Cawdery Kaye Fireman & Taylor v Minkin

Every solicitor will encounter, in one way or another, the kind of problem which gives rise to this appeal. The solicitor is instructed to conduct certain litigation on the client’s behalf. He gives his best estimate of the cost of doing so. He asks for a payment on account. The litigation becomes more complicated than had been envisaged. The estimate is exceeded. More money is requested on account. The client is by now dissatisfied with the service he has been receiving and believes that the costs are excessive and that the solicitor is achieving nothing. The fractious relationship is terminated and the solicitor’s bill is assessed. Then - and this may be the unexpected turn of events, at least from the solicitor’s perspective - the costs judge conducting the assessment concludes that it was the solicitor who wrongfully terminated the retainer and did so before the litigation had come to its end. Not having performed an entire contract, the solicitor is entitled to no further fees: indeed he must repay the fees he has already received on account. That was the thrust of the judgment of Master O’Hare Costs Judge made on 16th September 2010 in favour of the client Mr Gary Minkin against the solicitors Cawdery, Kay, Fireman & Taylor trading as C.K.F.T, upheld on appeal by Cranston J., sitting with assessors, on 7th February 2011. It seemed to me that clarifying what solicitors can and what they cannot do was a compelling enough reason to grant permission for this second appeal.

Let me first set the background. Underwood, Son & Piper v Lewis [1894] 2 Q.B. 306 is an established authority. Lord Esher M.R. said at 309:

“When one considers the nature of a common law action, it seems obvious that the law must imply that the contract of the solicitor upon a retainer in the action is an entire contract to conduct the action till the end. When a man goes to a solicitor and instructs him for the purpose of bringing or defending such an action, he does not mean to employ the solicitor to take one step, and then give him fresh instructions to take another step, and so on; he instructs the solicitor as a skilled man to act for him in the action, to take all the necessary steps in it, and to carry it on till the end. If the meaning of the retainer is that the solicitor is to carry on the action to the end, it necessarily follows that the contract of the solicitor is an entire contract – that is, a contract to take all steps which are necessary to bring the action to a conclusion.”

A.L. Smith L.J. added at p. 314:

“… prima facie the contract of the solicitor, when he accepts a retainer in a common law action, is an entire contract to carry on the action till it is finished and he cannot sue for costs before the action is at an end. On the other hand, it is clear that the solicitor may be placed in such a position by the client as to absolve him from any further performance of the contract. … the client may put the solicitor in such a position as to entitle him to decline to proceed; for instance, if the solicitor asks for necessary funds for disbursement, and such funds are refused by the client, the solicitor is not bound to go on; and, speaking for myself, I should say that the solicitor is not bound to go on acting for the client if the client insists on some step being taken which the solicitor knows to be dishonourable; and many other cases may be supposed in which the solicitor may be entitled to refuse to act for the client any further.”

The solicitors’ profession is, of course, now heavily regulated. The Solicitors Act 1974 contains these relevant provisions:

“65(2) If a solicitor who has been retained by a client to conduct contentious business requests 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 and the client refuses or fails within a reasonable time to make that payment, the refusal or failure shall be deemed to be a good cause whereby the solicitor may, upon giving reasonable notice to the client, withdraw from the retainer.

…

69(1) Subject to the provisions of this Act, no action shall be brought to recover any costs due to a solicitor before the expiration of one month from the date on which a bill of those costs is delivered in accordance with the requirements mentioned in subsection (2) …

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 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, …

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.”

Solicitors are also bound by the Code of Conduct issued by the Solicitors Regulation Authority, the material Code being that published in 2007, not the present Code of 2011. Although it is common ground that the terms of the Code are not implied into the retainer, the provisions are nonetheless instructive. They include these rules on client relations:

“2.01(1) You are generally free to decide whether or not to take on a particular client. …

(2)

You must not cease acting for a client except for good reason and on reasonable notice.”

There is also guidance on ceasing to act:

“A client can end the retainer with you at any time and for any reason. You may only end the relationship with the client if there is a good reason and after giving reasonable notice. The retainer is a contractual relationship and subject to legal considerations. Examples of good reasons include where there is a breakdown in confidence between you and the client, and where you are unable to obtain proper instructions.

9.

If there is good reason to cease acting, you must give reasonable notice to the client. What amounts to reasonable notice will depend on the circumstances. For example, it would normally be unreasonable to stop acting for a client immediately before a court hearing where it is impossible for the client to find alternative representation. In such a case, if there is no alternative but to cease acting immediately, you should attend and explain the circumstances to the court ... There may be circumstances where it is reasonable to give no notice.”

I must now set out in a little more detail the circumstances giving rise to the retainer in this case and its termination. Instructions seem to have been given on 26th June 2011 when Mr Gary Minkin, the client, was in the throes of divorce proceedings though quite what stage they had reached is not clear on the papers before us. It does not much matter. His problem at that time was that his wife had brought proceedings in the County Court for a non-molestation injunction and a so-called ouster order to exclude him from the former matrimonial home. Her application was returnable on 28th July 2009 and the client wished Mr Philip Cooper, a solicitor in the Litigation/Family Law Department of CKFT, to advise him and represent him in those applications. They had a discussion that day. The client made his position known and to keep costs down, the solicitor advised instructing junior counsel at a reduced fee. He considered that costs were likely to be £3,000 plus VAT, saying in an email of that day:

“I doubt very much that we can do this cheaper and I understand it is a sizeable sum. You have agreed to transfer £2000 to us now and the balance prior to the hearing (as advised we must have the full amount prior to attending Court on your behalf).”

