SOLICITOR AND OWN CLIENT COSTS: AN AGREEMENT TO PAY A SPECIFIC SUM FOR PAST COSTS NOT UNFAIR AND NOT SET ASIDE

The judgment of Master Brown in Whitaker v Richard Slade & Company Plc [2018] EWHC B17 (Costs) may have some interesting implications for solicitor and own-client costs.  In particular the finding that an agreement in relation a specific sum for work done was not a Contentious Business Agreement and, if anything, was a benefit to the claimant client rather than the solicitor.

“… the observation may sensibly be made that the Court should be slow to set aside an agreement as to fees under these provisions where a party had the benefit of legal representation … or indeed where it can be demonstrated that a sophisticated client had an understanding of the nature and effect of the transaction …If it were otherwise it would make it make difficult for solicitors and their clients to achieve finality over fees. “

 

THE CASE

The claimant, a former client of the defendant solicitor firm, issued proceedings seeking a detailed assessment of £166,671.29. One issue to be decided was whether a sum of £86,000 plus vat was a Contentious Business Agreement and whether it was “in all respects fair and reasonable”.  That agreement related to sums due from the claimant to the defendant for work done up to the date of the agreement.   The claimant had been encouraged to seek separate legal representation in relation to the agreement.

THE DECISION

The Master found that the agreement  in question was was not a CBA.

FAIRNESS

What is interesting in this judgment is the Master’s rejection of the claimant’s objection to the bills.  On the morning of the hearing the claimant “abandoned the allegations that the Agreement had been procured by undue influence, duress and/or improper threats and the allegation that the Agreement should be set aside as an unconscionable bargain.”

    1. The Claimant also asserted in his witness statement that the bills were requests for payments on account. He stated:
Any agreement would therefore be confined to arranging what was to be paid in respect of those payments on account and would not be an agreement to finalise what I owed.”
  1. He said he had no intention of finalising his liability to the Defendant such that he lost his right to ask the Court to consider whether the charges are reasonable. He contended that the invoicing was chaotic, not easily understood, and no basis upon which to make a decision as to whether the amount offered was a reasonable sum. He said that he simply needed to continue with his claim.
  2. These assertions, as to the alleged difficulties in understanding the Defendant’s bills, seem to me to contrast with the underlying contemporaneous correspondence from which it appears that the Claimant was able to scrutinise bills or draft bills and to mark those entries or charges which he contested. Moreover the bills and the accompanying ledgers, in my judgment, readily identify the work done, the fee earner who is said to have done the work and the hourly rates applicable to the work done. As indicated in the ledgers there was significant attendance on the Claimant so he was likely to have known what work his solicitors had done; and in any event he was able to go through the bills and identify the relevant charges to which he objected such that he was able to consider the reasonableness of the charges. I reject his case that the billing system was confusing or, to the extent that it is necessary for me so to find, that he was confused by it.
  3. The Claimant was an experienced businessman and a sophisticated client, as is apparent from the proposals that he put to the Defendant in the course of discussions prior to the entry into the Agreement. Further, as I have found above, the terms of the Agreement were clear. It was, in my judgment, clear to the Claimant that he was indeed agreeing to compromise on terms that precluded any subsequent attempt to have the relevant fees assessed. It is difficult to see how there could be any genuine misapprehension as to the nature of the agreement- the assertions he makes in his witness statement appear to have been prepared with hindsight. Even if the witness statement of the Claimant could be relied upon as indicating that at the time of entering into the Agreement he did not understand the nature of the agreement (which I do not accept), it is clear that in determining the fairness of the making of the Agreement I am concerned with the steps taken to ensure that the client understood the effect of the agreement. If those steps had been taken, as they have in this case, it does not seem to me that the agreement could properly be said to be unfair because of the Claimant’s subjective state of mind, particularly if any such state of mind was unreasonably formed.
  4. Mr. Dunne also argued that the Agreement could not have been fair because the Claimant, he said, had been misadvised as to the status of the bills; that the solicitors had proceeded on the basis that they were statute bills whereas, on the basis of the decision in Boodia, they were not and that, accordingly, the Agreement was unfair. I do not accept that argument. Quite apart from the fact that there was no evidence that Claimant was given any further advice by the Defendant as to the bills beyond that which is stated on the bills, he had the benefit of legal advice at the stage when the terms of the Agreement were made and if it were right to query any claim for payment of fees he could have done so with the benefit of such assistance. Moreover, even if the bills were requests for on account payments, section 65 of the 1974 Act entitles a solicitor to seek a reasonable interim on account payment for contentious business and if not paid, the solicitor can terminate the retainer. As Mr. Dunne appeared to accept it could not realistically be said that the Defendant was required to continue to act for the Claimant without him making any such payment. In any event it is clear that it is open to the parties to come to an agreement as to the fees payable even where there is a dispute as to the status of the bills and I do not consider that any misunderstanding as to the status of the bills (which, it was accepted, was innocent) would make the Agreement unfair.
  5. As I have recorded above the Defendant encouraged the Claimant to get independent legal advice, which he obtained. He was made aware of the meaning and effect of the terms of the Agreement and I am satisfied, applying the guidance set out in paragraphs 50 and 51 above, that the mode or manner of obtaining the Agreement was fair.

