Many years ago, I remember being led in the Court of Appeal in a particularly contentious set of appeals, before a division of the court presided over by the sadly deceased Lord Justice Brooke, who was then Vice President of the Court of Appeal.
The silk on the other side made a particularly tendentious point, buttressed by reference to a House of Lords authority. With a sigh, his Lordship observed wearily, that the House “lived in another world”, which perhaps indicated what he thought of the argument.
For most of my professional life, the House of Lords and then latterly the Supreme Court, tended not to engage in hearing appeals on issues of costs and latterly litigation funding, viewing, rightly, that the Court of Appeal was closer to the coalface of legal practice and better placed to resolve such issues.
How times have changed.
Now they seem readily prepared to engage in these fields, and not to put too fine a point on it, havoc has ensued, with decisions such as Paccar, and before that Adelekun in recent memory. The most recent case where the Supreme Court has intervened is that of Oakwood Solicitors v Menzies [2024] UKSC 34.
This case concerns an important point of construction of section 70 of the Solicitors Act 1974 and the consequential practice that solicitors should follow, when formulating their retainers and then delivering their bills to their clients, in order to trigger the time limits within the Act which determine whether a solicitor and client assessment can be brought, or not, as the case may be.
The case has gained some notoriety already, and was ably and skifully argued by counsel on both sides, Mr Mallalieu KC and Mr Ralph, leading respectively for the former client and the solicitors and their juniors Ms McGungle and Ms Bedford providing support.
Section 70 says:
(1)Where before the expiration of one month from the delivery of a solicitor’s bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.
(2)Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment, order—
(a)that the bill be assessed; and
(b)that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.
(3)Where an application under subsection (2) is made by the party chargeable with the bill—
(a)after the expiration of 12 months from the delivery of the bill, or
(b)after a judgment has been obtained for the recovery of the costs covered by the bill, or
(c)after the bill has been paid, but before the expiration of 12 months from the payment of the bill.
no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the assessment as the court may think fit.
(4)The power to order assessment conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill.
(5)An order for the assessment of a bill made on an application under this section by the party chargeable with the bill shall, if he so requests, be an order for the assessment of the profit costs covered by the bill.
(emphasis added)
At first blush the scheme is straightforward: once payment of a bill has been made, a client has a truncated time period to seek an assessment, before a guillotine descends precluding any assessment. In this respect it seems clear from the wording of the section, that payment and assessment are two different things: payment is the transfer of funds in respect of costs, and assessment is the fixing of the amount of costs that a client owes their solicitor. Payment can conceptually be an anterior step, and need not be agreement of the sums owed by the client: otherwise there would be no scope for an assessment after payment.
The concepts reflect how solicitors have traditionally worked: and continue to work in private practice today, and how long before the innovation of conditional fee agreements, clients would put solicitors in funds which would be held on their client account, forming the basis for an “evergreen retainer”.
As the solicitor did work, they would periodically issue a request for payment on account or a statutory bill of costs to the client, and transfer monies from client account to office account. Payment reflected this process of transfer. Assessment often happened long after payment, when a client decided they were unhappy with the bills they were delivered.
The Solicitors Accounts Rules still reflect this scheme, whereby payment of monies out of client account can be made before delivery of a bill, and therefore before any assessment, provided that written notification of the transfer is made:
Where you are holding client money and some or all of that money will be used to pay your costs:
1. you must give a bill of costs, or other written notification of the costs incurred, to the client or the paying party;
2. this must be done before you transfer any client money from a client account to make the payment; and
3. any such payment must be for the specific sum identified in the bill of costs, or other written notification of the costs incurred, and covered by the amount held for the particular client or third party.
Payment then is the simple transfer of funds.
Not so, says the Supreme Court.
Instead, they have utilised caselaw largely from the nineteenth century, and thus caselaw decided without regard to the context of the Law Society Model terms or modern business models, to add a gloss to the statute. Payment now requires a settlement of account, where the client expressly and specifically agree the payment of funds to discharge a bill, to the solicitor whether by deduction from monies held, or by physical transfer to the solicitor.
This concept of settlement of account, now elides what were hitherto the separate concepts of payment and assessment, and means that the efficacy of the standard term in the Law Society Model CFA has been destroyed.
Solicitors now face a potentially open ended limitation period for assessment, unless they move quickly to act in relation to ongoing cases, and revised their terms and conditions and billing practices to cope with the new orthodoxy.
In this appeal, the key point was the time bar.
The danger of too prescriptive an approach to the timebar, is that a client’s ability to effectively challenge unreasonably incurred fees is lost, before they can make sensible use of their right to an assessment. Conversely, if the solicitors can point to a construction of “payment” and the time limits which does not impair the client’s right to assessment, there is no problem that needs curing. Also underpinning the significance of the timebar, is that lack of certainty, is inimical to justice: solicitors having rendered a bill, received payment of the bill, should be able to draw a line under a case.
If there must now be a settlement of account with precise figures, what is the effect of the contractual clauses in the Law Society Model CFA? If they are necessarily ineffective to provide for “payment” to occurr, then what does the solicitor do with the funds, where the client is objecting to a deduction proposed? Can they still make the deduction? Are they precluded from making the deduction? Does a Mexican stand off ensue, potentially for years, with no payment occurring, but the client not making an application for an assessment?
The Solicitors Accounts Rules may yet prove to be of great importance. They are made, under statutory powers in the Solicitors Act 1974. They seem to suggest, that if a solicitor is owed fees, they can lawfully deduct the monies from client account and transfer to office account, either with written notification (where there is an entitlement to a payment on account for example) or on delivery of a bill. It is most odd that the solicitor is authorised by law to make those transfers, yet at law, they do not amount to “payment” of the bill.
It is clear that payment can occur in many different ways other than by way of deductions from client monies held on account: delivery of a bill, and payment of it by cheque from the client’s own funds, would presumably represent a settling of accounts. But would this mean that the client is not able to bring an assessment having “settled the account”? There is a certain irony in that potential outcome: it seems to me that a settling of accounts, is actually a far more expansive phrase than payment.
If it means anything, it must mean a once and for all compromise of the solicitors right to be paid. Thus if payment and settlement of accounts, means effectively the same thing, that would actually erode the client’s consumer rights in some scenarios, by removing the right to an assessment.
Practically how do you distinguish between payment of the exact sum of solicitors bill to the last penny leaving a right to an assessment, and a settlement of a potential dispute in its entirety?
This case is the last word on “payment”, until the Solicitors Act 1974 is revised, in the form of a root and branch revision of the type that the Court of Appeal, the Master of the Rolls and numerous costs judges are quite clear is needed.
But I think the effect of this decision will be to lead to more litigation.
It undoubtedly will require solicitors to revise their terms and conditions, and just as significantly their billing practices, in order to avoid leaving an open ended limitation period for an assessment on their files.