Category: Solicitor and Own Client Costs

Section 70 of the Solicitors Act 1974 – the importance of clear billing agreements and accurate cost estimates

Bethany CollingsLeave a comment

In the recent judgment of Toplasson GmbH v CMS Cameron McKenna Nabarro Olswang LLP [2025] EWHC 118 (SCCO), the Claimant sought an order under section 70 of the Solicitors Act 1974 (“the Solicitors Act”) for the Detailed Assessment of 27 invoices raised by the Defendant. All but the last bill was delivered more than 12 months before the issue of proceedings and all but the last 8 bills were paid more than 12 months before the issue of proceedings.

The Claimant, a software supplying company, instructed the Defendant, in August 2019 to prepare a contract with a customer on their behalf. The contract was subsequently terminated by the customer, which resulted in litigation and a judgment against the Claimant in the sum of €5 million, which at the time of the hearing, was being appealed by the Claimant. There were therefore two retainers between the parties, one in respect of non-contentious work for preparing the contract and the second for contentious work in respect of the litigation. Work commenced in respect of the litigation in April 2020.

There were three costs estimates given to the Claimant. The first was provided in July 2020, which was the day before the mediation was to commence, in the sum of £1,920,664. This included incurred costs of £240,000. The Defendant then filed a case management sheet in July 2021 which stated that the incurred costs were at that point £565,000, and the estimated costs to trial were £2.05 million. The final costs estimate was provided in March 2022 where future costs were stated as £1,717,500.

The invoices largely followed the same format and included a description of the work done in a similar level of detail to that which would be set out in a bill of costs, or breakdown, for Detailed Assessment. The first invoice in respect of the non-contentious work was delivered in July 2019. The Defendant issued monthly invoices for their work thereafter, with the final one delivered in May 2022.

As the litigation progressed, the balance of fees outstanding grew, with a partial payment of £500,000 fees made in January 2022. By May 2022, unpaid legal costs reached £1.3 million, prompting the Defendant to terminate their retainer.

Key issues considered

The case proceeded, based on the determination of the following key issues:

  1. The status of the bills and whether they were interim statute bills or a series of on account bills which taken together formed a Chamberlain bill?
  2. Under which subsection of section 70 of the Solicitors Act did the bills fall under?
  3. Insofar as the bills (or any of them) were found to come within the subsections of section 70 of the Solicitors Act, on what basis could an assessment be ordered?
  4. Did the Court have power to make an order for Detailed Assessment restricted to the profit costs and all other disbursements (excluding counsel’s fees and Court fees) under section 70(6) of the Solicitors Act?
  5. Should the Court make any order for payments on account and if so, for how much?

Judgment

In respect of the first issue, the Defendant’s position was that the bills were interim statute bills, and final bills for the periods they covered. Meaning only the final 8 could be subject to assessment, unless ‘special circumstances’ were proven. The Claimant’s position was that all 27 bills were on account bills that together formed a single final statute bill on 7 June 2022.

Senior Costs Judge Gordon-Saker ruled that the Defendant did not have the right to render interim statute bills because:

  • The retainer agreements did not explicitly state that each bill was “final” for the period it covered.
  • The wording in the agreements (“keep you informed of the level of costs incurred”) was more consistent with monthly billing.
  • Previous case law showed that without a clear statement that bills are final, they do not qualify as interim statute bills.

The bills collectively formed a single final statute bill on 7 June 2022 and the Claimant was therefore entitled to request a Detailed Assessment of all 27 bills, totalling £2.15 million.

For the purposes of the second issue, the judgment analysed which subsection of section 70 applied:

  • Section 70(2) applies when the client seeks an assessment within 12 months of receiving the bill and provides that the Court may order such assessment on such terms as it sees fit.
  • Section 70(3) applies if more than 12 months have passed and requires the client to prove ‘special circumstances’.

The Judge found that because the final bill was issued on 7 June 2022 and the claim was brought within 12 months, section 70(2) of the Solicitors Act applied, and the Claimant did not need to prove ‘special circumstances’.

Although the Claimant did not need to prove ‘special circumstances’, the Judge still examined key factors which were raised by the Claimant. In particular, the Claimant argued that the Defendant unlawfully ended its services. However, the Judge rejected this, finding that the Defendant was entitled to stop work due to non-payment.

Furthermore, the Defendant’s initial estimate was £1.95 million, but later invoices suggested costs could reach £3.7 million. The Judge therefore found, that even if section 70(3) of the Solicitors Act applied, the large discrepancy in cost estimates alone would justify a Detailed Assessment.

