England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE QBENI 99/0384/1

IN THE COURT OF APPEAL (CIVIL DIVISION) PTA + A 99/6682/1

(Mr Justice Buckley )

Royal Courts of Justice

The Strand

London WC2

Wednesday 28th July, 1999

B e f o r e:

LORD JUSTICE EVANS

LORD JUSTICE SCHIEMANN

MR JUSTICE LINDSAY

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TURNER & CO

Appellant

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O PALOMO SA

Respondent

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(Handed down Transcript of Smith Bernal Reporting Ltd

180 Fleet Street, London EC4A 2HG

Tel: 0171 421 4040

Official Shorthand Writers to the Court)

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MR P DOWNES (Instructed by Messrs Turner & Co, London EC3M 5JP) appeared on behalf of the Appellant

MR J MORGAN (Instructed by Messrs Holman Fenwick Gwillan, London EC3N 3AL) appeared on behalf of the Respondent

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J U D G M E N T

(As approved by the Court )

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LORD JUSTICE EVANS:

This is the judgment of the Court.

1. There is nothing new about clients of London commercial solicitors feeling that their charges are excessive, whilst the solicitors feel equally strongly that their charges are reasonable and that their erstwhile clients are seeking to evade or at least to postpone the date for payment of what is properly claimed and legally due.

2. The present case is novel, perhaps, in that the solicitors are challenging the client’s attempts to have the reasonableness of their charges established, either by taxation before a Costs Judge or by some other form of judicial assessment. But, as Mr Paul Downes, Counsel for the solicitors, has reminded us, we are not concerned with the merits or apparent merits of the dispute, but rather with what he calls questions of some technical nicety under the relevant legislation.

3. A number of issues are raised by the case, the one of most general importance being whether, after the lapse of the times for taxation provided for in s.70 of the Solicitors Act, a solicitor is conclusively entitled to whatever amount he claims in his bill even though the client does not accept that the solicitor is so entitled. The position apart from the Act is broadly as follows. If the solicitor wishes to be paid and is not in funds he will need to sue and prove that his charges were either expressly agreed or are reasonable charges. If he is in funds and purports to deduct the amount of his bill but the client challenges the deduction the solicitor will still need to prove that the charges were either expressly agreed or were reasonable charges. The question is whether the client loses these rights to challenge the amount of the bill after the period for taxation has passed.

4. The client appeals from a judgment of Buckley J. dated 9 February 1999 in which he held that the client could have applied for taxation of five Bills of Costs which were submitted on various dates between 1994 and 1996 , and which were paid, up to 12 months after the dates of payment, as provided by s.70(4) of the Solicitors Act 1974, but they could not do so after the period had expired. The Originating Summons issued by the client on 26 November 1998 was outside this time limit. A sixth Bill dated 28 November 1997 had been issued during the previous 12 months and an order for taxation of that Bill under s. 70(2) was made without objection by the solicitors.

5. All six Bills related to work done by the solicitors in connection with a commercial arbitration dispute between the client, O.Palomo S.A., and Agro-Trading SRL between December 1993 and November 1997. The issue is whether the first five Bills were no more than interim requests for payments on account, or whether they had the status of Statute Bills which, although interim in the sense that they cover only part of the work done, can be made the subject of taxation under s.70. If they were Statute Bills, however, the time for taxation had expired.

6. The Agro-Trading dispute was only one of a number of matters in which the solicitors acted for the client between 1993 and 1998. The client is a commodity trader based in Madrid. The solicitors specialise in handling commodity disputes in London, and they have much experience of the arbitration procedures operated by two of the leading Trade Associations, namely, GAFTA and FOSFA.

7. The first dispute in which they were instructed arose in July 1993. The terms of the solicitors’ retainer, so far as they are now known, were set out in a letter dated 16 July 1993 from Mr Paul Turner who, with Mr Roger Spencer and another, founded the eponymous firm in 1985. The letter includes:-

"On the question of my firm’s charges we are only permitted to charge on a time basis. The Law Society will not allow us to charge in any other way. We charge at the rate of £180 per hour ........

It is difficult for me to say what the costs will be. This depends on how much there is to read and how much work is required in the drafting of the submissions.

Would it be acceptable if, for example, I asked for £1,500 on account of costs and then advised you in due course if and when that sum is exceeded? If so, I will send Palomo SA a request for monies on account and we can proceed on that basis.

I shall also need Palomo S.A.’s VAT registration number in Spain because under new laws applying in the U.K. I now need to put those details onto my firm’s invoice in due course so as to prevent VAT being assessed in this country."

8. There is no suggestion in the evidence of the client or of the solicitor, Mr Spencer, that the terms were not fully and accurately set out in this letter.. We can take it, therefore, that apart from express reference to £1500 cash on account nothing was said or agreed with regard to the possibility of the solicitors claiming interim payments before their work on the particular matter was complete.

9. The client paid the solicitors’ bill for that first dispute, and further instructions followed. These included, in addition to Agro-Trading, arbitration disputes between the client and parties known as Sasson and Nidera. By November 1998, sums in excess of £200,000 had been paid, and the solicitors were claiming a total of about £67,000 as their outstanding fees. A Writ was issued on 25 November 1998, and of the total, £19,096.37 related to Agro-Trading. This part of the claim was stayed pending resolution of the taxation issues raised by the client’s Originating Summons.