That initial payment of £2,000 was duly made.

These instructions were confirmed on 14th July when Mr Cooper sent his client care letter with the firm’s standard terms of business which were accepted in writing by Mr Minkin the following day. The letter assured the client that the firm always sought to work as economically as possible without compromising their standards. Fees were to be calculated principally by reference to the time spent during the work on the client’s behalf. Hourly charging rates were set out. Paragraph 2 of the letter under the heading “Fees” continued:

“Generally, it is extremely difficult to estimate the total costs or the number of hours that will need to be expended to bring a case such as yours to a conclusion.

However, our overall charges and expenses for this matter are likely to be £3,500 plus VAT. I will try to keep costs down as much as possible, hopefully to £3,000 plus VAT. Any such overall or step by step estimates are not intended to be fixed or binding and other factors may mean that the estimate will be varied from time to time. We will update you on estimates in writing at your request and will in any event inform you in writing if it appears that any previous estimates may be exceeded. Our invoice will also keep you fully informed of the level of charges being incurred on a monthly basis with a statement as to the actual level of charges incurred as against the relevant estimate. In any event we will communicate with you by telephone or in writing (including by email) when our charges have reached £3,500 at increments of £1,000 thereafter.”

Under the heading “Estimate”, paragraph 4 of the letter informed Mr Minkin that further information was contained in paragraph 4 of the Standard Terms of Business. Paragraph 7 dealt with “Billing and payment” and Mr Minkin was told:

“We shall usually submit interim accounts on a monthly basis and a final account after completion of the matter. Further information on billing and payment terms can be found at paragraphs 5 and 6 of the Standard Terms of Business. If you have any query about the bill, you should consult us immediately.

In accordance with the firm’s usual policy as per paragraph 7 of the Standard Terms of Business, we should be grateful if you would let us have the sum of £3,000 to be held by us on account of fees and disbursements to be incurred.”

The material Standard Terms were to this effect:

“4.

Estimates and fixed fee for arrangements

We only give estimates as a guide. Thus we will make every attempt to ensure their accuracy, we cannot guarantee that the final charge will not exceed the estimate. This is because there are many factors outside our control which may affect the level of costs. …

5.

Billing Arrangements

To avoid costs rising to an unexpected level, we will usually submit regular monthly accounts for costs and disbursements while we are working on the matter, which will be final bills up to the date of delivery, unless they are marked as interim, and a final account on or after completion of the matter. …

6.

Payment Terms

Where we hold sufficient funds on your behalf and we have sent you an account, we will usually deduct our fees and disbursements from these funds. Where this is not the case, or where it is not possible (for example where the funds are required for some other purpose), our account will be due to us on receipt and you should make payment by cheque or electronic funds transfer to our client account …

Unless otherwise stated our bills are payable on presentation …

If an account is overdue for payment, without reasonable justification, we may suspend or terminate our services to you and retain documents and papers belonging to you, irrespective of the matter to which the work or documents and papers relates. In particular, in the event of a transaction-based piece of work such as a conveyance of a property or the purchase or sale of a company or business, we reserve the right to refuse to complete the transaction should you fail to settle your account when requested to do so. In this respect, we may also require that you provide a payment to us at any stage during the transaction on account of anticipated fees and disbursements that we will incur after completion.

…

7.

Payment on Account

In most circumstances, and invariably in matters dealt with by the firm’s commercial litigation and family departments, we will ask you for payment on account of anticipated fees and disbursements. Sometimes, we may ask for further payment on account as the matter progresses. We shall ensure that you have reasonable notice of our requirements as and when the need arises. Any delay in payment could have an adverse effect on the case and where that delay is without reasonable justification, we reserve the right to stop work pending payment. …

13.

Termination of our Engagement

You may terminate your instructions to us in writing at any time. For example, you may decide you cannot give us clear and proper instructions on how to proceed or you may lose confidence in our work. We are entitled to keep all your papers and documents while money is owing to us.

We may only decide to stop acting for you on reasonable grounds and on giving you reasonable prior written notice.

19.

Complaints

… The subject matter of a complaint can include complaints about the firm’s bills, which you may also be entitled to object to by making a complaint to the Legal Complaints Service or the Office of Legal Complaints, and/or by applying to the court for an assessment of the bill under Part III of the Solicitors Act 1974.”

Counsel was duly instructed and work was done to prepare for the hearing to take place on 28th July. Then there was an unexpected twist to the tale. The day before that hearing it was discovered that Mrs Minkin had left the matrimonial home and had let it to tenants. As a result the occupation order was dismissed on 28th July because Mrs Minkin was no longer in occupation herself but at her request her application for non-molestation was adjourned to 2nd October 2009. There was discussion at court with counsel and the trainee about obtaining a copy of the tenancy agreement, taking possession against the tenants, and endeavouring to obtain his share of the rent to which he could claim he was entitled since the matrimonial home was held in the joint names of husband and wife.

On 30th July 2009, barely a fortnight after sending the Client Care letter, Mr Cooper took the “opportunity of enclosing [his] firm’s interim account to update [Mr Minkin] on the costs position”. The bill was marked “Re: Your Personal Affairs” and charged the firm’s fees in the sum of £3,490, disbursements of £1,271.50 and VAT at £711, a total of £5,472.50 from which the £2,000 received on account could be deducted leaving an outstanding balance of £3,472.50. At the foot of that bill were notes to remind the client that “This invoice is payable on presentation”. The client was also told to look overleaf for an important notice which informed him:

“1.

