COST BITES 93: SOLICITOR IS NOT LIABLE TO PAY FEES WHEN THEY WERE ACTING AS A PROFESSIONAL DEPUTY

The arguments raised in Brassington v Knights Professional Services Ltd (t/a Knights) (Re Court of Protection – Deputyship) [2023] EWHC 1568 (Ch) are interesting ones.  HHJ Hodge KC (sitting as a High Court Judge) rejected the defendant’s assertions that a solicitor employee, acting as a deputy, had become personally liable for costs that were unrecovered.  The judgement contains a detailed consideration of the retainer letters.

“Both parties understood that P, rather than Mrs Brassington, was Knights’ true client, as evidenced by the way the client was identified and referenced in Knights’ statements of account and, by inference, its files and other records. That conclusion accords with both the common sense, and the commercial reality, of the retainer, with Knights owing duties in contract, and not only in tort, to P, rather than to Mrs Brassington, who was the person charged with carrying out the work in relation to the deputyship, which was the relevant engagement. After all, the work Knights was being engaged to carried out was for the benefit of P, rather than Mrs Brassington personally.”

THE CASE

The claimant had been a former “partner” at the defendant firm of solicitors (in reality a paid employee). Most of the claimant’s work involved acting as a professional deputy for people who lacked professional capacity.

The claimant resigned from the defendant firm in November 2022.

After she left the defendant claimed that the claimant was personally liable for time costs (“WIP”) which she recorded on her deputyship files whilst working for the defendant, but which could not not be recovered from the protected persons for whom she had been appointed a deputy, attorney, trustee or executor.

The defendant was refusing to hand over files on which it claimed to have a lien, on the grounds that it was entitled to payment of the WIP.

THE REASON FOR THE DIFFERENCE BETWEEN BILLED COSTS AND WIP

1. Mr Kelly accepts that there is no dispute as to how Mrs Brassington operated her deputyships from 2016. Invoices were submitted to the SCCO; and where costs were allowed, Mrs Brassington was billed and such sums were paid from P’s funds. Where costs were not allowed, the costs remained on the system as WIP. By September 2022 WIP of this nature in relation to deputyship files had reached £166,468.97. According to the table at paragraph 28 of Ms Neyt’s witness statement, this represents a recovery rate of just under 64%. There is a dispute as to whether Knights was aware of the reason why this position had been reached. Through one of her assistants, in September 2022 Mrs Brassington had made a request to Knights’ accounts team to write-off this WIP. This request was not processed as the value of the WIP was too large for approval to be given by the accounts team, with approval being required either from the appropriate CSD or from Knights’ chief executive officer. Mr Kelly maintains that before Mrs Brassington handed in her notice, there had been no prior discussions as to what attitude Knights might take in relation to her deputyship files. Knights assert that Mrs Brassington is personally liable for all costs incurred on the deputyships (save as previously recovered from P) and has threatened to exercise its lien over the documents in its possession. Mrs Brassington has decided not to terminate Knights’ retainers, and its junior staff continue to deal with routine deputyship matters, including the payment of general expenses for P. Knights accept that its lien over the deputyship files cannot be exercised whilst it continues to act, and that Mrs Brassington is free to see any documents which she requires to assist her in her duties as deputy. Knights have now submitted bills to Mrs Brassington and her co-deputies for each deputyship; and, as Knights continues to act, further bills will be sent in due course.

THE PROCEEDINGS

The claimant issued Part 8 proceedings claiming declarations from the court that:

“(1) Mrs Brassington is not personally liable to pay for time recorded on any deputyship file which cannot properly be billed to P.

(2) Knights is not entitled to a lien over any deputyship file in respect of claims for payment for time recorded on a file which cannot properly be billed to P.

(3) In the alternative (and only if and insofar as may be required), orders under s. 70 of the Solicitors Act 1974 for each of Knights’ bills of costs set out in the schedule to the claim form to be assessed.

(4) An order under s. 70 of the Solicitors Act 1974 that no action on any bill may be commenced until such assessment is complete.

(5) Further or other relief.

(6) Costs on the indemnity basis.”

THE JUDGE’S CONCLUSION IN THE CLAIMANT’S FAVOUR

After detailed consideration of the terms of engagement the judge found in favour of the claimant.  The claimant had been employed by the defendant. She had never been the defendant’s client and the retainer documentation did not support the assertion that she had personally accepted responsibility for the “shortfall”.

THE JUDGMENT

VI: Analysis and conclusions

1. 1. Having fully considered the carefully crafted submissions of Mr Berragan and Mr Kelly, and despite the latter’s forceful representations to the contrary on Knights’ behalf, I have no hesitation in preferring the competing submissions of Mr Berragan (representing Mrs Brassington). In my judgment, on the true construction of the engagement letters, and for the reasons which Mr Berragan has so persuasively given (which I do not propose to repeat in full, having previously set them out in detail in this judgment), Mrs Brassington was contracting solely as agent for P. I further find that she accepted no personal liability for Knights’ remuneration or expenses.