10. The claims in relation to Sasson and Nidera totalled £48,006.89. The solicitors applied for summary judgment in that amount and they succeeded before Master Rose. On appeal, however, Mr Michael Tugendhat Q.C. (as Deputy High Court Judge) held that the Court had power only to give judgment on liability (which was never in dispute) and to order the amount due to be assessed. The solicitors now seek permission to appeal against his judgment.

11. Both the client’s appeal against the order of Buckley J. and the solicitors’ application for permission to appeal against Mr Tugendhat’s judgment were listed for hearing together before us. The following procedure was adopted. Mr Morgan, counsel for the client, opened the client’s appeal. He did not appear before Buckley J.. He submitted that the first five Bills in respect of the Agro-Trading matter, all of which have been paid, were “on account” rather than Statutory Bills. If this is correct, those bills are not affected by the s.70 time limits and there is no reason why they should not be brought into taxation of the final Bill No.6 in respect of which taxation has been ordered.

12. Mr Paul Downes submitted that Buckley J. was correct. Bills Nos. 1-5 were Statute Bills and therefore taxation could have been applied for up to 12 months after the dates when they were paid. That was not done, and it is too late to do so now.

13. We were unpersuaded by Mr Downes’ submissions and did not hear Mr Morgan in reply. For my part, we are clearly of the view that Bills Nos. 1-5 were not Statute Bills, and the judge was wrong to hold that they were. We will give our detailed reasons below.

14. Mr Downes then made his application for permission to appeal against the judgement of Mr Tugendhat. The issue is whether the solicitors are entitled to summary judgment under what was RSC Order 14 for the amounts they claim in respect of the Sasson and Nidera matters. They contend (1) that the client has no defence to the claim, because he failed to invoke the statutory provisions for taxation under s.70 and taxation is no longer open to him: (2) that the client has no defence at common law in any event, unless he makes a counter-claim for damages for professional negligence, which he has not done; and (3) that the client fails to show that he has an arguable defence, even if he is entitled to put the solicitors to proof that their claim is for no more than a reasonable amount.

15. We indicated in the course of the hearing that we were content to give permission to appeal on grounds (1) and (2) above, and we heard Mr Morgan for the client on those issues. Having heard Mr Downes in reply, we indicated that, notwithstanding the grant of permission, the solicitors’ appeal would be dismissed. In our view, Mr Tugendhat was correct to hold that s.70 does not take away the client’s common law right to defend an action by the solicitor for his fees on whatever grounds are available to him, independently of the Act.

16. It is convenient to begin with the solicitors’ application and appeal, because this will permit an over-view of the facts and because the appeal raises a more fundamental question regarding the statutory scheme.

17. Following the first instructions given in July 1993, the first relevant matter was the dispute with Sasson, which arose under a Joint Venture Agreement. A GAFTA Arbitration Award was in favour of the client, for about $300,000. The solicitors billed fees totalling £41,564.10 and these were paid. There followed an unsuccessful appeal by the opposing party, but the client was not awarded his legal costs. These were billed on 8 October 1997 in a total figure of £35,649.50. None of this was paid, nor did the client seek taxation within 12 months, and this formed the first item in the Writ issued on 25 November 1998.

18. The Nidera dispute arose under a trading contract made on 8 December 1994. There was a FOSFA arbitration Award dated 31 October 1996 under which the client was ordered to pay the opposing party a sum of about $180,000. At this stage, the solicitors billed and were paid fees totalling £13,600.10. There was an unsuccessful appeal by the client and the Appeal Award in favour of the opposing party included their costs. The client’s application to the Commercial Court for leave to appeal was refused, again with costs awarded against him. The fees billed by the solicitor for these two stages totalled £32,330 and the Bill was dated 24 October 1997. Some payments were made and credited to this Bill, and the Writ claimed a balance outstanding of £12,980. There was evidence, first, that Nidera’s costs of the Appeal and the Application for Leave to Appeal totalled £18,878, and secondly, that the solicitors gave an estimate to the client of the likely costs of this matter in its initial stages of about £9,500.

19. The Agro-Trading disputes arose under two contracts made in June 1993. The solicitors were first instructed on 2 December 1993. A GAFTA Award was dated 31 July 1996. The client was successful and Agro-Trading claim was dismissed. There was an appeal and the Appeal Award was published by GAFTA on 2 July 1998, but it had not been taken up by either party when these proceedings began.

20. A total of six Bills were rendered by the solicitors in respect of this matter. The first three were dated 14 July 1994, 19 April 1995 and 14 September 1995. These were paid in August 1994, September 1995 and October 1995 respectively. On 16 November 1995 the solicitors issued a document in the form of an unparticularised Bill, or invoice, for the total amount involved in the first three Bills, and bearing their signed receipt. The total was £17,667.95 and, whatever the reason for this document, it was issued as a receipt after each of the three Bills had been paid. The 4th Bill dated 12 January 1996 was paid in May 1996. Again, payment was followed by a receipted Bill or invoice dated 14 May 1996. The 5th Bill, dated 16 February 1996, was for £7,964.10 and it was paid, subject to an agreed reduction which I shall refer to below, in October 1996. The final, 6th Bill dated 28 November 1997 was for £27,932.30. The balance outstanding at 25 November 1998 and claimed in the Writ under this head was £19,096.37.

