IMPORTANT THINGS TO THINK ABOUT WHILE THE SUPREME COURT JUDGMENT IN MENZIES -v- OAKWOOD IS PENDING
The Court of Appeal decision in Menzies v Oakwood Solicitors Ltd [2023] EWCA Civ 844 was appealed to the Supreme Court and was heard last week. The judgment is pending. In the interim period my colleague Matthew Smith suggests that claimant solicitors have to take careful steps to protect their position. (My colleagues Craig Ralph and Erica Bedford – represented the respondent solicitors at the hearing).
THE COSTS JUDGE OVER YOUR SHOULDER (SOLICITOR AND OWN CLIENT COSTS): WEBINAR 15th JULY 2024
This is one of many, many, recent issues I will be looking at in the webinar on the 15th July 2024. This webinar looks at the regulations and case law relating to the deduction of costs from the client’s damages in a personal injury claim. Booking details are available here.
- When can a deduction from damages be made?
- Protection for the client
- What must be the client be told?
- What steps need to be taken if court approval is needed?
- How is a “success fee” justified?
- Avoiding difficulties and potential pitfalls
- Where do things go wrong?
The webinar examines the key judgments on this topic and looks at those areas that have proven to be problematic and which have led to litigation and solicitor-own client disputes. It looks in detail at the Legal Ombudsman’s guidance on Good Costs Service and the steps that lawyers have to take to comply.
MATTHEW’S INTERESTING TV VIEWING…
“I spent 4/7/24 watching 4 hours 29 minutes & 36 seconds of hearing before the Supreme Court in Oakwood Solicitors Limited (Respondent) v Menzies (Appellant). Others were celebrating elsewhere by watching fireworks. Although developments in the law of costs can only comically be compared to fireworks, they can lead to particular organisational difficulties for solicitors. This case could well do so.
THE ISSUE IN OAKWOOD
The issue is whether the authority that a client usually gives in a CFA, to have paid into a designated account money received from a losing opponent and to have the solicitors take from it the balance of basic charges success fee, disbursements, after the event insurance premium and any VAT before forwarding the remainder to the client followed by the delivery of a statutory bill, means that the bill has been paid. The argument centres on whether or not some further “settlement of account” is needed – something along the lines of the client receiving the solicitors’ bill and then emailing back with “I’ve seen the bill, we’re quits”.
Of course, whether or not a bill has been paid has an implication for how long the client has to seek a Solicitors Act 1974 assessment of the bill. Assuming a statutory bill has been delivered section 70 permits a client who has not yet paid the bill a month from delivery with an absolute right to seek an assessment, without conditions. After that the client has a further 11 months to seek an assessment but the court may impose terms as it thinks fit other than as to the costs of the assessment. After 12 months has expired from the delivery of the bill special circumstances are required before the court will order an assessment.
THE TIME PERIOD FOR DISPUTING A BILL
If the bill has been paid, the client still has an absolute right to seek an assessment without the imposition of conditions so long as it is requested before a month has expired from delivery. After a month has expired special circumstances must exist before an assessment will be ordered. After 12 months from payment of the bill no section 70 assessment may be ordered and nothing more than a broad brush common law assessment tantamount to an assessment of damages for breaching the contract for not paying the bill will be achievable.
THE POTENTIAL OUTCOME IN THE SUPREME COURT
The Supreme Court may consider the proper interpretation of the word “payment” in section 70 does require some form of settlement of account. It is a curiosity that most CFA’s for contentious business are only saved from being regarded as contentious business agreements by dint of the fact that they explicitly say that they are not. By section 61(5) of the Solicitors Act a contentious business agreement other than with a representative client:
Where the amount agreed under any contentious business agreement is paid by or on behalf of the client or by any person entitled to do so, the person making the payment may at any time within twelve months from the date of payment, or within such further time as appears to the court to be reasonable, apply to the court, and, if it appears to the court that the special circumstances of the case require it to be re-opened, the court may, on such terms as may be just, re-open it and order the costs covered by the agreement to be assessed and the whole or any part of the amount received by the solicitor to be repaid by him.
Whilst not an issue before the Supreme Court, it is perhaps a curiosity that the period for challenging a payment agreed under contentious business agreement seems less strict than that for challenging a bill under s.70. It may be that the proper interpretation is not one that enhances that disparity.
THE STEPS THAT SOLICITORS SHOULD BE TAKING NOW
Because of that danger solicitors would be very well advised at least to consider seeking explicit approval from clients when they send out their bills having held back a portion of the damages to pay for them in accordance with the Solicitors Account rules.
Indeed, this would be an ideal opportunity to put some ducks in a row by:
- Making sure that the bill sent is a proper statutory bill including details of the recovery made from the other side and all disbursements paid for.
- Giving an explanation that the client is required to approve the bill in order for the retention of the damages to constitute payment and “settlement of (the) account”.
- Inviting the client to contact the solicitors if the client is unhappy with the bill.
- Explaining, including the narrowing time limits, the client’s entitlement to seek an assessment of the bill.
ADVISING THE CLIENT
HHJ Gosnell, sitting as a High Court Judge, noted in Slade v Erlam [2022] EWHC 325 at para 25:
…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.
INVITING TROUBLE OR HEADING OFF TROUBLE?
So, whilst all of this might be thought to be inviting trouble, such steps will put you in a better light in the event that the Supreme Court decides that a settlement of account is required. In that event solicitors will not suddenly find that their bill has not been “paid” and a section 70 assessment can still be ordered beyond 12 months from delivery, subject to the existence of special circumstances. A client who has had such an explanation will find it more difficult to demonstrate special circumstances in the event of delay.”