Sharif v The Law Society

By an application issued on the 9 August 2005 the Claimant, a solicitor, sought either (1) an Order for delivery of a final bill or (2) detailed assessment of seven bills rendered by their intervention agents to the Defendants, the Law Society, on various dates between 27 February 2004 and 28 February 2005 and totalling some £109,422.15. At the conclusion of the hearing of the application before me on 28 October, I dismissed the same indicating that I would give my reasons for that dismissal in writing and it is these reasons that now follow.

On 11 February 2004 a resolution was made by the Law Society against the Claimant who was an equity partner in the firm of Zahid Solicitors. The resolution was to intervene into any practice(s) of Mrs Sharif only. The defendants appointed Victoria Davey of Nelson & Co to act as the Law Society’s intervention agent. At the time of the intervention she was a partner in Nelson & Co, but that firm subsequently merged with Gordons on 1May 2004. Following the intervention Gordons discovered a deficit on the client account amounting to £250,434.91. The evidence put before me shows that there is a very clear procedure which has to be followed by intervention agents in a case of this sort.

The intervention agents are obliged by the Law Society to render monthly bills to the Law Society and to supply copies of those bills promptly to the solicitor whose practice has been intervened in so that that solicitor can exercise his or her rights under section 71 of the Solicitors Act 1974. Those bills have to be accompanied by schedules showing the category of the fee earner and the work carried out by those fee earners during the month in question and it is fair to say that the Law Society has been able to negotiate very competitive rates for this work.

I set out below the bills rendered by Messrs Gordons to the Law Society with the dates of payment, that is:

It will be noted from the above that with the exception of the bill rendered on 20 June all those bills were paid more than one month before the issue by the Claimant of her Part 8 application. The sole exception may be the bill of the 20 June 2005 which was rendered to the Law Society on 25 June did not reach the Claimant until less than one month before the issue of these proceedings. However, that bill does not seem to be included in the proceedings as presently constituted and at the conclusion of the hearing I gave permission to the Claimant to amend her application to seek a detailed assessment of that bill small though it is relative to the overall amount which she owes. Since the hearing on 28 October, the Claimant’s Solicitors have submitted an amended claim form to include a request for an order for assessment of the 20 June 2005 bill to which amendment the Defendant’s solicitors have consented.

There is an argument advanced by Mr Wade on behalf of the Law Society that time runs against the Claimant not from the date that she receives the bill but from the date on which the bill is rendered to the Law Society in which case that bill also would be out of time. This aspect of the matter depends on conflicting two cases, firstly, McPherson v Bevan Ashford [2003] 3 Costs LR 389 a decision of Mr Justice Patten and a decision of His Honour Judge Maddocks in October 2004 case of Simon John Pine v The Law Society and David Blank Furniss.

I have the unenviable task of deciding between two decisions, both of which are binding on me. I have come to the clear conclusion that the decision of Mr Justice Patten is to be preferred so that in fact, this problem does not really arise, even though the amendment foreshadowed in paragraph 5 above has now occurred.

These were:

It was contended on behalf of the Law Society that Messrs Gordons, the solicitors who had done the work and who had rendered their bills to the Law Society had to be joined to the proceedings. Mr Wade on the authorities to which he referred and in his Skeleton submitted that it was absolutely vital that the solicitors should be joined because it was their bills that were being challenged and they alone could defend them. The Law Society had to remain a party to the action because if a detailed assessment were to be ordered, there would be a stay on in the proceedings and those proceedings would be by the Law Society.

Mr Sisley of Counsel, who equally ably represented the Claimant, submitted that it was unnecessary to join the solicitors and could only add to the costs, but that he would not strongly object if no additional costs were to fall on his client.

Mr Wade submitted that there would be few, if any, additional costs involved but could not say that there would be none. As indicated, I am satisfied that joinder would have been appropriate. In the event, as I have decided to dismiss the application the question of joinder does not really arise, but, if it were to be held at a higher judicial level, that my decision on the main issue was wrong, then I would have ordered that Messrs Gordons be added as second defendant.

