In Part 1, I discussed the rights which clients (usually ex-clients) have under the Solicitors Act 1974 to ask the court to check whether bills they receive from their existing or former solicitors, are fair and reasonable.
20 years ago, in Harrods Ltd v Harrods (Buenos Aires) Ltd, Jacob J had expressed the view that a small footnote on the bill referring to those rights was insufficient: solicitors should do better than that and it was time that that was done. That was particularly the case where the solicitor and client were on the same side in ongoing litigation and the delivery of complete bills put the client in an impossible position, as it meant that a challenge was being made to the charges of the very solicitor who was acting for them against another enemy. That would mean that the client was in a position of conflict with his own solicitor as well as his opponent, an impossible situation indeed.
However, two decades on, another case (Carpmaels & Ransford LLP and Collyer Bristow LLP v Regen Lab SA) has cast a somewhat different light on the Harrods decision.
Facts
The claimant solicitors had obtained judgments against Regen “on a default basis” before Bryan J in respect of unpaid fees in the sums of €201,000 and £320,000 respectively. Upon those firms having been dis-instructed, Regen had gone to a third firm, Black Legal LLP, with instructions to apply to Waksman J to set aside the judgments. That application had two strands:
- To obtain relief from the sanction of allowing judgment in default of defence being entered.
- For Regen to show merit, in the sense of advancing a defence that had real prospects of being successful.
Decision
Regen failed on both grounds. Applying the test in Denton v TH White, there had been no good reason for the failure to serve a defence, the breach of the CPR had been serious and significant, and when taking into account all the circumstances, which included a history of disobedience as regards compliance with court orders, it followed that there was no justification for granting relief.
As to merits, Regen omitted to serve any supporting evidence, save a witness statement from its new solicitor which was insufficient to persuade the court that there was a real prospect of success in defending the claims for fees. No arguable defence, so no setting aside on that ground.
That left the Solicitors Act 1974.
Could Regen mount some sort of defence in the nature of obtaining a detailed assessment of the bills they had received, so that at least they could be satisfied that what was being charged was fair and reasonable? Even where judgment has been obtained on bills, the court retains a discretion under section 70(3) to entertain an application for a section 70 assessment. It was Regen’s submission that that discretion should be exercised in its favour on the facts of the case.
The basis of Regen’s submission was that the two firms had not been entitled to bring proceedings on the bills in the first place. That was because the bills had not been interim “statute” bills, final for the periods to which they related and that, accordingly, no proceedings could be brought in respect of them due a failure to comply with section 69 of the 1974 Act (see Part 1). They were merely requests for payments on account and since no final bill had ever been served, there had been an effective bar to the proceedings under that section. In any event, the bills had contained insufficient information to enable Regen to take advice as to whether they should be assessed, as they had simply referred to a “schedule of charges” (that failed because the schedules had accompanied the bills). Finally, at least in so far as Carpmaels were concerned, no information had been given to Regen about its rights to have a section 70 assessment. That was a further reason for the court to exercise its discretion in favour of an assessment.
None of these submissions impressed Waksman J. The point about there having been no final bill did not trouble him as it had Paul Walker J in Vlamaki v Sookis & Sookias (see Part 1):
“…it is quite plain to me that the series of bills came to an end when the retainer was terminated for both claimants by the defendant and, at that point, they collectively amounted to a final bill. At that point, any argument about whether there was a contractual entitlement to render interim bills disappears. Even if it was on the basis of an entire contract, that contract had then come to an end.”
(paragraph 21, judgment.)
It followed that, in contrast to Paul Walker J’s decision, the last bill delivered by Carpmaels was the final bill, even though it had been delivered on an interim “on account” basis.
As to Collyer Bristow, the judge reached the same conclusion. A letter had been sent stating that if Regen’s account was not brought up to date, the firm would stop acting. In Waksman J’s view:
“…although there was not a final bill which encompassed all the earlier bills, there was a similar request then to pay. So it does not matter whether the interim bills were interim statute bills or not.”
What of the entitlement to an assessment in the context of what Regen had been told or should have been told about its rights under the Act? The company’s case was that bills had not been sufficiently informative so that Regen could appreciate that there was such an entitlement (this was the Jacob J point in Harrods).
That too fell on stony ground. At paragraph 24, Waksman J stated:
“The notion that this defendant did not know that there was an ability to seek an assessment is wholly unrealistic not least because having parted company from the first claimant, it then had the second claimant……..The defendant could easily have consulted the second claimant about an assessment or what its rights were, if it wished, and it chose not to do so. [Carpmaels’] retainer letter did not expressly refer to the Solicitors Act 1974 but it did refer to its own complaints procedure and [the solicitor] has set out in his witness statement that almost inevitably, or inevitably, that would engage the right to have the bill assessed. That evidence has not been challenged or gainsaid.”
So far as Collyer Bristow’s retainer letter was concerned, this had referred to the right to an assessment, but merely that the client “may be entitled to an assessment, without giving any more detail”. That did not concern Waksman J either. Such information was not misleading. If an assessment were to be sought at an early stage it would be successful and if Regan had been in any doubt about it:
“…by the time [Regen] got on to its third set of solicitors, it could have considered what steps to take.”
(paragraph 25, judgment.)
That left, as the last string to Regen’s bow, the deployment of section 70(3) that where judgment has been entered on the bills, the court can order an assessment where there are “special circumstances”.
Nothing of the kind existed here, such that there was something obviously wrong with the bills in that they had been excessive or unreasonable, the court held. It followed that as there was nothing in the arguments about special circumstances, no assessment was ordered and the default judgments stood in the sums claimed in the bills, with the application under the Act sinking without trace.
Comment
What can practitioners take out of this tangled web where, happily for the two firms of former solicitors to Regen, Waksman J took against their one-time client in a big way?
First, Carpmaels can consider themselves fortunate that the court was unconcerned about the absence of any advice to the client in its retainer about the entitlement to an assessment under the Act. So can Collyer Bristow where the information had been that the client “may” be so entitled, without further elaboration. It seems that on the facts here it was a case that “If you wanted to know, you could and should have asked” which was enough to get the solicitors home. That said, notwithstanding Waksman J’s view, firms who do not tell clients their rights may not be so lucky. It cannot be wrong to include thorough information about rights under the Act in the retainer: indeed, it is foolhardy not to do so, not least due to Jacob J’s remarks in Harrods that that should be done.
Second, the retainer must make clear in contentious business the type of bills which the client is to receive. The solicitor has a choice. The firm can render interim bills on account of a final bill on completion of the job, upon delivery of which, the right to a section 70 assessment arises, and not before: or, interim statute bills can be rendered, final for the period to which they relate, so the section 70 entitlement begins when each is delivered and not when the job is done.
Here again, both firms can consider themselves fortunate in the way that Dr Vlamaki may consider herself unlucky, since it appears that having opted for the latter, no final bill was ever delivered to Regen. However, in contrast to the finding of Paul Walker J, that did not matter since in Waksman J’s view, delivery of the last bill in time coupled with the series of bills that had come before, constituted a complete and final bill, so the proceedings were not a nullity as had been the case in Vlamaki.
Finally, if ever it were needed, Carpmaels v Regen is another reminder that proceedings under the Act operate as a caution to rattlesnakes. “Knowing your rights” cuts both ways and it is as important for the solicitor as it is for the client to know their way round it, lest otherwise they may be left wanting so far as recovery of their costs is concerned in hard fought litigation. Here, at least, there was a successful outcome for both firms.
And a final obiter to the blog. If solicitors did not extend credit to a client to the tune of hundreds of thousands of pounds in the first place, would problems like this ever arise? Surely not.
