Layass v DWFM Beckman (A Firm)

The Claimant instructed the Defendant to act for him as his solicitors in relation to proceedings in the High Court of Justice, Family Division between himself and his wife. An account of these proceedings is given in the judgment of Stephen Bellamy QC, sitting as Deputy Judge of the High Court dated 25/02/2008 and 31/04/2008 which can be found at Tab 5 – 0358 of the agreed bundle.

The Defendant wrote a letter (“the client care letter”) to the Claimant dated 7^th June 2007 and the Claimant countersigned the letter as “agreed and accepted” on 8^th June 2007. A copy of the client care letter can be found at Tab 2 – 0020 to 0023.

The Defendant delivered 13 invoices to the Claimant in the course of their retainer totalling £243,562.81. These invoices can be found at Tab 2 – 0024 to 0038.

Seven of the invoices have been paid through transfers of money held on office account to current account. Of the remaining six invoices, one is part paid and the others are unpaid.

Of the paid invoices, the first three were met by transfers more than twelve months before the application for assessment was made (24 September 2008).

Thus, if the invoices were interim statute bills (“ISBs”) the first three cannot be assessed under s.70 of the Solicitors Act 1974 (see s.70(4)) and the next four can only be assessed if special circumstances are shown (see s.70(3)(a)).

The invoices are as follows:

In her witness statement dated 20/2/2009 Sofia Moussaoui (a partner in the Defendants’ firm) says (Tab 4 – 0236):

“26.

The Claimant was issued with invoices on a monthly basis so that he could be kept up to date with the costs he was spending. The invoices would very occasionally be sent to him but our usual practice was to hand them to him personally and we would go through them together. There is now shown and produced to me at exhibit “SDM15” a true copy of attendance note of the claimant being presented with an invoice and discussing future fees. The claimant was also handed copies of our client ledger. The claimant was given copies of the Bank of Ireland statements on a monthly basis when they were received by the Defendant. The Claimant was always assisted by a translator and the claimant assisted us when the costs schedule was prepared to serve on the wife. The claimant was also kept informed of counsel’s fees. There is now produced and shown to me at exhibit “SDM16” true copies of the attendance notes.”

Exhibit “SDM15” (Tab 4 – 0328) is an attendance note dated 6 March 2008 which reads:

“DB [Diana Bastow, an assistant] attending client in office with Sofia and Mr Harb [Translator]. Discussing issues on agenda and the issue of costs. Present outstanding bill and do rough calculations of expected fees for hearing re costs and injunctions. Estimate a further £50,000 on top of the outstanding bill.”

The reference to the “Bank of Ireland statements” is to a nominated joint account held in the names of the solicitors of the Claimant and his wife with the Bank of Ireland, in London. The account was established pursuant to paragraph 2(j) of the order of Mrs Justice Baron DBE dated 28 March 2007 and was the source through which payments were made to the Defendant for legal fees (see paragraph 4 of the order)(Tab 4 – 0275).

In paragraph 10 of her witness statement (Tab 4 - 0230) Sofia Moussaoui says:

“The Claimant was fully aware that the invoices had been paid and money transferred from client account. It is clear from the invoices that money had been transferred across and the indication that there was nil owed to our firm was further evidence that the invoice had been paid. The invoices also indicate the period of time that the invoice covered. The invoices were mostly presented to the client either by hand and only occasionally by post and would have come to his attention within 7 days of being issued. There is now shown and produced to me at exhibit “SDM4” a true copy of the bundle of documents that the Claimant would have received each month.”

Exhibit “SDM4” (Tab 4 – 00254) comprises a copy letter to the Claimant dated 5^th February 2008 which says:

“Please find enclosed our invoice and running costs schedule for your attention. Should you have any queries concerning your account or generally please do not hesitate to contact us. Thank you for your continued instructions.”

The invoice which was enclosed is that dated 1^st February 2008 (which, it will be recalled, was partly paid). It shows the period covered as 1/1/2008 to 31/1/2008. It is headed “Re Matrimonial Proceedings” and says:

“Acting on your behalf, in connection with ancillary relief proceedings in accordance with the attached schedule £1807.50.”

It goes on to set out charges for numerous disbursements (including counsel’s fees) and VAT. The total is £21,908.35. It says “Transferred from client account £2844.00, amount owed £19064.35.

At the foot of the second page of the bill it says:

“NB Your attention is drawn to the Notice on the reverse”.

