A COURT, ON A SOLICITOR AND OWN CLIENT ASSESSMENT, CANNOT CONSIDER ASSERTIONS OF UNDUE INFLUENCE OR ECONOMIC DURESS: DEFENDANT’S SUCCESSFUL APPEAL

In  Lisa Jones v Richard Slade And Company Ltd [2022] EWHC 1968 (QB) Mr Justice Johnson overturned a decision that the court, on a Solicitors Act assessment, can determine issues of undue influence or economic duress.  The judge held that such issues fell outside Section 70 of the Act.  The judgment contains an important consideration of the kinds of issues that can, and cannot, be considered within the scope of a Section 70 assessment.

“I do not consider that there is anything within section 70 that permits the court to embark on what is in effect a freestanding enquiry into the question of whether the agreement should be set aside on grounds of undue influence. That involves the exercise of a distinct equitable jurisdiction which forms no part of an assessment of costs.”

THE CASE

The claimant issued Part 8 proceedings under the Solicitors Act 1974 seeking assessment of a number of bills of costs.  A directions hearing took place and the District Judge made an order for several matters to be determined as a preliminary issue.

“(i)the legal status of the Defendant’s retainer; and

(ii)the legal status and effect of the agreement recorded by an email exchange between the Claimant and Richard Slade on 10 June ”

THE DEFENDANT’S APPLICATION

The defendant issued an application to strike out parts of the points of claim on the grounds that the court had no jurisdiction, in a hearing under the Solicitors Act, to determine the claimant’s assertions that an agreement should be set aside because of economic duress.

“Having served Points of Defence to the Points of Claim served by the claimant, the defendant decided to issue an application dated 9 July 2021 seeking:

“an order in the form attached striking out or staying point 2 of the Claimant’s points of claim dated 26 May 2021 (pursuant to CPR rules 3.4(2) or 3.1(2)(f)) on the basis that it discloses no reasonable grounds for bringing that part of the Claimant’s claim.”

4. At paragraph 10 of the application notice, the defendant outlined its reasoning for the application in the following terms:

“1. This is a claim for relief under Part III of the Solicitors Act 1974 (“the Act”).

2. By point 2 of her points of claim dated 26 May 2021 the Claimant claims that the settlement agreement dated 10 June 2020 should be set aside on the grounds of undue influence or economic duress.

3. The remedy sought is not one that the court has jurisdiction to give in proceedings under the Act and that part of the Claimant’s claim should be struck out or stayed accordingly.”

THE JUDGE’S REJECTION OF THE DEFENDANT’S APPLICATION

At first instance, the  costs judge rejected the defendant’s application. He held that issues such as these could be heard in the course of a Solicitor’s Act application. Such issues were grist to the mill in relation to costs issues.

THE DEFENDANT’S SUCCESSFUL APPEAL

Mr Justice Johnson allowed the defendant’s appeal. Section 70 of the Solicitors Act 1974 did not give the court jurisdiction, on a solicitor and client own assessment, to consider an issue such as undue influence.

THE JUDGMENT ON APPEAL

Is there jurisdiction to set aside the agreement under section 70 of the 1974 Act?

1. 1. I accept Mr Dunne’s submission that the judge here was exercising a highly specialised jurisdiction and considerable weight should be given to his judgment. That is so, even though the underlying question concerns the ambit of his jurisdiction. The contours of permissible enquiry under section 70 are not sharply defined. The views of an experienced judge in this particular field are formed from countless costs assessments which involve the resolution of many different types of dispute. That is a valuable resource for testing the outer limits of the powers of enquiry that are granted by section 70.

1. 1. There is, though, a limit. The difficulty is locating where, precisely, it lies. If, in principle, section 70 permits an enquiry into whether the agreement was procured by illegitimate pressure or economic duress and allows it to be set aside, then I would not allow this appeal on the basis of Mr Williams’ argument that such a dispute is better suited to the County Court. That is effectively a case management decision. I accept Mr Dunne’s submission that in the particular circumstances of the present case, the issue could fairly be tried in the course of a part 8 claim, and there is no compelling reason why it would be fairer to do so in the context of a small claims or fast track trial.

1. 1. If, on the other hand, the issues that Ms Jones seeks to canvass lie outside the ambit of section 70, then the appeal must be allowed because otherwise the first instance court would be acting without jurisdiction.