With regards to the question as to whether the Court could order a partial assessment, which excluded counsel and Court fees, as per the Claimant’s request, the Judge decided that section 70(6) of the Solicitors Act, did allow the Court to exclude certain categories of costs at assessment, and limit the assessment to profit costs and selected disbursements only. It was concluded that the Claimant can challenge only the parts of the bill they have disputed, rather than being forced into a full assessment. It was the Defendant’s position that this was not possible, and all costs should be assessed together.

The Court confirmed:

“… it seems to me that it is not necessary to shoehorn what was charged as a disbursement into the profit costs. The Claimant is not unhappy with counsel’s fees (and I understand that the same counsel are continuing to act for it) and nor is it unhappy with the court fees. It would be absurd to force the Claimant into an assessment of either. They would be included in the breakdown and then not challenged in the points of dispute. Their only effect would be in increasing the size of the bill when calculating whether one-fifth had been disallowed for the purposes of considering the incidence of costs under s.70(9).”

This was important for the purposes of the 1/5 rule in section 70(9) of the Solicitors Act, which will largely determine who is responsible for the costs of the assessment process. Had the Court ordered assessment of all fees, then the threshold for reducing the bill by 1/5 would have increased significantly for the Claimant, meaning they were more unlikely to recover their costs of assessment from the Defendant, even if significant reductions were made to the issues they were disputing.

The ruling reinforces the need for good housekeeping in respect of accurate fee estimates, and for solicitors to ensure they have a right to raise final ‘statute bills’ during the course of the retainer, if they wish to do so.

Bethany Collings is an Associate in Clarion’s Costs and Litigation Funding Team. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Lack of care with cost estimates, retainers and time recording leads to reductions on a solicitor/own client assessment

Robert PattersonLeave a comment

Although the sums in issue in this detailed assessment under the Solicitors Act 1974 were not significant (the bill totalled £3,841 plus VAT), Costs Judge Nagalingham’s judgment in Jennifer Underhill v Thackray Williams Solicitors [2024] EWHC 3206, gives a useful insight into the consequences of some common failings by solicitors with regard to cost estimates, hourly rates and time recording.

The Facts

The Claimant instructed the Defendant to advise in relation to an employment matter. The Defendant received three instructions from the Claimant. The first was on a fixed fee basis of £250 plus VAT for a meeting and a written advice. The second instruction related to the preparation of a letter before action and conduct of an employment tribunal matter. The third instruction concerned the negotiation of a settlement agreement following a settlement with the Claimant’s employer. The costs associated with the first and third instruction formed no part of the detailed assessment, which focussed solely on the bill delivered by the Defendant in connection with the second instruction, in the sum of £3,841 plus VAT.

The Issues

Due to the modest size of the bill, a formal breakdown was not ordered. Instead, the parties had agreed that the Defendant’s time ledger provided sufficient detail for the costs claimed to be assessed. However, the time ledger was not accurate. It totalled £5,863 plus VAT, but there was no explanation that could be reconciled with a bill figure of £3,841 plus VAT. In addition, the front of the ledger reported time of 26 hours 11 minutes, but the final page totalled the time 27 hours 24 minutes; neither were correct because the individual items amounted to 23 hours 36 minutes.

All work done on that instruction was subject to a conventional private fee-paying agreement. In their engagement letters, the Defendant provided a cost estimate which indicated that their fees should not exceed £1,470 plus VAT for pre-action and without prejudice letters but that if the matter proceeded to a final hearing, costs were estimated at £15,000 to £20,000 plus VAT. The Claimant believed that the cost estimate meant that her total bill would not exceed £1,470 plus VAT as a settlement was agreed before proceedings were issued.

The hourly rates claimed by the Defendant were also in dispute. The claim was conducted by a Grade C solicitor and the Claimant had agreed rates of £195 per hour and £210 per hour for him. However, although the engagement letters indicated that the Grade C would be supervised by a Partner, there was a dispute as to whether the Claimant had been advised of her hourly rate.

The Decision

As with all detailed assessments under the Solicitors Act 1974, the costs were assessed pursuant to CPR Rule 46.9(3), which provides that:

“…costs are to be assessed on the indemnity basis but are to be presumed –

(a) to have been reasonably incurred if they were incurred with the express or implied approval of the client;

(b) to be reasonable in amount if their amount was expressly or impliedly approved by the client;”

In respect of the cost estimate, the Costs Judge found in the Defendant’s favour. He found that, correctly interpreted, the cost estimate related only to the preparation of the letter before action and that the wording of the engagement letters was sufficient to conclude that the Claimant had either expressly or impliedly approved costs to be incurred beyond the initial estimate. However, the Costs Judge could not conclude that the costs beyond the estimate were reasonable in amount, because the Defendant failed provide an updated cost estimate until the conclusion of the matter.

