Clearing the Special Circumstances Hurdle; Section 70 (3)(c) of the Solicitors Act

The case of Eurasian Natural Resources Corporation Ltd v Dechert LLP [2017] EWHC B4 (Costs) addressed what is a special circumstance for the purpose of securing an application for the assessment of a solicitor’s bill where payment had been made, but 12 months had not yet lapsed.

Section 70 (3)(c) of the Solicitors Act 1974 states that, where a paying party wishes to have the costs assessed but has failed to make an application within one month of delivery of their solicitor’s invoice, and where the paying party has either; allowed 12 months to lapse following delivery of the invoice, had judgment against them for recovery of the costs billed, or where they have paid the bill in full but 12 months has yet to lapse post payment, the court will not make an order expect in special circumstances.

Eurasian Natural Resources Corporation Ltd addresses what those special circumstances could look like. This particular case was subject to private proceedings; however, the Judgment has been made public with a small number of redactions.

The defendant rendered invoices totalling circa. £13.6 million, which were all paid in full. The claimant was unable to seek an assessment of invoices totalling £3.9 million on the basis they had been rendered and paid more than 12 months prior – the Court had no jurisdiction to assess those costs. The parties also agreed that invoices totalling £5.5 million could be assessed on the basis one month had not yet passed. A balance of £4.2 million remained, spread across 15 invoices where the Claimant had to show special circumstances in order to obtain an order for their assessment.

The claimant identified seven different reasons why this was a special circumstance, with Master Rowley accepting six of those seven reasons.

The starting point for the claimant was whether there was a special feature in the case which required an explanation, and whether this meant it was reasonable to proceed to a detailed assessment.

Firstly, Master Rowley accepted that a special circumstance existed in the discrepancy between the estimates provided to the client and the costs actually billed by the solicitor. This provided reason to proceed to a detailed assessment. He continued, however, to also comment on whether further submissions amounted to special circumstances.

Master Rowley found that the size of the bills, whilst not a direct special circumstance, could be a ‘magnifying prism’ to billing irregularities, which was also identified as a low hurdle to demonstrate a special circumstance in this case.

He also found that the relationship between the claimant and his solicitor was very important, as the claimant in this case highly valued their solicitor’s relationship with the Serious Fraud Office. The claimant was aware that a relationship breakdown with their solicitor would not only lose their prized expertise, but may also undermine the Serious Fraud Office’s confidence in the investigation. This point, whilst very case specific, highlights the fragility of some relationships and demonstrates why some claimants may not, despite wanting to, challenge the levels of fees within the one month as required by s.70 of the Solicitors Act 1974.

Secondees from Addleshaw Goddard had assisted the claimant’s legal department during the matter and as part of their duties they had queried the defendant’s billing. The claimant submitted that the defendant’s hostile reaction to these modest queries showed how unrealistic it was to expect the claimant to formally challenge the fees during the course of the retainer, to which Master Rowley agreed. This, again, amounted to a special circumstance.

Finally, Mr Rowley also concluded that the parties’ conduct in Solicitors Act proceedings could be relevant. In this case, the defendant’s conduct of these proceedings (in that they sustained attempts to avoid scrutiny of their charges), would amount to a special circumstance in that they called for an explanation.

The one submission that was rejected as a special circumstance was the fact that there was going to be, in any event, a detailed assessment of the invoices totalling £5.5 million. Master Rowley did not accept that the existence of other invoices resulted in a special circumstance.

There is a wealth of information considered within this one judgment, with Master Rowley succinctly summarising what amounts to special circumstances at paragraph 102;

“The only one which does not amount to a special circumstance is the existence of other bills being assessed (factor 3). The peculiarities of the solicitor client relationship here making Solicitors Act applications unrealistic (4) combined with the defendant’s response to any challenges (5) amounts to a special circumstance in my view. So too does the defendant’s approach to these proceedings (7). The billing irregularities (6) would amount to a special circumstance when viewed through the magnifying prism of the size of the bills (2)”.

 

This Judgment helpfully provides guidance on what factors may be deemed a special circumstance when attempting to secure an application for the assessment of a solicitor’s bill where payment has been made, but 12 months has not yet lapsed. It must be remembered that this case is very fact sensitive, but for any paying party finding themselves in a position where they are considering an application for the assessment of a bill paid less than 12 months prior, this case may be exactly what they need.

If you have any questions or queries in relation this blog please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s