The importance of getting it right with your client

8 June 2022

Election challenge led to costs dispute

The matter of Richard Slade and Company PLC v Erlam [2022] EWHC 325 (QB), heard in front of His Honour Judge Gosnell, sitting as a judge of the High court, relates to an appeal submitted by the appellant in relation to a matter whereby the appellant was ordered, by District Judge Batchelor on 22 November 2019, to prepare a final statute bill pursuant to section 68 of the Solicitors Act 1974.

This states: “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.”

By way of background, the respondent, along with three others, brought a petition to challenge the 2014 election of the mayor of Tower Hamlets in London, Lutfur Rahman. The respondent was successful in their petition and awarded costs, which included an order for payment on account of costs of £250,000.

Richard Slade & Company (RSC), the appellant solicitors, were instructed to enforce the costs order against Mr Rahman and the respondent entered into a retainer dated 23 April 2015. Invoices were raised to the respondent during the relevant period. The respondent entered into a conditional fee agreement (CFA) on 25 January 2016, the work under which was retrospective from 27 June 2015. The terms of the CFA included a cancellation clause, whereby the respondent would be liable for the appellant solicitors’ base costs and disbursements, should the retainer be cancelled by the respondent. Subsequently, the respondent terminated the retainer, and instructed new solicitors, thus triggering the terms of the cancellation clause.

Interim bill questions

The respondent duly issued part 8 proceedings on 7 February 2018 for assessment of the bill represented by RSC’s invoices, which detailed base costs and disbursements in separate invoices. District Judge Bellamy found that the bill could not be assessed because the bills were not interim statute bills.

This decision was appealed by the appellant, but was subsequently resolved by the Court of Appeal in Richard Slade and Company v Boodia [2018] EWCA Civ 2667, in which it stated that statute bills that “included only profit costs or disbursements, not both, did not prevent them from being interim statute bills.” Following this, the decision of District Judge Bellamy was set aside with an assessment to be undertaken by an alternative district judge.

The matter was heard by District Judge Batchelor, a regional costs judge, on 5 September 2019, with judgment given at a separate hearing on 19 November 2019. An appeal was brought against this decision, with permission to appeal given by Mrs Justice Lambert on 14 October 2021.

The grounds of appeal, and decisions, were as follows:

1) The district judge was wrong to find that the appellant’s retainer agreement and CFA did not provide for the rendering of interim statute bills to the claimant. This appeal was granted in relation to the original retainer but dismissed in relation to the CFA.

2) The district judge was wrong to find that the appellant’s bills were not interim statute bills. This was granted in part but limited to disbursements and detailed bills only.

3) Alternatively, the district judge was wrong to find that the claimant’s bills were not a Chamberlain bill or multiple Chamberlain bills. The appeal on this point was granted in full.

4) The district judge was wrong to find that in any event there were special circumstances which would have justified an assessment outside the periods at section 70(3) of the Solicitors Act 1974. This appeal was dismissed.

One of the main questions raised was whether the retainer dated 23 April 2015 allowed for interim statute bills. Any invoice from a solicitor that is not an interim statute bill is simply a request for a payment on account of work undertaken and does not start the time ticking under the Solicitors Act.

A further question was whether the CFA lite entered into on 25 January 2016 would allow for interim statute billing. District Judge Batchelor found that a CFA would not allow for interim billing, as the interim bill would be presented for a specified period to be paid on delivery of the same. This would, in turn, start the clock ticking for an assessment under the Solicitors Act.

It was deemed, therefore, inconsistent with the terms of the CFA, which would require payment for work at the conclusion of a matter, or the date at which the liability for costs came into force, for example the acceptance of a part 36 offer. A further trigger for payment of the solicitor’s costs is the termination of a retainer, as happened on 15 June 2016. Any bills delivered prior to this date would not trigger the client’s liability to pay the costs of their solicitor until such liability came into force at termination.

It was decided that “there was no written contract to enable an interim statute bill to be delivered after the CFA was brought into effect on 27 June 2015 and so all the bills delivered before it was terminated would be requests for payments on account in law”.

Advice on giving advice

The importance of knowing best practice is demonstrated also in the matter of ST v ZY [2022] EWHC B5 (Costs). This is an important matter, which will influence how advice is provided to clients. The claim related to a road traffic accident that included a minor. The claim for costs totalled £187,506 with a settlement agreed between the parties of £132,000. This resulted in a shortfall of £55,506. The solicitor sought approval to recover the shortfall, capped at £53,719 (including VAT), after-the-event insurance premium and a 12.5% success fee.

The claimant was advised that there would be a shortfall between the costs recoverable inter partes and those ultimately payable by the claimant just one month before the case settled. This was estimated at £43,500 plus VAT. This advice was also detailed in the claimant’s skeleton argument. The shortfall sum was similar to the total amount of the budget overspend and the capped costs management sum.

In regard to the overspend within the phases of issue/statement of case and ADR/settlement, no attempt was made to clarify the ‘good reason’ to undertake the work which resulted in the overspend. Instead, it was decided that these monies would be deducted from the client’s damages.

However, as Senior Costs Judge Gordan-Saker stated: “To avoid the presumption applied by CPR 46.9(3)(c), the solicitor must tell the client that as a result the costs might not be recovered from the other party. That must mean as a result of their unusual nature or amount. Telling the client that some costs might not be recovered from the other side is not sufficient. ST should have been told that the budget was being exceeded by a wide margin and that, as a result, those costs might not (and, indeed, almost certainly would not) be recovered from the other side.”

Therefore, the costs incurred above the approved budget were unreasonably incurred. This implied also to the costs management caps of 1% and 2%.

Senior Costs Judge Gordon-Saker concluded: “I should add that I think it very surprising that a solicitor would not tell their client that the budget had been exceeded and that the costs in excess of the budget would not be recoverable. At that point the client is moving from pursuing a claim in which reasonable and proportionate costs will be recoverable to a claim where no further costs will be recoverable in respect of some or all of the phases.”

These are important lessons to ensure legal professionals understand the implications of not servicing clients to the best possible standards. Budgeting is often disregarded until it is too late, without due consideration given to how a case is run and managed to the benefit of the client.

It is not simply enough to identify which work resulted in an overspend, but we must be managing these cases throughout their lifecycle and ensure that the client is involved in how they are conducted and what effect this will have on the settlement outcome and the client’s liability to pay costs.

This article first appeared on Practical Law’s Dispute Resolution Blog

David Bailey-Vella is an ACL Council member and a senior Costs Lawyer at Masters Legal Costs Services

Exclusive Access

Members only article

This article is exclusively for ACL members. Please log in to proceed, or click the button below to fill out an application from and become a part of our professional community.

Post details

Post type
Features
Published date
08 Jun 2022

Fill this form out to be notified when booking goes live.

Your Full Name
Hidden
This field is for validation purposes and should be left unchanged.