Kerry Underwood

SOLICITORS ACT: DOES FORMER CLIENT HAVE RIGHT TO FILE?

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In Riaz v Ashwood Solicitors Ltd [2018] EWHC B5 (Costs)

Master Leonard, sitting in the Senior Courts Costs Office refused an application by Mr Riaz a former client of Ashwood Solicitors Ltd seeking delivery up of papers from the firm so that he could take advice as to his right to detailed assessment of the firm’s fees.

Master Leonard commented that the courts were facing many applications of this nature.

Master Leonard had adopted the same approach in Green and others v SGI Legal LLP [2017] EWHC B27 (Costs), but other Masters have reached the opposite conclusion.

In this case two new arguments were advanced:

  • That the court could exercise its inherent jurisdiction over solicitors;

 

  • That the fiduciary duties owed by a law firm to a client should be taken into account when deciding whether the court should exercise its inherent jurisdiction over solicitors.

 

The solicitors firm argued that the court only had a residual jurisdiction that could only be exercised where there was a clear breach of duty and where there was no other way of avoiding injustice.

 

The Master rejected that contention and referred to the key case of

 

Assaubayev v Michael Wilson and Partners Ltd [2014] EWCA Civ 1491

 

which stated that it was for the court, in its discretion, to choose whether to exercise the jurisdiction and examples given in that case made it clear that it is a summary jurisdiction to be exercised only in clear-cut cases.

The Master said that equitable remedies for breaches of fiduciary duty are not usually matters for a Costs Judge and therefore the concept had to be approached with some caution.

 

The Master rejected the client’s arguments as:

 

  • There was no clear-cut evidence of conduct on the part of the solicitor that would make it appropriate for the court to exercise its inherent jurisdiction;

 

  • No fiduciary duty obliging a solicitor to supply copies of documents that did not belong to the client had been identified, and nor had any breach of any other fiduciary duty;

 

  • It was inappropriate to exercise the court’s inherent jurisdiction effectively to order pre-action disclosure based on the client’s suspicion that the solicitor had overcharged him. The criteria under CPR 31.16 were not satisfied.

 

  • Furthermore the time limits for applying for an assessment of the solicitors’ bills had expired some years earlier.

 

 

The court had this to say:

 

“It is important to put this application into context. One must bear in mind the criteria for pre-action disclosure set out by CPR 31.16, which this case does not meet. One must also bear in mind the stated purpose of the application, which is to allow the Claimant to take advice on the exercise of his statutory right to apply for assessment of the Defendant’s bills. Those rights are subject to time limits. Given that, on the evidence, the Claimant received bills and paid them about three years before he instructed his present solicitors to explore the possibility that he had been overcharged, it seems likely that those time limits expired some years ago.”

 

As with most recent cases, this matter involved a deduction by the solicitors of a success fee capped at 25% of general damages and part special damages, and it is clear and settled law that a solicitor cannot simply deduct 25%, but must justify the fees by reference to the solicitor and own client retainer, any shortfall between solicitor and own client cost and recovered cost, and in any event the success fee must not exceed 100% of base costs.

Thus the maximum is the lower of 25% of the Allowed Damages Pool or 100% of base costs.

There was no doubt that the documents sought here belonged to the solicitor and not the client and the issue was whether the client, on payment coping costs, had the right to obtain copies of documents in which he had no proprietary interest, from the solicitor.

Here the solicitors for the client put forward a wholly erroneous argument, which they have pursued in other cases and in correspondence with other solicitors, that the success fee is based on recovered costs rather than solicitor and own client costs.

Thus in this case, a portal case, the fees recovered were £600 being £500 plus VAT, which is the fixed road traffic accident portal fee.

The Master comprehensively and correctly rejected the argument that the success fee was based on that figure:

“I do not accept that the evidence shows that an unlawful success fee has been charged. Mr Carlisle’s argument to that effect is based upon the assumption that the Defendant’s base costs are exactly £600 inclusive of VAT. That was however the amount received by way of costs between the parties. It does not follow that the Defendant was not entitled, under the terms of its retainer, to charge more than £600 to the Claimant by way of base costs on a solicitor/client basis. If the Defendant’s base costs, as payable by the client, were £650 or more then the success fee will not have been in excess of 100%.”

The reference to £650 reflects the fact that that was the sum deducted from damages by way of a success fee, being 25% of the Allowed Damages Pool.

 

­In Whale v Mooney Everett Solicitors Ltd [2018] EWHC B10 (Costs) (12 June 2018),

Master Leonard, sitting in the Senior Courts Costs Office, allowed the client correspondence from his former solicitors, upon payment of a fee, but nothing more.

The client was seeking to bring a claim over deductions from the settlement of a claim in 2015 for damages for personal injury arising out of a road traffic accident.

The court rejected the application for copies of invoices and client account ledgers, saying that there was no evidence of misconduct on the part of the law firm to justify an order and that the claimant was not owed any fiduciary duties relating to the documents that did not belong to him:

If, as the evidence indicates, the Claimant was, during and on the conclusion of the retainer, sent sufficient information to take any necessary advice on applying for the assessment of the Defendant’s costs, then no imbalance exists in any material sense. It is not suggested that the Claimant was in some way incapable of keeping an adequate record. He just did not do so.”