On the reverse is a Notice dealing with the client’s rights under the Solicitors Remuneration Order 1994 (which is not relevant to contentious business). At the foot is another notice which says:

“Court Assessment

You may be entitled to have your charges assessed by the Court but you should get independent legal advice before you pursue this option. Court assessment of your bill is a Court proceedings and it is likely you will pay the Court costs. Even if the Court reduces your bill you may be ordered by the Court to pay your own Court costs and ours. There are strict time limits on applications to the Court for assessment and more information can be obtained from the Supreme Court Costs Office either by telephone or by visiting their website”.

There then follows a “Client/Matter Time Ledger” for the period covered by the bill giving details of the work done by Diana Bastow and Sofia Moussaoui, time spent and charging rates applied.

In his witness statement in reply to the witness statement of Sofia Moussaoui (Tab 5 – 0341) the Claimant does not contradict what is said in paragraph 26 save that in paragraph 23 he denies having agreed counsel’s fees and denies having received Bank of Ireland statements until 18^th November 2008 (after the retainer had come to an end) and denies having received invoices every month as he was travelling and he says the Defendant would often hand him several months’ worth at the same time.

In paragraph 7 of his witness statement in reply (Tab 5 – 0343) the Claimant says:

“As regards paragraph 10 of Sofia Moussaoui’s statement, she states that I was fully aware of the fact that the invoices had been paid and the money transferred from client account. I accept that of the first 7 bills dated between 4^th July 2007 and 4^th January 2008 the first 4 were sent to me showing a nil balance owing, the 5^th was paid by way of transfer 10 days after the date of the invoice, and the 6^th and 7^th were also issued showing a nil balance. Notwithstanding this, however, at no time did the Defendant ever explain the Solicitors Remuneration Order 1994 certificate to me, or inform me of my right to challenge its invoices pursuant to Section 70 Solicitors Act 1974, and the difference in my rights if those bills were paid or unpaid at the time of the challenge. As a foreigner with limited English, how was I to know my rights to challenge the bills and the time limits for doing so if they were not expressly pointed out and explained to me by the Defendant?”

Mr Williams, Counsel for the Claimant, submitted that the bills were not ISBs but were simply requests for payments on account. He referred me to the decision of the Court of Appeal in Penningtons v Abedi (23 March 2000) where the Court of Appeal considered the question of interim billing by a solicitor to his client. He said that the judgments showed that ISBs may only be rendered at a natural break in the proceedings or pursuant to a clear agreement with the client to that effect. There was no suggestion here that the invoices raised on a monthly basis represented a series of natural breaks so the question could only be whether the parties had agreed to ISBs being delivered.

Lord Justice Simon Brown in his judgment in Penningtons had referred to a passage from the judgment of Lord Justice Bowen in Romer v Haslam (1893)2QB286 He had said:

“Payment on account by a client in respect of the separate bills is not conclusive to show that each of them was a separate bill of costs under the Act; it may be consistent with a clear understanding between the parties that the ultimate bill sent in should be the ultimate bill of costs, and that the payments were to be considered as made against that bill. It must always be a question of fact whether a document is a separate bill of costs or, so to speak, a chapter in a volume. In determining whether a document has been delivered as a bill of costs, it must not be forgotten that the onus of showing that it has been lies with the solicitor.”

Mr Williams submitted that no such agreement is provided for in the client care letter (Tab 2 – 0004) of 7 June 2007. Under ‘Terms of Business’ the letter states that normal practice is to seek payments on account of costs and disbursements. This, he said, was immediately followed by the statement that “we shall deliver bills to you at regular intervals for the work carried out during the conduct of the case. In this instance we will require money on account of costs of £2000.”

He submitted that the client care letter made no satisfactory distinction between ‘on account’ bills on the one hand and ISBs on the other and fell far short of endowing the Defendant with a special contractual right to deliver ISBs.

In the next paragraph of the client care letter it was stated, he said, that monthly invoices would be submitted ‘to enable you to budget for the case.’ There was no suggestion that this was intended to give the Defendant a right to deliver ISBs. Further, the paragraph began by saying that the delivery of monthly invoices was “subject to changes which may be needed if significant costs or disbursements are to be incurred in a short period of time”. This, he submitted, showed that it was envisaged that monthly invoices may encompass not only accrued liabilities but also forthcoming charges something permitted in ‘on account’ invoices but not ISBs.

Mr Williams submitted that the final sentence in that paragraph in which it is said that in the event of payment not being made ‘we must reserve the right to decline to act any further and that ‘the full amount of the work carried out until that date will be charged to you’ was entirely consistent with the invoices being ‘on account’ bills (see section 65(2) of the Solicitors Act 1974).

