ASSESSMENTS UNDER THE SOLICITORS ACT: INTERIM BILLS, VALID BILLS AND “SPECIAL CIRCUMSTANCES”: A DECISION ON APPEAL

February 18, 2022 · by · in Appeals, Assessment of Costs, Costs

The decision of HHJ Gosnell (sitting as a High Court Judge) in Richard Slade And Company Plc v Erlam [2022] EWHC 325 (QB) relates to the assessment of solicitor and own client bills.  However the appeal also gave rise to significant procedural issues. In particular both parties ran cases that were different to their skeleton arguments, both accused the other of raising issues that had not been raised before the District Judge.

THE APPEAL

The appeal related to the assessment of bills of costs rendered by the appellant solicitors to the respondent (their former client.  Initially work was done on a private basis, the later work was done on a conditional fee basis.  The CFA contained a clause that if the respondent terminated the retainer then the costs became payable. The respondent terminated the retainer the the costs became payable.

The respondent issued Part 8 proceedings seeking assessment of the bills.

THE FINDINGS OF THE DISTRICT JUDGE

HHJ Gosnell summarised the findings of the District Judge, broadly all of these were in favour of the respondent client.

a) the first retainer did not permit the rendering of interim statute bills and so the first four bills rendered could not, for that reason, be interim statute bills;
b) the CFA did not permit the rendering of interim statute bills until R’s termination on 15.6.16 and so the bills rendered in the course of the CFA could not, for that reason, be interim statute bills;
c) the bills rendered on the termination of the CFA were not interim statute bills;
d) the last of the bills rendered in each of the five series (each series being the bills rendered on each of the five separate matter files) did not have the character or effect of a Chamberlain bill;
e) for these reasons, no bill had been rendered and so the correct course was for the Court to make an order for the delivery of a bill or bills now, which is what she did;
f) obiter, even if that was not correct, there were special circumstances which would have permitted an assessment out of time under s.70(3) of the Act of the unpaid bills

THE DIFFERENCE BETWEEN THE SKELETON ARGUMENTS AND THE CASE AS ARGUED

  1. The skeleton argument for permission to appeal and the Respondents skeleton opposing the same were both drafted by the advocates who appeared below. At the appeal before me Mr Williams QC appeared for the Appellant and Mr Dunne for the Respondent. Both of them chose to make submissions which bore no real relation to the skeleton arguments which had been served no doubt because they wanted to argue the case in a different way. Both of them complained that the other had sought to put arguments before the appeal court which had not been made below and I suspect these complaints may well have some force. I did not have the skeleton arguments which had been deployed before District Judge Batchelor, nor did I have a transcript of the hearing (other than the judgment) and so I was not able to properly resolve these disputes. I do not ask for, or intend to read those documents now. I did, however, suggest to both counsel that this was not a helpful way to conduct an appeal from my point of view.

 

