TALES FROM COSTS LAW CONFERENCE II: THE RISE OF SOLICITOR AND OWN CLIENT COSTS DISPUTES

One of the predictions made by several speakers at the Association of Costs Lawyers conference last week was the likelihood of a rise in the number of solicitor and own client disputes in relation to costs.

  1. Clients are now paying part of their damages as costs;
  2. As a result of costs budgeting and the principle of proportionality there will be discrepancies in the sums allowed on assessment and the sums billed to the clients.
  3. The law and practice of “solicitor and own client costs” is not something that features greatly in the law school curriculum.  The law is often misunderstood and misapplied.

SOME BASIC POINTS

Some basic points were considered in the judgment of Master Gordon-Saker in Rahimian -v- Allan Janes LLP [2016] EWHC B18 (Costs).

A solicitor’s bill must contain sufficient detail to allow the client to understand the work that has been done

  1. A bill must contain sufficient information to enable the client to obtain advice as to its detailed assessment. In Ralph Hume Garry v Gwillim [2003] 1WLR 510, the Court of Appeal considered whether a series of bills submitted by the claimants to the defendant complied with section 69 of the Solicitors Act 1974. Ward LJ summarised the authorities:
63 I accept the principle expressed in Lord Campbell CJ’s judgment in Cook v Gillard 1 E & B 26 , 36–37 that:

the defendant who undertakes to prove that the bill is not a bona fide compliance with the Act cannot found an objection upon want of information in the bill, if it appears that he is already in possession of that information … a client has no ground of objection to a bill who is in possession of all the information that can be reasonably wanted for the consulting on taxation.

In Eversheds v Osman [2000] 1 Costs LR 54 , 61–63 Nourse LJ posed this test in not dissimilar terms, viz: is the client unable to judge as to the justice of the amount of the fees which are charged?
64 Thus I would accept the proper principle to be that there must be something in the written bill to indicate the ambit of the work but that inadequacies of description of the work done may be redressed by accompanying documents (as in Eversheds v Osman where it was doubtful whether the bill on the face of it would have been sufficient) or by other information already in the possession of the client. That, it seems to me, would serve the purpose of the Act to give the client the knowledge he reasonably needs in order to decide whether to insist on taxation. If the solicitor satisfies that then the bill is one bone fide complying with the Act.
70 This review of the legislation and the case law leads me to conclude that the burden on the client under section 69(2) of the Solicitors Act 1974 to establish that a bill for a gross sum in contentious business will not be a bill “bona fide complying with this Act” is satisfied if the client shows: (i) that there is no sufficient narrative in the bill to identify what it is he is being charged for, and (ii) that he does not have sufficient knowledge from other documents in his possession or from what he has been told reasonably to take advice whether or not to apply for that bill to be taxed. The sufficiency of the narrative and the sufficiency of his knowledge will vary from case to case, and the more he knows, the less the bill may need to spell it out for him. The interests of justice require that the balance be struck between protection of the client’s right to seek taxation and of the solicitor’s right to recover not being defeated by opportunistic resort to technicality.
  1. Of the 22 invoices delivered in the present case, only the last 3 contained any information about the work that had been done. The last 3 invoices did not contain any details of the work done in the periods covered by the first 19 invoices.
  2. If one were to view the 22 invoices as constituting one final bill delivered on 22nd July 2014 , in my view, without more, that bill did not contain sufficient information, or indeed any information, of the work done between 8thSeptember 2011 and 28th February 2014 so as to constitute a bill complying with the 1974 Act.”

 A bill does not become a final bill just by calling itself one

The fact that the bill called itself a “final” bill did not mean that it was.  The Master found that it contained insufficient information to be a final statute bill.

 There is no implied right for a solicitor to deliver interim bills

This is an important point.   If a solicitor wants to deliver interim bills in litigation there has to be an express agreement.

  1. A solicitor’s retainer is an entire contract and, save in two circumstances, solicitors are not entitled to payment on account other than for disbursements. The exceptions are, first, where there is a natural break in protracted litigation and, secondly, where there is an agreement that the solicitor can submit interim statute bills.
  2. It is not suggested by the Defendants in the present case that there was an agreement, either expressly or by conduct, that they could deliver interim statute bills. Nor is it contended that there were natural breaks. Rather they contend that the invoices that they delivered were chapters culminating in a final bill.
  3. Mr Cropp on behalf of the Defendants relied on the decision of the Court of Appeal in Chamberlain v Boodle & King [1982] 1 WLR 1443. In that case the terms of the Defendants’ retainer did not allow for self-contained interim bills, but did allow for regular “statements”. The retainer lasted for 6 months over the course of which they delivered 4 bills to the Claimant. The court concluded that there had been no natural breaks, but that the bills “should be regarded as one bill in respect of one complete piece of work, although divided into parts”. As the Claimant had demanded taxation of the last within one month, he was entitled to have the whole of it taxed.
  4. In Bari v Rosen [2012] 5 Costs LR 851, the Defendant submitted 12 bills to his client over a period of 10 months, all of which were paid promptly. On an application for an order for assessment the Master concluded that the Defendant had no contractual right to issue interim statute bills. It was not suggested that the bills had been issued at natural breaks and so the bills should properly be treated as a series comprising a single bill, delivered at the date of the last in the series. That decision was upheld on appeal.
  5. In Vlamaki v Sookias & Sookias [2015] 6 Costs LR 827 the Master concluded that a series of bills rendered by the Defendants should be regarded as a single bill delivered on the date of the last. On appeal Walker J decided that there had been no final bill. A letter from the Defendants to the effect that they would not render any further invoices did not change the nature of the bills. Accordingly the application for an order for detailed assessment was premature.”

OVERSPENDING AND PROPORTIONALITY

One area where issues are likely to arise is incurring litigation costs outside the costs budget or which are not recoverable inter partes because they are disproportionate.

THE COUNTY COURT RULES

CPR 46.9(2) & (3)

This is an important (and I suspect often overlooked rule) which applies on solicitor and own client assessments.

“(2) Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.
(3) Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed –
(a) to have been reasonably incurred if they were incurred with the express or implied approval of the client;
(b) to be reasonable in amount if their amount was expressly or impliedly approved by the client;
(c) to have been unreasonably incurred if –
(i) they are of an unusual nature or amount; and
(ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party.”

SECTION 74 OF THE SOLICITORS ACT 1974

74 Special provisions as to contentious business done in county courts.
(1)The remuneration of a solicitor in respect of contentious business done by him in a county court shall be regulated in accordance with sections 59 to 73, and for that purpose those sections shall have effect subject to the following provisions of this section.
(2)The district judge of a county court shall be the costs officer of that court but any assessment of costs by him may be reviewed by a judge assigned to the county court district, or by a judge acting as a judge so assigned, on the application of any party to the assessment.
(3)The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in a county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.

THE KEY POINTS

  • The amount allowed on a solicitor and own client assessment will not, normally, exceed the amount which could have been allowed on an inter partes basis.
  • If a solicitor wants to recover matters that are not allowed on an inter partes basis then the client has to tell the client that the costs may not be recovered.
  • This can only be excluded by a written agreement.

The reason I am writing on this issue now is that an article in Litigation Futures this week states that “Lawyers are overspending in 89% of High Court and county court cases where costs management orders are made...”

The article makes the point that problems occur when any particular phase is exceeded not just when the entire budget is exceeded.

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