COSTS BITES 136: SOLICITORS COULD NOT RENDER BILLS FOLLOWING TERMINATION OF RETAINER: THE REMEDY WAS TO SUE FOR DAMAGES

An earlier post looked at some aspects of the judgment of Mr Justice Trower in Winros Partnership v Global Energy Horizons Corporation [2021] EWHC 3410 (Ch). The assessment of costs in that action continued after the appeal.  Preliminary points were considered by Senior Costs Judge Gordon-Saker and judgment given, the case is available here Global Energy Horizons v Winros -judgment – 29.2.24 (1)  . *(The assessment itself started in 2016).  For the second time the solicitors involved did not fare well, with their right to issue the bills not being accepted.  Their claim is confined to an action for damages.

The purpose of a Solicitors Act assessment is to determine the amount payable by the client in respect of the bill which is the subject of the order for assessment. If nothing is payable when the bill is delivered, the bill must be assessed at nil”

THE CASE

The claimant sought an assessment of bills for work done by the defendant solicitors.    There has been a long running saga in relation to the ongoing enforceability of the bills.  In this, the latest chapter, the bills were found to be unenforceable and the solicitor’s remedy was to bring an action for damages.

THE PROCEDURAL HISTORY

  • An assessment took place before Costs Judge James where it was found that the CFA was unenforceable and there had been a wrongful termination of the retainer.
  • There was then the partially successful appeal to Trower J and a remission for assessment before a different costs judge.
  • The costs were again assessed at nil.  It was held that the defendant’s right to bill was lost and its remedy was to to sue in damages ahead.

THE JUDGMENT OF THE SENIOR COSTS JUDGE

The claimant took a further point as to why the bills were not enforceable/should be assessed at nil.

THE POINT TAKEN

“As pleaded in the points of dispute, the Claimant contends that the Defendant’s bills
should be assessed at nil because, when they were delivered, the Claimant was not liable
to pay them and/or they were delivered after the termination of the retainer when the
Defendant had asserted a claim for damages. (The Defendant has issued proceedings
against the Claimant for damages in the Chancery Division.) As at the dates of the bills,
the fees were contingent. Trower J had found that the 2012 bill was not a statute bill
because, at the time it was rendered, the Defendant was not entitled to payment under
CFA 2. Applying the principle that a non-statute bill becomes a statute bill only when
a final bill is served,

12 and given that the Claimant was not liable to pay the 2016 bill,
both bills must be assessed at nil.”

THE DEFENDANT’S APPLICATION TO STRIKE OUT

The Defendant contends that these points should have been taken, if at all, at the
preliminary issues hearing, which was intended to cover the issues as to the Defendant’s
liability for the bills. Further, these are new points and contradict the Claimant’s
previously pleaded case.
17. The Re-Amended Particulars of Claim pleaded an alternative case13 that, if CFA 3 was
found to be enforceable and the Defendant was found not to have terminated it
wrongfully, pursuant to clause 14.3 the Defendant would be entitled to its basic charges
(subject to assessment), but not a success fee. That was rehearsed in the Claimant’s
skeleton argument for the preliminary issues hearing14 and the Claimant’s written
closing submissions15
. This was picked up by Costs Judge James in her judgment on
the preliminary issues:16
If the solicitor terminates the retainer without good cause he is
not entitled to recover any remuneration either contractually or
on a quantum meruit basis (Wild v Simpson [1919] 2 K.B. 544).
Conversely, where a retainer is terminated without breach or
frustration or is repudiated by the client, the solicitor is entitled
to recover costs for work done up to the date of termination (Re
Lane Joynt [1920] I.R. 228; Colgrave v Manley [1823] Turn. &
R. 400) (emphasis added).
18. The Claimant’s position is that, given the conclusion of Trower J as to the Claimant’s
repudiation, it is open to the Defendant to sue for damages as it has now done (as to
which the Claimant will have defences and a counterclaim). There is therefore a real
advantage to the Claimant if the Defendant’s claim is for damages for breach of
contract, rather than for its fees subject to assessment. The argument that the Defendant
is entitled to damages rather than fees has developed only as a result of the decision of
Trower J.