If you are not satisfied with the amount of our fee you have the right to ask us to obtain a remuneration certificate from the Solicitors Regulation Authority.

…

Assessment

You may be entitled to have our charges reviewed by the court. This is called “assessment of costs”. The procedure is different from the remuneration certificate procedure and is set out in ss. 70, 71 and 72 of the Solicitors Act 1974 and the Civil Procedure Rules.”

In his covering letter Mr Cooper added:

“I will not be able to begin any court action until such time as the outstanding balance has been brought up to date so I would be grateful if you would kindly arrange settlement in the near future.”

Not surprisingly this led to the client telephoning his solicitors on 3 August to say, as it is recorded in the attendance note placed before us, that “he was shocked by the size of the bill”, leading Mr Cooper to explain that:

“I exceeded the estimate because of the very large amount of work that was undertaken shortly before the hearing in the light of the situation changing dramatically – his wife moving out and moving in tenants caused an increase in work. Going through the letter with him on the phone, he said how could he pay this? He wanted to know if he could get his costs back from the other side. I explained that the court had reserved the issue of costs until October. …

He said he could not pay the fees until he had a costs order in his favour from his wife. Explaining, that we could not carry on acting on that basis, as he needed to keep up to date with his fees, solicitors are responsible for counsel’s fees and we cannot instruct a barrister if he is challenging this bill because what guarantee is there that we would get the money on any future bill. It is important to have money on account to cover counsel at all times.”

Later on 3 August at 17.00 hours Mr Minkin emailed Mr Cooper to outline his proposals to resolve the matter saying also that,

“I wanted to go to the house this evening to check it out. Can I still do this? …

I need to get regular access to get post and check to see if any of my possessions are in the house. I cannot trust anything Sharon [his wife] says. Raine [the letting agents] are refusing to co-operate. I would like a very short time limit put on this proposal. If either the tenants, Sharon or Raine decline, then I want the tenants out of the house asap.”

Mr Cooper responded at 18.22, giving him his “strong advice” not to go to the property and advising him to arrange a time in advance of any visit. “To do otherwise will no doubt result in the tenants calling the police and you will be in further trouble. I advised you this previously and you ignored me.” He then advised that the client’s proposals for settlement were not likely to be acceptable. Then he added:

“I would also like to write on the issue of costs. My original estimate of £3,500 plus VAT (£4,025) has indeed been exceeded by £1,445. This was caused largely by an increase in work by the fact that the tenants had been moved in. This accounted for at least an extra £700 to include discussing the matter with our litigation department, Barnet Family Law, liaising with you, speaking with Raine and counsel. There is no way I could have anticipated what happened hence why our costs estimate clearly states that estimates are not meant to be fixed or binding. I should point out that you had at the start of the matter agreed to transfer at least a further £1,000 on account by the end of July and this has not happened.

Given that you have queried the bill I am concerned that I should not carry out substantive further work for you. It is to be hoped that you will ultimately be able to recover a large proportion of the fees from Sharon. However, it is not the policy of CKFT to act on the basis of the possibility of recovering future costs from the other side. We need therefore to be paid as we go along so if you would like CKFT to continue acting for you then you will be (sic) need to make arrangements to meet our interim fees.”

He apologised if his response seemed curt which it was not meant to be. Mr Minkin replied:

“Concerning the further £1,000 I am waiting to be paid on some business and as soon as I have it I will send this on.”

He did so on 18 August.

That payment was acknowledged on 18 August but it was pointed out that there was still £2,472.50 outstanding, excluding work in progress. Mr Cooper informed his client:

“I’ve not heard from the tenants or Raine and Co despite chasing phone calls. I suspect the only way we will be able to move matters along is by an application for possession.”

Mr Minkin’s immediate response was:

“As I mentioned previously, please proceed with the possession order. The deadline has expired. I want the tenants to know I am serious. I am past waiting on others. I also want to get into my house today/tomorrow.”

Two days later on 20 August Mr Cooper emailed:

“I have had a telephone conversation with Raine and Co who inform me that you went to the property last night, contrary to my consistent advice, and were abusive and threatening to the tenants’ 16 year old daughter. I understand the police have now been involved and I suspect they will want to talk to you when you are back from Spain. The tenants told Raine and Co last night that they were intending on moving out but as a result of your actions will not do so.

Regarding the possession proceedings the most sensible course is to obtain Counsel’s Opinion on the issue – i.e. a document setting out clearly whether or not you would be likely to be successful in your claim. …

However, we cannot either obtain Counsel’s Opinion or launch directly into possession proceedings until we are up to date on fees and have money on account. Currently the balance of the outstanding invoice is £2,472.50. There is Work in Progress on your file of £1,114 plus VAT. I would be grateful therefore if you could arrange to provide us with the sum of £5,500 which will clear the outstanding balance and enable us to hold money on account of circa £1,750.

I thank you in advance for putting payment in hand.”

The client’s response was to accuse the tenants of lying but:

“Concerning your fees, you know my financial position. I have suggested that you get hold of the rent money to cover this. Why has this not been done yet. You seem to be raking the fees at an alarming rate, yet there is no actual, definitive progress. I should like to know you have arrived at this figure.”

Mr Cooper replied 17 minutes later:

“The initial liability for legal fees falls with the client not with the tenants or Sharon. You may be able to recover your costs at the end of the matter from Sharon/the tenants but on an ongoing basis, and I am aware of your financial position, we cannot work for free.

