Oakwood Solicitors Ltd v Menzies
Facts of the case :-
On the 29 November 2015 Mr Menzies was involved in a Road Traffic accident as a result of which he sustained serious injuries. He instructed Oakwood Solicitors to pursue a claim for damages and entered into a CFA in December 2015. The agreement provided for payment for the Solicitors’ basic charges and success fee capped at 25% of the Claimant’s damages, net of any costs recovered from the other side (this is not unusual in personal injury claims).
It was further agreed that the balance of the Solicitors’ basic charges and success fee would be paid “out of your compensation” and that, out of compensation monies received, “you agree to let us take the balance of the basic charges; success fee; insurance premium; our remaining disbursements; and VAT. You take the rest”.
Following settlement of the substantive action the Solicitors (Oakwood) retained approximately 25% of the Claimant’s damages (as per the CFA) They provided the Claimant with an “Interim Statute Bill” showing its total costs (including the insurance premium) in the sum of £83,711.20 an “Opponent Bill of Costs” showing the amounts potentially recoverable from the Defendant and a “Claimant Bill” showing the non-recoverable costs amounting to £2,797.20. The covering letter explained that the recoverable costs from the Defendant would be negotiated between the parties.
The between the parties costs were agreed in the sum of £38,000.00, the shortfall was recalculated with the remainder being paid to the Claimant from the monies held on account. On the same date the Solicitor also sent a “Final Statute Bill” that stated the total fees were £73,711.20 (to include basic charges, disbursements, insurance premium and VAT). The bill further stated that “unless otherwise stated in the covering letter, the total charge has been deducted from your damages, as agreed”
The Claimant requested to have a Solicitor Own Client assessment of the fees of Oakwood Solicitors. The Final invoice was dated 11 July 2019 with the application not being made until April 2021 in the Sheffield District Registry, later being transferred to the Senior Court Cost Office by District Judge Batchelor for a preliminary issues hearing on whether the client had a right to assessment.
What is important to note here is where a client wishes to dispute their Solicitors charges (as per S70 of the Solicitors Act 1974) they must do so within 1 month of receipt of the bill in so as to obtain an order for assessment as of right. If this is not done, the client then has 12 months from delivery of the bill to request an assessment, albeit such requests are at the discretion of the Court. After 12 months from the date of delivery or payment of a bill, an order for Solicitor own client assessment under the Solicitors Act can only be made if there are “special circumstances”. The question in this case was what constitutes a payment for timescale purposes?
Lord Hamblen, giving the lead judgment in the Supreme Court, determined that in order for there to be a payment of a Solicitors bill for the purposes of section 70 of the Solicitors Act 1974 the client must have received a statutory bill and must have provided agreement to the amount sought in the bill. An earlier agreement (as per those we regularly see in CFA’s) is not sufficient. There must be an agreement to the sum to be taken by way of payment of the bill of costs. If no agreement, then any payment taken will not be considered as a payment under the Solicitors Act 1974 and the Client may be able to seek an assessment of fees (special circumstances allowing).
This may open doors for a possible challenge to bills which previously may have been considered time barred. If the facts are similar to those in this case, when it was considered that the clock has not started under section 70(4) of the Solicitors Act.
Going forward, it is evident that Solicitors will have to provide (ideally) a statutory bill giving a breakdown of the amounts recovered from the paying party, the disbursements which have been paid for and a covering letter explaining that that the client needs to confirm (ideally by way of a form of authority) their agreement to the bill so that the damages retained can be used to pay the outstanding costs as per the bill presented. The covering letter should also detail the clients’ rights under the Solicitors Act (including time limits for challenge). If a client hasn’t responded to the letter within one month (despite chasing) you the Solicitor will have to commence the assessment process to recover the outstanding costs as per the bill presented. The costs of which should be recoverable from the client if they have failed to engage with you (subject to the provisions of the Solicitors Act which deal with the costs of such assessments, such as the one fifth rule and, again, provision for the Court to consider special circumstances).
It is worth noting that Solicitor own Client assessments are indemnity basis assessments, with presumptions that costs have been reasonably incurred and are reasonable in amount where they were incurred with the express or implied approval of the client, subject to the client having been given adequate costs advice during the course of the underlying proceedings.
It is also advisable firms consider their existing retainers paying particular attention to the terms in relation to retention of damages and billing processes to ensure that they align with the Supreme Court’s decision.
Our TTL+ service provides a bespoke, accurate and current own-client costs exposure calculation that will provide certainty and perspective for your client at all stages, avoiding any end-of-case surprises, and allowing you to keep your client fully informed at any point, and enabling you to conclude your client costs without controversy based on an accurate and understandable costs foundation.
Menzies v Oakwood Solicitors Ltd [2023] EWCA Civ 844 (14 July 2023)
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Victoria Fortune, 25.10.2024