COMMENT ON THE SOLICITORS ACT 1974

The judge commented on the Solicitors Act and the issue of whether a solicitor has a specific duty to inform their client that an interim bill has to be challenged within a short period of time.
25. The Solicitors Act 1974 is legislation of some antiquity and does not appear to have been amended substantially over the years other than to replace “taxation” with “assessment”. In particular it does not appear to have undergone the sort of transformation which is common when consumer rights are brought into the equation. When dealing with a client’s right to seek an assessment of costs from his or her solicitors the Act seeks to strike a balance between allowing a reasonable time for a client to question the quantum of costs whilst protecting solicitors from having to deal with stale allegations of overcharging. Whilst the Act purports to regulate those rights it does not go so far as to oblige the solicitor to advise the client of these provisions in terms, nor to explain in plain English what the actual consequences of the application of those terms are for the client. I am personally sympathetic to the argument that it probably should.
    1. Both counsel advised me that there are no regulations either connected with the Solicitors Act or Code of Conduct, arising from their obligations as a Solicitor, which would oblige solicitors to explain to clients that the effect of the service of an interim statute bill (properly authorised by the retainer) would be to start the clock running for a potential Solicitors Act assessment and that there are different time limits depending on the circumstances.
    1. I am not convinced that the decision of Mr Justice Fulford (as he then was) in Adams v Ali Malik is a sufficiently firm foundation to base the proposition that a solicitor has an obligation to his client not only to advise a client of his rights under the Solicitors Act to ask for an assessment but also to explain what the legal consequences of the service of an interim statute bill would be. This was a decision handed down in 2003 which, as it was a decision on permission to appeal , is not a legally binding authority. It also does not appear to have attracted any notoriety until comparatively recently. The issue which the Judge was considering was whether it was arguable that the Master had misapplied the law as to natural breaks. The high water mark of the Appellant’s case on this issue is the passage set out in paragraph 18 above which says the solicitor must make it plain to the client that the purpose of sending the bill at that time is that it is to be treated as a complete self- contained bill. The Judge does not go on to say that the solicitor should also tell the client that if a complete self-contained bill is delivered then this starts the clock running for the purposes of a Solicitors Act assessment.
    1. I fully accept that Costs Judge Rowley in Masters v Charlies Fussell appears to suggest that a solicitor does bear this additional obligation but I am not convinced that Mr Justice Fulford’s decision in 2003 is sufficient authority to support the proposition. I fully accept the practical difficulties for the client in applying for an assessment of his own solicitor’s costs whilst still instructing him in the underlying litigation as identified in paragraph 19 above. Perhaps this would be a good reason for amending the legislation or for the Solicitors Regulation Authority to amend the Code of Conduct or introduce regulations to like effect. In the absence of such amendment however the situation remains that there is no statutory or regulatory obligation to advise a client what the legal consequences are likely to be for him or her when a solicitor serves an interim statute bill. It is not normal for provisions explaining the legal consequences of contractual terms to be implied into a contract unless there is some additional statutory or regulatory obligation to do so as a result of a perceived need for consumer protection. Whilst there may be such a need here it has not resulted in any changes to the Act or relevant regulatory reform. In the absence of such, I take the view that if there is a clear contractual term reserving the right of a solicitor to deliver interim statute bills then he is entitled to do so, without having to spell out what the legal consequences of such an act would be for the client.
  1. In this case the provision reserving the right to deliver interim statute bills is set out in paragraph 15 above. The wording is clear , and in my judgment, contains no room for ambiguity. It makes it clear that they “are detailed bills and are final in respect of the period to which they relate” which is sufficient explanation to justify the delivery of an interim statute bill in my judgment.

INTERIM BILLS UNDER A “CFA LITE”

There was then a question as to whether the change of funding to a conditional fee basis allowed the solicitor to render interim bills. The judge found the existence of a CFA is incompatible with the rendering of interim bills.
The first issue is whether the CFA is a variation of the original retainer (which contained authority to render interim statute bills) or is intended to be a new agreement. This is an issue which was not argued below , nor was it argued in the Appellant’s skeleton argument. The District Judge below appears to have assumed that it was a new agreement and it does not appear that she was challenged on that finding. There is some support for her finding in an email sent by Ms. Turner on 6th July 2015 where she states:
” The new agreement will be such that we will be paid only when we recover fees from Lutfur Rahman”
It would also be correct to record that it is not stated anywhere in the CFA that the intent of the agreement is to vary the original retainer. The main purpose of the change to a CFA was of course to reassure the Respondent and his colleagues that they would not have to pay the Appellant’s costs until they had secured a recovery from Mr Rahman. This obviously needed a significant change in the contractual provisions regarding billing which is what the CFA was intended to achieve. In my view, the provisions of the original retainer under the heading ” payment terms” are not consistent with the payment terms under the CFA. If it had been intended preserve any of those rights in the CFA then that document should have so stated in terms. The clause giving the Appellant the right to deliver interim statute bills in the original retainer was not carried forward into the CFA and in my view is inconsistent with the terms of the CFA. I am in agreement with the District Judge on this issue.
    1. Whilst the argument that Sprey v Rawlinson Butler did not apply in this case was not pursued on the appeal I should deal with it briefly. I accept in that case there was an added complication that the solicitors hourly rate increased if the condition which triggered the success fee applied. Not surprisingly Mr Justice Nicklin found that an interim bill at the lower hourly rate could not be an interim statute bill because it was not a self-contained and final bill for that period. I would also question whether a bill rendered during the currency of a CFA can be an interim statute bill when there is no liability to actually pay it ( and there may never be a liability if the condition is not met). It would be wholly wrong if interest were allowed to run and the clock for assessment allowed to start running before there was actually any liability to make any payment.
  1. I find therefore that there was no written contract to enable an interim statute bill to be delivered after the CFA was brought into effect on 27th June 2015 and so all the bills delivered before it was terminated would be requests for payments on account in law.