Mr Sisley in his Skeleton as developed in his oral submission to me strongly submitted that all the bills in question were interim bills and therefore there was no question their being assessed and that the proper remedy open to the Claimant was to seek an order for delivery of a final bill which would of course only be possible if the intervention had ended. He pointed to the wording on the bills which did not indicate that they were interim statute bills and he also relied on a dictum of Lord Denning MR in the case of Chamberlain v Boodle & King [1982] 1WLR 1443:

“We were referred to one or two cases on this point. First in re: Romer & Haslem [1983] 2 QB 286: and the latest was a case in this court on March 6, 1980, of Davidsons v Jones-Fenleigh, The Times, March 11, 1980. Putting it quite shortly, as Bowen LJ said [1893] 2 QB 286, 298, it is a question of fact whether there are natural breaks in the work done by a solicitor so that each portion of it can and should be treated as a separate and distinct part in itself, capable of and rightly being charged separately and taxed separately. Applying that simple test, it seems to me that over this short time – the end of November 1978 to the beginning of May 1979 – this was one continuous dealing and work done by a solicitor, not dividing itself naturally or otherwise into any breaks at all. When the bills were delivered, they were delivered each time as part of the running account – “account rendered” being carried on in each to the next. I agree with the judge on this point too that this should be regarded as one bill in respect of one complete piece of work, although divided into parts. As this is one bill, and the client demanded taxation within the month, he is entitled to have the whole of it taxed”.

The Claimant has used three firms of solicitors, Messrs Abbey, Messrs Cobbetts and her present solicitors, Messrs Blacks. Mr Sisley relied on a letter written by the second of those firms, Messrs Cobbetts to the Law Society, indicating that this was the primary contention of the Claimant.

This letter was written on 3 June 2004 and the sixth paragraph reads as follows:-

“Further, it would be inappropriate and costly for our client to seek detailed assessment until such time as a final invoice is rendered by your Agent. This will avoid the costs of multiple applications and hearings which our client ill afford. You will also accept, no doubt, that a period of time ought to be given following receipt of the final invoice in which negotiations in respect of costs can take place”.

That wording is, at best equivocal as to the Claimant’s contention in that respect. However, it is clear from the reply to that letter from the Law Society that they did not agree, from the first paragraph which reads:

“Thank you for your letter of 3 June 2004. The advice that you give to your client in respect of when she makes an application for detailed assessment of intervention agents’ costs is, of course, a matter for you”.

Though stigmatised by Mr Sisley as “unhelpful”, that reply clearly indicates that the Law Society did not, and still do not, accept the contention put forward in that respect.

Mr Wade, on behalf of the Law Society, strongly maintained that these bills were all interim statute bills even though they did not actually say so on their face. He points to the fact that they are for an agreed contractual period and were supported by detailed time sheets as has been suggested is the best practice to be followed, by the Court of Appeal in Ralph Hume Gary (a firm) v Gwillim [1003] 1 WLR 510; [2003] 1 Costs LR 77.

I am quite satisfied that in this case these bills were interim statute bills and so should in each case have been challenged within one month of their delivery. I also find support for Mr Wade’s submissions in paragraphs 305-307 of section L of Cordery on costs.

Mr Sisley contended that some of the bills were not sent to the Claimant but rather to solicitors acting as her agents and, as such, there had been no proper delivery and he relied on the old case of re: Abbott [1861]. There the Master of the Rolls said this:

“I am of the opinion that there has been no proper delivery in this case of the bills of costs, to tax which the common order has been obtained. Delivery on which to found a taxation must be a delivery to the party chargeable, that is to the client. Here the bills were sent, not to Mr Gorely, Mr Abbott’s client, but as a mere matter of courtesy to Mr Bebb, the solicitor of the mortgagor whose party is ultimately liable to pay them”.

Mr Wade submitted that that submission simply could not stand analysis because the client and paying party was the Law Society to whom the bills were rendered, albeit the Claimant under section 71 has a remedy by way of seeking to challenge the size of those bills. The Law Society is seeking to enforce recovery of the bills already paid to Messrs Gordons by way of the statutory debt which is laid down in the relevant schedule to the Solicitors Act 1974.

I entirely accept Mr Wade’s submission. These bills were “delivered” to the paying party the Law Society and the fact that copies only were sent to the agent for the Claimant does not avail her at all.

It is common ground that if the Claimant failed on the points that I have already dealt with, she could only succeed if at all in this matter by establishing “special circumstances”. The special circumstances relied on are set out in her Witness Statement in general and three paragraphs in particular:

“11.

