England and Wales High Court (Senior Courts Costs Office) Decisions

IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE
IN THE MATTER OF IRWIN MITCHELL AND IN THE MATTER OF THE SOLICITORS ACT 1974

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		29/08/2008

Master Simons :

1. This is a Part 8 Claim in which the Claimants seek:-

(1) An order for the Defendants to deliver up a final bill and cash account to the First Claimant; and/or

(2) A certificate for special circumstances pursuant to section 70(1) of the Solicitors Act 1974; and/or

(3) An order in standard form for detailed assessment of 20 bills rendered by the Defendants to the Claimants, the first of which was dated the 11^th November 2004 and the final one dated the 14^th September 2006.

2. The Defendants oppose the claim on a number of grounds. Firstly, they state that all the bills are statute bills and, apart from the final three, have all been paid at least 12 months prior to the issue of the claim and that I am precluded from ordering a Detailed Assessment by s.70(4) Solicitors Act 1974. With regard to the three bills that have not been paid, the Defendants state that the last of these three bills was rendered more than 12 months prior to the issue of the claim and that the Claimants have shown no special circumstances why there should be a detailed assessment of those bills.
3. This Part 8 Claim was issued on the 11^th December 2007. On the 7^th January 2008 I ordered the First Claimant to file and serve a witness statement dealing with the issue as to whether the bills were statute bills or non-statute bills and whether there were any special circumstances. I also ordered that the Second and Third Claimants file witness statements specifying their interest in the proceedings and dealing with special circumstances. Permission was given to the Defendants to file witness statements in response.
4. Sybina McLoughlin, the receiver and litigation friend (and daughter) of the First Claimant, filed a witness statement dated 3^rd February 2008 and Adam Draper, an associate solicitor with the Defendants, filed a witness statement dated 25^th February 2008 having previously filed a witness statement dated 4^th January 2008. No witness statements were filed by the Second and Third Claimants. On the 7^th August 2008 Mr Draper filed a third witness statement which was handed to me immediately prior to the hearing.
5. Mr Paul Jones, a Costs Draftsman instructed by the Claimants, and Mr Luke Wygas, Counsel instructed by the Defendants, both filed detailed and helpful Skeleton Arguments which I have read and I have listened to their oral submissions.

The Parties

6. All the bills were rendered to the First Claimant. On 6^th December 2006 an application was made to the Court of Protection by his daughter, Sybina McLoughlin, that she be appointed receiver of the First Claimant's estate on the grounds that he was incapable of managing his own affairs and a First General Order was made by the Court of Protection dated 27^th February 2007 acceding to the application.
7. All the bills related to work carried out by the Defendants on the instructions of the First Claimant to act on his behalf in relation to a professional negligence claim against the First Claimant's previous solicitors. On the 17^th July 2006 the First Claimant and the Second Claimant, who were the freehold owners of 9 Whitelow Road, Chorlton-cum-Hardy, Manchester, M21 9HQ, charged that property to the Defendants in respect of legal fees. As a result of the non-payment of legal fees, the Defendants have commenced proceedings to enforce their Legal Charge. The Second Claimant and the Third Claimant both claim to have a beneficial interest in the property and I am informed that is the reason why they are named as Claimants in these proceedings. I am told that these enforcement proceedings have been stayed pending the outcome of this Part 8 Claim.

Claimants' Submissions

8. The Claimants submit that all the bills are interim non-statute bills. In support of this submission, the Claimants rely upon the following:-

(1) A client care letter sent by the Defendants to the First Claimant dated 15^th October 2004 contains the following paragraph:-

"While our work is in progress we will send interim bills at intervals of approximately one month, and a final bill after completion of the work. If you have any query about any of our bills please contact me straightaway."

(2) The letter of the 15^th October 2004 contained Irwin Mitchell's standard terms and conditions and one of those conditions read as follows:-

"1.4 We shall be entitled to deliver interim bills to you before the conclusion of your matter. Such bills may not include all the costs incurred to the date it is issued. A final account will then be rendered upon completion of the matter."

