England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
SHEFFIELD DISTRICT REGISTRY

		The Law Courts 50 West Bar Sheffield S3 8PH
		19/01/2018

 


Mr Justice Soole :

1. The Appellant/Claimant Miss Annie Parvez (AP) appeals with the permission of District Judge Bellamy against his Order dated 24 March 2017 whereby he dismissed her claim against the Respondent/Defendant (ME), her former solicitors, for assessment of an alleged bill of costs pursuant to s.70 Solicitors Act 1974.
2. By new solicitors JG Solicitors Ltd (JG) she contended that a 'statute bill' (to use the colloquial expression) dated 28 June 2016 in the sum of £1505.25 was delivered by ME to her on 3 October 2016 in respect of professional services rendered under a Conditional Fee Agreement (CFA). The CFA concerned a claim for injury loss and damage arising from a road traffic accident. As below, it is convenient to describe the alleged bill of costs as 'the June bill'.
3. By his judgment dated 24 March 2017 the Judge held that the June bill was not a statute bill and had not been delivered to AP. That was sufficient to dispose of the claim, which was duly dismissed : judgment para.10.
4. However, having heard full argument, the Judge went on to consider three other issues:

(1) whether a further document from ME dated 31 August 2016 (the 'August bill') constituted a statute bill within the meaning of s.70; if so,

(2) whether there were 'special circumstances' within the meaning of s.70(3) such as to justify an order for assessment of the August bill;

(3) whether, pursuant to s.70(6), any detailed assessment could be limited to the elements of the bill concerning the success fee and the ATE insurance premium.

The Judge in effect answered those questions 'yes', 'no' and 'no'.

5. In granting permission to appeal the Judge's reasons extended into the issues raised by the August bill but made no reference to the issue of 'delivery' of the June bill which had been sufficient to defeat the claim. The grounds of appeal include the issues arising from the August bill.
6. However, as the Judge recognised, the 'August bill' formed no part of the claim: see the Claim Form which identified the bill to be assessed as: 'Invoice number: SG 134662 dated 28th June 2016 and delivered on 3rd October 2016 in the sum of £1505.25 (a copy of which is attached to this Claim Form).'
7. In these circumstances it was necessary, at the outset of the hearing of the appeal, to be clear as to its proper ambit. It is important to remember that an appeal is against the order(s) made by the Judge below, i.e. against the 'result(s)' of the hearing, not the 'findings' or reasons given in the judgment: see White Book para.52.0.6.
8. By its first and critical paragraph the Order under appeal simply provides that 'Judgment, as attached is formally handed down'. However, as already noted, the Judge made clear in the attached Judgment that his adverse conclusions in respect of the June bill compelled the dismissal of the claim.
9. Accordingly I concluded that the appeal was confined to the grounds relating to the dismissal of the pleaded claim in respect of the June bill. The submissions of Counsel were thus focussed on:

(1) whether the June bill constituted a 'statute bill'; if so,

(2) whether it had been delivered to AP;

– in each case within the meaning of s.70.

10. Section 70 provides as material:

'(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 assessed and that no action be commenced on the bill until the assessment is completed.

(2) where no such application is made before the expiration of the period mentioned in subsection (1) then, on an application being made by the solicitor or, subject to subsections (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 assessment) order – (a) that the bill be assessed; and (b) that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.

(3) Where an application under subsection (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 assessment as the court may think fit.'

11. Thus if AP is correct that the June bill was a statute bill delivered on 3 October 2016, 4 days before the issue of the claim, s.70(1) entitles her to an order for assessment.