1. 1. Both Mr Berragan and Mr Kelly are in agreement that the issue for the court is to construe the terms of the engagement letters in the light of all the relevant and admissible surrounding circumstances. I agree with Mr Berragan that these include all those matters relevant to the engagement that were known or reasonably available to both parties. I find that these extend to: (1) the statutory framework and ancillary practice and guidance governing COP deputyships; (2) the fact that Mrs Brassington was acting both as a COP deputy and as a solicitor employed by Knights, who was required to devote the whole of her working time and attention to such duties as Knights might reasonably assign to her, and perform them to the best of her ability; and (3) the way in which Mrs Brassington’s deputyships had previously been dealt with at Slater & Gordon, and might reasonably be expected to be dealt with during the course of her employment as a ‘partner’ at Knights.

1. 1. In common with Mr Berragan, Mrs Brassington, and – I think – Mr Kelly, I recognise that Mrs Brassington’s standard deputyship letter is not an apt document to govern the retainer of solicitors by a COP-appointed deputy, not least because the provision (in paragraph 4.1) for invoices to be sent to Mrs Brassington monthly “unless agreed otherwise” is wholly inconsistent with the practice applied by COP and the SCCO, under which invoices are only to be submitted by a deputy every three months, in accordance with paragraph 6 of COP Practice Direction 19B. Instead, each letter of engagement should have incorporated a term along the lines of paragraph 4.1 of Ms Conboy’s deputyship letter (cited at paragraph 10 above). I recognise that it is not for the court to re-write the contract of retainer that the parties have chosen to enter into, to the advantage of Mrs Brassington and her co-deputies, and contrary to Knights’ own interests. But the authorities make it clear that when construing a written contract, the worse the drafting, the more ready the court can properly be to depart from the natural meaning of the words the parties have chosen to use. As Lord Hodge JSC (speaking for the Supreme Court) observed in Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173 at [11]:

… in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause …

In any event, the focus of the present debate about the true meaning and effect of the engagement letters is upon the true identity of the contracting parties rather than the actual terms of their engagement.

1. 1. As I observed (at paragraph 10 above), Ms Conboy’s deputyship letter related not to an existing deputyship, but to a new deputyship application. I recognise that, logically, the court should approach the issue of construction by considering, first, a letter of engagement that relates to a new deputyship application, before turning to construe a retainer letter in respect of an existing deputyship. In the instant case, however, although relating only to existing deputyships, since, chronologically Mrs Brassington’s standard deputyship letter pre-dated Ms Conboy’s deputyship letter, the former document should fall to be construed first. Each deputyship letter was addressed to Mrs Brassington and she is therefore the “you” referred to in the letter; but that was inevitably the case: Because each P lacked capacity, they were unable to engage solicitors to act on their own behalf, and they therefore had to act by a COP-appointed deputy. Necessarily, Mrs Brassington, as P’s COP-appointed deputy, had to act for them by signing the letters of engagement. The issue for the court is whether, in doing so, Mrs Brassington was acting in a personal capacity, or solely as deputy and agent for P, or jointly for P and herself personally.

1. 1. For the reasons Mr Berragan has so elegantly articulated, in my judgment, by subscribing to her standard deputyship letter, Mrs Brassington was, in each case, contracting with Knights solely in her capacity as deputy, and as agent, for and on behalf of P. That seems to me to be the clear meaning and effect of the language of the standard-form letter, construed in the statutory context against which both parties subscribed to it. Both parties understood that P, rather than Mrs Brassington, was Knights’ true client, as evidenced by the way the client was identified and referenced in Knights’ statements of account and, by inference, its files and other records. That conclusion accords with both the common sense, and the commercial reality, of the retainer, with Knights owing duties in contract, and not only in tort, to P, rather than to Mrs Brassington, who was the person charged with carrying out the work in relation to the deputyship, which was the relevant engagement. After all, the work Knights was being engaged to carried out was for the benefit of P, rather than Mrs Brassington personally. That conclusion also accords with the provisions of s. 19 (6) of the MCA, which treat the deputy as P’s agent, and the explanation of its effect at para 8.55 of the Code of Practice. I agree with Mr Kelly that this explanation is only a short, and necessarily, incomplete, rather than a comprehensive statement of the law concerning the personal liability of an agent; and that the terms of any contract signed by the deputy, its nature, and the surrounding circumstances, all have to be scrutinised carefully to determine whether the deputy is thereby assuming any personal liability.

1. 1. However, in the instant case I do not accept that, by her standard deputyship letter, Mrs Brassington, still less her family co-deputies, were assuming any personal liability for any irrecoverable remuneration and expenses incurred by Knights, as Mrs Brassington’s employer, and the entity through which she was discharging her deputyship responsibilities, and that they were doing so without any recourse against P personally or their estate. Mr Kelly submits that this is what Mrs Brassington agreed to by the terms of her standard deputyship letter; and that she persuaded her family co-deputies to do likewise. However, Mrs Brassington’s standard deputyship letter says nothing expressly about the capacity in which she is appointing Knights to act on her behalf, and with her, in connection with her deputyship. Nor is there any shred of evidence that Mrs Brassington, or anyone else at Knights, ever informed any of the family co-deputies that the true meaning and effect of Mrs Brassington’s standard deputyship letter was that they were assuming any personal liability to Knights, so those co-deputies certainly never gave their informed consent to the assumption of any such supposed personal liability.