DID THE INTERIM BILLS COMPLY WITH THE SOLICITORS ACT

The next question was whether the interim bills complied with the requirements of the Solicitors Act.  The judge found that some did, and some did not.

THE ARGUMENTS ON APPEAL
    1. If interim statute bills were delivered was there bona fide compliance with the Solicitors Act ?
The District Judge helpfully set out the law on this topic in paragraph 29 of her judgment which both counsel agreed was an accurate summary. In order to be valid a bill must be signed, delivered and “bona fide complying with the Act” . This is a reference to Ralph Hulme Garry v Gwillim [2003] 1 WLR 510 which made clear that the bill should contain sufficient narrative for the client to see what he is being charged for. There is a presumption in favour of the solicitor so the client bears the burden of showing that the bills are not bona fide in compliance with the Act. The client will not be able to do so where, quite apart from the content of the bills, he otherwise has sufficient knowledge about the solicitor’s charges to take advice on whether to apply for assessment of the bill.
    1. The District Judge was critical about the content of some of the bills in this case and found that in respect much of the billing the Respondent would not have had sufficient information to challenge the bills. She found that they lacked sufficient detail and clarity to enable the claimant to decide whether he should seek to have them assessed. She recorded that the Solicitor for the Appellant, Mr West, had conceded before her that the invoiced marked FF (“Fixed Fee”) did leave the Respondent without sufficient information to be classed as interim statute bills and were accordingly payments on account.
    1. Mr Williams seeks to challenge whether Mr West did indeed concede that the FF bills were to be treated as payments on account. He submitted that they were gross sum bills and the Respondent had the right to ask for a detailed bill within three months of receipt of it. His overall submission is that the bills were tolerably clear , and when coupled with the knowledge which the Respondent already had from emails and telephone calls it could not be successfully asserted that he did not have the knowledge to enable him to decide whether or not to take advice about challenging the bill . Although the Respondent had filed two witness statements he has not actually stated in terms that he did not have sufficient information to enable him to decide whether to challenge the bills.
    1. Mr Williams also introduced a new point that it is difficult for the Respondent to argue that he does not have sufficient information to challenge the bills when he has in fact done exactly that by issuing a Part 8 claim form seeking an assessment of all the bills.
    1. Mr Dunne correctly pointed out that this argument had not been raised below or in the Appellant’s skeleton argument. He submits that the Respondent has always wanted the bills assessing by the court but his Part 8 claim form makes clear in the alternative that he seeks an assessment of the final bill or an order for delivery of a bill.
    1. The Respondent submits that the issue about whether the bills contained sufficient information was determined by an experienced Regional Costs Judge and should be afforded considerable respect on appeal.

THE JUDGMENT ON APPEAL

On appeal it was found that some of the bills in question complied, whilst some did not.

