Dean Menzies v Oakwood Solicitors Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Geoffrey Vos,Lord Justice Lewison,Lady Justice Simler |
| Judgment Date | 14 July 2023 |
| Neutral Citation | [2023] EWCA Civ 844 |
| Court | Court of Appeal (Civil Division) |
| Year | 2023 |
| Docket Number | Appeal No: CA-2023-000014 |
[2023] EWCA Civ 844
Sir Geoffrey Vos, MASTER OF THE ROLLS
Lord Justice Lewison
and
Lady Justice Simler
Appeal No: CA-2023-000014
Case No: QA-2022-000090
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
Mr Justice Bourne: [2022] EWHC 3199 (KB)
Costs Judge Rowley
Royal Courts of Justice
Strand, London, WC2A 2LL
Craig Ralph and Erica Bedford (instructed by Oakwood Solicitors Limited) for the Appellant Solicitors (the Solicitors)
Gemma McGungle (instructed by JG Solicitors) for the Respondent/Claimant (the Client)
Hearing dates: 5 July 2023
Sir Geoffrey Vos, Master of the Rolls, Lord Justice Lewison, and
Introduction
Section 70 (section 70) of the Solicitors Act 1974 (the 1974 Act) entitles a client to apply to the court for an assessment of a solicitor's bill. But section 70(4) provides that the power to order assessment is not “exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill”. The question raised on this appeal is what amounts to payment of the bill.
That question arises in the context of a Conditional Fee Agreement agreed in writing on 17 December 2015 (the CFA) between the Client and the Solicitors some years before settlement of the Client's claim. The CFA included terms by which the Client agreed in advance to the deduction of the Solicitors' fees. When the claim was settled in 2019, the Solicitors deducted the fees shown in their final statutory bill from the settlement monies they held in their client account, before sending the balance to the Client. The Solicitors contend that that deduction constituted “payment” for the purposes of the provisions in section 70 restricting the time within which there can be a court assessment of their bill. Accordingly, they say that the Client was barred by section 70(4), when he started proceedings in 2021, from seeking an assessment of the Solicitors' bill.
On the other hand, Mr Justice Bourne (the judge) on the first appeal held, and the Client submits in this court, that “payment” of the Solicitors' costs for the purposes of section 70(4) can only take place when there has been “a settlement of account between the parties”. On the facts of this case, there was, the judge held, no “settlement of account” between the Client and the Solicitors, so that it was open to the Client to seek an assessment notwithstanding the delay between the deduction of the costs and the commencement of these proceedings. The Client submits, in effect, that solicitors must get their clients' express consent to the precise amount of the bill they seek to deduct before that deduction will amount to “payment” so as to start time running for an assessment application under section 70.
We have decided that none of the 1974 Act nor the authorities provide any warrant for a requirement that there must be a “settlement of account” in addition to a prior agreement to payment of the fees shown in a statutory bill. Instead, “payment” in section 70 is to be construed as including the deduction of fees payable under a statutory bill with the knowledge and consent of the paying client.
This is another case, following the recent decisions of this court in Belsner v. Cam Legal Services Ltd [2022] EWCA Civ 1387, [2023] 1 WLR 1043 ( Belsner) and Karatysz v. SGI Legal LLP [2022] EWCA Civ 1388, [2023] 1 WLR 1071 ( Karatysz), which, in our view, highlights the inadequacy of the 1974 Act for the purposes of regulating the relationship between solicitors and clients in relation to the costs of modern personal injury disputes. The 1974 Act restricts the time during which clients can seek court assessments of their solicitors' bills. There are, of course, regulatory requirements outside the 1974 Act, but this case highlights (as did Belsner and Karatysz) that it is for consideration whether there should be further and more up-to-date statutory safeguards to protect clients in relation to the charging and payment of solicitors' fees.
In this judgment, we will now deal with the essential factual background, the relevant statutory provisions, the decisions of the Costs Judge and the judge, other requirements in relation to statutory bills, the relevant authorities and a discussion of our reasoning.
