Kerry Underwood

SOLICITOR & OWN CLIENT COSTS AND BILLS

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Solicitor and own client bills are very heavily regulated in a way unparalleled in any other profession, business or trade.

 

One little known provision is that in County Court matters a solicitor cannot charge her or his own client anything beyond that recovered from the other side in the event of a win, or, in the event of a defeat, a sum which could have been allowed on a party and party basis, unless there is a written agreement to the contrary.

 

Section 74(3) of the Solicitors Act 1974 reads:-

 

“(3) The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in a county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.”

 

The rules of court do provide otherwise, but only to a limited extent. CPR 46.9(2) and (3) read:-

 

“(2)        Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.

 

(3)          Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed –

 

  • to have been reasonably incurred if they were incurred with the express or implied approval of the client;

 

  • to be reasonable in amount if their amount was expressly or impliedly approved by the client;

 

  • to have been unreasonably incurred if –

 

  • they are of an unusual nature or amount; and

 

  • the solicitor did not tell the client that as a result the costs might not be recovered from the other party.”

 

Thus unless there is a written agreement to the contrary a solicitor in a County Court matter cannot charge the client any more than could have been recovered from the other side and must tell the client that the costs may not be recovered.

 

The requirement to tell the client that any particular item of costs may not be recovered only applies if the costs are of an unusual nature or amount, but applies to all matters, not just County Court matters.

 

The written agreement provision applies to County Court matters only.

 

The requirement to tell the client applies to any individual item, not just the overall bill. Thus if, say, £10,000.00 could have been recovered and the total bill is £9,000.00, the solicitor still cannot charge for, say, an unrecovered medical report fee unless these provisions are satisfied.
This can become a circular argument which applies to between the parties’ assessments.

 

Thus a phase in the costs budget is exceeded. Arguably the excess is something of “an unusual nature or amount” relieving the client from any obligation to pay it unless told in advance.

 

Under the Indemnity Principle if there is no liability on the client to pay, then there can be no recoverability from the other side.

 

Note that the mere fact that the costs might not be recovered from the other party does not bring the requirement to inform the client in to play. The costs need to be of an unusual nature or amount as well, as the link between CPR 46.9(3)(c) (i) and (ii) is and, not or.

 

Conditional Fee Agreements

 

There is an obvious issue here. Success fees and After-the-Event insurance premiums, with very limited exceptions, are no longer recoverable from the other side, so in County Court proceedings cannot be charged to the client without written agreement.

 

As a Conditional Fee Agreement must be in writing that should not be a problem but it is most important that details of any After-the-Event insurance premium, as well as the success fee, are dealt with in writing and that the client’s written agreement is obtained to charging such  premium.

 

If any costs are “of an unusual nature or amount” then additionally the solicitor must tell the client that as a result the costs might not be recovered from the other side.

 

As a success fee and ATE generally cannot be recovered from the other party it is best to always include the appropriate wording, whether or not the expenditure may be considered of an unusual nature or amount.

 

Suggested wording

 

I suggest the following wording for all retainers, whether or not they are County Court or otherwise and whether or not they are Conditional Fee Agreements or otherwise:-

 

Section 74 Solicitors Act 1974 agreement

 

“This agreement expressly permits the solicitors to charge an amount of costs greater than that which you will recover or could have recovered from the other party to the proceedings and expressly permits payment of such sum.

 

This part of this agreement is made under section 74(3) of the Solicitors Act 1974 and Civil Procedure Rules 46.9 (2) and (3).

 

In so far as any costs or disbursements are of an unusual nature or amount these costs might not be recovered from the other party.”

 

Information required

 

In Rahimian (1) & Scandia Care Ltd (2) v Allan Janes LLP [2016] EWHC B18 (Costs)

 

the Senior Courts Costs Office was considering a Part 8 application by the claimants seeking an order under Section 68 of the Solicitors Act 1974 that the defendant firm of solicitors deliver a final statute bill or bills in relation to proceedings brought against the claimants by Ottercroft Ltd.

 

Section 68 reads:-

 

“(1) The jurisdiction of the High Court to make orders for the delivery by a solicitor of a bill of costs, and for the delivery up of, or otherwise in relation to, any documents in his possession, custody or power, is hereby declared to extend to cases in which no business has been done by him in the High Court.”

 

The defendant solicitors gave a costs estimate of “between £15,000 and £25,000 plus VAT and disbursements” and stated that an application by their opponent for an interim injunction might add “costs of between £5,000.00 and £10,000.00 plus VAT”.

 

Between September 2011 and July 2014, 22 invoices totalling £76,153.14 were delivered. All except the last were termed Interim Accounts; the last was described as a Final Account.

 

Only the last three bills contained any narrative explaining the work done.

 

For reasons relating to late service any application for a Solicitors Act assessment was out of time, and therefore the claimants had to show that the invoices delivered were not “bills” for the purposes of the Act in order to get fresh bills which they would then be in time to have assessed.

 

A solicitor’s retainer is an entire contract and solicitors are not entitled to be paid other than for disbursements until the case is finished unless there is a natural break in protracted litigation or the parties have agreed that the solicitor may submit interim and statute bills.

 

Neither occurred here. The solicitors contended that the invoices were chapters culminating in a final bill as in the Court of Appeal decision in Chamberlain v Boodle & King [1982] 1 WLR 1443 and Bari v Rosen [2012] 5 Costs LR 851.

 

The court here rejected that submission as the bills did not contain sufficient information about the work done so as to comply with the Act.

 

However in Ralph Hume Garry v Gwillim [2003] 1WLR 510

 

the Court of Appeal approved the principle set out in

 

Cook v Gillard 1 E & B 26 , 36–37

 

that a person cannot object to a bill on the ground of lack of information if it appears that that person is already in possession of that information, even if it does not appear on the bill.

 

In Cook the court said:-

 

“64.        Thus I would accept the proper principle to be that there must be something in the written bill to indicate the ambit of the work but that inadequacies of description of the work done may be redressed by accompanying documents (as in Eversheds v Osman where it was doubtful whether the bill on the face of it would have been sufficient) or by other information already in the possession of the client. That, it seems to me, would serve the purpose of the Act to give the client the knowledge he reasonably needs in order to decide whether to insist on taxation. If the solicitor satisfies that then the bill is one bone fide complying with the Act.

 

 

  1. This review of the legislation and the case law leads me to conclude that the burden on the client under section 69(2) of the Solicitors Act 1974 to establish that a bill for a gross sum in contentious business will not be a bill “bona fide complying with this Act” is satisfied if the client shows: (i) that there is no sufficient narrative in the bill to identify what it is he is being charged for, and (ii) that he does not have sufficient knowledge from other documents in his possession or from what he has been told reasonably to take advice whether or not to apply for that bill to be taxed. The sufficiency of the narrative and the sufficiency of his knowledge will vary from case to case, and the more he knows, the less the bill may need to spell it out for him. The interests of justice require that the balance be struck between protection of the client’s right to seek taxation and of the solicitor’s right to recover not being defeated by opportunistic resort to technicality.”

 

Here the court held that the claimants did not have sufficient information at the time that they received the final invoice.

 

It is irrelevant that the claimants subsequently gained that knowledge when they received the files from the solicitors and the court said that that development cannot “convert the final invoice into something that it was not as at the date that it was received by the Claimants.”

 

Accordingly the court found that the defendants had not yet rendered a final bill to the claimants and therefore the application succeeded to the extent that the claimants were entitled to an order that the defendants now render a final bill.

 

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Written by kerryunderwood

August 15, 2016 at 8:10 am

Posted in Uncategorized

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