I will arrange for a printout of the work carried out since our last invoice to be sent to you. I confirm that I will not do any more substantive work on your matter until we are in funds.”

To that Mr Minkin responded half an hour later:

“Regarding the possession proceedings I do not see the need for a counsel’s opinion. … Surely your firm should know the answer to this …

You have not answered my question concerning the use of the rent money. I am entitled to this, so why have you not yet sought receipt of it?”

Mr Minkin raised the subject of rent money on 24 August at 15:14 asking what was happening about getting hold of it. Mr Cooper responded at 18:18 informing the client that:

“Until we issue the possession proceedings and/or reopen the financial proceedings there is nothing we can do about the rent money. … You are aware you have strong arguments against Sharon …but your chances against the tenants are less good. That is our advice. Until we are in funds we are unable to issue begin [sic] either set of proceedings. I appreciate finance is currently a strain for you but our firm’s policy is to have money on account before launching into litigation.”

Half an hour later Mr Minkin replied:

“I am not satisfied with this reply. You are aware of my financial position. You have still not answered my previous four requests to know why you haven’t gone for the rent money already. I am at a complete loss to see where all your time has gone. Since the hearing, you have not achieved anything. Yet you are now expecting more money. You have received £3,000 so far and yet I do not have anything to show for it! You are not able to give a definitive opinion on the tenants, you have not sought to get hold of the rent money, I have not received my possessions and I still can’t get into my house so what on earth has £3,000 achieved! And now you want even more. What have you actually achieved for me over the past 3 weeks? I would like to know.

[Counsel] said to me I should get at least half the rent money. Why has this not been actioned? …

I would therefore like the financial aspect immediately pursued, and I can then cover your costs from the receipt of the rent money. I feel this is a fair compromise as it seems the money you have already received has not been used effectively.”

Another half hour passed. Mr Cooper then replied at 19.15:

“As advised previously you cannot get the rent money now. You are not the landlord. Sharon is the landlord. You only have two forms of redress:

1.

Possession proceedings to try and get the tenants out for you to go back in

2.

Matrimonial proceedings within which we can get your share back at the end by looking again at the division of net proceeds. …

… I have not issued proceedings because we are not in funds and I will not incur fees particularly where you continually question previous fees.

… There is nothing I can do to alter this position save taking the matter to Court but to do so we must be paid.

You are well aware that the £3,000 was put against the preparation and attendance at the non-molestation and occupation order final hearing. It has nothing to do with the costs incurred since our last invoice.

I am afraid I am unable to continue to act while there is this outstanding arrears. This firm cannot take fees at the end of the matter as that is not our policy.

Once again I do sympathise with your position but I will not be issuing any proceedings until we are in funds.”

On Friday 21st August 2009 Mrs Minkin had issued a further application returnable on 25 August at 10.00 am for an occupation order stating that it was an emergency application and that she wished the court to hear the matter without notice being given to the respondent. She complained that Mr Minkin had forced entry into the property and threatened and intimidated a 15 year old girl who was alone at the property. She applied for an order that Mr Minkin not be permitted to return to the property so that the tenants could be allowed to enjoy the property in accordance with the tenancy agreement. In addition she asked that Mr Minkin’s share of the rent be applied in payment of the ongoing mortgage and arrears of mortgage, there being no surplus to repay Mr Minkin. That application was served by the court by post and was received by CKFT on the morning of 25th August, the day fixed for the hearing. In Mr Cooper’s absence, his secretary, Mrs Louizou, attached it to an email sent to Mr Minkin at 10:15 on 25th August. They spoke at some time later and at 12:17 the secretary emailed referring to that conversation:

“… when you requested that I send an urgent fax to the court requesting the hearing be dismissed. Unfortunately we cannot do so for two reasons: (1) even if it is not too late the court will not dismiss the hearing. What will happen today is the matter will be put back to a return date in about 1-2 weeks time when you will have the chance to answer the allegations made. (2) There have been various requests for settlement of the outstanding invoice and payment on account but to date this has not been done. CKFT cannot continue to act in such circumstances.”

In what seems to be a reply to Mr Cooper’s email of 24th August, timed at 19:15, Mr Minkin responded by email on 25th August at 21:22:

“Before I pay anything further, I would like you [to] provide me with the following:

1.

Where all the fee time has gone so far. You must appreciate that this is a lot of money to me and so far I’ve not seen any positive results. …

2.

A plan of action. How we proceed, what needs to be done, what it will cost and that I can get this money back from Sharon afterwards. There must be a way to get hold of the rent money via some emergency application. If Sharon can keep doing this then why can’t we? …

3.

I want to see decisive, proactive results … Sharon used a low level legal aid firm who seem to be way ahead of your firm. You can see my frustration. I came to CKFT as I thought you were large enough to have the expertise to handle this. So far what I have experienced has not met with what your firm claims on its website.

I am not unreasonable but neither am I flushed with money. … So far you have been out-thought and manoeuvred. If you are not up to this then please be honest and I shall have to look elsewhere. I would like you to continue but I need convincing that your firm is up to the job.”

Matters came to a head on 1st September. At 18:05 Mr Cooper emailed:

“I have now received the order from Barnet dated 25th August and this is attached herewith. You will see that the matter has been listed for 8th September to determine the occupation order and also to look at the issue of rental money.