The essential factual background
On 29 November 2015, the Client suffered serious injuries in a road traffic accident. He instructed the Solicitors (Michael Lewin Solicitors Ltd, which later changed their name to Oakwood Solicitors Ltd) to act for him to pursue a claim for damages for personal injury against the other party (the defendant).
The CFA between the Client and the Solicitors included the following:
Paying us
If you win your claim, you pay our basic charges, our disbursements, and a success fee together with the premium for any insurance you take out. You are entitled to seek recovery of some of our basic charges and out disbursements from your opponent, but not the success fee or any insurance premium. You will pay the balance of our basic charges and our success fee out of your compensation The success fee that you will pay is itself subject to a maximum limit, which is detailed in the accompanying ‘Conditional Fees — what you need to know’ document which forms part of this agreement, but in addition we agree to limit the amount you will be liable to pay in respect of the balance of our basic charges and the success fee to a maximum of 25% of your damages as defined in the ‘Conditional Fees — what you need to know’ document.
It may be that your opponent makes a formal offer to settle your claim which you reject on our advice, and your claim for damages goes ahead to trial where you recover damages that are less than that offer. If this happens, we will not add our success fee to the basic charges for the work done after we received notice of the offer or payment. You would also be liable for your opponent's costs should this happen, but usually only up to the amount of any award.
If you receive provisional damages, we are entitled to payment of our basic charges, our disbursements and a success fee at that point. If you receive interim damages, we may require you to pay our disbursements at that point and a reasonable amount for our future disbursements, but will seek to recover these form your opponent at the conclusion of the claim.
If you lose you do not have to pay our charges at all, although you may have to pay any expenses or disbursements we have incurred on your behalf, although you can take out insurance against this risk. If you lose your opponent cannot seek to recover their costs from you unless a judge concludes that your claim was fundamentally dishonest.
The Success Fee
The success fee is set at 25% of basic charges. None of this percentage relates to postponement of payment of our fees and expenses. The total amount of the Success Fee cannot exceed 25% of your damages as explained within the ‘Conditional Fees – what you need to know’ document. For further details in relation to the Success Fee, see the ‘Conditional Fees – what you need to know’ document. [Emphasis added].
The “Conditional Fees – what you need to know document”, which formed part of the contract, stated:
1.5 You agree to pay into a designated account any cheque received by you or by us from your opponent and made payable to you. Out of the money, you agree to let us take the balance of the basic charges; success fee; insurance premium; our remaining disbursements; and VAT. You take the rest.
1.6 Whilst there is no maximum limit in relation to our Basic Charges, to give you certainty as to the maximum amount that you can be charged, we agree with you that, if you win, we will limit the total amount we will charge you for Basic Charges, Success Fee and Disbursements to a maximum of 25% of all the compensation you receive after deducting any fees and expenses recovered from your opponent. This does not include any insurance premium for any policy that you choose to take out which has to be paid in addition. The amount payable in respect of any Success Fee shall never exceed 25% of the amount of your damages as set out below. [Emphasis added].
[15.5] of that document recorded that, before signing the CFA, the Solicitors had explained the Client's right to an assessment of the costs. [17.1] repeated the point made in [1.5] of the Solicitors' terms of business referring to their complaints procedure; and went on to say that there might also be a right to object to the bill by applying to the court for assessment of the bill under Part III of the 1974 Act.
On 1 March 2019, the Solicitors put to the Client an offer made by the defendant to settle the claim for a global sum of £275,000. The Solicitors' advice was that he should continue with the claim. But their letter said:
If you accept the global offer £275,000 the case will settle now. Our 25% deduction fee with apply and [we] will have to work out the CRU Benefit deductions alone with any subrogated costs payable, so that you are clear on what your final “in hand” settlement figure will be.
The Client replied by email on the same day:
… I will accept their offer of £275,000 subject to your costs being deducted, can those costs be retrieved from the defendant is that correct?
In answer to that query, the Solicitors replied:
Turning to the specific figures we take 25% from the global amount awarded on all injury cases (as do other solicitor firms) – this is not recoverable back from the Defendant.
On 4 March 2019, the Client instructed the Solicitors to accept the offer. On 18 March 2019, the Solicitors received the balance of the Client's damages totalling £210,004.85, net of...
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