    1. Discussion and decision
There are eighteen invoices in total which, in my view, fall into three categories:
a) Disbursement bills;
b) Fixed fee bills;
c) Detailed bills.
Of the eighteen bills, nine of them are for disbursements only.
    1. I do not accept the general point made by Mr Williams that the Respondent must have had sufficient information to decide whether to take advice about applying for the bill to be assessed because that is what he in fact did. A fair review of the Respondent’s part 8 claim form shows that he was seeking an assessment of those bills which were capable of assessment and an order for delivery of a bill in the alternative. Realistically, the Respondent wants all the bills to be assessed. Only when the Appellant argues that he is out of time under the Solicitors Act 1974 does the Respondent then need to argue that some or all of the bills are not interim statute bills so that time would not begin to run.
    1. The disbursement bills are mainly for modest amounts with the description of the particular disbursement being clear and an invoice for the disbursement being attached to the bill. The exceptions are Invoice IN802187 for £44,479.39 and IN8022451 for £3,780. The latter invoice is in respect of work done by barrister Simon Johnson. His fee note is attached and contains a breakdown of the work done and individual charge for each item. The former invoice incorporates both the work done by Mr Johnson and another barrister Francis Hoar. Both of their fee notes are attached with full particulars and the Respondent would know that Mr Johnson was brought into the case only to deal with the challenge of Mrs Rahman which ended with the trial before Master Marsh. In my view the disbursement bills , when combined with the invoices attached to them are clear and contain enough information to enable the Respondent to decide whether to challenge them.
    1. The Fixed Fee bills are not in fact fixed bills but are capped bills and there is no evidence that the Respondent agreed the figures before the invoices were sent. I cannot successfully resolve the dispute between the parties about whether Mr West conceded below that they should be treated as payments on account. The burden is on the Appellant however to convince the appellate court that the District Judge was wrong and he cannot do so in the absence of a transcript of the hearings themselves.
    1. Mr Williams sought to argue that they are gross sum bills but this was not contended below and so the District Judge never had chance to consider it. The only possible authority for them to be interim statute bills is the original retainer and which clearly states “our bills are detailed bills and are final in respect of the period to which they relate”. This means that the authority to render interim statute bills is specifically referenced to detailed bills. The FF bills can in no way be described as detailed bills and I find that they cannot be treated as bona fide bills because they were conceded as payments on account in the hearing and only detailed bills are authorised by the retainer agreement.
    1. The remaining category is detailed bills of which there are six. All of them were delivered either during the currency of the CFA or after its termination. Given my earlier findings it does not therefore matter whether they pass the test set out in Garry v Gwillim. For the sake of completeness however I have looked at the bills individually. Of the six bills four of them encompass the whole work done for one of the five categories of work I set out earlier in this judgment. The other two both relate to the main file which was concerned with enforcement of the judgment. Each bill clearly states at the beginning which category of work it relates to and there are no bills which confuse the categories. Whilst there is no generic narrative at the beginning there is a detailed description of all time spent with a short description for each item saying what work was done. This is clearly taken from the Appellant’s time billing system. With the information which the Respondent is likely to have possessed I find that he would have sufficient information to take a decision whether or not to take advice on whether to challenge the individual bills.
  1. I recognise that District Judge Batchelor has reached a different conclusion but I can only assume that the bills were not well demarcated in the three lever arch files of documents she had. I had one paper bundle and all the bills were in the last divider in date order. I would also respectfully suggest that I perhaps had better quality submissions than she received below. The issue whether the bills bona fide complied with the Solicitors Act is a mixed finding of fact and law and not the exercise of a discretion. I find that the bills for disbursements and the detailed bills pass the test set out in Garry v Gwillim but the fixed fee bills do not for the reasons I have given.

 

A CHAMBERLAIN BILL OF COSTS

The District Judge described a Chamberlain bill.

The editors of Cook on Costs describe Chamberlain bills in the following way :
” Alternatively , courts have been prepared to conclude that the disputed bills , particularly when the retainer has clearly ended and there would be no benefit in the solicitor having to serve a variation upon his previously rendered bill to comply with a statutory requirement. Such bills are sometimes called “Chamberlain” bills following the decision in Chamberlain v Boodle and King ( a firm) [1982] 3 All ER 188″
THE CHAMBERLAIN BILLS ON APPEAL
    1. District Judge Batchelor found that there was no Chamberlain bill in this case. She said that the court must be satisfied that that the totality of the bills in the series can properly be viewed as final statute bill. She referred to the authority of Rahimian v Alan Jones LLP [2016] EWHC 818 (costs) where the senior costs judge held that a series of bills could not be a Chamberlain bill because it did not contain sufficient information to enable the client to seek advice as to its assessment. In the current case she found that the Respondent had said that he found the billing ” confusing and difficult to follow“. This was exacerbated by the fact that there were separate disbursement and costs invoices.
  1. The District Judge also criticised the fact that the invoices did not identify which retainer they were delivered under. She found that it was impossible to ascertain which of the five categories of work the invoice actually related to. In relation to the Fixed Fee invoices she criticised the lack of narrative but acknowledged that the Appellant contended that the Respondent had enough information in any event from the many detailed emails he had received. The District Judge was also critical of the lack of narrative in the bills. She found that the invoices could not be treated as a series, which, when taken together , can be treated as a final statute bill which the court could assess or upon which the Respondent could have sought advice as to assessment.