Narrative

12. AP suffered a road traffic accident on 23 February 2016. When stationary at traffic lights her car was struck from behind by another vehicle.
13. On 7 March 2016 she entered a CFA with ME. The retainer provided for a success fee of 100%, capped at 25% of damages recovered, and for an ATE insurance policy to be taken out at her option. That option was exercised. The CFA provided for these costs and disbursements to be deducted by ME from any award/settlement of damages.
14. Settlement with third party insurers was agreed in the total sum of £2100. By letter to AP dated 28 June 2016 ME confirmed this and advised that, after deduction of the success fee (£525 (inc.VAT)) and ATE premium (£164.25) she would receive the net balance of £1410.75. By letter dated 5 July 2016 ME sent her a cheque in that sum.
15. On 18 August 2016 JG was instructed by AP and on that date asked ME to supply its file of papers. ME did so by 22 August 2016.
16. Amongst the papers in the file was a document dated 28 June 2016 headed 'Bill of Costs'. The sub-heading of that document stated 'For our Professional Services acting on your behalf in the recovery of damages'. The 'Total Bill' was £1505.25. It comprised 'Profit Costs' of £1125 (£500 inter partes costs recovered, success fee (net of VAT), plus VAT) and disbursements of £380.25 (medical report and 'ATE payable by client'). This is the 'June bill' on which the claim is founded.
17. This document had not previously been supplied to AP. It had not been referred to in ME's letter to her of the same date (28 June 2016) which had confirmed the settlement terms, nor did ME make any reference to that document when supplying the file. However it was unsuccessfully contended before the District Judge that ME's inclusion of this document in the file of papers constituted its 'delivery' of a statute bill to her within the meaning of s.70.
18. As will be seen, this contention was rightly not pursued in the course of oral submissions on the appeal but was replaced by an argument that AP was entitled to elect to treat it as having been delivered; and that she had made such election on or about 3 October 2016.
19. By letter of 22 August 2016 JG advised ME that it had now reviewed the file 'in detail'. It continued: 'It appears that a final statute bill was never delivered to Miss Parvez in spite of the fact that deductions were made from her damages' and requested that a statute bill be delivered within 7 days, in default of which an application for such delivery would be made pursuant to s.68 of the Solicitors Act 1974.
20. By letters to AP and JG dated 31 August 2016 ME enclosed what was described as a 'bill of costs in relation our professional charges'. This is the 'August bill'.
21. This document was headed 'Breakdown of Claimant's Costs dated 5th July 2016', included a narrative of work done and identified profit costs and disbursements in the total sum of £6461.95 inclusive of VAT. Above the signature on behalf of ME was a statement of AP's entitlement to seek an assessment pursuant to ss.70-72 of the 1974 Act.
22. By reply of the same date (31 August 2016) JG stated: 'We note that the Claimant's final statute bill was delivered to the Claimant (via this firm) on 31st August 2016' and gave notice of intention to seek a s.70 assessment. Over the following ten pages, the letter took objection to various aspects of the bill, including the success fee and ATE premium.
23. ME responded in detail by letter dated 15 September 2016 to which JG replied on 20 September 2016.
24. By further letter dated 23 September 2016 JG advised that it was preparing to issue s.70 proceedings. The letter's heading began 'Statute Bill Request'. However it made no reference to the 'August bill' but stated 'As you have received costs from the third party insurers and deducted a success fee from our client then then you will have already raised a final statute bill with a view to complying with rules 17-18 of the Accounts Rules. You have not however complied with rule 17.2 in that such bill has not been delivered to your former client. As you will appreciate it is the delivery of a statute bill that starts time running for the purpose of assessment under s.70 of the Solicitors Act 1974. We therefore formally request that the statute bill already raised by you is now delivered to Mr Methven immediately, so that we can consider the amounts charged. We confirm that we are instructed to receive delivery of that bill on behalf of Mr Methven. Please deliver the bill to us by email, which will be deemed sufficient delivery under s.69(2C)(c)(i) of the Solicitors Act."

It is accepted by JG that the reference to 'Mr Methven' is an evident error.

25. By further letter dated 26 September 2016 JG changed course and for the first time contended that the 'June bill' was a final statute bill. Thus: 'We note that in fact a final statute bill has already been created which is dated 28^th June 2016, your reference SG 34662. It appears that it was not delivered to the claimant as she has not seen it before. It was not attached to your letter of 28^th June 2016 and the letter makes no reference it it's (sic) inclusion. Neither the bill or the covering letter are signed. Please can you confirm by return that this is the final statute bill that needs to be assessed? If so, please confirm that we can agree a bill delivery date of today? In which case there is no need to deliver an additional final statute bill in accordance with the request contained in our previous correspondence, but we remind you that our client still requires a formal cash account detailing receipts and payments made on her behalf.'
26. By reply to this correspondence dated 29 September 2016 ME stated that it had on 31 August 2016, and pursuant to JG's request, delivered a statute bill, i.e. the 'August bill'; that JG had acknowledged such delivery; and that it had no intention of delivering a further bill. It did not agree to the request for a 'formal cash account' but enclosed a 'breakdown of receipts and payments'. This reflected the gross receipts of £2100 damages and the costs and disbursements which had produced the net payment of £1410.75 to AP.
27. By letter to ME dated 6 October 2016, JG noted that 'we have not been able to settle this matter amicably' and continued : 'We have therefore triggered a solicitor/own client assessment of the Claimant's bill of costs' and attached a copy of the unsealed Part 8 claim. The claim was issued on the following day.