In April 2004 I became pregnant with my third child. I suffered a difficult pregnancy, as I suffered a lot of stress due to the above situation. My health was greatly affected and I had a difficult birth in January 2005. There has been immense pressure on me personally since the intervention as I have paid hundreds and thousands of pounds in legal fees and the firm’s debts alone. I have had a very difficult time in the last year and a half, and I am suffering from depression. Out of the firm of four partners, only one partner has had to face the brunt of the Law Society. I have found it extremely difficult to cope with such pressures and on top of it all, to look after three children all under the age of four years.

12.

My family life, my health and my career have greatly suffered. I have suffered huge financial loss.

13.

The Law Society have been very unfair with me. During the last nine months before the intervention, I was on maternity leave with my second child, however, the Law Society has only targeted me and not any of the other partners who, in my opinion, are jointly and severally (sic) liable according to the Law Society’s own rules”.

The position regarding special circumstances is that there is no hard and fast rule as to what can amount to special circumstances and the authorities show that the facts of the particular case have to be looked at. As I indicated during the course of the submissions, recent cases such as Kundruth v Henry Kwatia & Gooding [2005] 2 Costs LR 279 indicate that the higher judiciary are often prepared to find “special circumstances” where perhaps in the past, it might not have been thought that such special circumstances existed. For instance in that case itself which was an appeal from a decision of mine, when the Claimant wrote asking the solicitors to apply for a detailed assessment of their bill against her, they replied that it was for her to take out such an application but that before it would be entertained by the court, she had to pay 40% of the costs to the solicitors.

That clearly was inaccurate but I did not feel that that alone even coupled with a considerable unexplained delay amounted to “special circumstances” but the High Court Judge on appeal from me held that it did. Similarly, he suggested that in both that case and the earlier case of Arrowfield Services Ltd v B P Collins (a firm) [2005] 2 Costs LR 171 that delay alone would not be fatal to such a claim unless the respondent solicitors could prove prejudice.

Mr Wade, on behalf of the Law Society, suggested that the Claimant’s own Witness Statement suggested prejudice in that if it was true that she had spent “hundreds and thousands of pounds” on creditors of the practice, then that made her less able to pay any costs which might be assessed.

It seems to me that that is a matter for enforcement, not a matter for assessment so that that objection does not carry the day so far as the Law Society is concerned.

However, I was referred by Mr Wade to a succession of letters written by the Law Society to the Claimant making it very clear to her that if she wished to challenge the intervention agents’ charges, then she should promptly apply to the court for an order for detailed assessment. Indeed, in reply to one of those letters, in May 2004, the Claimant actually said that she was going to do that but as already indicated, the actual application was not issued until 9 August 2005, though in fairness to the Claimant’s current solicitors, it appears to have been received in the SCCO originally on 29 July 2005.

I have also to take into account that the Claimant is a solicitor who must be presumed to know rather more about such matters than a layman, coupled with the fact that she has had no less than three firms of solicitors and the benefit of two firms of costs draftsmen to advise her and yet it was only at the end of July this year that she issued her application.

In the circumstances, I am not satisfied that the evidence she has put before me entitles the Claimant to successfully contend that there are “special circumstances” in this case.

For the avoidance of doubt, I should mention that I raised, during the course of the argument, the possibility that a third party such as the Claimant in this case who seeks assessment of costs may clothe the court with a wider discretion than if the claim were being made by the party chargeable. The authority is McIlwraith v McIlwraith [2004] 4 Costs LR 533. In that case, His Honour Judge Rich QC sitting as a Deputy Judge of the Chancery Division went through the predecessors to the present Act in considerable detail and concluded that there was a somewhat wider discretion under section 71 than under section 70, but added the following paragraph at the end of his Judgment:-

“32.

Finally, I would add this. I have decided that there is a discretion. This, however, a discretion be exercised in circumstances where the court is required to have regard to the fact that there would be no power to order a taxation on the application of the chargeable party. It will, therefore, in my Judgment, be for the applicant, who is interested in the chargeable property, to persuade the court that it should nonetheless order a taxation at his request, and that the considerations of finality which justify the rule in respect of the chargeable party should not prevail upon the present application. In my Judgment some special circumstances precluding a more time consuming application would have to be shown to invoke the court’s discretion….”.

In this case, I do not think that any such has been brought to my attention and that is why I have held that there are no “special circumstances” in this case.