21. Mr Downes took us through the correspondence covering most of 1996. The broad picture which emerges is that the client became reluctant to pay the Bills which he was receiving. He said that he had come under pressure from the auditors of his company and from members of his family to explain why the charges were so high. The solicitors sent a full break-down of their charges and of the time they had spent up to May 1996, which was the period covered by the Bills then outstanding. In the result, an agreement was reached in a telephone conversation on 9 October 1996. On 10 October Mr Spencer wrote to Mr Palomo as follows:-

"I refer to our telephone conversation yesterday evening when we agreed to settle the matter of our outstanding statements by a reduction of 10%. On my calculation the figures are as follows ......

I also confirm we agree, in future, to charge you at the rate of £180 per hour as opposed to £200. I am grateful to you for sorting this matter out and look forward to your remittance ....."

22. There was no reply to this letter, and we have no other evidence as to what was agreed, except in Mr Spencer’s Affidavit dated 14 January 1999 where he refers to the agreement reached on 9 October 1996 (paragraph 13). There clearly was an agreement to reduce the amounts of the Bills which were outstanding at that time, and these included the 5th invoice for the Agro-Trading matter. Equally clearly, there was an agreement to charge £180 per hour for the future. Mr Downes submits that the agreement was also a final compromise of the claims made in all the invoices to date which was effective to bar any subsequent challenge to them, even if they were not Statute Bills. We shall consider the merits of this submission later, but at this stage we should note that Mr Spencer in his evidence does not say in terms that the agreement had this wider effect.

23. Between October 1996 and November 1998 further Bills were rendered, certain payments were made and the client made offers to agree lower figures which the solicitors were unwilling to accept. There were long periods when the client did not respond to communications from the solicitors and when he gave the appearance of temporising and even prevaricating in order to put off the day for payment. They wrote a letter before action dated 3 November 1998. Mr Palomo replied “We have not responded to your request because quite frankly we were absolutely amazed for the size of the Bills issued for this type of cases. We have no problem to pay reasonable legal fees incurred but we strongly believe this Bills are inflated to a larger extent because unmeritorious points were taken by you and the Arbitration proceedings were lengthen (sic) as a result. This is not only our view but also the view of a number of senior arbitrators involved in this cases.” This letter revealed that the client had been making certain enquiries in London as to the amount of the fees, which was confirmed when, following Mr Spencer’s reply dated 10 November, the solicitors received a letter from Holman Fenwick & Willan dated 24 November 1998 stating that they had been instructed to act on behalf of the client and to lodge the Agro-Trading bills for taxation purposes. The solicitors issued their Writ on the following day.

24. By that time, it was too late for the client to claim taxation of the Sasson and Nidera Bills under s.70(2), because more than 12 months had passed since the date of service of the Bills, unless there were special circumstances (sub-section 3(a)) and the Bills had not been paid (sub-section 3(c) and (4)). The position was different with regard to the Agro-Trading Bills. The last (6th) could be taxed under section 70(2). Nos. 1-5 had been paid but more than twelve months had passed since the payments were made. If they were Statute Bills, then taxation could no longer be claimed. Alternatively, if they were “on account” Bills, then those bills could be taxed together with the sixth.

25. Master Pollard held that they were not Statute Bills, but Buckley J. allowed the solicitors’ appeal. Meanwhile, the solicitors claimed summary judgment under Order 14 in respect of the Sasson and Nidera Bills. The client sought leave to defend the action by reference to an affidavit of Ms Francies. Like Mr Spencer, she is an experienced London solicitor who is active in this specialised field. The client had approached her during 1998. She thought that the fees claimed were excessive and had asked the solicitors to disclose their working papers to her, but they had refused. She said in her affidavit that the solicitors’ fees appeared to be unreasonably high for the work they had done.

26. The Deputy High Court Judge allowed the client’s appeal and ordered that the sum due to the solicitors be assessed by a Costs Judge. He also ordered the client to pay 80% of the sum claimed to the solicitors by way of interim payment by 27 July 1999, but he refused to make that payment a condition of the client having leave to defend the action.

Issues

(1) Arguable defence .

27. It is convenient to deal with this subsidiary issue at this stage. It is whether Ms Francies’ evidence raises a triable issue, on the assumption that the client is entitled to put the solicitors to proof of the reasonableness of their charges. Mr Downes submits that her evidence is not sufficient, because her complaint is not particularised in any way and it refers only to the total charges made. The submission does not come easily from counsel for solicitors who refused Ms Francies’ request for sight of their papers and who have not provided to her or to the client, voluntarily or otherwise, a breakdown of their gross sum bills. The Bills do describe the work done, and in our judgment the client, through Ms Francies, is entitled to look at the total figures and, knowing the hourly rate which was agreed, calculate how many hours’ work has been claimed for. She can then say whether that amount of time spent can reasonably be justified for contentious business of this sort. If she had been given a breakdown of the total sum charged, then the position would be different. In the present case, however, we would reject this submission.

28. The evidence of Mr Spencer contains comments on and criticisms of Ms Francies’ evidence which we regard as unfortunate and which in our view do not detract from the weight of her evidence in any way. In particular, he suggests that her experience of these specialist arbitration tribunals is less extensive than his own and therefore, he infers, she is less well qualified than he is to express views on these matters. The question, as we see it, is whether she has a sufficiently long and close knowledge of the procedures for her view to carry weight, and we have no hesitation in concluding that she has. Mr Spencer’s evidence on these matters is entitled to equivalent respect.