I do not propose to comment at length on your assertion that I have been out-thought and manoeuvred. This is not the case …

I would have preferred to have been pro-active i.e. issuing applications with the court but given your consistent queries regarding fees I have been unprepared to increase these costs further.

My firm’s position remains as before in that we cannot continue to act in circumstances where there is a substantial amount outstanding. To summarise, there is £2,472.50 outstanding from our first invoice and there is about £1,100 of work in progress.

I attach the breakdown of costs to date for your records.”

The reply sent at 22:07 on 1st September 2009 may be crucial. Mr Minkin emailed:

“I am afraid that yet again you have completely failed to answer my very correct and direct questions.

I have looked at your list of costs. It is exactly what I feared. … This is exactly why I have been suspicious of how your fees have mounted up without any definable progress being made.

I am right to query your fees. The only reason you are so defensive, is that you know that they are indefensible. My criticism of you is based on the time after the hearing. Despite the list of actions given to [the trainee who attended court on 28th July], none of them have been actioned. During the past four weeks your only advice has been not to go to my house. Why haven’t you been able to advise me on anything proactive? After £6,500 of fee time you still have not formulated definitive advice and action! This is because you have not been proactive. You seem to have spent time shuffling paper and consulting. This is not what I expect to pay for. I can do this a lot cheaper than you. I expected you to be proactive and to have achieved noticeable benefits for me by now.

I would not be too boastful about the dismissal of the occupation order. This was an administrative formality. I could have done this myself …

I made my financial position very clear to you at the outset. You assured me that you would minimise costs as best you can. Well according to the costs to date this is not what you have done. I have made a very sensible suggestion to you concerning the rent money, which you have dismissed.

To summarise you have at no time presented me with a plan of action. … I again maintain you have been out-thought and manoeuvred. Your advice to obtain counsel’s opinion on the tenancy agreement has really dented my confidence in your firm’s ability. This is a simple matter for anyone who knows property law! If Raine could work this out then why the hell can’t CKFT?

You have succeeded in making what is already a very stressful situation much worse. I trusted you to help me. I paid you £3,000. I feel you have badly let me down. And all you can say to this is that “I want more money to continue getting nowhere.” Why should I have any faith in your ability to get this matter resolved? There is no point in telling me I can get the costs back at the end. It’s here and now I am worried about.

In the absence of a proactive proposal for you, I would like this matter referred to the firm’s senior partner for their review. I would have liked to continue to work with you but I feel we have got nowhere since the hearing. I cannot afford to give you more money only for it to be wasted.”

The following day Mr Cooper replied telling him that a partner would review the matter thoroughly.

“In the meantime I shall arrange for a final invoice to me [sic] rendered and I will also write to the court to come off the record as acting for you.”

We are now told by Mr Bacon that in fact the solicitors made no formal application to come off the court record. He duly rendered a further interim bill from 30th July to 31st August in which he reduced the charge for time recorded from £1,234 to £950 plus VAT of £142.50. On 4th September he wrote to the court saying that:

“Unfortunately we are no longer instructed by Mr Minkin so will not be able to attend court on his behalf on the return date listed for 8th September 2009.”

The bills of 30th July and 31st August eventually went for assessment by Master O’Hare Costs Judge in June 2010. Mr Minkin’s solicitors contended that the solicitors were in breach of the retainer by not doing any more work on the claimant’s behalf. The Master came to a provisional view that that was correct and that as this was an entire contract, the solicitors were not entitled to receive any fees for the work they had done and indeed should repay any sum received on account of fees (though not in respect of disbursements). He gave liberty to apply to challenge that provisional ruling but proceeded to assess the bills in the event that his provisional view was wrong. On the assessment he reduced the charge of £3,490 in the first bill to £2,785. He was of the view that there were certain duplications between the fee earners whose time was charged, some of the attendances could not be verified and there was some excess of charging. In the result that bill was reduced by £705 which was only £7 more than the 20% cut off point at which liability for the costs of the assessment passes from the client to the solicitor. He eventually awarded the costs of the detailed assessment to Mr Minkin and summarily assessed them in the sum of £17,650. He reduced the solicitors’ fees charged in the second bill by only £10. Thus the position on costs is as follows:

The solicitors duly requested Master O’Hare to review his provisional decision. He upheld it on 16th September 2010 and ordered the solicitors to pay their client £1,437.50 plus the costs of the assessment in the sum of £17,650 as already stated.

In his admirably short judgment Master O’Hare recorded that he had had evidence from three witnesses who were cross-examined. He found:

“In the end there is little difference in the factual evidence. The parties differ in their interpretation of events but not as to the facts of the events themselves. This is largely a matter of interpretation of events and documents.”

He accepted the solicitors’ arguments that they were entitled to deliver accounts for immediate payment by the clients and that the bills submitted were interim bills which were payable immediately. He held:

“9.

… I have to make a decision about any contractual right to suspend services until paid in clause 6. The solicitors purported to exercise that right on 3 August, 20 August, 25 August and 1 September 2009. On the first occasion, in fact, despite the statement that they would not act, the solicitors did continue to act, mainly on the new issue relating to the tenancy agreement.

10.

On 20 August again the solicitor said he would not act, but there was little opportunity to act as he then went on holiday. The threat to suspend services was carried on 25 August. Mr Cooper, by his secretary, refused to attend an urgent matter because of non-payment.

11.

The contractual right to suspend payment [sic] had a qualification – the client had to be without reasonable justification in not paying his bill. I find as a fact that the client did have reasonable justification in not paying. The bill exceeded the estimate. The work done had not reached a conclusion of the proceedings the estimate was intended to cover. The client raised objections promptly and as soon as he got the bill. The solicitors had no right to suspend work.