(3) The majority of the bills apart from those that are marked "Disbursement Only Account" are headed with the words "Interim Bills on Account of Professional Fees incurred from ….".

(4) At no time was the First Claimant ever advised that interim bills would be treated as interim statute bills or of the effect of an interim bill being treated as a statute bill.

9. Mr Jones submitted that there was a rebuttable presumption that interim bills are non-statute bills unless it can be proved to the contrary by the Defendants. In support of this submission he referred me to the following passage in the judgement of Mr John Martin QC in Winchester Commodities Group Limited v R.D. Black & Co [2000] B.C.C.310.QBD:

"…. the requirement that the solicitor make it plain to the client that he intends the interim bill to be a statute bill, and the imposition on him of the burden of proving that the client agreed to treat it as such, reflect what is in reality a presumption that interim bills are merely bills on account. There is good reason why that should be so. Both solicitor and client should be concentrating on the litigation which the solicitor is retained to conduct. Whilst both might well expect the solicitor to be entitled to payment from time to time while the work proceeded, it is unlikely that either of them will have intended that they should be constantly distracted and their relationship disrupted by the necessity to go to assessment on each disputed bill. On the face of it, questions of what is properly due would be expected to be left until the work is concluded."

10. Mr Jones submitted that the Defendants had failed to rebut the presumption that the interim bills were non-statute bills.
11. In the alternative, Mr Jones submitted that, in any event, there were special circumstances why there should be a detailed assessment, at the very least, of the three bills that were unpaid and that those special circumstances were that the First Claimant had no capacity to apply for a detailed assessment within the statutory period. It was clear from the evidence submitted to the Court by the Claimants with their Claim Form that the First Claimant had been suffering from serious mental health problems since the 25^th January 2006 which culminated in an application to the Court of Protection on the 6^th December 2006. The First General Order was made by the Court of Protection on the 27^th February 2007 and this was clearly a special circumstance as to why there should be a detailed assessment.
12. Mr Jones referred me to CPR 48.5(2) which stated:-

"The general rule is that -

(a) the court must order a detailed assessment of the costs payable by, or out of money belonging to, any party who is a child or protected party…"

13. The Claimants submitted that this section illustrated the general proposition that costs payable by a patient should be considered and sanctioned by a court before payment can be enforced against the patient.
14. Mr Jones also submitted that it would have been impractical to have challenged the bills before the conclusion of the case. At no time was the First Claimant advised of the effect of an interim statute bill, the procedure for challenging the same or the effect on the Claimant's right to challenge the reasonableness of the costs if the client paid or did not seek assessment of the costs within the required time limits. Furthermore, the Defendant was applying pressure on the Claimant to pay together with the threat that they would stop working on the case if there was no payment. In those circumstances, it would be difficult for the First Claimant to make an application to challenge the Defendants' costs at that time without severely prejudicing his position in the ongoing litigation.

The Defendant's Submissions

15. The first submission made by Mr Wygas was that the Second and Third Claimants had no standing within the proceedings and were not valid parties to the action.
16. Mr Wygas then submitted that there was an express agreement that the interim bills were to be treated as full and final with regards to the work contained in them. The Defendants' standard terms and conditions made it clear that they would deliver the bills to the First Claimant which were to be paid on delivery of the invoices. Furthermore, there was an implied agreement to treat the bills as interim statute bills. Mr Wygas supported these submissions on the following facts:-

(1) No query was made about the general level of the bills until the 10^th April 2006.

(2) The bills were paid as they were rendered.

(3) The figures contained in the bills were precise rather than rounded up figures.

(4) The bills were provided at specific points in the proceedings.

(5) The bills were bills for specific periods of time.

(6) The bills were stated to be payable with 28 days and were followed in some cases by demands for payment.