29. (2) The first issue raised by the solicitors’ appeal against the judgment of the Deputy High Court Judge is whether the client, no longer having the right to claim taxation of the Bills under s.70, nevertheless is entitled to defend the solicitors’ claim on the ground that the fees claimed are unreasonably high. Mr Downes submits that the statutory right to claim taxation in accordance with s.70 excludes any other common law right to challenge the bill.

Section 70 reads as follows:-

"70(1) Where before the expiration of one month from the delivery of a solicitor’s bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into Court, order that the bill be taxed and that no action be commenced on the bill until the taxation is completed.

(2) Where no such application is made before the expiration of the period mentioned in sub-section (1), then on an application being made by the solicitor or, subject to sub-sections (3) and (4) by the party chargeable with the bill, the Court may on such terms, if any, as it thinks fit (not being terms as to the costs of the taxation) order-

(a) that the bill be taxed; and

(b) that no action be commenced on the bill and that any action already commenced be stayed, until the taxation is completed."

(3) Where an application under sub-section (2) is made by the party chargeable with the bill -

(a)after the expiration of 12 months from the delivery of the bill, or

(b)after a judgment has been obtained for the recovery of the costs covered by the bill, or

(c)after the bill has been paid, but before the expiration of 12 months from the payment of the bill,

no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the taxation as the Court may think fit.

(4) The power to order taxation conferred by sub-section (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months after the payment of the bill......."

30. We are indebted to Mr Downes for a learned history of this provision, back to the first legislation regulating attorneys (an Act of 1402 (4 Henry IV Cap. XVIII)) and including an Act of 1602 (3 Jac I Cap VII) which he describes as the genesis of the present legislation. An Act of 1843 (6 & 7 Vict. Cap. 73) was “An Act for consolidating and amending several of the laws relating to Attorneys and Solicitors” and it provided in clauses 37 and 41 a framework almost identical to the present legislation. This Act is important because as will appear below the leading authorities were concerned with it rather than with the Solicitors Acts of 1957 and 1974 which followed.

31. Mr Downes is correct in our view in submitting that s.70 provides a statutory code for the regulation of this contentious matter. The relevant features of it are that, first, the client is able to apply for taxation within 12 months from the delivery of the bill and, in special circumstances, even after that period has expired; but secondly, no application shall be made more than 12 months after the bill is paid. The issue raised is whether the section excludes the client’s common law right to object to paying more than a reasonable sum for the solicitor’s services, if he does not avail himself of the statutory procedures.

32. The Act itself does not state that that is its effect. There is no express exclusion of the client’s common law rights, and sub-section (2) contemplates that the solicitor will bring an action on the bill in order to enforce payment. Nevertheless, Mr Downes submits, the time-limits imposed by the Act on applications for taxation are meaningless if the client can defend an action brought by the solicitor against him by seeking to have the reasonableness of the charges assessed by the Court, even after the right to claim taxation has expired, particularly when the appropriate method for such assessment is by a reference to a Costs Judge. He also submits that there is no unfairness to the client who fails to claim taxation within 12 months of delivery of the bill, and who can do so up to 12 months after he has paid the bill, because in those circumstances it can properly be assumed that he does not object to it.

33. These are powerful arguments, but they have been raised and rejected before. In In re Park (1889) 41 Ch. D.326 the solicitors’ bill of costs was delivered to their late client more than 12 months before he died, and he had taken no objection to them and even had paid £200, a large proportion, on account. His executor then alleged that some of the charges were unreasonable. Stirling J. (whose judgment has been called recently “a valuable and often cited explanation of the Court’s practice in controlling solicitors’ claims for remuneration” per Dillon L.J. in Harrison v. Tew [1989] 1 Q.B. 307 at 318B) and the Court of Appeal held, quoting the headnote:-

"....that although, as no special circumstances were alleged, a taxation on the Solicitors Act could not be ordered, and the retaining the bill for 12 months without objection was prima facie evidence of its being reasonable, the executor was not estopped from disputing any of the items, and that it ought to be referred to the Taxation Master to enquire and state whether any and which of the items to which the executor objected were fair and proper to be allowed, and to what amount respectively”."

34. The headnote accurately sets out the effect of the judgments in the Court of Appeal and although there are relevant and important passages in each of them it is not necessary to quote from them here. The form of order made had already been approved by the Court in Allen v. Jarvis L.R.4 Ch.616. We should, however, quote the following from Stirling J.’s judgment:-

"The case is one which raises a somewhat important point of practice as to the mode of dealing with claims in respect of solicitors’ bills .....

Having heard what was said on both sides, I made enquiry first to the practice in Chambers, and so far as I could discover, it seemed to be the practice for the Chief Clerk to look into the bill, and to ascertain from his own examination, or from what was pointed out to him by the parties, whether there were any items in it which required investigation; and if he found there were he referred the bill to the Taxing Master to be dealt with in the way I have mentioned, i.e. not in the same way as on a taxation under the Solicitors Acts, which involves particular consequences as regards costs, but simply as a mode by which the claim might be investigated, the costs being dealt with in the same way as the costs of any other claim by a creditor under the administration .....

Now, in dealing with solicitor’s costs, the Court has a three-fold jurisdiction. First, the statutory jurisdiction conferred by the Solicitors Acts ....