THE JUDGE’S FINDINGS

Objection 1 – abuse of process – decision
25. Clearly Objection 1 could have been included in the preliminary issues decided by
Costs Judge James. While the Claimant’s primary case was that the CFAs were
unenforceable and its secondary case was that CFA 3 was wrongfully terminated by the
Defendant, it was able to plead an alternative to the secondary case: that, if CFA 3 is
enforceable and is found not to have been terminated wrongfully by the Defendant,
such termination was pursuant to clause 14.3 and the Defendant was entitled only to its

basic charges and disbursements. The Claimant could easily have added a further
alternative, between these two positions, that if the termination was not pursuant to
clause 14.3, the Defendant was not otherwise entitled to its fees for work done.
26. Clearly there was an intention that the court would deal with “liability” at the
preliminary issues hearing, at which oral evidence might be given. While the court
controlled the agenda of that hearing, it was incumbent on the parties to raise all matters
which could sensibly and efficiently be dealt with as preliminary issues. That would
include any alternative cases on liability.
27. Mr Williams submitted that both the Defendant and the court had policed the issues
which could be raised. While the court did not permit amendment of the Particulars of
Claim to include allegations of misconduct, Costs Judge James did allow some repleading of the Claimant’s case in relation to the termination of the retainer.It was
open to either party to ask the court at any time to reframe the preliminary issues or add
to them. There was a significant delay between the initial formulation of the issues (June
2016) and the preliminary issues hearing (December 2018), in the course of which the
Claimant managed to revise its pleaded case twice. While Costs Judge James might
properly have resisted a freewheeling hearing on the Claimant’s allegations of
misconduct, there is nothing to suggest that she would have resisted any widening of
the issues in relation to legal arguments in respect of the consequences of termination
of the retainer.
28. In my judgment therefore the Claimant should have pleaded what is now Objection 1
in the Particulars of Claim and, insofar as may have become necessary, sought
appropriate directions from the court as to its determination at the preliminary issues
hearing.
29. The Defendant contends that the Claimant cannot now raise Objection 1 as it is
inconsistent with its earlier pleading and also with its opening skeleton argument and
closing written submissions at the preliminary issues hearing. However, it seems to me
that Objection 1 could have been pleaded without embarrassment as a further
alternative to its pleaded case that CFAs 2 and 3 were wrongfully terminated by the
Defendant and the alternative that the Defendant could have exercised its rights under
clause 14.3, on the basis that (as is not now in issue) the Defendant did not do that.
30. The skeleton argument (at paragraph 78) set out the general proposition that where a
retainer is terminated, the solicitor may recover costs for work done. However, that is
not inconsistent with Objection 1 which argues that the general proposition does not
apply where the solicitor’s right to payment is conditional. The closing submissions
reiterated (at paragraph 211) the alternative pleaded case that if, contrary to the
Claimant’s primary case, CFA 3 was terminated for good cause, the Defendant’s
remedy lay under clause 14.3. That is not inconsistent with Objection 1, given the
common ground that the Defendant did not exercise its rights under clause 14.3.

31. An important factor to which I should have regard is the nature of solicitor and own
client assessments, which fall into two stages. In the Part 8 proceedings, the issue is
whether the court should make an order for assessment. In most cases, this is agreed. In
22 Re-amended Particulars of Claim para 146.4 [B/172]