12.

The emails saying the solicitors would suspend work were wrongful. I find that the retainer was ended by the 1 September 2009 email timed at 18.05. Mr Cooper there refused to act until payment was made and on that occasion the wrongful refusal was accepted by the client in an email timed at 22.57. That brought the matter to an end.

13.

The solicitors were in breach of contract because the client had reasonable justification in not paying.

…

15.

… The breach here was severe in that the solicitors repeatedly threatened to down tools and actually downed tools. That was not the most devastating, but from the client’s point of view, where the solicitors refused to comply with a demand to contact the court that refusal destroys any continuing relationship. That was a major breach and the consequences are that the solicitors cannot sue for any money which otherwise would have been payable.”

On appeal to Cranston J., sitting with assessors, he held that clause 6 had to be read subject to clause 13 to render the terms harmonious as a whole with the consequence that:

“46.

… First, termination for non-payment under clause 6 must be with reasonable notice. … Secondly, termination for non-payment must be reasonable. That underlines the point, in my view, that a justification on the part of a client not to pay can be reasonable even if not objectively correct, for example, as determined subsequently by a costs judge. A failure to pay, because an invoice exceeds an estimate, may also be reasonable justification within clause 6, one aspect being the extent to which the client has relied on the estimate. So long as the basis for withholding payment is not frivolous, trivial or made in bad faith, it may not be reasonable for the firm to terminate for that reason.”

So he held that it could not be said that the Master was wrong in concluding that Mr Minkin had reasonable justification within clause 6 for withholding payment of the balance of the invoice issued on 31st July 2009 because it exceeded the estimate by a considerable margin. The estimate was important to Mr Minkin because he had limited funds, a fact which Mr Cooper knew. No advance warning had been given that the estimate would be exceeded and the bill was questioned promptly on receipt. He concluded:

“49.

Thus in my view the firm did not have the contractual right to terminate its retainer on the ground of non-payment under clause 6. Consequently, it was in breach of contract when it refused to continue to act. That refusal was contained in Mr Cooper's email of 24 August 2009, Mrs Louizou's of 25 August 2009, and Mr Cooper's of 1 September 2009. On any view this was a serious breach of contract. As the Master characterised it, it was a threat to "down tools". As such it constituted a repudiatory breach, ultimately accepted by Mr  Minkin. The contract was therefore terminated. There is no flaw in the Master's finding that the retainer was terminated by the firm and not by Mr  Minkin.

…

51.

On Mr Munro's alternate submission the emails of 24, 25 August 2009 and 1 September 2009 did not purport to terminate the retainer but were a suspension of it under clause 6 of the standard terms. That is difficult to accept given the language of these emails which is redolent of termination, not suspension. The word suspension or any synonym for it is simply not used in the emails. In any event, if the emails were meant to suspend the retainer, it was a precondition that payment was withheld without reasonable justification. For reasons already explained, it cannot be said that Mr  Minkin 's non-payment of the 31 July invoice was without reasonable justification.

52.

Mr Munro's further submission, that if the firm terminated the contract, that was justified under section 65(2) of the Solicitors Act 1974, gets nowhere. The Master held that the bill dated 31 July 2009 was an interim statute bill, not a request for payment on account triggering that section. That finding is not surprising since the invoice was in the form of an interim statute bill, not least with the reference to the possibility of assessment on its reverse side. As an interim statutory bill the firm could have sued on it but chose not to do so. If it had done so it would have faced the contention – on which I express no view – that there was no right at that point to issue an interim statute bill under clause 5 of the firm's standard business terms.

Conclusion

53.

The outcome may seem harsh on the firm. But the fact is that it should have been clearer in its retainer letter as to the nature of the engagement. That may have allowed it to inform Mr  Minkin  that pursuit of the tenants his wife had allowed into the matrimonial home did not fall within its ambit. It should also have complied with the terms in its retainer letter and those in its standard terms of business. Under these it should inform a client in writing when it appears that any previous estimate may be exceeded. It must then consider whether, in the circumstances, the client has reasonable justification for not paying and whether it would be reasonable to terminate the contract for non-payment. And it can only do that with reasonable notification.”

So he dismissed the appeal.

Both Master O’Hare and Cranston J. found that the solicitors were in breach of contract, that the breach was “a major breach”, per the Master, and “a repudiatory breach”, per Cranston J. The question arising in this appeal is whether that analysis is correct.

The retainer undoubtedly came to an end and there are three possible ways for that to have happened.

I can deal with the section 65(2) possibility very shortly. Section 65(2) applies where the solicitor requests payment of a reasonable sum of money on account of costs incurred or to be incurred. The client’s refusal or failure within a reasonable time to make that payment is then deemed to be good cause for the solicitor to withdraw from the retainer on giving reasonable notice. Although there were requests for payment on account, see, for example, Mr Cooper’s email of 20th August, see [15] above, and 24th August, [16] above, Mr Cooper never gave clear notice that he would withdraw and that he was withdrawing from the retainer for this reason. Looking at the whole of the exchange of emails, there is nothing there to suggest that Mr Cooper was exercising any entitlement to terminate on this ground and so I say no more about it.