The above is sufficient to dispose of this application adversely to the Claimant but should this matter go further, and because the matter was fully argued before me, I now deal also with the question of the terms which I would have imposed had I been minded to refer these bills to detailed assessment.

Mr Wade, in his bundle of authorities, helpfully referred me to a decision of Master O’Hare in the case of Simms v The Law Society of England & Wales and Russell-Cooke decided on 7 May last year. In paragraph 16, Master O’Hare said this:-

“16.

Assuming I am wrong about that and assuming that none of these bills have been paid within 12 months of April 2004, then it seems to me that there is a prima facie case for detailed assessment. I derive that not so much from the size of the bills, although the size of the bills is large, but from the possibility of duplication with other bills. Had Mr Simms not been limited by section 70(4), not limited by that stumbling point, I would have allowed detailed assessment of all of the bills on terms. Those terms would ordinarily be on payment of, for example, half of the bills or, if one was being less bullish about them, half of the bills plus all the VAT included in the bills. Of course, that is the sort of order imposed in McPherson v Bevan Ashworth [2003] 3 Costs LR 389 and it is a fairly standard approach in this office”.

Mr Sisley , on behalf of the Claimant, suggested that the sum of £20,000.00 which, according to the correspondence the Claimant had offered to pay into court when she issued her application, was adequate, bearing in mind the other sums which she has had to disburse. However, I was not satisfied that these other sums directly related to this intervention matter and in my Judgment, had this been a case for detailed assessment, I would have made an order for half the amount in dispute, or perhaps £50,000.00, to be paid into court as a condition of the assessment proceedings being allowed to proceed.

I am satisfied that this application fails on all grounds, but of course, that is not necessarily the end of the matter as far as Mrs Sharif is concerned. In paragraph 20 of the Judgment of Master O’Hare in Simms from which I have already quoted, he sets out an alternative approach to the problem from the point of view of the Claimant in that case:-

“I do not believe there is any unfairness in him losing his section 71 rights. There is every fairness in him being made to pay Russell-Cooke’s costs, but only to the extent that they are reasonable; and the people best placed to assess the reasonableness of Russell-Cooke’s costs are the Costs Judges. Although Mr Simms is the loser today, he will seek to rely on what I have said in order to slow down or halt insolvency proceedings or in order to block any debt proceedings or the full sum without an assessment, but that is for the future”.

I echoed this sentiment, so to speak, in paragraphs 48 and 49 of a reserved Judgment I handed down in the case of Antares SRL v The Simkins Partnership on 29 April 2005 where I said:-

“48.

As indicated, we spent a considerable time looking at this issue, and the conclusion which I have reached is that, odd though the distinction may seem to be, the present position is that if a client, or former client, seeks assessment under section 70 more than 12 months after the bill has been paid, then Harrison v Tew is fatal to such a claim. If, on the other hand, the solicitor seeks to bring an action on the bill, the client, or former client, can raise as a defence over-payment, and so forth, even outside the primary 12 month period, and so obtain an order for detailed assessment of the bill(s).

49.

Since the Claimant here is relying on its section 70 rights, I conclude that, in respect of all the bills which have been paid more than 12 months before the date this application was issued, the Claimant cannot obtain an order for assessment, whatever merits it may have”.

I informed Mr Wade that there was to my knowledge a decision of a bankruptcy registrar that a solicitor who sought a bankruptcy petition to enforce payment of his bill could not obtain one if the debtor sought to contest the solicitors’ bill upon which the preceding statutory demand had been based.

Mr Wade accepted that that might well be the case where the solicitor was simply suing as it were on his bill, but would not apply as here where the Claimant based on what might be termed a “statutory debt” but that of course is a matter for argument on another occasion in a different place.

There will be no need for the parties to attend the hearing when these reasons are formally handed down if the quantum of the costs is agreed and if the Claimant does not seek permission to appeal. However, if either those events does not occur or, for some other reason, either or both parties wish to attend when the reasons are handed down, they will of course be at perfect liberty to do so.

I should, earlier, have paid tribute to the excellent advocacy from the two representatives before me, Mr Sisley of Counsel and Mr Wade from Wright, Son & Pepper which, coupled with their citations of authority and reference to the critical parts of the voluminous documentation, considerably assisted me in concluding this hearing much more quickly then would otherwise have been the case.