SPECIAL CIRCUMSTANCES AND OBITER PART OF THE JUDGMENT BELOW

The District Judge had found that the bills were not valid and therefore she did not to consider her discretion whether to allow the respondent client an extension of time in which to challenge the bills.  However she gave an indication that if she were asked to consider her discretion she would have granted an extension and found “special circumstances”.  The question arose as to the basis on which the appeal court considered such an express of opinion.  In the current case the District Judge’s views were given after hearing full argument on the point.

    1. Discussion and decision
“There was some debate between counsel during the hearing about whether this issue is a review of the decision of the District Judge or a decision of the appeal court de novo, due to the fact that the District Judge made this decision obiter, in order to assist the parties and the appeal court. I am grateful to both counsel for agreeing that the correct approach is as follows:
“the court should proceed on the footing that, at least in this case – where the DJ’s “fallback” finding resulted from full argument and was itself fully reasoned – the DJ’s alternative determination will stand unless it fails the applicable appellate test”
    1. The decision whether to find that special circumstances do, or do not, exist is either the exercise of a discretion (Respondent) or an exercise in evaluation and judgment (Appellant). In either event, the result is the same and I refer back to my analysis of the law in relation to appeals at paragraph thirteen above.
    1. Mr Williams says that the District Judge failed to take into account the switch to the CFA Lite when considering the issue of the exceeded estimate. I am not convinced that the existence of the CFA should have much relevance. Whilst it meant that the client would not have to pay as the case went along and would not have to pay at all if the claim failed he would still have costs to pay up to the extent of recovery and so it would have been helpful to him to be aware at various stages how the original estimate had changed in the light of developments as they occurred. I fully accept that on a detailed assessment the Appellant may well be able to convince a Judge that despite the costs having risen from £80,000 to £236,607.83 the District Judge was entitled to take into account at this stage the fact that the billed costs had substantially exceeded the estimate (although there was an explanation for this).
    1. The District Judge described the bill as “significant” in amount and said that large bills require explanation. Mr Williams may be right in saying that a bill of £236,607.83 is not large in the context of London litigation but I take into account this is an experienced Regional Costs Judge who sits in Sheffield and she considered the bill significant enough in size to be a factor worthy of taking into account and placing in the balance. I cannot say she was wholly wrong to do so.
    1. The District Judge took into account the confusing nature of the billing. Whilst I have found that it is not so confusing that it cannot amount to a valid Chamberlain bill I have to accept that there are elements of the individual bill that make them difficult to follow, for the example the absence of a narrative on the detailed bills and the limited narrative on the fixed fee bills. I cannot find that the District Judge should not have put this issue into the balance, even if it was limited to the Respondent’s evidence that he found the billing “confusing and difficult to follow”
    1. My experience of applying this test accords with the experience of most Costs Judges. It is not a threshold which is considered to be particularly onerous. The underlying reason for this can perhaps be explained by the knowledge of the court that it is very difficult for a client to complain about the size of bills submitted during the lifetime of the case whilst still retaining the same solicitor. Judges are also aware that a Solicitor is under no duty to advise the client in terms of the time limits in for applying to the court for an assessment. It might be said that the court’s underlying sympathy may sometimes lie with the client, depending on the circumstances.
  1. This was not the strongest case for special circumstances but District Judge Batchelor identified the correct legal test and set out those factors which had persuaded her to find that special circumstances existed. I suspect that a significant cohort of other Cost Judges might have reached the opposite conclusion but, in my view, there would still be a large number of other Cost Judges who would have reached the same view that she did. Her decision is well within “the generous ambit within which a reasonable disagreement is possible” and I find that she was not wrong to find that special circumstances existed.
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