The District Judge's judgment

28. The Judge noted AP/JG's submission that the June bill was the statute bill and that it had been 'effectively delivered when it was contained within the Claimant's file of papers and that once a receipt and payment account had been supplied (pursuant to written request) on 3^rd October that completed delivery of the bill.'
29. He then noted ME's response that 'The June bill was an internal document, placed on the file and was never delivered (sent) to the Claimant nor was it ever intended to be the case'; and its reliance on Kingstons Solicitors v. Reiss Solicitors [2014] EWCA Civ 172 as authority for the proposition that a document is not a bill unless it is sent to a client as a demand or statement of what is due.
30. Dealing first with the issue of 'delivery', the Judge concluded that '… I cannot accept that simply including the June bill in a file of papers sent on request to the Claimant's solicitors can constitute delivery of a bill to the Claimant. In my judgment it would need specific reference to the bill being contained within the file being treated as delivered. All the more so since the Defendants were under no obligation when sending the file of papers to include internal documents' : para.8.
31. As to whether it was a statute bill, the Judge accepted that the decision of the Court of Appeal in Kingstons was authority for the stated proposition : para.9. He concluded that 'I have found the June bill has not been delivered and as such is not a bill that can be the subject of assessment' : para.10.

AP's submissions

32. The grounds of appeal, drafted by the Costs Draftsman who appeared below, are diffuse and wide-ranging. In his carefully focussed oral submissions Counsel for AP, Mr Robin Dunne, rightly did not pursue the previous contentions that ME had delivered the June bill in October 2016 by the combined effect of (i) its inclusion within the file of papers which it had delivered up in August 2016 and (ii) the subsequent 'completion' of delivery by the supply of the 'breakdown of receipts and payments'. Mr Dunne's essential argument on 'delivery' raises a point which was not argued below but is sufficiently identified in the grounds of appeal. Counsel for ME, Mr Robert Marven, rightly took no objection to a new point which is one of law and requires no additional findings of fact.
33. Mr Dunne based his appeal on three central propositions.

First, that the June bill was capable of being a statute bill upon delivery.

Secondly, that by virtue of the Solicitors Accounts Rules it was incumbent on ME to deliver that bill.

Thirdly, in circumstances where a solicitor fails to comply with that obligation but the bill otherwise comes into the possession of the client, the client may elect to treat it as having been delivered.

Mr Dunne submits that AP made that election upon receipt of the 'breakdown of receipts and payments', containing its further information, on or about 3 October 2016.

34. Expressed in those terms, I did not understand the first stage of the argument to be in dispute. (At this stage I defer the distinct issue of whether a document which has not been sent to the client as a demand for payment can constitute a bill of costs).
35. The second stage of the argument depends on the Solicitors Accounts Rules which provide:

'17.2 If you properly require payment of your fees from money held for a client or trust in a client account, you must first give or send a bill of costs, or other written notification of the costs incurred, to the client or the paying party.

17.3 Once you have complied with rule 17.2 above, the money earmarked for costs becomes office money and must be transferred out of the client account within 14 days.'

Mr Dunne also pointed to :

'…29.15 You must keep readily accessible a central record or file of copies of:

(a) all bills given or sent by you (other than those relating entirely to activities not regulated by the SRA); and

(b) all other written notifications of costs given or sent by you (other than those relating entirely to activities not regulated by the SRA).'

and Guidance note (x) : 'The rules do not require a bill of costs for an agreed fee, although your VAT position may mean that in practice a bill is needed. If there is no bill, the written evidence of the agreement must be filed as a written notification of costs under rule 29.15(b).'

36. The June bill had been raised on the same date (28 June) as the letter to the client which notified the deduction of the success fee and ATE premium. In breach of rule 17.2 the bill had not been given or sent to the client before the money was transferred from client to office account. The June bill was the only true bill and was not, as ME contended, merely an internal document. It should have been sent with the letter of 28 June. In such circumstances ME was not entitled to 'rely on its own breach' and contend that the bill had not been delivered.
37. The final stage of the argument depended on whether or not the bill had come into the client's possession. If the client learned that the solicitor had created such a bill, but the document had not come into his possession, the client could not elect to treat it as delivered. The client's remedy was to ask for delivery of the bill and in default to apply to the Court under s.68 for an order for it to be delivered up.
38. Conversely, if a client came into possession of the bill (as here, when the file was passed over in August 2016) she was entitled, at her election, to treat it as delivered.
39. In order to illustrate the practical consequence of refusing such entitlement Mr Dunne produced a comparative analysis (not before the District Judge) which showed the disparity between the June and August bills. These showed, e.g., a VAT element of £187.50 in the former and £671.20 in the latter. The Court should only be assessing the bill that was in fact paid, i.e. the sum deducted. The second bill created a 'fictitious' VAT figure. On an assessment AP would have greater difficulty in achieving a one-fifth reduction in the higher August bill and thus would or might be prejudiced on the issue of costs.
40. AP's right of election to treat as delivered a bill which was in her possession was consistent with the scheme of ss. 69 and 70 of the Solicitors Act. Those sections were dealing with two different situations.
41. Section 69 set out conditions for the recovery by a solicitor of his costs. It imposed strict requirements as to signature and delivery of the bill. In the absence of compliance the solicitor's claim must fail. As to delivery, s.69(2C) required that the bill be delivered :