1. 1. The professional negligence cases are valuable in indicating a principled approach to the limits of section 70. They show that “wholesale” allegations of professional negligence may not be determined when assessing costs. Such allegations are simply not relevant to the exercise of assessing costs. On the other hand, a discrete and contained allegation of negligence (what Mr Williams termed “localised” negligence) may be relevant to the question of whether particular items of costs were reasonably incurred. If, for example, a solicitor submits a witness statement late, and costs are incurred in securing an extension of time, then it may be relevant to enquire whether the delay was the fault of the client, or the solicitor. If the former, then the costs of securing an extension of time are likely to be reasonably incurred. If the latter, then the client might succeed in showing that they were unreasonably incurred, in that they were due to the solicitor’s negligence. In that type of case, the issue of negligence is closely tied to the exercise that the court is required to undertake – the assessment of the costs’ bill. Resolving where the fault lies is a necessary part of assessing the costs. Conversely, if a claim is issued after the expiry of the limitation period, and is, for that reason, ultimately unsuccessful, the assessment of each item of costs that was incurred during the case does not depend on whether the solicitor was negligent in issuing the claim late. Such a case of “wholesale” negligence is irrelevant to the assessment of costs.

1. 1. The same might be said of allegations (such as the claimant here advances) of breach of fiduciary duty, or inappropriate pressure, or economic duress. There is no good reason why they should be treated in a qualitatively different way from allegations of professional negligence. If an individual item of costs was incurred because, for example, a solicitor acted in breach of fiduciary duty, then that might be relevant to the assessment of costs. More generalised allegations about a solicitor’s conduct are less likely to be within the proper scope of a costs assessment.

1. 1. That does not mean that issues which (as the Judge put it) “go to the heart of the retainer” are always excluded. Such issues may be highly relevant to the assessment of costs (for example whether there is a retainer at all or whether there is a conditional fee agreement (and, of so, whether it is enforceable)). The reason why there is jurisdiction to address such matters is because it is necessary to do so as part of the process of assessing costs (including the decision whether to order the assessment of costs). Other types of issue which might be fundamental to the relationship between client and solicitor (such as wholesale professional negligence, or breach of fiduciary duty) are different and, as the authorities show, do not fall within the section 70 jurisdiction.

1. 1. In the present case, the court has jurisdiction to determine whether the agreement precludes a section 70 assessment. It is necessary to resolve that issue in order to embark on the assessment itself (or to decide not to do so). The parties agree that should be determined as a preliminary issue. The court would also have jurisdiction (if this were in issue) to determine if the agreement is a contentious business agreement. In all these respects, the court is required to determine the legal status and effect of the agreement and thereby address the preliminary issue.

1. 1. Further, if the court were to conclude that the agreement is a contentious business agreement, then it would have power (but under section 61(2)(b), not section 70) to decide if it was unfair or unreasonable, and, if so, to set it aside.

1. 1. I do not consider that there is anything within section 70 that permits the court to embark on what is in effect a freestanding enquiry into the question of whether the agreement should be set aside on grounds of undue influence. That involves the exercise of a distinct equitable jurisdiction which forms no part of an assessment of costs.

1. 1. The judge put the matter the other way round, and said that there was nothing in section 70 that excluded a power to do what Ms Jones asked. Mr Dunne urges the same point. It is right that section 70 does not explicitly say that a court assessing costs may not set aside a prior agreement between solicitor and client. But that is not particularly informative. Where, as here, a judge is exercising a wholly statutory jurisdiction, it is necessary to show what the statute positively permits. The fact that something is not positively excluded does not mean that it is, by omission, permitted.

1. 1. Further, the fact that Parliament included a power to set aside a non-contentious business agreements under section 57(2), and a power to do the same in respect of contentious business agreement under section 61(2)(b), but did not include a more general power to set aside agreements under section 70, is a strong indicator that section 70 was not intended to permit this type of exercise.

1. 1. Judge Rowley was, I think, right to indicate that RSC would have a strong case if Ms Jones was asking the court to grant an equitable remedy. But this is exactly what Ms Jones is asking the court to do. She explicitly asks that the agreement be set aside. The Judge was right that the reason for doing this was to remove “an obstacle on the way to [an] assessment.” That does not, however, avoid the fact that Ms Jones is asking the court to exercise a jurisdiction that it does not have. The Judge was also right that the case would not have to be dealt with by a specialist Chancery Court and that it is not an issue that is “closely held by one part of the judicial structure”. It could, for example, be dealt with in the County Court. None of that means, however, that it may be dealt with in the course of an assessment of costs under section 70.

1. For all these reasons, I have concluded that the court does not have power to set aside the agreement when assessing costs under section 70.