The judge said that there was no entitlement to internal records and no entitlement to have funding documents sent more than once.

 

In Green & Ors v SGI Legal LLP [2017] EWHC B27 (Costs)

the Senior Courts Costs Office gave guidance on applications by clients under section 68 of the Solicitors Act 1974 for the delivery up of documents in the possession of solicitors.

Here, the Master dismissed applications by the clients for delivery up of funding documents, all invoices and all correspondence sent to them.

 

The Master referred to

Re Wheatcroft (1877) 6 Ch.D. 9 and

Leicestershire County Council v Michael Faraday and Partners Ltd [1941] 2 KB 205

and said that they drew an important distinction between the property of a professional adviser and the property of a former client and the appropriate law was that of proprietary rights and not confidentiality or anything specific to a solicitor/client relationship.

It was for the claimants to show that they were entitled to receive copies of another person’s property.

The Master gave the following guidance:

If a person writes a letter to another, keeping a copy, the recipient was not, of right, entitled to a copy, even if they agreed to pay for it. The purpose of creating documents for a client’s benefit was fulfilled when the documents were originally given to the client.

A client wishing to challenge the bill, but who had lost key documents, would be disadvantaged, but it did not follow that the solicitor had any obligation to compensate. A client’s inability to provide required documents with an application for detailed assessment would not invalidate the application and the court could manage the issue.

Ralph Hume Garry (a firm) v Gwillim [2002] EWCA Civ 1500

was authority saying that a client did not need the whole file in order to challenge a bill.

Granting such applications would bypass the specific provisions of CPR 31.16 regarding pre-action disclosure.

 

A different view was taken in

Hanley v JC and A Solicitors Ltd [2017] EWHC B28 (Costs)

the Senior Courts Costs Office, in Part 8 proceedings,  refused to order a firm of solicitors to supply a former client with a copy of the entire file, including documents owned by the solicitor rather than the client.

The court noted that there is no binding authority where solicitors have been ordered to hand over papers which they, rather than the client, own.

It also referred to the the Law Society’s practice note Who owns the file which states that there are many papers on a solicitor’s file which do not have to be handed over to the former client.

 

The Master said

“However, I am also concerned by the floodgates that would likely be opened by a ruling that solicitors can be ordered to hand over their complete file in circumstances such as these; such a move would foreseeably instil considerable satellite litigation and I am not persuaded that this would be a positive step, and dismiss the Application accordingly.”

 

A different view was taken in

Swain v JC and A Ltd [2018] EWHC B3 (Costs)

where a Master in the Senior Courts Costs Office ordered solicitors to provide a former client with documents from the file, so that the client could decide whether to seek a Solicitors Act assessment.

The application was made under section 68(1) of the Solicitors Act 1974 and the court’s inherent jurisdiction and sought disclosure of four schedules to the conditional fee agreement dealing with fees and expenses, together with any other documents forming part of the retainer.

Here, the Master said that the court had a discretion to order the provision of copies of the documents whether or not the client had a proprietary right to them.

He doubted that many clients would appreciate the need to retain the documents provided by their solicitors and would be at a significant disadvantage without them.

He realised that this may encourage satellite litigation, but that transparency might assist in the resolution of disputes and frivolous requests would be deterred if clients knew that they would have to pay for the copies.

The Master recognised that this decision differed from others of the SCCO and said that authoritative guidance would be useful.

The Master also queried the charging rate of £250.00 per hour as details of the fee-earner had been removed from the documents supplied.

“27. Further, quite apart from any concern as to the reasonableness of the fees generally and the necessity of expenses claimed in the bills in this case, it seems to me that there is a particular need to consider the status of the fee earner and the rates that were agreed for the fee earners (Pilbrow v Pearless de Rougmont & Co. [1999] 3 AER 355). In a letter dated 1 October 2015 the Claimant was told that a Legal Executive would be handling his claim but as I have recorded above the details of fee earners have been obscured in the documents disclosed. The rate of £250 per hour is perhaps a rate one would normally associate with a substantially higher-grade fee earner in a matter of significantly greater complexity and value. I would expect details as to the charging arrangements to be set out in the schedules to the CFA and I think it would be necessary to consider these prior to an application for an assessment in the context of a general consideration of the reasonableness of the funding arrangements and the charges.”

 

The Master also said

“29. I should perhaps add that the bills generated in 2015 do not state whether and, if so, what element of the charges consist of a success fee. Nor does the October bill assert any charge for a success fee. However, according to the Claim Notification Form the CFA provided for a success fee and as such the agreement would appear to be subject to the requirements of section 58 (4B) of the Courts and Legal Services Act 1990 and the Conditional Fee Agreements Order 2013 (no 689). The relevant information required by these provisions should be in the first of the schedules to the CFA.”

Both Green and Hanley are being appealed, with a decision likely before the summer 2018 break.

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Written by kerryunderwood

June 25, 2018 at 9:38 am

Posted in Uncategorized

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