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31 January 2019
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Litigation Funding

The Solicitors Act 1974 may well be into its middle age by now, but time has not fully matured our understanding of statute bills. 

The latest case on them, Slade (t/a Richard Slade And Company) v Boodia & Anor [2018] EWCA Civ 2667, is an important one because it addresses what it is that makes a bill a statute bill. 

Lord Justice Newey began his ruling by usefully explaining the terminology: “Not every bill that a solicitor renders to his client is a ‘statute bill’. A ‘statute bill’ is one complying with the Solicitors Act 1974. Where a solicitor has delivered such a bill to his client, he can potentially sue on it, but he cannot subsequently charge any more for the work in question and, subject to certain time limits, the client can ask for the bill to be assessed by the court under section 70 of the Act. 

“Depending on the terms of the retainer, a solicitor may be able to raise statute bills during the course of a retainer as well as when he has completed the task on which he has been instructed, but interim bills may, alternatively, represent requests for payments on account. If that is the case, the time limits on applications for assessment do not bite and the solicitor cannot bring proceedings to recover his fees. On the other hand, it may be open to the solicitor subsequently to increase the amounts claimed and also to terminate the retainer if a bill is not paid.” 

The question before the court was whether a statute bill has to include both profit costs and disbursements. Both Master James in the Senior Courts Costs Office and Mrs Justice Slade, on first appeal, held that it did. The Court of Appeal found that it did not. 

First instance decision

Solicitor Richard Slade had been acting for Mr and Mrs Boodia in a rights of way dispute between 2013 and 2016. His retainer provided for bills to be sent out monthly in arrears, with disbursements normally billed for separately. By October 2016, when the Boodias instructed alternative solicitors, Mr Slade had delivered 61 invoices, 43 of which were devoted exclusively to profit costs and the other 18 purely to disbursements. 

The Boodias were billed £141,300 plus VAT for profit costs and £31,700 plus VAT for counsel’s fees and other disbursements. They issued a claim form in November 2016, asking for all their bills to be assessed under section 70. 

The question was whether the bills were all statute bills, in which case those rendered more than a year before the retainer was terminated could not be assessed, or whether, as claimed by the Boodias, they were “a series of on account bills culminating in a final statute bill”. 

Master James held that the retainer – though “somewhat ambiguous between payments on account monthly and [statute] bills monthly” – did allow for interim statute bills. But she found that, to be a bill of costs within the meaning of section 70, the bill must include both profit costs and disbursements for the period covered by the bill. As the individual 61 bills did not, they were not interim statute bills. 

First appeal

Mrs Justice Slade upheld this decision. She said: “Master James could have but did not find that the retainer did not provide for delivery of interim statute bills. The bills, the subject of agreement between the parties were not to be 'complete self-contained bills of costs to date' [per Spencer J in Bari v Rosen (t/a RA Rosen and Co Solicitors) [2012] 5 Costs LR 851]. 

“There were to be separate bills rendered at different times for profit costs and disbursements. There can be no subsequent adjustment of costs claimed in a statute bill in respect of the period to which they relate. The finality referred to in the agreement relates only to the solicitor's profit costs not to the totality of the costs incurred or payable in respect of the period of the bill.” 

Here, none of the bills contained both profit costs and disbursements and so were not statute bills. If the time for applying for an assessment ran from the date of delivery of each monthly profit costs bill, the court would be asked to make an assessment without knowing what disbursements had been paid or were liable to be paid by the solicitor in respect of the same period. 

Court of Appeal ruling

Giving the ruling of the Court of Appeal – sitting with Lords Justice Coulson and Haddon-Cave – Newey LJ said that sections 67, 70 and 87 of the Solicitors Act 1974 did not assist with determining the issue. He noted that Slade J had said that the treatment of incomplete bills of costs as statute bills “could lead to a multiplicity of applications under section 70 merely to preserve the client's right to apply for assessment”. 

But Newey LJ said the approach adopted by Slade J and Master James would itself have “unsatisfactory implications”. He explained: “A solicitor could not, it seems, raise a statute bill until he had himself been invoiced for all disbursements incurred during the relevant period, leaving the solicitor dependent on the cooperation of third parties. 

“The difficulties would be the greater if work were being undertaken (say, by counsel or an expert) at the end of a solicitor's billing period. The solicitor would, presumably, be unable to render a statute bill until he knew the cost of work done up to midnight on the final day and, where work continued into the next billing period, an apportionment might be required.” 

The Boodias argued that the solicitor could ask for payments on account instead of raising interim statute bills (relying, if necessary, on section 65(2) of the 1974 Act). Newey LJ said: “But that would deny both solicitor and client finality and also mean that the solicitor would be unable to bring proceedings to recover his fees. That would be the case, moreover, even in circumstances such as are mentioned in section 69(1)(a) and (b). In any case, the 1974 Act nowhere states that a statute bill must encompass both profit costs and disbursements, and I can see no justification for such a rule in the case law either.” 

In any case, the 1974 Act did not state that a statute bill must encompass both profit costs and disbursements, and Newey LJ saw no justification for such a rule in the case law either. 

He cited the Court of Appeal decision in Ralph Hume Garry v Gwillim [2002] EWCA Civ 1500 that a client could establish that a bill is not one “bona fide complying” with the Act by showing “(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”. 

That court also spoke of the test being “whether the information in the bill supplemented by what is subjectively known to the client enables the client with advice to take an informed decision whether or not to exercise the only right then open to him, viz, to seek taxation reasonably free from the risk of having to pay the costs of that taxation”. 

Though Newey LJ said he would not wish to exclude the possibility of a bill restricted to either profit costs or disbursements failing to provide sufficient information that the client could not decide whether to exercise his right to challenge the bill, “that, however, would be the exception rather than the rule”. 

He continued: “I do not think it can be inferred that a statute bill must always, or even usually, include both profit costs and disbursements. Separate billing for profit costs and disbursements is common with modern, digital billing, and I do not accept that that need give rise to problems.” 

Good news, bad news

It is for this reason that the decision is good news for solicitors as the practicalities of the earlier judgments are well noted by Newey LJ. It arguably makes life trickier for clients as they will have to consider exercising the right to challenge interim statute bills as they come along and while they are still being advised by the solicitors. 

While the answer for the client could be to demand that the retainer makes provision for no delivery of interim statute bills, it will only be an extremely switched-on client who would know to do this. Newey LJ did provide a possible escape if the bill provides insufficient information, but then made clear this would be the exception rather than the rule. Perhaps that is the most surprising element of the decision. 

Practically speaking the time restrictions on rights to assessment would have the appearance of being reasonable in themselves. It is, in itself, unreasonable for these rights to be open ended. With the fact that such assessments are usually the result of a bad or unexpected result, or a breakdown in a relationship between the solicitor and his client, is it fair that a client is in a position to compel assessment on fees since inception – fees that the client has previously been perfectly content with? 

In my experience, most clients are more than capable of querying the level of fees at any point where they feel they may be being overcharged. At that point, and in ongoing proceedings, there is scope for any rights to be reserved by the client. It would be unusual for the court to refuse an assessment of costs by consent, i.e. with the agreement of the solicitor. However, this is again unlikely to be a suggestion coming from the solicitor and most clients are simply not informed enough to follow this path.

ARTICLE BY FRANCIS KENDALL, VICE-CHAIRMAN OF THE ASSOCIATION OF COSTS LAWYERS

This article was first published in Litigation Funding in January 2019.

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