REASONABLENESS

The Master rejected an argument that the agreement was unreasonable. If anything it was favourable to the claimant.
  1. It seems to be clear, and was in any event accepted by Mr. Dunne, that in considering whether the Agreement was reasonable the Court could not be required to carry out what is in effect an assessment. As Mr. Dunne put it, that would be an assessment ‘by the back door’; it would obviously defeat the purpose of entering into an agreement as to fees (which I would assume to be commonplace).
  2. Mustill J commented that “from a practical point of view the agreement of the client is strongest evidence that the fee is reasonable” (see Walton). As recorded above the extent of the dispute between the Defendant and the Claimant as to the fees due was modest at the time of the final discussions. It seems to me clear from the correspondence that the Claimant had been able, on the substantial amount of documentation that had been provided to him, to ascertain the reasonableness of the charges in order to propose a discount in respect of those items which he had highlighted on the spreadsheets. He was, at the time of the discussions, well aware of the nature of the work undertaken by the solicitors.
  3. I do not accept Mr. Dunne’s argument that the Agreement simply followed an error in the bills in respect of the hourly rate of Mr. Emanuel and that the agreed sum of £86,000 plus VAT simply reflected a moderation of the hourly rate in respect of this fee earner. It is clear that the Defendant were indeed willing to reduce their charges to discount the appropriate rate to £200 per hour. But it is also clear that the extent of the discount achieved by the Claimant went beyond that (the error in hourly rate was in respect of Mr. Emanuel only and would account for 20% of the fees charged in respect of his work); and the overall discount agreed would have included the Defendant writing off a substantial amount of the sums claimed in the bills (which may well already have been discounted, at least in part).
  4. If I were required to consider the reasonableness of the terms of the Agreement in respect of the CBA in unsevered form it would be necessary for me to consider also all the terms which include a term that that they would continue to act under the terms of the previously agreed retainer. As I have already indicated the hourly rates he had negotiated were substantially below the ordinary commercial rates for this type of work, particular for solicitors in Central London; and it seems to me that the terms which he had negotiated as to the continued involvement of the Defendant were favourable to him.
  5. The Agreement also set the date for payment of the sum due. There is some indication that in the course of early 2017 the Claimant was seeking to release sums from the equity of a property, with a value put at some £1.5 million and £1.7 million. The Agreement put off the day when he was required to make any substantial payment.
  6. I accept that this was an Agreement made in the course of litigation and thus there were pressures on the Claimant but he could not expect the solicitors to continue to act for him without receiving any significant payment.
  7. I see nothing unreasonable about the term of the Agreement to the effect that the interim on account payment of £5,000 not be set against the debt for past fees. It could reasonably be set against future charges which the Claimant would incur arising out of the continued representation and advice that he would receive.
  8. Nor do I accept that there is any complaint to be made about the extent of the charge on the Claimant’s property. The fact that it was limited, and not increased, worked to the detriment of the Defendant whose fees and charge would not therefore be secured.
  9. Even if it were appropriate to sever the obligations in the Agreement and have regard to the terms of the Agreement as to past fees only, I do not consider there are any proper grounds for saying that its terms were unreasonable, applying the guidance set out above. This Agreement bought the Claimant certainty and limited his liability in respect of past fees, which was a considerable benefit to him. Moreover no real or proper basis was put to me for reducing the fees payable whether substantially or at all; indeed nor was any real basis put to me for the making of any further enquiry. This is notwithstanding the availability of detailed ledgers setting out the work done.

AGREEMENT NOT SAID ASIDE

  1. I am satisfied that the Agreement, in both severed and unsevered form, was favourable to the Claimant. Even if I had been satisfied that a matter had been raised (or arose from a consideration of the papers), which gave me some basis for thinking there was some prospect of reducing the amount agreed in respect of past fees on an assessment, I do not think that it follows that the Agreement should be set aside. Section 61 of the 1974 Act contemplates that there might be a reduction of the sums due under a CBA in the event of a finding that the Agreement was unfair and unreasonable in any material respect – a remedy not sought by the Claimant. I would add that that the setting aside of the Agreement would seem to work an unfairness on the Defendant who had encouraged the Claimant to take independent legal advice; it could delay the date when payment is due and lead to the incurring of costs which may well be substantially more than the amount in dispute.
  2. I therefore conclude that the Agreement is a bar to the relief that the Claimant seeks against the Defendant in respect of the bills caught by it. It is not necessary therefore for me to deal with other potential issues as to whether the bills in the relevant period were statute or interim bills; or indeed whether the Claimant would in any event be entitled to the relief he seeks against the Defendant.
  3. Whilst it is not the basis of my determination, the observation may sensibly be made that the Court should be slow to set aside an agreement as to fees under these provisions where a party had the benefit of legal representation (noting Chitty 8-097) or indeed where it can be demonstrated that a sophisticated client had an understanding of the nature and effect of the transaction (see Bolt Burdon paragraph 108). If it were otherwise it would make it make difficult for solicitors and their clients to achieve finality over fees. The judgment of Fletcher-Moulton LJ in Clare v Joseph suggests that the underlying rationale for the jurisdiction is the Court’s concern that agreements between clients and solicitors which preclude assessment may be procured by undue influence- and the allegation that the Agreement was procured by undue influence was abandoned in this case, albeit at the last moment. If an assessment of the fairness and reasonableness of solicitors’ charges were merely a means of ascertaining whether there were any basis for considering a CBA unfavourable to the extent that it should be set aside by reason of any such concern, that might have suggested a more direct route to the result I have reached on this issue.