17. Mr Wygas referred me to the letter from the First Claimant to the Defendants dated 10^th April 2006 in which the First Claimant complained about the extent of the Defendants' costs. He stated that he would be considering his position with a law costs draftsman. Notwithstanding that letter, the First Claimant still continued making payments up to the 18^th July 2007.
18. Mr Wygas submitted that the First Claimant had two opportunities to seek advice with regard to the contents of the bills and as to whether or not he could seek detailed assessment. The first time was following the letter written on the 10^th April 2006 when the First Claimant could have seen a costs draftsman and, the second time was in July 2007 when both the First and Second Claimants saw separate solicitors for independent advice concerning the Charge that they were offering to the Defendants to secure payment of the legal fees.
19. Mr Wygas submitted that the fact that the Defendants were entitled to render a final account that did not include all costs contained in previous bills as set out in their standard terms and conditions did not mean that they had to do so. They did not do so in this case as each of the bills contained the costs claimed from the First Claimant for the period specified in each bill. It was clear from the circumstances that there were express and implied agreements that the bills would be treated as interim statute bills.
20. Mr Wygas submitted that there were no special circumstances as to why any of the bills should be assessed outside the regulatory time limits. The Defendants denied the First Claimant was a Patient during the proceedings and they submitted that the Court of Protection Order was made in February 2007 which was some time after the final bill had been delivered. The First Claimant had provided no evidence to support the proposition that he was a Patient prior to this.
21. Mr Wygas concluded his submissions by stating that the purpose of this Claim was to obstruct and delay the Defendants from enforcing the Legal Charge which the First Claimant had freely given as security for payment of legal costs.

My Conclusions

22. Whilst it may be arguable that the Second and Third Claimants could be parties chargeable with the bills in view of their purported interests in the property which is charged to the Defendants as security for payment of the bills, I see no purpose to them being parties to this Claim. Mr Jones appeared to be ambivalent about whether or not they should continue as claimants. They have not filed witness statements as ordered by me on 7^th January 2008. I, therefore, accept Mr Wygas's submission that the Second and Third Claimants are not valid parties to the action and I, therefore, direct pursuant to CPR 19 that the Second and Third Claimants be removed from being parties to this claim.
23. I consider all the bills to be interim non-statute bills. The Defendants' standard terms and conditions clearly state that interim bills will be rendered before the conclusion of the matter and that those bills may not include all the costs incurred to the date to which the bill is issued. That indicates that the bill is an interim on-account bill and is not a statute bill. The conditions further state that a final account will then be rendered on completion of the matter and, even though the final account in this case did not actually appear to include any costs from outside the period that it stated to cover, that in my judgment does not mean that the earlier bills must have been statute bills. The First Claimant had been informed that the Defendants might not include all the costs incurred in the interim bills and that the final bill may contain additional costs. The First Claimant would not know until the final bill had been rendered whether or not there would be any additional costs included in that bill. That the final bill did not actually do so is not relevant. It is for the Defendants' benefit that this standard term and condition is included so as to ensure that all time is charged to the client even if it was for a period covered by previous bills. If the Defendants want the benefit of this condition they must accept the consequences that the effect of this condition as drafted is that all interim bills are non statute bills. If they wish otherwise they must make this clear in their standard terms and conditions.
24. I reject Mr Wygas's submission that there was an express or an implied agreement that these bills would be considered to be interim statute bills. I have seen no evidence that the First Claimant knew the difference between a statute and a non-statute bill or the effect and the consequences of such. An agreement can only be made where both parties are fully aware of the relevant facts and, in this case, whilst the solicitor may have known the difference between a statute and a non-statute bill the First Claimant did not.
25. The bills ( apart from those marked "Disbursement Only Account" and the bill dated 25 August 2005) specifically stated that they were interim bills on account. The word "statute" is never mentioned. Although Mr Wygas submitted that these bills were rendered only after specified steps had been taken, Mr Jones informed me that initially these bills were rendered at monthly intervals.
26. In addition, I am not satisfied that any of the bills complied with the provisions of the Solicitors Act 1974. A bill must contain sufficient information to enable the client to obtain advice as to its detailed assessment (Haig v Ousey [1857] 7 E. & B. 578 at 582). Furthermore, in Ralph Hulme Gary (A Firm) v Gwillim [2002] EWCA Civ 1500 Ward LJ stated:-