Secondly, the Court has I apprehend, jurisdiction to deal with solicitors’ bills of costs under its general jurisdiction over the officers of the Court....

Then, thirdly, there remains the ordinary jurisdiction of the Court in dealing with contested claims. This action is one for the administration of a testator’s estate ..... It is contended ..... that the investigation of this claim which takes place in Chambers is merely in substitution for a common law action, and that the Claimants ought to be placed as nearly as may be, having regard to the different forms of procedure, in the position in which they would have been if they had brought an action at common law against the testator’s legal personal representative for the amount of his bill. To that general proposition I agree. I think that is the proper way in which to look at the case" (331-2).

35. Stirling J. then considered whether the failure to object for more than 12 months “prevented any investigation of the bill”, and he concluded that it did not. He expressed himself as being:-

"....in entire agreement with the common law authorities, that if the client does not object to the bill, and makes no effort to get it taxed, but allows a long time to elapse - a fortiori , if he makes a payment on account - those are very strong circumstances against him, and without further explanation would probably be held to be conclusive against him"(335).

36. The matter was considered in the modern context of an application for summary judgment under Order 14 in Jones v. Whitehouse [1918] 2 K.B.61. The decision in In re Park was approved and applied. There were no special circumstances which entitled the defendant, who was being sued by a solicitor to recover the amount of a bill of costs, to claim taxation under the 1843 Act. Pickford L.J. continued:-

"What is the position apart from the Act? At one time it seems that the common law Courts would not have allowed an objection to the reasonableness of the items to be taken at nisi prius. That cannot be said to be the law since the decision in In re Park ...We have to deal with the matter upon an application for leave to sign final judgment under Order XIV. It seems to me that we must deal with it on the same principle, and we are not entitled to say that if the defendant can point out items in the bill as being apparently unreasonable that is enough to entitle him to have leave to defend as to the whole bill and to have the whole bill taxed. If he can specify certain items as being extravagant, and can thus show a plausible ground of defence as to them, he can have those items, and those items only, taxed, not the whole bill. Though there is no right to have the bill taxed under the Act, the Court may still under its general jurisdiction order any of the items to be enquired into." (64-5).

The client, however, had not shown a “plausible ground of defence in respect of any of the items” and his appeal was dismissed.

37. These judgments, in our view, are clear Court of Appeal authority for the proposition that a client who is sued by his solicitor for the amount of his charges is entitled to challenge the reasonableness of the sum claimed, notwithstanding that the period during which he may apply for an Order for taxation under what is now s.70 of the 1974 Act has expired. It seems to us also that the approach adopted in Jones v. Whitehouse was a straightforward application of the principles which govern any application for summary judgment under Order 14. In 1918, the solicitor was required to serve a particularised bill of costs. It was then for the defendant to show “plausible” grounds for objecting to individual items. If he did so, then the Court would enquire into the reasonableness of those items, but without embarking on a full-scale taxation or in inquiry into the whole bill. Today, the solicitor is entitled to deliver a gross sum bill, as the solicitors have done in the present case. In those circumstances, if no break-down has been provided, then the most that the defendant can be expected to do is to challenge the reasonableness of the total sum claimed. The language used in In re Park reflects the same approach, though at a time when the question of reasonableness was for a jury to decide, subject to the Court ruling that the evidence disclosed a prima facie or even a conclusive case.

38. We should add, however, that in the light of the later House of Lords’ decision in Harrison v. Tew (see below), Pickford L.J.’s reference to the “general jurisdiction” of the Court should be taken as referring not, to the “general jurisdiction over the officers of the Court”, the second of Stirling J.’s three-fold classification, but to his third heading, the “ordinary jurisdiction of the Court in dealing with contested claims”.

39. Against this background, in our respectful opinion, the decision in Thomas Watts & Co. (a firm) v. Smith [1998] 2 Costs L.R. 59 was clearly correct. The Vice-Chancellor (sitting with Schiemann L.J.) said this:-

"In my judgment, in a case such as this, where solicitors are applying for payment of their bill, the situation is analogous to one in which a plaintiff is applying for an unquantified sum which has to be quantified by a judicial process before judgment can be awarded for the appropriate amount. This is common in damages claims. Judgment for damages to be assessed is a very common form of order under an Order 14 application. Where a quantum meruit for work done, the benefit of which has been obtained under a contract but where the contract sum has not been agreed, is claimed, there may be an order for judgment to be entered for the plaintiff with the quantum to be assessed. In my judgment that is the position of the plaintiff’s claim in the present case. It is no doubt too late, having regard to the terms of s.70 of the Solicitors Act 1974, for Dr Smith to make an application for taxation. But if the Court is to be asked to make an order for payment by Dr Smith, the client, of the amount claimed by the solicitors, a process of judicial assessment, must, in my judgment, first take place. The judicial assessment should be carried out by a Taxing Master. It is the Taxing Masters that have the requisite expertise for that purpose ..... I would not be prepared simply to dismiss the appeal and leave the client, Dr Smith, liable to pay the sums that the solicitors have chosen, perhaps rightly chosen but that has yet to be tested, to include in their bills" (73-74).