As regards hourly rates, the engagement letters all indicated that the Grade C would be supervised by a Partner. However, none of the engagement letters mentioned the Partner’s hourly rate or that the Claimant would be charged £350 per hour. In the circumstances, all Partner time was removed from the bill.

The inaccuracies in the time ledger did not result in any significant reductions, as there had been a significant write off in the sum of £1,772 plus VAT. However, it was beyond doubt that there had been errors and that was taken into account in respect of costs of the assessment.

The bill was assessed in the sum of £3,150 plus VAT, a reduction of circa 15%. Pursuant to section 70(9) of the Solicitors Act 1974, a reduction to the bill of less than 20% would normally have resulted in the Claimant paying the costs of the assessment. However, the Costs Judge held that the errors in the time recording and the fact that an updated cost estimate was not provided until all the costs had been incurred (thus depriving the Claimant of an opportunity to approve the costs) were special circumstances which justified a different order. Consequently, the Costs Judge made no order as the costs of the assessment.

Robert Patterson is a Senior Associate in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Oakwood Solicitors Ltd v Menzies [2024] UKSC 34

Katie SpencerLeave a comment

Case overview

The case of Oakwood Solicitors Ltd v Menzies [2024] UKSC 34 explores a client’s right to request an assessment of legal fees, focusing on the interpretation of “payment” in Section 70(4) of the Solicitors Act 1974. The Supreme Court ultimately ruled in favour of the client, reinforcing protections that allow clients to review and negotiate billed costs.

Initial Proceedings

The Respondent, Oakwood Solicitors, were instructed by the Appellant, Menzies, following his involvement in a Road Traffic Accident, under a Conditional Fee Agreement.

The claim settled for £275,000, after which the Respondent issued a ‘Final Statute Bill’ outlining the fees incurred throughout the case, totalling £73,711.20. The Respondent deducted from the damages an amount to cover the shortfall in costs after deducting costs recovered from the Defendant, as agreed in the CFA.

On 1 April 2021, the Appellant initiated proceedings to request an assessment of the final bill. To determine whether the Appellant could bring these proceedings, the Costs Judge assessed the date on which payment of the bill was made. The Costs Judge decided that payment had occurred over 12 months before the assessment (apparently taking the date as being when the Final Statute Bill was delivered).

Legal Issue

Section 70(4) of the 1974 Solicitors Act states:

‘The power to order assessment conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill.’

Applying this rule, as the payment of the bill occurred over 12 months prior to the assessment application, the Appellant was barred from seeking an assessment.

Appeal to the High Court

The Appellant appealed to the High Court, which allowed the appeal on the grounds that there had been “no sufficient settlement of account” to warrant treating the deduction as payment under Section 70(4).

Appeal to the Court of Appeal

The Respondent then appealed to the Court of Appeal, which found that, because the Appellant had agreed in the CFA to the deduction of monies and had been sent a Final Statute Bill no further agreement on the bill amount was necessary. The Court of Appeal allowed the appeal.

The Appellant subsequently appealed to the Supreme Court.

Supreme Court Decision and Reasoning

Lord Hamblen delivered judgment on the matter, considering several key points to reach a conclusion. Section 70 was concerned with the right to assess solicitors’ bills of costs with a focus on the proper amount to be charged, having regard to whether costs have been reasonably incurred and are reasonable in amount.  The client needed an opportunity to consider the bill and decide to what extent it should be paid. Section 70 envisages payment after the delivery of the bill and rather than by delivery of the bill.

 

The right to have the bill assessed is intended to protect the client’s interests, which are compromised if the client is not given the opportunity to consider the bill of costs.  Consideration of the meaning of ‘payment’ in Section 70(4) and previous authorities supported the Appellant’s case.

In considering the requirement for a settlement of account, the cases of Re Bignold (1845) and Harrion v Tew (1987) were referenced, both of which were found to support the Appellant’s position that an agreement to the bill is necessary. Lord Hamblen said, “the authorities show a long established understanding as to what payment by deduction or retention requires…both generally and with specific reference to section 70…The need for a settlement of account has been consistently stated…This requires an agreement to the sum taken or to be taken by way of payment of the bill of costs.” Therefore, there needed to be agreement as to the amount to be paid in respect of the bill of costs and mere delivery of the bill was not sufficient.

 

Lord Hamblen felt that the Respondent’s submissions as to practical implications of this conclusion were overstated, in any event these could not dictate the correct interpretation of ‘payment’ in the legislation, and the need for agreement by way of a settlement of account was long established.

Consequently, the appeal was allowed which restored Bourne J’s order for assessment.

 

Katie Spencer is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Prevention is better than cure

Andrew McAulayLeave a comment

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.