The recent case of  Stella v Hodge Jones & Allen LLP demonstrates the importance (and benefit) of a law firm having a retainer in place with a client which clearly sets out the type (or types) of bills that will be raised.

Types of Bills

There are 4 types of invoices that can be raised:

1. Statute Final.
2. Payment on Account.
3. Gross Sum.
4. Chamberlain (a series of bills which are treated as payment on account bills, but which all become final bills upon delivery of the statute final bill)

Retainer

Law firms should clearly set out in client care letters and terms of business how a client will be billed i.e. will the bills raised be interim statute final bills or will they be payment on account bills.

Stella v Hodge Jones & Allen (HJA)

The Claimant requested an assessment of 34 bills raised to him by HJA.

There were a number of legal arguments in relation to the Claimant’s ability to challenge all the bills, but this blog only focuses on the arguments in relation to the type of bill raised.

HJA’s position was that only 8 of the 34 bills were capable of assessment, because the other 26 bills were outside the time limits for assessment i.e. the 26 bills (totalling £140,492.20) were interim statute final bills and, as a result, those bills were outside the period for challenge (s70 Solicitors Act 1974).

Judge Whalan determined that the bills were payment on account bills; therefore, the time limits under the Solicitors Act 1974 had not commenced. The primary reason being the wording in the HJA retainer in relation to billing arrangements. This meant that the Claimant was entitled to assess all the bills, despite some of them dating back to 2017.

Judge Whalan made an interesting comment (obiter dicta) in his Judgment:

“There is no real excuse for imprecision, uncertainty or ambiguity. If a solicitor wants to provide for the demand and payment of interim statute bills, then the retainer should express an unequivocal provision to this effect. The profession’s consistent failure to do so is, frankly, baffling.”

In reaching his decision, Judge Whalan relied on this test:

1. The burden of proving that the retainer provides for the delivery of interim statute bills falls on the receiving party.
2. When considering a retainer, it is necessary to refer to the relevant contractual provisions as a whole.
3. When determining whether a retainer does allow the solicitor to render interim statute final bills, the court should resolve any fundamental ambiguity against that construction.

This is a common dispute on solicitor/own client assessments, and an argument which, more often than not, falls in favour of the client (because of the above test and, in particular, paragraph 3). The client is in a position of strength if there is ambiguity or doubt over the contractual terms because the burden of proof falls on the law firm.

Points to consider for good practice 

These are basic points, but if followed, will help a law firm to avoid such a dispute:

• Harmony 

Ensure that what is said in your client care letter aligns with what is said in your terms of business. Also, ensure that someone who has expertise in costs law has the responsibility of drafting the relevant parts of your client care letter and terms of business.

• Bill (invoice) template 

Ensure you have a bill template (or templates) which cover the 4 types of bills mentioned earlier. Also, ensure the communication sending the bill to the client (email or letter) provides the correct information.

Summary

A lack of consistency is usually the problem. Ensuring harmony between the client care letter, terms of business, bill and communication with the bill is key to avoid a dispute.

As a law firm, it is sensible to have a default type of bill that you want to raise for most of your matters. For example, your template client care letter and terms of business may cater for statute final bills, so that would be the default bill template. However, you should provide your lawyers with the knowledge and autonomy to modify template client care letters and terms of business to change the type of bill to be raised, where appropriate. For example, payment on account bills would be appropriate for a matter funded by way of a discounted Conditional Fee Agreement.

We are regularly instructed by law firms to review their retainers and provide advice to ensure compliance with the latest developments in costs law and litigation funding. Please contact Andrew McAulay (andrew.mcaulay@clarionsolicitors.com or 07764501252) if you have any questions.