40. Mr Downes submits, however, that the case was wrongly decided, and in particular that it is inconsistent with the House of Lords’ decision Harrison v. Tew [1990] 2 A.C. 523. The Vice-Chancellor’s judgment does not refer to this earlier judgment, and Schiemann L.J. has confirmed that it was not cited by either of the parties, who appeared as litigants in person. The reasons for the House of Lords’ decision were given by Lord Lowry, who said:-

"The question for decision is whether section 70(4) of the Solicitors Act 1974 precludes an application for taxation of a solicitor’s bill of costs by the party chargeable after the expiration of 12 months from the payment of the bill or whether, not withstanding the wording of that sub-section, the Court has an inherent jurisdiction to order taxation" (528C).

41. Lord Lowry paid tribute to and largely adopted the judgment of Dillon L.J. in the Court of Appeal ([1989] Q.B. 307). The issue decided by the House of Lords, in our judgment, is clear: the Court has no power to order taxation under section 70(4) outside the statutory period, that is to say, more than 12 months after the bill has been paid, and the House of Lords held that the wording of the sub-section is such as to exclude any inherent jurisdiction to order taxation which the Court might otherwise have had. After quoting section 41 of the 1843 Act, Lord Lowry said:-

"That provision impliedly and section 70(4) of the Act of 1974 expressly were negative enactments which in my clear opinion ousted the inherent jurisdiction to refer a bill for taxation in conflict with what they lay down." (536F).

This referred to the second of Stirling J.’s three categories of jurisdiction, but Mr Downes argues that it referred to the third category also, with the result that the statutory scheme excludes not merely the client’s right to claim taxation but also his right to dispute the reasonableness of the sum which the solicitor claims. There is much learning in Lord Lowry’s speech and Dillon L.J.’s judgment but in our view Mr Downes gains no support for his submissions from them. The plain fact is that the decision did not go so far. The question of the Court’s ordinary jurisdiction was raised in argument and is referred to in Lord Lowry’s speech, and In re Park was cited without disapproval (535B). Counsel for the appellant clients (who was Mr Michael Tugendhat Q.C., the Deputy High Court Judge in the present case) submitted:-

"It is also open to the plaintiffs, in any event, to rely on the Court’s ordinary jurisdiction; this might involve the Court in referring the matter to the Taxing Master simply as a convenient mode of assessing what is reasonable, without the statutory consequences as to costs. see Allan v. Jarvis L.R.4 Ch. App. 616, 619-621" (526F).

Their Lordships “did not require argument by the defendant on the plaintiff’s ordinary jurisdiction point” (527F), and Lord Lowry dealt with the matter as follows:-

"In the course of a well-marshalled argument ..... Mr Tugendhat relied also on the ordinary jurisdiction to which Sterling J. referred to in In re Park, but on the facts of this case as narrated by Dillon L.J., the client’s action for an account of moneys come to the hand of the solicitor would have been met by a plea of settled account" (538D).

Harrison v. Tew , therefore, was a case where the client sought only taxation, if not under the statutory provisions, then under the “inherent jurisdiction” of the Court, which the Court held that the statute prevented him from doing. If Mr Downes’s submission were correct, and the House of Lords was holding that the ordinary jurisdiction was excluded also, then their Lordships would not have dealt with the alternative submission in this way. It cannot be said that they decided that the ordinary jurisdiction does remain, because that issue was not argued before them, but for present purposes it is sufficient that they did not decide that it is excluded by the Act. The judgments in Jones v. Whitehouse and Thomas Watts v. Smith therefore are not inconsistent with it. Moreover, Lord Lowry appears to have accepted that the ordinary jurisdiction does co-exist with the statutory scheme. When considering the argument that “a client who had been grossly over-charged would have no remedy once he had been careless or unfortunate enough to fall foul of the 12-month time limit”, he continued:-

"But it has to be said that in some cases the solicitor will have deducted his costs from money received on the client’s behalf, in which case the client could sue under the ordinary jurisdiction described in In re Park " (538B).

That would be a case where the client had paid the bill and more than 12 months had elapsed since payment. If he claimed money which was due to him from the solicitor, and the solicitor deducted his charges from it, then the client could put the solicitor to proof that the charges were not unreasonably high. This come so close to the situation in the present case as a matter of principle that, in our view, it is indistinguishable from it.

42. Mr Morgan, in his helpful response on behalf of the client, identified four reasons why taxation under the statutory powers has advantages over the Court’s ordinary procedures for assessing what sum is due. These are (1) the specific rules as to costs (2) taxation is a summary procedure, and relatively quick and efficient and perhaps inexpensive compared with an action at law (3) the solicitor can obtain a Certificate under section 72(4) leading in practice to a summary judgment, and (4) taxation may become necessary in a non-adversarial situation, for example in the administration of a trust.

43. Mr Downes based two arguments on section 64 of the Act. First, that the client has the right under s.64(2) to require a detailed bill in place of a gross sum bill, within very short time limits; and secondly (a submission made by letter after the hearing), that s.64(3) gives the client a right to demand an order for taxation of a gross sum bill within one month of an action being commenced on it. These are both features of the statutory scheme. The issue is whether scheme excludes the client’s common law rights to challenge the amount of the bill, whether as defendant or otherwise. These features in our judgment do not affect that issue.