1. 1. Nor can I understand why, if Knights ever considered and understood that Mrs Brassington (or any of her co-deputies) had assumed the risk of non-recovery of Knights’ remuneration and expenses through the SCCO process, this was never drawn to her (or their) attention at any time during the period of more than six years that unbilled WIP was mounting up (to a level in excess of £166,000), either through the partner with overall responsibility for the management and supervision of the engagement and delivery of Knights’ contracted deputyship services, or through the Chester office’s CSD. I recognise the inadmissibility of post-contract conduct as an aid to the construction of a written contract; but where a contract is capable of more than one interpretation, in my judgment it is permissible to test alternative permissible constructions against the way in which that contract was actually performed in practice, as a guide to the parties’ common understanding of how that contract falls to be understood and applied. Further, the way each deputyship had been conducted in practice under the original deputyship letters is clearly admissible as an aid to the construction of the later engagement letters, when these were issued following increases in the permissible guideline hourly rates. Such evidence extends to the way client files were opened and styled, and the frequency and the manner in which each deputyship was invoiced and billed.

1. 1. Mr Kelly seemed to accept that paragraph 4.3 of the engagement letters created no independent liability on the part of Mrs Brassington if none already existed, acknowledging that her supposed liability for Knights’ unbilled WIP derived from the fact that, on his case, it was she who was Knights’ client. Clearly, from its opening words, paragraph 4.3 can have no application unless Mrs Brassington is already “responsible for payment of [Knights’] fees, disbursements and expenses”.

1. 1. I have previously raised the question (at paragraph 25 above) of how the terms of Mrs Brassington’s standard deputyship letter might be capable of rendering her (and her family co-deputies) liable to Knights for unpaid WIP, representing sums by way of remuneration and expenses that have been disallowed by the SCCO, if (as both parties accept) P is not liable for such sums. I find it difficult to understand how the same words can bear different meanings, and produce different effects, for Mrs Brassington and for P. Counsel have supplied me with no satisfactory answer to this conundrum.

1. 1. Subject to any further argument that might be presented to the court on this aspect of the case, it seems to me that the position can only be reached whereby P is not liable under Mrs Brassington’s standard deputyship letter for any remuneration and expenses that have been disallowed on assessment by the SCCO if the terms of that letter are subject to an overarching implied term to that effect. Such a term could only be implied on the grounds either of business efficacy, or of obviousness, on the basis that, without it, the deputy’s engagement of Knights would lack all practical or commercial coherence. Even then, there is the obvious problem that a term cannot properly be implied which would contradict an express term of the contract. Such a term would have to be justified by reference to the peculiar position of a COP-appointed deputy, and the constraints imposed by the MCA and ancillary COP and SCCO practice and guidance. The difficulty I entertain about all of this, however, is that identical, or similar, considerations would seem to me to militate in favour of the implication of such a term into any contract of retainer whereby solicitors are engaged to act in connection with a COP deputyship, whether the counter-party is P, a professional deputy, or a family co-deputy, since the constraints operate in precisely the same manner in all such situations. Fortunately, these are matters that call for no final determination as part of this judgment.

1. 1. It follows from my conclusion about the true parties to Knights’ retainer that no lien can be asserted by Knights against Mrs Brassington, both because she was never Knights’ client, and she was never personally liable for any of their costs and expenses. In principle, Knights could have asserted a lien as against any P, had they been liable to Knights for payment of any outstanding fees, disbursements and expenses. However, Mr Kelly accepts that P is not liable for any remuneration and expenses that have been disallowed on assessment by the SCCO; and it is this which constitutes the unbilled WIP.

1. 1. I propose formally to hand this judgment down at a remote hearing on 30 June 2023 without the need for any attendance by the parties or their legal representatives. In my draft judgment I invited the parties to seek to agree a substantive order to give effect to this judgment. Unfortunately, I am told that the parties are unable to agree the terms of any substantive order. I therefore propose to proceed in accordance with the practice recommended at paragraph 12-91 of the 2^nd update to the Chancery Guide (issued earlier this month) and to determine on paper all consequential matters (including questions relating to costs, and any application for permission to appeal) that cannot be agreed between the parties. I direct that by 4.00 pm on Friday 14 July 2023 the parties are to provide a draft composite order, concise grounds of appeal (where relevant), and brief written submissions, which should be no longer than necessary and, in any event, no longer than 15 pages. Unless I consider it necessary to direct a further remote hearing, or counsel certifies (in accordance with para 12-92) that a that a hearing is needed to dispose of any consequential matter, I will proceed to determine the outstanding matters on paper when I return to Manchester at the end of July. I therefore formally adjourn all consequential matters, including consideration of all issues relating to costs and to any application for permission to appeal. I will extend the time for appealing until 21 days after my paper determination is released to the parties, or 21 days after the conclusion of any further remote hearing. I invite the parties to agree an order to give effect to these interim arrangements. I conclude by expressing my thanks to both counsel for their considerable assistance in this case.

1. That concludes this reserved judgment.