'(a) …to the party to be charged with the bill personally,

(b) …to that party by being sent to him by post to, or left for him at, his place of business, dwelling-house or last known place of abode, or

(c) …to that party – (i) by [electronic or other means] and that person has indicated to the person making the delivery his willingness to accept delivery of a bill sent in the form and manner used.'

42. By contrast, s.70 did not contain such specific requirements. This demonstrated that there was room for a wider definition of 'delivery' in the circumstances of a client's application for assessment of a bill.
43. The argument was supported by analogous authorities. In Ex p d'Aragon 3 TLR 815 the Court of Appeal had held that the clients were entitled to a taxation of a bill of costs in their possession notwithstanding that the solicitors had not signed the bill. In Brown v Tibbits (1862) 11 C.B. N.S. 855 the absence of the formality of delivery of a bill did not prevent solicitors from maintaining a set-off against the client's claim for damages. The bill thus had a status notwithstanding the absence of delivery.
44. The cash account/breakdown supplied with ME's letter of 29 September completed the picture and showed that the August bill was not the true bill. At that point AP had elected to treat the June bill in her possession as having been delivered.

ME response

45. In response, Mr Marven first submitted that the new argument was inconsistent with the decision of the Court of Appeal in Kingstons Solicitors v Reiss Solicitors. This supported the proposition that a document was not a bill unless it was sent to the client as a demand or statement of the amount due. That case concerned a dispute between solicitors (Reiss) and their agent solicitors (Kingstons). Kingstons sent Reiss a bill of costs for use in negotiation with a third party opponent in successful litigation. The Court accepted Reiss' contention that the terms^[1] of the email attaching the bill did not 'reasonably and objectively convey to Reiss as the recipient the message…that this bill represented a final demand which Kingstons expected Reiss to meet in the sense of representing a claim to the amount there stated…' and thus did not constitute a bill of costs for the purposes of s.69 : see paras.26, 27, 32, 33.
46. Thus the question of whether a document constituted a statute bill could not be isolated from the question of what was done with it. In this case there had evidently been no demand for payment.
47. As to delivery, the essential fallacy in AP's case was that the client was entitled to point to a document and require it to be delivered as a bill of costs. The client could not do so; nor therefore could she elect to treat an undelivered bill as if it had been delivered.
48. Section 68 concerned the jurisdiction of the court to order the solicitor to deliver 'a bill of costs' to the client. The court was not empowered to order a particular document to be delivered as 'the bill' : cf. the power in the same section to order delivery up of specific documents.^[2] Thus ME could not be ordered to deliver the June bill as the bill of costs.
49. As to the Solicitors Accounts Rules, there had been no breach. The letter of 28 June provided sufficient 'written notification of the costs incurred' within the meaning of rule 17.2. In any event, ME was not 'relying' on any breach. It was entitled to deliver such bill as it thought fit. Once delivered a bill cannot be withdrawn without consent or leave of the court : Bilkus v. Stockler Brunton [2010] 1 WLR 2526. The corollary of that principle was that a solicitor was free to deliver such bill as he considered appropriate; and for that bill to be subject to challenge on assessment.
50. As to ss. 69 and 70, neither section defined the concept of delivery. Section 69 imposed specific requirements as to the mechanism of delivery for the purpose of that section : s.69(2C). Under s.70, in considering whether a bill had been delivered, it was necessary to consider the basis on which the document had been sent by ME : Kingstons.
51. Ex parte d'Aragon was merely authority for the proposition that a solicitor cannot deliver an unsigned bill and then use the want of signature as an objection to the client's application for taxation of the bill. The decision thus anticipated the distinction between the requirements of ss.69 and 70. Brown v. Tibbitts simply held that the defence of set-off was not caught by the statutory requirements for bringing an action on a bill of costs.
52. Mr Marven further submitted that JG's approach to the case, including its change of tack on the June and August bills, was motivated by a wish for tactical advantage, e.g. for the purposes of the one-fifth rule on the assessment of costs.