He therefore submitted that the client care letter contains no agreement to the delivery of ISBs rather than ‘on account’ requests.

Mr Williams submitted that the Court of Appeal decision in Penningtons v Abedi and the older cases discussed in that case predated the requirements in the Solicitors’ Costs Information and Client Care Code 1999 which, he said, required solicitors to have written retainers and to record important costs information in writing. He submitted that there is no place for the ex post facto creation of an implied right to submit ISBs when, at the outset, there are written terms of retainer which are intended to govern the whole of the relationship between solicitor and client. He referred to the judgment of Judge LJ (as he then was) in Penningtons where he envisaged that the approach would have been different were the case one whose terms of agreement had been formally agreed.

In his judgment in that case Judge LJ said:

“My only other observation is that it remains pretty startling that in the circumstances in which the present solicitors were retained by Mrs Abedi, the terms of payment were not expressly agreed from the outset. The desirability of such arrangements is likely to be reinforced by the increasing impact of the Civil Justice Reforms on a client’s entitlement to be kept properly informed of his escalating financial obligations at each stage of the proceedings. As clients should know exactly where they stand throughout the process, it is reasonable to anticipate that questions of their own costs, and payment, should be arranged at an early stage in the process.”

Mr Williams further submitted that where there was, as here, a client care letter setting out the terms of the retainer, consideration would be required for any alleged variation of that agreement. He also submitted that the ex post facto imposition of an unwritten contractual term, without notice to the client, which has the effect of significantly impacting on the client’s section 70 rights is irreconcilable with the special rules relating to consumer contracts: see regs 4-8 of the Unfair Terms in Consumer Contracts Regulations 1999.

Mr Williams referred to the modern view that significant variations to the terms of a retainer require informed consent from the client: See MacDougall v Boote Edgar Esterkin [2001] 1 Costs LR118.

Mr Williams submitted that for these reasons no implied right to deliver ISBs can be inferred in this case. Nor was there any such right on the facts. There was no statement that any invoice in this case was final and complete and in the earlier invoices they simply appeared to be records of the sums being taken from money held on account.

The only covering letter for an invoice disclosed in the Defendants’ evidence (see paragraph 12 above) actually referred to the accompanying schedule as a “running cost schedule” and the fax produced by the Defendant (exhibit “SDM11” to Sofia Moussaoui’s witness statement) also appeared to treat costs as incurred on a ‘running account’ see Tab 4 – 0312.

Finally Mr Williams referred to the notice which says “Court Assessment” (see paragraph 16 above). He submitted that this was pro forma and merely stated that there ‘may’ be the right to a section 70 assessment (although it appeared to be drafted in such a way as to discourage clients from exercising any such right). He submitted that such general pre-printed notices cannot suffice to create a right to submit ISBs where there is no such right conferred expressly in the written retainer.

Miss Ayling for the Defendant, replied by submitting that there was an express agreement between the parties that ISBs could be delivered. Nothing in the client care letter excluded the solicitor’s right to deliver such bills. Each of the delivered bills showed the period of the work covered by the bill accompanied by a print-out of the client ledger for that period showing the work done by each relevant fee earner and the time spent with the relevant hourly rates. The Claimant was an experienced business man and had consented to the bills being paid from money which had been transferred to the solicitors client account from the joint account. (see paragraphs 8, 9,10 and 11 of Sofia Moussaoui’s witness statement (Tab 4 – 0229 to 0230).

She submitted that the Claimant’s evidence had not addressed these issues save that in paragraph 11 of his first witness statement (Tab 2 Tab 2 – 005) he had said that he maintained that the first three bills should be assessed by the court because they were “simply bills on account, and not interim statute invoices”. She submitted that the Claimant’s evidence was in the main to complain that he had not received a proper estimate of costs (see paragraph 6 of his second witness statement at Tab 5 – 0342) and to answer the point made in paragraph 31 of Sofia Moussaoui’s witness statement that he had not raised any complaint against fees until the Defendant issued a statutory demand against him for payment of fees. The consequence of this and the other now irrelevant issues raised was that Sofia Moussaoui’s evidence dealt with those other issues rather than with the issue of billing.