some cases there is an issue, usually as to the nature of the bills, which may require
lengthier determination. In a few cases there will be a conflict, such as in relation to the
nature of the bills or the client’s liability to pay them, which can be decided only by
oral evidence. In some of these cases the clients are seeking the assessment of bills
which they say they are not liable for. While that may appear to be paradoxical, the
practice24 is to determine liability as a preliminary issue to the question of whether an
order for assessment should be made. If an order is made, the second stage is the
detailed assessment proceedings, which follow a similar path to proceedings between
the parties following an order for costs, namely the production of a detailed bill, points
of dispute and replies, and a request for a detailed assessment hearing.
32. In detailed assessment proceedings between the parties, if the paying party denies its
liability for some or all of the costs claimed (for example, because of an apparent
deficiency in the receiving party’s retainer), the place that will be articulated formally
is the points of dispute. There is no earlier point at which it can be raised, except in
correspondence. It is not uncommon, in more substantial cases, to have a separate
preliminary issues hearing in the detailed assessment proceedings prior to the line by
line assessment to determine any issues such as liability for the costs claimed. However
it is not usual, in solicitor and own client proceedings, to have a preliminary issues
hearing on liability in the Part 8 stage and then another preliminary issues hearing on
liability in the detailed assessment stage.
33. The present case broadly followed the path described in paragraph 31. However there
were some oddities. The formulation of the preliminary issues after, rather than at, the
first directions hearing deprived the parties’ advocates of simultaneous input into the
drafting. However, the overall delay (in itself unusual) did give the parties ample
opportunity to get everything in order subsequently. Although the formulation of the
preliminary issues was not widened, the hearing of those issues became wide-ranging,
in large part because of the Costs Judge’s decision to allow cross-examination on any
issue, so as to avoid the witnesses having to attend again. While obviously well intentioned, freewheeling cross-examination, where the issues between the parties have
not yet been identified, is likely to be more expensive to untangle than the cost of
transatlantic flights.
34. In the event, the order for detailed assessment was not made until May 2022, six years
after the commencement of these proceedings, and Objection 1 was not pleaded until
April 2023, seven years after the commencement of these proceedings. While Mr
Williams rightly submitted that the overall delays were not the fault of the Claimant, it
is equally right to say that the Claimant had ample opportunity to work out its case long
before the seventh anniversary of the issue of the claim form.
35. It is unfortunate, although not entirely unforeseeable given the Claimant’s skeleton
argument, that the legal basis of the issue now raised was the subject of a statement of
law by Costs Judge James in the preliminary issues judgment in the context of whether
the termination of the retainer by the Defendant was wrongful.
25
36. However, this passage of the judgment is not part of any decision or part of the ratio. It
was simply an excursion into the judge’s understanding of the consequences of
24 Described in Civil Procedure 2023 at 67.2.1

wrongful repudiation by the client, which, in the event, was not what she found. Nor
was it considering whether the general principle stated did not apply where the client’s
liability is conditional on an event which had not then happened. While Trower J did
find that there had been a wrongful repudiation by the client, the appeal before him did
not require him to adjudicate on the consequences of that conclusion.
37. Thus Objection 1, while the subject of judicial comment, has not been the subject of a
judicial decision.
38. It seems to me that it is the oddities of this case which weigh heavily in the broad,
merits-based judgment which the court must make. Had the Claimant raised Objection
1 before the preliminary issues hearing, the Costs Judge may have expressed the view
quoted at paragraph 17 above or she may have been persuaded by the Claimant’s
argument or expressed no view. However, it would not have resulted in a different
order. The order was based on the finding that the Defendant had repudiated the
retainer. The result of the preliminary issues hearing would have been the same.
39. On an appeal from the order, Trower J’s conclusion that the client had repudiated the
agreement would not necessarily have resulted in a decision as to the consequences of
that conclusion. He may well have left it to the costs judge, as he left the Claimant’s
argument that CFAs 2 and 3 are unenforceable on the grounds of illegality.
40. That itself is significant. Although the illegality issue has since been abandoned, as at
the conclusion of the appeal before Trower J there was still an outstanding issue as to
liability.
41. The Claimant can be fairly criticised for not raising Objection 1 earlier. However, there
would still have been a preliminary issues hearing and there would still have been an
appeal. It may be that some of the costs since the appeal would have been avoided, but
any prejudice caused by that can be remedied in costs.
42. Raising the objection in the points of dispute simply followed Trower J’s conclusion
on repudiation. I cannot conclude that raising it in that way at that time involved unjust
harassment of the Defendant. In all the circumstances, I cannot say that it is an abuse
of process

THE STICK OR TWIST PRINCIPLE

Where solicitors have accepted the risk that they may be entitled to no fees at the end
of the case, it is not clear that they should have the right to deliver a bill where the
retainer is determined before the end of the case. In my experience there are similar
provisions to clause 14.3 in most conditional fee agreements, almost certainly for this
reason.
64. In the present case, at the point of termination, the solicitors had a choice. They could
“stick” and elect for their basic fees and disbursements under clause 14.3 (but lose the
success fee) or they could “twist” and claim damages for their loss of basic fees and
success fees.
65. In my judgment the Defendant was not entitled to deliver the 2016 bill and the Claimant
was not liable to pay it. Trower J has already found that there was no right to payment
of the 2012 bill at the time that it was delivered.

66. The purpose of a Solicitors Act assessment is to determine the amount payable by the
client in respect of the bill which is the subject of the order for assessment. If nothing
is payable when the bill is delivered, the bill must be assessed at nil