Thus in my judgment the appeal turns on clauses 13 and 6 of the Terms of Business. The vital question is whether the solicitors were entitled to, and did, suspend the retainer or whether they wrongly terminated their engagement. It is first necessary to consider whether Cranston J. was correct in deciding that clause 6 must be read subject to clause 13 “to render the terms as a harmonious whole”. In my judgment, the judge goes too far. Suspension and termination are different concepts. Suspension is provided for by clause 6 only whereas the right to terminate is provided for both in clause 6 if an account is overdue for payment without reasonable justification, and in clause 13 if the solicitor has reasonable grounds to stop acting and gives the client reasonable prior notice of that decision. These grounds for termination may overlap in that the unjustified failure to pay a bill on presentation may also be a reasonable ground to stop acting but they cover different territory. Clause 6 is fact specific: the client knows he must pay the bill on presentation and he is warned in advance by the Terms of Business and in that way already has been given reasonable notice that unless he has some reasonable justification for not paying, suspension or termination may be the consequence. Clause 13 is more general in its application and the client may not appreciate on what grounds the solicitor feels justified in ceasing to act and in those circumstances the client needs reasonable notice of termination in order to make other arrangements for his representation. Clause 13 expressly requires the giving of reasonable notice. Clause 6 does not provide for it, but could easily have done so had it been thought that any further notice should be given than is already built in to the operation of clause 6. As a matter of construction reasonable notice cannot be read into clause 6. It is not necessary for the efficacious operation of clause 6 to imply it and I see no reason to do so. If, contrary to this my primary position, notice is necessary to harmonise clauses 6 and 13, then notice is in my judgment only necessary for termination and is not a necessary prerequisite for the different remedy of suspension.

In any event, Mr Minkin was put on notice of a failure to pay. When the bill was sent to him on 30th July Mr Cooper told him, see [10] above, that he would not be able to begin any court action until such time as the outstanding balance had been brought up to date. He was given a further warning in the oral conversation on 3rd August that the firm could not carry on acting on the basis that fees would not be paid until he had a costs order from his wife. He was told of the need to keep up to date with his fees and that counsel could not be instructed if he was challenging the bill. In the email that was sent later that evening he was told, see [13] above:

“We need therefore to be paid as we go along so if you would like to CKFT to continue acting for you then you will … need to make arrangements to meet our interim fees.”

I turn to those emails which could be said to amount to a termination or a suspension. First there is the email of 3rd August. I do not regard that as amounting to a suspension of the solicitors’ services, still less as a termination of the retainer. Writing to say, “Given that you have queried the bill I am concerned that I should not carry out substantive further work for you”, is not to say, “I am now suspending further work”. Rather it is a pointed warning that that would happen if money was not paid “as we go along”.

By the email of 20th August, [15] above, Mr Cooper did give notice that he would not either obtain a counsel’s opinion or launch directly into possession proceedings “until we are up to date on fees and have money on account”. Not being prepared to act until money is paid shows a willingness to act when there is money on account. This is clear language of suspension as the Master correctly held and I regret that I fundamentally disagree with Cranston J.’s view that “the language of these emails is redolent of termination, not suspension”. I do not see it that way. The message is, “I will not do any more work until you pay up”: the message is not, “I will not do any more, goodbye”. The continuing correspondence shows that the parties did not proceed upon the basis that it was all over between them.

In order, however, for the suspension to operate pursuant to clause 6, the account must be overdue for payment “without reasonable justification”. The justifications offered on 3rd August were:

The Master found, and was upheld on appeal, that this was reasonable justification for not paying. Mr Nicholas Bacon Q.C. submits that this is a finding of fact which cannot be said to be wrong and that we should, therefore, not interfere with it. That is not strictly correct. The primary facts were not in dispute and were for the trial judge to find but the inferences to be drawn from those facts are matters for us as much as for the judges below. Whether the facts give rise to a reasonable justification for non-payment is a value judgment, a conclusion of mixed fact and law, which is either right or wrong: it is not an exercise of discretion which admits of a range of choices in which there is a generous ambit for decision-making. The costs judge is expert in his field and his views command respect but we have had the invaluable assistance of our assessor and so are not in any weaker position. Whilst I do, therefore, pay deference to the conclusions of the courts below, I am not bound by them and I am free to decide whether they were right or wrong.

In my judgment they were wrong. The fact that the client complained promptly cannot assist him if his complaint is not a reasonable justification in itself. The complaint that the bill exceeded the estimate cannot stand in the face of the fact that the letter enclosing the Terms of Business, the contents of which the client accepted in writing, made plain by paragraph 2 that estimates were not intended to be fixed or binding and that other factors might mean that the estimate would be varied from time to time. Clause 4 of the Terms of Business again informed the client that estimates are given “as a guide” only. There was no guarantee that the final charge would not exceed the estimate because there were many factors outside the solicitors’ control which might affect the level of costs. Refusal to pay cannot be justified on that ground. Moreover the client was fully informed as to his right to challenge any bill which he felt was excessive. The notes on the back of the bill informed him of his entitlement to have the charges reviewed by the court. The client did not exercise his right to do so. He was told in clause 19 of the Terms of Business how to complain about the firm’s bill but Mr Minkin did not follow either formal avenue of complaint.

Mr Minkin could not reasonably expect his solicitors to wait for payment until they had an order for costs made against Mrs Minkin. That is not the way the world works and Mr Minkin was well aware of that fact. The reality in this case is that, as his emails reveal, Mr Minkin was short of money and could not readily pay for his solicitors’ services in coping with a new and unexpected turn of events. The comparatively simple case had become more complicated and as a result more expensive. The unexpected complication does not justify a refusal to pay a bill which became payable on presentation. The client was obliged by the payment terms set out in the Terms of Business to pay bills on presentation. He did not do so. That put him in breach.