AP reply

53. In reply, Mr Dunne submitted that Kingstons v Reiss was simply a case where the document was, by the terms of the attaching email, demonstrably not a bill. By contrast the June bill was plainly a bill of costs, as it reflected the costs which had in fact been charged and deducted from the agreed sum of damages. Furthermore the present case involved a deduction from damages, so the bill did not require a 'demand' in the same sense of a demand for payment. The purpose of the bill was to allow the solicitors to transfer the money from client account to office account. Once the requisite rule 17.2 bill was created, it became the statute bill. The alternative of a 'written notification of the costs incurred' required essentially the same information as in a bill of costs. ME's letter of 28 June did not constitute such a notification.
54. As to s.68 Mr Dunne accepted that, if no bill existed, the Court could not order the solicitor to produce a bill in a particular form or content. However, if a bill of costs had been created and headed as such, the Court was able to order delivery of that bill. Any other conclusion would give the solicitor a potential benefit from his breach.

Conclusions

55. For the reasons essentially advanced by Mr Marven, I do not accept that AP was entitled to treat the June bill, contrary to the fact, as having been delivered. I also agree with Mr Marven and the Judge that the undelivered June bill did not constitute a bill of costs.
56. In my judgment these questions cannot be considered in isolation from each other. I accept that Kingstons v Reiss provides authority for the proposition that a document is not a bill of costs unless it is sent by the solicitor to the client as a demand or claim of the sum therein stated to be due. I do not accept that the significance of the Court of Appeal's decision is confined to its particular facts.
57. It must follow that it is only the solicitor who can determine the content and terms of what is his demand or claim for payment. Neither the client nor the Court can make that determination on his behalf.
58. Both in consequence of this principle and as a matter of construction, the Court's power under s.68 to order a solicitor to deliver a bill of costs does not entitle the Court to order (nor therefore the client to seek) delivery of a specific identified document and thereby to determine the terms and content of the solicitor's demand or claim for payment. It is for the solicitor to provide 'a bill' of his costs; and for the process of assessment to deal with any challenge thereto. The prohibition against withdrawal of a delivered bill without consent or Court order provides further protection for the client.
59. The client can be in no better position if the relevant document has come into his possession otherwise than in the character of a delivered bill of costs. There is no principled basis to treat it differently from a document which remains in the possession of the solicitors.
60. It is unnecessary to determine whether or not there was a breach of the Solicitors Accounts Rules. Even if there was, this does not entitle the client to treat an undelivered bill of costs as if it had been delivered. To do so would again allow the client to determine the terms and content of the solicitor's demand or claim for payment. In any event, no part of ME's case involves 'reliance' on a breach of the Rules.
61. Ex parte d'Aragon provides no support for AP's case. The solicitors in that case had physically delivered a bill to their client as a demand for payment. By the ruse of not signing the bill they were seeking, in the event of challenge by the client, to both (i) obviate taxation and (ii) preserve the ability to serve a fresh bill. That was an example of solicitors seeking to rely on their own breach in order to defeat the client's entitlement to tax the bill. The decision anticipates the distinction between the formalities of s.69 and s.70.
62. That distinction is immaterial in the present case. Section 70 requires delivery by the solicitor of a bill of costs. There was no such delivery. For the reasons given above, AP was not entitled to treat the document as if it were a bill of costs which had been delivered by ME.
63. Brown v. Tibbits has no wider significance than its confirmation that the solicitor's defence of set-off is not caught by the statutory requirements for bringing proceedings on a bill of costs.
64. My conclusions are that the Judge was right to dismiss the claim for the essential reasons he gave in paragraphs 7-10 of his judgment; that the new point on 'delivery' does not succeed; and that the appeal must be dismissed.

Note 1   ‘I have attached a copy of the bill of costs. Just send it off as it is to the other side and let me know what they come back with. I have pitched it high deliberately so that it gives us some room to negotiate on the matter. In terms of how much for each person, we will sort that out at the end. Let us first see how much they are offering.’    [Back]

Note 2   s.68(1) : ‘The jurisdiction of the High Court to make orders for the delivery by a solicitor of a bill of costs, and for the delivery up of, or otherwise in relation to, any documents in his possession, custody or power, is hereby declared to extend to cases in which no business has been done by him in the High Court.’    [Back]