In Karis Developments Ltd v EMW Law LLP  EWHC B14 (Costs) (13 January 2020), Master Brown was required to determine various preliminary issues arising from two claims for detailed assessment on several bills delivered by the Defendant, a firm of solicitors, to the Claimant. The Claimant was a company involved in property development and from about April 2016 they instructed the Defendant in respect of a number of matters including a claim against Lewes District Council (‘LDC’) arising out of agreements concerning the development of land, and a related claim in professional negligence against their former solicitors Howard Kennedy (‘HK’). After termination of the retainer with the Defendant, the Claimant instructed another firm of solicitors to pursue the claims against LDC and HK. The claim against LDC, which had been issued in the Chancery Division was discontinued pursuant to a settlement agreement dated 11 March 2019 on the basis of no order as to costs. There remained a real prospect of a claim being pursued against HK therefore the Hearing was conducted in private and elements of the Judgment provided to the public were removed.
There were 6 bills subject to detailed assessment totalling approximately £260,000 inclusive of VAT and there were four key issues.
Issue 1 – what did the fee of £50,000 cover?
The parties entered into a CFA in February 2017 to fund the pursuit of claims against LDC and HK and the Claimant contended that the sum of £50,000 was paid to the Defendant as a condition for entry into the CFA. The first issue therefore being what did the £50,000 cover? The Claimant was of the view that the payment ‘cleared the decks’ in respect of work done thus far whereas the Defendant’s position was that it strictly only covered work done in pursuing LDC up to 26 November 2016 (the costs thereafter being subject to the CFA).
There was an abundance of evidence as well as detailed submissions and Master Brown was satisfied that the agreement reached between the parties in respect of the £50,000 was that it covered all outstanding fees on the Defendant’s books across a number of matters – in effect, to ‘clear the decks’.
Issue 2 – the RBS bill – conflict of interest?
The second issue arising was as to whether any sums could properly be charged by the Defendant in respect of investigating a potential claim against Royal Bank of Scotland Plc (‘RBS’) on behalf of the Claimant. The Claimant alleged there was a conflict of interest which ought to have prevented the Defendant in acting and by reason of fiduciary duties arising, or terms to be implied in the contract between parties, the costs should be assessed at nil.
Master Brown decided that the Solicitor for the Defendant had mispresented the position of the firm at the outset in respect of the conflict and as such the Bill was assessed at nil.
Issue 3 – the £50,000 bill – whether it is a valid statute bill and other there are special circumstances justifying an assessment
In the (further) alternative to the first issue, the third issue which developed was whether the £50,000 bill was a sum agreed by way of compromise in respect of outstanding fees or whether it was an invoice seeking payment for all the WIP (work in progress) on the LDC case up to 25 November 2016. If the latter, there was an issue as to whether it was a valid statute bill; and if so, whether there were special circumstances justifying an assessment of this bill (pursuant to section 70 of the Solicitors Act 1974).
Master Brown had found, at issue 1, that the £50,000 payment covered all outstanding fees therefore this issue fell by the way side however it was noted that the payment of £50,000 was the product of an agreement or compromise which implicitly waived any right to an assessment under section 70 of the Solicitors Act 1974.
Issue 4 – ‘unlawful termination’
The fourth issue was whether the CFA was “wrongfully terminated”. The Defendant contended that pursuant to the terms of the CFA it was entitled to payment of its fees as the CFA was terminated by them under provisions of the contract which required the Claimant to pay their fees.
Again, the evidence and submissions advanced by the parties were substantial in this respect. The focus was primarily on the advice provided to the Claimant by the Defendant in relation to the tactical approach to the litigation and whether the Claimant rejected that advice. Master Brown deemed that the Defendant’s advice was unreasonable and as such their termination of the CFA, on the grounds that the Claimant had unreasonably rejected their advice, was unlawful. Therefore, the LDC bill, totalling approximately £169,000 inclusive of VAT, was assessed at nil.
This case is another stark reminder of the importance of retainer and funding documentation in the recovery of costs. The advice given to a lay client when entering into any type of funding arrangement needs to be clear and concise, and the terms and clauses of that agreement need to be interpreted and applied correctly.