Solicitors Indemnity Fund Ltd v Hewitson & Harker

This is an appeal against a judgment of HHJ Walton in the Newcastle-Upon-Tyne County Court delivered on 27 April 2009. The issue on which permission was granted by Longmore LJ, interesting though it may be, has been overtaken in the course of argument in this court. I can therefore deal with the background relatively shortly. The facts are in any event set out very clearly in the judgment.

The case goes back to proceedings issued by Hewitson and Harker, the appellants before us (“Hewitsons”). That was as long ago as 1998 when they were seeking to recover unpaid legal fees from a former client Mr Ewbank. The fees amounted to £89,000-odd. Mr Ewbank served a defence to claim and a counter claim alleging professional negligence. Hewitsons then referred the matter to their insurers, SIF (the respondents here) who in turn instructed a local firm Crutes to act for the purposes of defending the counter claim. Thereafter it was agreed that Crutes should act both in relation to the claim and the counter claim.

The main proceedings were coming to a trial, but in November 2004 there were discussions of a settlement and happily in that case those discussions were successful. There was a meeting on 10 December 2004 between representatives of Hewitsons, SIF and Crutes at which an agreement was arrived at. The agreement was that the defendants in the main proceedings (by this time represented by the late Mr Ewbank's daughter) would pay £120,000 in full settlement of the claims against them and the counter claim was discontinued. As to the division of that £120,000 I quote the judgment:

“It is now common ground that agreement was reached to seek £120,000 from the estate from which Hewitsons would receive at least £80,000 and SIF would receive up to £40,000 depending on what Crutes costs were”

In effect the amount SIF would receive for costs was capped at £40,000. If the costs were greater than that amount, the excess would be SIF's responsibility. If the costs were less than £40,000 the balance between the sum due to Crutes and £40,000 would be paid to Hewitsons.

There matters rested until the end of 2007 when the defendants in the main proceedings finally paid the £120,000 plus interest, which by that time was some £26,000-odd. That money was paid into Hewitsons' account.

In January 2008, Crutes wrote to Hewitsons saying that they had rendered a bill of costs to SIF in the sum of £42,000-odd. As the judge says this marked the start of the dispute which led to the hearing before him and has led unfortunately to the appeal before us.

The dispute was a relatively narrow one. Crutes was saying that since their costs were more than the cap of £40,000 the matter should rest there because Hewitsons would not get any further amount out of the £120,000. However, Hewitsons were saying that they were not bound to accept £42,000 as being the right figure. It was to be assumed under the agreement that there would if necessary be taxation or some means to assess what was a reasonable figure, which might well end up as being less than the cap of £40,000. If that was found to be the case they would benefit at least by the difference.

No one at that stage seems to have put their mind to how much might be at stake. The question was apparently asked in cross-examination at the hearing and the representative of Hewitsons suggested that he might have been able to knock some £5,000 off the claim fee. If that is right these protracted and no doubt expensive proceedings have been about a little more than £2,000. Unfortunately, as so often, there is nothing we can do at this stage to turn the clock back. So the matter proceeded. During 2008 SIF and Crutes continued to take the position that there was no implied agreement or any other basis on which the fees could be looked into. Hewitsons were maintaining that they were entitled to some sort of taxation.

In October 2008 for the first time Hewitsons were given by solicitors for SIF the actual invoices on which the £42,000-odd had been calculated. They had in March been given a schedule which listed them but not the details. The significance of that is that, on any view of the s70 of the Solicitors Act 1974, it is accepted as I understand by Mr Musaheb for Hewitsons that time began to run from the receipt of those details in October 2008.

I turn to s70 of the Solicitors Act 1974. This section is headed “Taxation on Application of Party chargeable for Solicitors”. No one seems to have referred to this section in the course of correspondence, perhaps because it is something which is so much at the back of the mind of any solicitor that it is not normally necessary to refer to the actual section. The first specific reference to it appears to have been made on the eve of the hearing before the judge which would be 2 March 2009. S70 of the Solicitors' Act provides:

“(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 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 taxation) order - that the bill be taxed…

(3)

Where an application under subsection (2) is made by the party chargeable with the bill - after the expiration of 12 months from the delivery of the bill, or after a judgment has been obtained for the recovery of the costs covered by the bill, or after the bill has been paid but before the expiration of 12 months from the payment of the bill, no order should 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 subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill.”

Before the judge there was interesting discussion about the extent to which, in a case such as the present, where the insurers are standing behind responsibility for the costs, the client, in this case Hewitsons, remains able to seek taxation. In the event that question, which led Longmore LJ to grant permission, does not, as I see it, arise. As I have shown, subsection (3) lays down various specific time limits for an application for taxation subject to “special circumstances”, none of which are suggested here. There is then an absolute bar under subsection (4). There was some debate during Mr Musaheb's submissions as to precisely when time started running from in this case. Mr Nicol assisted us by referring to the pleadings which in the action commenced on 6 March 2008. The Particulars of Claim alleged in paragraph 6.2 that SIF had paid the fees incurred in pursuing the defendant's claim against Mr Ewbank in defending his counter claim. That allegation was admitted by Hewitsons in their defence dated 31 March 2008. It is quite clear from that that the relevant fees had been paid not later than 1 March 2008, so that arguably time should run from then. The latest alternative suggested by Mr Musaheb is when the bills in question were actually delivered to him or to his clients in October 2008.

It is unnecessary to consider how the three potential times in S70(3) interrelate, because it is quite clear that what is contemplated by the section is the making of an actual application to the court for taxation within a year of whatever is the latest time. The latest time was October 2008 and we are now in February 2010; and no application has been made. It seems to me therefore that the case must fail on that ground alone. The only possible arguments put against that are that the invoices which were sent in October 2008 were not actually invoices addressed to Hewitsons. They were addressed to SIF. With respect, that argument must be nonsense. They were addressed to SIF because they were the people who were expected to pay, and they did pay. If it is now argued that implicitly the charges for which SIF were liable were subject to a residual responsibility on behalf of Hewitsons, I see no reason why that should not be equally implicit in the invoices themselves..

It is then said that if an application had been made to the court it could have been struck out, because proceedings were ongoing in the County Court, in which SIF were arguing that there was no right to any kind of taxation. Indeed after the judge had ruled there was no such right then, it is said, it would have been an abuse of process for Hewitsons to commence such proceedings. Again, with respect, that seems to be nonsense; it is commonplace for a party who needs to protect his position pending other litigation to make whatever applications are necessary to protect his position, making clear that it is without prejudice to the arguments in the other proceedings. The fact remains that here we are in February 2010, and no application has been made.

I would add that the whole tenor of the section is that applications for tax should be made promptly. In this case we are talking about fees incurred as long ago as 2004. I find it extraordinary that even now no attempt seems to have been made to work out what, if anything, was wrong with the fees as presented. Anyway it seems to me that in view of what I have said this appeal must be dismissed.