SOLICITOR’S BILL AND SPECIAL CIRCUMSTANCES WITH £4.2 MILLION AT STAKE
The case of Eurasian Natural Resources -v- Dechert LLP  EWHC B4 (Costs) has already attracted much attention. A previous hearing before the Court of Appeal involved no less than five QCs just to determine whether aspects of the solicitor and own client assessment should be held in private. Master Rowley, in this judgment, considered what amounted to “special circumstances” under Section 70(3) of the Solicitors Act 1974 so that the court could assess bills that were challenged but had been paid in the 12 months prior to the proceedings.
Special circumstances under Section 70(3)
- A discrepancy between estimates and the bills delivered can amount to special circumstances.
- The peculiarities of the solicitor/client relationship in this matter could amount to special circumstances.
- The defendant’s response to the challenges could amount to special circumstances.
- Billing irregularities could amount to special circumstances.
- The size of the bills was a factor to take into account when assessing special circumstances.
- The fact that there were other bills being assessed in relation to the same issues did not amount to special circumstances.
The claimant was seeking an assessment of its former solicitor’s costs. The invoices had been paid in full. Some of the bills (some£3.9 million) were outside the 12 month period for solicitor and own client assessment and the court had no jurisdiction. There were 15 invoices which were rendered between one and twelve months before the assessment, these amounted to £4.2 million. If assessment of these bills was to take place the court had to find “special circumstances”. The Master considered “special circumstances” in this case.
(1) Where before the expiration of one month from the delivery of a solicitor’s bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.
(2) Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment ), order—
(a) that the bill be assessed ; and
(b) that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.
(3) Where an application under subsection (2) is made by the party chargeable with the bill—
(a) after the expiration of 12 months from the delivery of the bill, or
(b) after a judgment has been obtained for the recovery of the costs covered by the bill, or
(c) after the bill has been paid, but before the expiration of 12 months from the payment of the bill.
no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the assessment as the court may think fit.
THE MASTER’S FINDING OF SPECIAL CIRCUMSTANCES
The Master found that there were special circumstances because of the major discrepancies between the estimates given in relation to costs and the actual bills.
Discrepancy between estimates and work done.
55. Mr Browne did not tackle the figures directly in relation to the discrepancy between the estimates and the actual costs billed. In my view that was simply because he could not do so. The only position the defendant could take was to say that the amount of the work done was demonstrated in the many documents exhibited to the witness statements. But that, it seems to me, is aiming at the wrong target. It may be that at the detailed assessment hearing all of the work claimed can be justified as being reasonable. But it cannot be an answer to the question of whether the discrepancy calls for an explanation simply to demonstrate that a lot of work has been carried out. There is no way to compare the amount of work carried out with the estimates because, as Mr Williams pointed out, there has been no attempt to cost the various work plans. The defendant’s attempt to provide an explanation in this manner so as to avoid the court concluding that the discrepancy calls for an explanation is an impossible one to achieve in a case of this size. If there was a small bill for which the defendant could demonstrate simply why the extra costs had been incurred, it might be possible to take the approach that the defendant has here. But in bills of this magnitude, it cannot in my judgment be done.
56. I therefore consider that the claimant has demonstrated that a special circumstance exists in the discrepancy between the estimates provided and the costs actually billed. Despite the estimates being updated periodically, they have not come close to mirroring the actuality and they are deficient in themselves. It must be arguable that the claimant can demonstrate some reliance upon the estimates such that the court may consider reducing the overall sums billed on the basis that it would be unreasonable for the client to pay the full amount in accordance with the decision in Mastercigars.
The Master went on to consider six other points which could have represented special circumstances.