The Solicitors Act process is not available to a third party who a court found had agreed to cover the costs of a solicitor’s client as he was not the “party chargeable with the bills”, the High Court has ruled.
Richard Slade, who at the time was the sole principal of his firm, sued Deepak Abbhi for the costs incurred in acting for his father-in-law, Balmohinder Singh, in an ultimately unsuccessful case brought against one of Mr Singh’s sons, Jasminder.
Mr Singh died in 2015 and his estate is insolvent, but Mr Slade claimed that he had an oral agreement that Mr Abbhi would pay his costs in acting for Mr Singh. He was seeking £333,260 in damages plus interest at 8% since the action had begun, taking the claim to £371,159.
Last September, His Honour Judge Russen QC – sitting as a High Court judge – found for Mr Slade, saying it was “implausible” that he would have taken on the case if he did not have a guarantee of payment. He refused permission to appeal.
In the latest hearing, Mr Abbhi argued that, as Mr Slade had not delivered the bills to him, the amount recoverable was nil because section 69 of the Act means that, if a solicitor brings an action against a party chargeable before delivery of a bill to that person, the solicitor’s claim for a money judgment must be dismissed.
Instead, he said that, if and when delivered to him at some future point in time, he would have the right to seek an assessment of Mr Slade’s bills and, if he did, “no action shall be commenced” on the bill until the assessment was completed.
HHJ Russen identified “four interconnected reasons” why Mr Abbhi was not within the language of section 70(1) and it was an “impermissible leap” to go from saying Mr Abbhi had primary liability to finding he was “the party chargeable” with the bills.
“The first is that the agreement established by the judgment quite deliberately did not involve bills being delivered to Mr Abbhi as if he was the party (or one of the parties) chargeable with their payment.” The second, related, reason was that it would have been “directly contrary to the funding agreement he reached with Mr Slade to contemplate that he would be entitled, independently of the right enjoyed by Mr Singh as the client, to enjoy the protection of [section 70(1)]”.
The judge explained: “Mr Abbhi’s promise to Mr Slade anticipated the credit risk posed by the client which, without that promise, Mr Slade was not prepared to take on by acting for Mr Singh. In my judgment, the correct analysis is not one of an implied term that, as ‘the party chargeable’, Mr Abbhi would not rely upon sections 69 and 70. For the first reason given above, he was not the party chargeable.
“And the essential term of his agreement with Mr Slade was that, through the promised lending to Mr Singh, he would enable Mr Singh to make the payments envisaged by the retainer agreement.” This linked to the third reason, namely that Mr Singh was the party chargeable with the bill.
The fourth reason related to the fact that, as a US resident, any bills delivered to Mr Abbhi would not be subject to VAT, while those delivered to Mr Singh were.
“Whether or not section 70 (alone, without reference to section 71) covers the situation of more than one person being chargeable with a bill otherwise than by reference to a joint obligation, the notion that Mr Abbhi was also a ‘party chargeable with the bill’, when at the same time he says he is entitled to strip out the VAT element of it, when Mr Singh could not, really answers the point against him.
“On Mr Abbhi’s own case, two persons are said to be chargeable with the same bill, but in different sums, and Mr Slade is not contractually entitled to look to Mr Abbhi for payment of its VAT element. The fact that Mr Abbhi says he is not liable to pay VAT demonstrates that only the VAT-paying client Mr Singh was the party chargeable with the bills.
“The amount of a solicitor’s bill cannot vary according to the identity of the person to whom it is addressed, whether that person is jointly liable or jointly and severally liable with another recipient of it.”
As a result, HHJ Russen rejected the argument that the value of Mr Slade’s claim should be assessed at nil and that the most Mr Slade could get out of the proceedings was declaratory relief that made it plain he was now entitled to deliver the relevant bills to Mr Abbhi.
He added that, even had he found there to have been substance in Mr Abbhi’s reliance upon section 69, “I would not have accepted [his] submission that the inexorable conclusion is that the recoverable quantum is nil. Instead, I would have found that it is now – after the judgment on liability reached by reference to the parties’ pleaded cases – too late for him to rely upon what that section actually provides.”
HHJ Russen directed a common law assessment, to be undertaken by a costs judge, and that Mr Abbhi make an interim payment on account of costs of £120,000.
Sebastian Kokelaar (instructed by Richard Slade and Company PLC) represented the claimant and Stephen Robins (instructed by Birketts) the defendant.