44. In our judgment, the authorities show quite clearly that Mr Downes’ submission is wrong. The 1843 Act introduced a taxation procedure, because it was regarded as more convenient and advantageous for the client, and perhaps for both parties, than the existing procedures were. Nothing in the Act, or its successors, takes away the need for the solicitor to prove that his fees are reasonable, if they are challenged, absent any express agreement as to what they should be. The Court of Appeal has held, three times, that the common law or “ordinary jurisdiction” of the Court is not excluded, and these judgments are not in any way inconsistent, in our view, with the decision of the House of Lords in Harrison v. Tew . Nor do we consider that the solicitor is disadvantaged by the possibility that the client is entitled to have the reasonableness of the charges assessed by the Court after the statutory periods for taxation have expired. He can himself claim an order for taxation under section 70(2), without any time limit, and obtain a form of summary judgment when the taxation certificate is issued (section 72(4)). The present issue arises only when that is not done.

(3) Nature of claim

45. Mr Downes takes what is essentially a pleading point. He submits that the solicitor’s right to claim a reasonable sum for his services is governed by special requirements relating to his status as a solicitor, and secondly, that it is always subject to the terms of the express agreement made in the particular case. The term he relies upon in the present case is the agreement made in October 1996 that Mr Spencer’s services would be charged at £180 per hour. It follows from this, he submits, that the client agreed to pay that amount for every hour which Mr Spencer devoted to the matter in question, regardless of how many hours he might spend. He accepts that a solicitor who proceeded more slowly than a competent solicitor could be deprived of his charges for the excess period which, on that hypothesis, would be due to his own failure to act as a reasonably competent solicitor would. But that, he submits, is a matter for counter-claim, alleging negligence, and no counter-claim is made here.

46. Mr Morgan submits that the legal basis for the solicitor’s claim is found in section 15 of the Supply of Goods and Services Act 1982 in any case where a contract exists between the solicitor and client. The contract contains a statutory implied term “that the party contracting with the supplier will pay a reasonable charge”, and what is a reasonable charge is a question of fact. This has to be read, in the case of a solicitor, subject to the terms of the retainer in the particular case and subject also to the statutory provisions which give the solicitor, as well as the client, certain additional rights. But we do not see any difficulty in holding that the solicitor’s claim is for a reasonable sum, whether by statute or at common law, and not for a liquidated sum. Again in accordance with general principles, the burden of proving that the sum is reasonable rests upon him. This is supported, if authority is needed, by the judgments in In re Park and Jones v. Whitehouse which I have quoted above.

47. The submission that a counter claim is necessary, where an hourly rate is agreed, seems to us to be contrary to the basic rule, that the solicitor is entitled to claim no more than a reasonable remuneration for the work that he was retained to do. As Mr Morgan put it, the solicitor would normally be required to prove the reasonableness both of the number of hours spent and of the hourly rate which he has charged. When the hourly rate is agreed, he is left to prove the former but not the latter. There could, of course, be a case where the client agreed to pay for as many hours as the solicitor in fact worked, notwithstanding that he would or might devote more time to the matter than a reasonably competent solicitor would. However, that is not the present case, and in our judgment the Deputy High Court Judge was entitled to hold that a triable issue as to the reasonableness of the charges was raised by the defence evidence in the circumstances of this case.

48. For these reasons, we would dismiss the solicitor’s appeal against the judgment of the Deputy High Court Judge. A further ground of appeal, namely, that the judge was wrong not to make the leave to defend the quantum proceedings conditional upon making the interim payment within the time specified, was conceded, we were told, before the hearing of the appeal, and we understand also that a question arises with regard to payment of the remaining 20%, about which the Judge made no order. These matters can be considered when the present judgments are handed down.

49. Mr Tugendhat Q.C. dismissed the client’s contention that there were special circumstances in the present case which justified an extension of the period within which taxation might be claimed of the Sasson and Nidera bills. There was no appeal against this part of his judgment, but at a late stage of the hearing before us Mr Morgan sought permission to amend the Notice of Appeal so that the point could be raised before us. He told us that no further evidence was necessary. The issue does not arise if the judgment is upheld, but we can permit the amendment so that it can be argued if the case reaches the House of Lords. So far as we are aware, no consequential or other amendments will be necessary.

(4) On account or Statute Bills

50. We come next to the client’s appeal against the order of Buckley J. Section 70 entitles the client to apply for taxation of a solicitor’s bill, but within certain time limits, as noted above. When the bill has been paid, then the maximum period is 12 months from the date of payment. The first five bills in the Agro-Trading matter were paid more than 12 months before the client’s application was made, on 26 November 1998. Sections 65(2) of the 1974 Act entitles the solicitor, who has been retained by the client to conduct contentious business, to request the client “to make a payment of a sum of money, being a reasonable sum on account of the costs incurred or to be incurred in the conduct of that business ...”. Such a request for an “on account” payment does not constitute a bill for the purposes of the taxation procedures under section 70. A solicitor may also render an Interim Bill before the work is complete, but he can only do this if the client agrees, and we were shown an example of terms having this effect which may be included in the original retainer. An Interim Bill, properly so called, may be sued upon by the solicitor and is subject to the taxation provisions in section 70. A request for an “on account” payment does not have this effect.