"This review of the legislation and the case law leads me to conclude that the burden on the client under section 69(2) to establish that a bill for a gross sum in contentious business will not be a bill "bona fide complying with the Act" is satisfied if the client shows:-

i) that there is no sufficient narrative in the bill to identify what it is he is being charged for, and

ii) that he does not have sufficient knowledge from other documents in his possession or from what he has been told reasonably to take advice whether or not to apply for that bill to be taxed."

27. In the same case Ward LJ suggested that a copy of the solicitor's computer print-out containing a description of the fee earner, the rate of charging and some description of the work done could easily be rendered to the client.
28. The bills rendered in this case are pro forma bills, the only narrative being:

"To providing legal services on your behalf in the above matter including where applicable all attendances, telephone calls, letters, stationery, postal charges and care and control. (A detailed narrative bill has not been prepared. Any further information required will be furnished on request)."

29. Attached to each of the bills is a print-out of the time recorded by each fee earner.
30. I do not consider that these bills contained sufficient information to enable a client to obtain advice as to whether or not he should apply for a detailed assessment. The narrative is pro forma and the same wording appears on each bill. The time recording sheets show the time has been spent but do not show or identify the actual work that was being done. Without this information the client does not have sufficient information to enable him to obtain advice as to whether to seek a Detailed Assessment.
31. As I have found that all the interim bills are non-statute bills, the appropriate course is for me to order that the Defendants now deliver up a final bill and cash account covering the whole period of their instructions.
32. Although the point is now academic, I consider that there are special circumstances why there should be a detailed assessment certainly of the three unpaid bills. I accept Mr Jones' submission that the First Claimant's incapacity is a special circumstance as to why these bills should be assessed out of time. It is clear from the evidence that was annexed to the claim form that the First Claimant was suffering from mental difficulties certainly from the beginning of 2006. On the 6^th December 2006 Dr K. Rajput, a Consultant Psychiatrist, confirmed that he believed that the First Claimant did not have the capacity to instruct a solicitor. At about this time an application was being made to the Court of Protection for a receiver to be appointed and a First General Order was issued by the Court of Protection on 27^th February 2007. These, in my judgment, must be special circumstances as to why an application for detailed assessment was not made within the statutory time period.
33. CPR 48.5 makes clear that the general rule is that the Court must order a detailed assessment in respect of costs payable by a protected person. The Defendants have issued possession proceedings against the First and Second Claimants in order to enforce their Charge. If the proceedings are successful and the property is sold there may be equity that is due to the First Claimant after the Defendants receive their costs. The First Claimant has an interest in the extent of that equity and the Court must be satisfied that the First Claimant's interests are properly protected. Even if this was not a special circumstance (which I believe it is), nevertheless I consider that the Court has inherent jurisdiction to order a detailed assessment in circumstances such as this.
34. I propose formally handing this judgment down on Friday 29^th August 2008 at 10.00am. I would suggest that, prior to that date, the parties endeavour to agree or, in default of agreement, lodge separate forms of consequential order which should contain the appropriate order for the delivery of the bill and standard form L. for the order of the detailed assessment of that bill. The parties should endeavour to agree a timetable but, if they cannot agree, each party should submit their own views and I will make a decision.
35. Consequentially it should not be necessary for there to be any attendance of the parties when I hand this judgement down. If, however, either of the parties wishes to attend before me at the handing down of this judgment, they should give both me and their opponent notice of their intention not less than three days before the date fixed for the hearing.