the jurisdiction authorising the court to check, by detailed assessment, whether a bill which has been delivered to a client is fair and reasonable, provided that an application for that purpose is made by the client within one month of its delivery (section 70(1)). Outside that period, the automatic entitlement is lost, but the client can still obtain an order for assessment where the application is made within 12 months, on terms, such as that any balance owing is brought into court (section 70(2)). After a year has elapsed, or if the solicitor has obtained judgment for the amount covered by the bill, the client must show “special circumstances” (section 70(3)), and the right to a detailed assessment is lost altogether if the application is made by the client after 12 months have elapsed from the date the bill was paid in full (section 70(4)). On the other side of the coin, the solicitor can apply without time limit (section 70(2)), although such applications are relatively rare.
The words “the occasion is piled high with difficulty” are attributed to Abraham Lincoln when referring to the difficulties faced by both sides during the American Civil War. In disputes between solicitors and their clients (who by then are usually former clients), an assessment under that Act is also something akin to a civil war, since at an earlier point in time, both solicitor and client have been on the same side. There will then have been a falling out over fees with the unfortunate consequence that having often been working together for years, they now find themselves in a bitter dispute about the costs, with the clients believing that they have been overcharged and the solicitors feeling that their fees have been hard earned on their part.
Whilst the aforementioned section 70 tightropes are for the client safely to traverse, firms of solicitors also need to keep their eyes peeled if they are to avoid their own perils under the Act.
Before there can be an assessment, there must be a final bill for the job which complies with section 69 of the Act, meaning that it must be signed by the firm and delivered to the client. If there have been earlier bills which have formed part of a series, as opposed to being final for the period to which they relate, the solicitors cannot sue for their costs if they are still unpaid and the client’s rights to an assessment do not crystallise until a final bill is delivered (see Vlamaki v Sookis & Sookias, where the client argued that there should be an assessment of all the bills, but the solicitor said that it was all too late, only for the judge to decide that there had been no final bill, only requests for payments on account (despite the solicitor having said he would not be charging any more), so the proceedings were a nullity and were struck out. Back to square one for both sides.
Consider, too, what happens if the client has been instructing the firm by email or WhatsApp, but has not agreed to delivery of the bill by means of “an electronic communications network” (see section 69(2C)). In these circumstances, effective service does not take place if the solicitor simply pings the bill off by email by means of a digital tap on the keyboard. That will mean that the client’s time for challenging the bill will not yet have arisen, still less can the solicitor sue if payment is not made and any action will be struck out for want of compliance with section 69, as was the case in Vlamaki.
Then there is section 64. Suppose that the solicitor sues on a bill which has been served in a “gross sum” (meaning that it is not one containing “detailed items”, this being another example of the arcane wording in the Act), having delayed a year before doing so, confident that “special circumstances” will need to be shown if the client now wants an assessment under section 70(3). An alert successor solicitor will know that in contentious business, the court must order an assessment provided the (ex) client makes a request for that purpose within one month of service of the proceedings (section 64(3)), regardless of how much time has elapsed since the bill was delivered to the client. By that route, the client will be able to obtain a stay on the proceedings until the outcome of the assessment is known. All this goes to show that finding the way through this statutory labyrinth can prove to be treacherous for both client and solicitor alike.
Against this background, what should clients be told at the start of the retainer by the firms they are proposing to instruct, about their rights under the Act and, in particular, what can be done if there is a dispute about fees?
The Solicitors Regulation Authority (SRA) Code of Conduct describes the standards of professionalism which the SRA expects of solicitors, but the code is just that; a code, which does not have the force of law. Rather, it is a very extensive list of “do’s and don’ts”, which solicitors ignore at their peril as to the risk of possible disciplinary action against them. In these circumstances, the next port of call is case law and the starting point is Jacob J’s decision in Harrods Ltd v Harrods (Buenos Aires) Ltd .
The facts bear out the reference to “civil war” above. Harrods (Buenos Aires) had successfully defended a claim by Harrods (Knightsbridge) both at first instance and before the Court of Appeal. At the detailed assessment, the costs as-between-the-parties had been assessed at £805,000, but Harrods (Buenos Aires)’s solicitor’s charges were £1.3 million, leaving a shortfall of £0.5 million. In Jacob J’s view:
“In the result, if [the solicitor’s] bill was fully justified, it will have cost these defendants £500,000 to win. Nobody but a lawyer could call that a creditable situation.”
Of the costs recovered from Harrods (Knightsbridge), £380,000 had been held by the solicitors who claimed a charge under section 73 of the Act over the money for their outstanding fees. Harrods (Buenos Aires) agreed to the charge, subject to there being an assessment under the Act. This was opposed by the solicitors on the basis that the paid bills, and those where more than 12 months had elapsed before they had been challenged, should be excluded.
Jacob J disagreed. In his view, the Act:
“… fails to take into account the modern practice of solicitors of sending bills on a regular basis which are complete bills, not interim bills. That causes difficulty when you have litigation which is ongoing. The client is called upon by these provisions to challenge an interim bill within one month, if he wants to do it as of right; and if he does not challenge it within 12 months then he has to show “special circumstances” to challenge his solicitors’ bill. That puts him in an impossible position. Either he challenges his solicitors’ bill — the very solicitor who is now acting for him — and continues using that solicitor at the same time; or he has to change solicitor, all in the middle of litigation when he is facing another enemy. It may well be that the court would regard ongoing litigation as, itself, “special circumstances”.”
He then observed that:
“None of the bills which were sent on a monthly basis did more than refer in a small footnote to those provisions. They did not warn the client that if he wanted to challenge the bill there was a time bar. I was told that one seldom does that. Well, it is time it was done”.
That could not have been clearer. The solicitor must tell the client about the right to an assessment. If the client does not challenge an interim bill that is final for the period to which it relates during ongoing litigation, that may be a “special circumstance” to justify a later assessment under section 70(3).
That was 2010, but two decades on, the lack of any information about section 70 rights was not a point which troubled Waksman J in another vexed dispute about fees in Carpmaels & Ransford LLP v Regen LAB SA. Nor indeed was he concerned, as Paul Walker J had been in Vlamaki, that no final bill had ever been rendered, taking the view that upon delivery of the last bill in time, sufficient crystallisation of the bills had occurred on the basis that nothing further needed to be done. It followed that judgments entered against the (ex) client for €201,000 and £320,000, had been validly obtained and that, accordingly, there would be no section 70 assessment.
The second part of this blog will address how the court reached these conclusions, and why it did not matter that the client’s rights had not been fully explained.