I conclude, therefore, that the client had no reasonable justification for not meeting the bill presented to him. Consequently the solicitors were entitled to and in my judgment did suspend the operation of the retainer pending receipt of monies on account of costs, both those incurred and those to be incurred. If, as I conclude, the retainer was suspended on 20th August, it remained suspended unless and until the suspension was lifted and it never was. It is important to bear this in mind as we examine the events that followed.

The matter was made clear in the exchanges which followed that day. Mr Minkin pleaded poverty. Mr Cooper responded that they were aware of his financial position but could not work for free. He added:

“I confirm that I will not do any more substantive work on your matter until we are in funds.”

“Until we are in funds” is the language of suspension.

The matter was made plain again on 24th August:

“Until we are in funds we are unable to issue … either set of proceedings (against the tenants or the wife). I appreciate finance is currently a strain for you but our firm’s policy is to have money on account before launching into litigation.”

Mr Minkin protested as the exchange set out at [16] above makes clear, but Mr Cooper informed him there was nothing he could do save taking the matter to court, “but to do so we must be paid”. The suspension is confirmed by Mr Cooper indicating he was unable to continue to act while there were outstanding arrears and that though he sympathised with his position, he would not be issuing any proceedings until the firm was in funds. In my judgment this is simply an affirmation of the suspension which had already occurred.

That brings me to 24th August. Mr Cooper’s secretary apparently acting on his instructions, refused to carry out Mr Minkin’s request to send an urgent fax to the court requesting that the hearing of Mrs Minkin’s application should be dismissed. Two reasons were given for that refusal to do what the client asked. The first was the entirely practical and sensible one that if it was not already too late, it would be ineffective. This was, it should be noted, the hearing date of a without notice application. The court was not likely to make and indeed did not make any effective order other than to fix a return date on notice to Mr Minkin. More relevantly, the firm repeated that they would not do more since various requests for settlement of the outstanding account had been ignored and the firm cannot continue to act in such circumstances. Taken in isolation the statement that “CKFT cannot continue to act” might be understood to be the language of termination but the email has to be read in the context of what preceded it and, indeed, in what followed on from it. Since, in my judgment, the firm had already suspended its services, this was no more than a reiteration of the previous communication. Mr Minkin did not treat it as a termination. In his response he was saying that before he paid anything further he wished further information and he concluded, “I would like you to continue but need convincing that your firm is up to the job.”

Mr Cooper refuted the allegation that he had been out-thought and manoeuvred. In his email on 1st September he repeated:

“My firm’s position remains as before in that we cannot continue to act in circumstances where there is a substantial amount outstanding.”

Once more he is suspending further operation. That was not the language of outright termination of the retainer.

How then did the retainer end? In my judgment it was terminated by Mr Minkin’s reply sent at 22:07 on that day. That email is set out at [20] above and repays re-reading. In maintaining that Mr Cooper had been out-thought and manoeuvred, he makes plain that the advice he had been given had “dented my confidence in your firm’s ability”. He repeats that he felt badly let down and his rhetorical question, “Why should I have any faith in your ability to get this matter resolved?” is a telling indication that he had lost confidence in their ability properly to represent him. Loss of confidence gives the client the right to terminate his instructions to the firm pursuant to clause 13. That is what Mr Minkin was doing. As he says, “I would have liked to continue to work with you but I feel we have got nowhere since the hearing.” Were he Lord Sugar dealing with his Apprentices he would be pointing his finger and saying, “You’re fired”. That is the true effect of that email. Mr Cooper accepted the termination of the retainer and promptly applied to come off the record.

The client’s termination of the contract absolves the solicitor from any further performance of the contract but it does not absolve the client from paying the costs properly incurred to that date. The costs judge was, therefore, wrong not to order the payment of the costs as they were assessed and he was wrong further to order the solicitors to make repayment to the client. I would allow the appeal and order accordingly.

I agree, and have very little to add.

In my judgment Mr Minkin’s email of 1 September 2009, set out at [20] above, made it impossible for Mr Cooper to continue to act for him. There was not only a refusal, or inability, to pay money on account; the email evinced a loss of trust and confidence in the solicitor’s work. The sentence “I would have liked to continue to work with you” indicated that the solicitor’s work was at an end.

The last sentence of the extract from Cranston J’s judgment cited at [25] above should not, in my judgment, be read as stating that it is only if “the basis for the client withholding payment is not frivolous, trivial or made in bad faith” that it may be reasonable for the firm to terminate the retainer. I do not think that this is what the judge intended to state, and if he had done so it would have been wrong.

I agree with both judgments. I confess that I had some qualms about departing from the two judgments below on the question whether Mr Minkin was reasonably justified in not paying his bills. However, as Master O’Hare noted, the primary facts are not in dispute, and we are in as good a position as the lower courts to draw inferences from those facts.

I have no doubt that Mr Minkin was justified in raising his concerns about the invoices with the firm, given that the amounts exceeded the estimates and that he had not been notified about this, as he should have been. But in my view, once there was a cogent explanation for the increase it was unreasonable for Mr Minkin to continue to refuse to pay, particularly since if he was dissatisfied with the amounts he could have challenged them. It seems to me that any other view would compel a solicitor to carry on working for a client even though there may be little realistic prospect of payment. So I too would uphold the appeal.