51. The reasons for the distinction and why it is important were spelt out by Lord Justice Bowen in In re Romer & Haslam [1893] 2 QB 286 in a passage which was quoted in the judgment of Roskill L.J. in Davidsons (a firm) v. Jones-Fenleigh [1980] Costs L.R. 70 at 71. We need not repeat it here. Roskill L.J. continued:-

"In a case such as the present, a solicitor is entitled to select a point of time which he regards [as] an appropriate point of time at which to send in a bill. But before he is entitled to require that bill to be treated as a complete self-contained bill of costs to date, he must make it plain to the client either expressly or by necessary implication that that is his purpose of sending in that bill for that amount at that time. Then of course one looks to see what the client’s reaction is. If the client’s reaction is to pay the bill in its entirety without demur it is not difficult to infer an agreement that the bill is to be treated as a complete self-contained bill of costs to date"(75).

52. The effect of Bowen L.J.’s judgment in the earlier case may be that the solicitor can only send an interim bill at what he called a “natural break” in the proceedings, but that question need not concern us here.

53. The five Bills in question are on the solicitors’ printed form which opens with the words:-

"On account of Charges and Disbursements

Incurred or to be incurred".

They conclude with, in typescript, “please remit by telegraphic transfer to Turner & Co. Client Account ......”. They do not contain any reference to VAT.

54. The judge was persuaded that, notwithstanding the opening words “on account”, the detailed terms of the Bills, showing that they covered work for a specified period up to the date of the Bill, and a number of other factors, including subsequent events and especially the fact that the client agreed to pay them subject to a 10% discount after the 1996 negotiations, showed that they were or came to be treated as Statute Bills.

55. In our judgment, the document cannot be construed in this way. The printed words do not merely say “on account of” but they reflect almost verbatim the words of section 65, under which “on account” payments may be sought. This form of document is in striking contrast to the form used by the solicitors for the final (6th) Bill and which was also used in the Sasson and Nidera cases. The printed heading for this other form is -

"To charges for professional services",

and it was accompanied by an invoice requesting “settlement of this account” with no reference to the solicitors’ client account. Moreover, the invoice gives the VAT registration number, which the solicitors had said in their original 1993 letter would be needed for “my firm’s invoice in due course”. On the evidence before us, therefore, the solicitors used two different forms of Bill, one appropriate for a final account and the other for “on account” payments expressly so described. The fact that payment was demanded to the client account was regarded by the judge as an important practical difference, and it may also be relevant, but Mr Morgan indicated that he does not rely on it in the present case.

56. For these reasons, we have no doubt that these were “on account” Bills when they were sent out. Mr Downes’ alternative submission is that the agreement reached in October 1996 whereby these Bills were paid subject to a 10% discount was a final settlement of the client’s liabilities under them. He also suggests that a form of estoppel by convention may have arisen, because the parties proceeded subsequently as if there had been a final settlement, but he accepts, as we understand it, that the estoppel argument takes him no further than the contractual submission.

57. There are difficulties in the way of this submission, which we can notice in passing. First, Mr Palomo so far as we are aware was ignorant throughout of the client’s right to claim taxation, and the solicitors knew that they had not advised him that he had such a right. An issue arises, which we would regard as subsidiary, as to whether they were under any duty to give such advice. The fact that he did not receive it is common ground. This must make it difficult to conjure up any agreement that the client would forgo that right or would agree to treat these Bills as if they were Statute Bills, when they were not (compare Griffith v. Evans [1953] 1 W.L.R. 1424).

58. Secondly, as we have noted above, Mr Spencer does not assert in the course of his evidence that there was an agreement which went so far as to be a final settlement of the bills in question, to the exclusion of the client’s rights to challenge them if otherwise entitled to do so.

59. In our judgment an agreement to pay the bills, even with a discount, could apply equally well to an “on account” bill as to a Statute or final Bill.

60. Mr Downes relies upon the passage from Roskill L.J.’s judgment in Davidson v. Jones Fenleigh which we have quoted above, that where the Bill is paid without demur “it is not difficult to infer an agreement that that Bill is to be treated as a self-contained Bill of costs to date”. But that was in the context of a Bill which was in the form of a Statute Bill, which the client had not previously agreed to pay but which he did pay after it was served. It seems to us that Mr Downes’ submission turns Roskill L.J.’s statement on its head. If the Bill properly regarded is an “on account” Bill, we do not see how payment of it without demur can convert it into a Statute Bill, which it was not before.

61. We therefore reject this submission also and hold that the judge was wrong to accept it. We therefore allow the appeal against his ruling.

62. We do not know the reasons why this dispute between a London commercial solicitor and his foreign client has escalated to the extent that so much Court time has been occupied by it and substantial costs incurred, already exceeding on the solicitors’ own estimate the amount that is in dispute. We were told that the parties provided formal Statements of their costs for the purposes of summary assessment by the Master of the proceedings before him, although in the event no assessment was made. The solicitors’ costs of the Summons were said to be more than £45,000, and the client’s present solicitors estimated theirs at £7,700, itself a considerable sum. In our view, the dispute cries out for a sensible, commercial solution, and we place on record that at the outset of the appeal hearing we offered to provide the Court’s assistance to arrange mediation, but this offer was refused.

ORDER: Appeal against Buckley J's order allowed; appeal against Mr Tugendhat's order dismissed. Parties to submit an agreed minute of order to Associate. In the action concerning Agro-Trading, upon an application for an order for interim payment of any part of the costs to claimant; no order. In the action concerning Sasson and Nideran; an order is made for an interim payment of £5,000. Application to vary the costs order in front of Mr Tugendhat refused. Application for permission to appeal to the House of Lords refused.

(Order not part of approved judgment)

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