Dealing with the client care letter, Ms Ayling submitted that nothing in the letter could be taken as ruling out the delivery of ISBs. The delivery of invoices monthly enabled the client to pay as the matter went on and ISBs would ensure that the client could not be charged extra at the end. The sentence beginning ‘we are sure you understand …….’ Was entirely consistent with the bills being ISBs. There was nothing in the letter which was inconsistent with interim statute billing. There was no reference to a final bill being delivered at the end of the case or to the bills not being final bills for the period they covered. There was nothing to say that the bills were requests for payment on account of a final bill.

With regard to the Notice (Tab 4 – 0258) referred to in paragraph 16 above, Miss Ayling submitted that it was sufficient to give the client the relevant information about his rights and that there was no obligation on solicitors to spell out the time limits imposed by the Act.

She submitted that the bills were all clear demands for payment. She referred to the bill dated 6 March 2008 (Tab 2 – 0018). This showed the amount owed from the previous invoice thus reinforcing that the amount charged (£2026.44) was a final invoice.

Miss Ayling referred to the letter of 5^th February 2008 (see paragraph 12 above). This referred to a ‘running cost schedule.’ However it was a ‘running costs schedule’ only for the period covered by the bill i.e 1/1/2008 to 31/1/2008.

She referred to paragraph 15 of Sofia Moussaoui’s witness statement (Tab 4 – 0231) and exhibit “SDM7”, which is an attendance note of a telephone conversation between Miss Bastow and the Claimant on 30 October 2007 (shortly before the trial). The Claimant authorised the transfer of £20,000.00 to cover counsel’s fees on account. This showed that the Claimant knew that sums were being paid out of the account and that withdrawals were being made to cover future disbursements.

Miss Ayling referred to paragraph 26 of Sofia Moussaoui’s witness statement and to the attendance note referred to in exhibit “SM15” (see paragraphs 8 and 9 above). She submitted that this was sufficient evidence for the court to infer that both parties agreed to the delivery of ISBs.

Miss Ayling submitted that if the court found that the client care letter did not permit the delivery of ISBs (which she contended it did) then the consideration for the variation was the continued representation by the Defendants of the Claimant in the litigation.

Miss Ayling referred to paragraph 24 of Sofia Moussaoui’s witness statement in which she says:

“24.

Furthermore, when we transferred the Claimant’s files from Messrs Goodwins the Claimant initially instructed us that he wished to challenge Goodwins bills and that he claimed that unauthorised deductions had been made….”

Exhibited as “SDM14” are correspondence and attendance notes relating to this.

Referring to the case of Penningtons v Abedi, Miss Ayling said that her primary submission was that the client care letter permitted ISBs to be delivered. However if that was not accepted, there was an agreement “to be inferred from the conduct of the parties that the bills which were delivered should be treated as completely self-contained bills covering the period down to the relevant date given”.

She referred to the submission made by Mr Williams in paragraph 16 of his skeleton argument and in his submissions before me that ‘the imposition of an unwritten contractual term without notice to the client, which has the effect of significantly impacting the client’s section 70 rights, is irreconcilable with the special rules relating to consumer contracts’. See regs 5-8 of the Unfair Contract Terms Regulations 1999. In his skeleton argument, although not in his submissions, Mr Williams overlooked regulation 4. This says at (2)(a):

“These Regulations do not apply to contractual terms which reflect-

(a)

mandatory statutory or regulatory provisions ……”

Miss Ayling submitted that the Notice “Court Assessment” to which attention was drawn on each bill and which appeared on its reverse (see paragraphs 15 and 16 above) were contractual terms which reflect statutory provisions, there being no requirement that the actual time limits have to be spelt out.

In my judgment the client care letter did not preclude the Defendants from sending ISBs to the claimant and the bills which were delivered had all the features of interim statute bills. They were all self contained statute bills for the work done during the periods covered by them. They were supplied with print-outs showing the work done and time spent and the hourly charging rate of each fee earner who was involved. They were each clearly demands for payment in their own right. Further, they are for precise amounts rather than lump sums and none of the bills form part of a series with amounts being carried over to the next invoice as a “running account”.

I also find that the Claimant was well aware that the bills were being settled from the moneys received by the Defendants which the Claimant had arranged should be paid to them from his previous solicitors (£30,875.57) plus £2000 on account of costs (see paragraph 8 of the Claimant’s first witness statement at Tab 2 – 0005) and the money being paid to them pursuant to the order of Mrs Justice Baron DBE dated 28^th March 2007 (Tab 2 – 0076 to 0078). I find that on the balance of probabilities the Claimant knew about and consented to these payments. Although the Claimant has said in his evidence that his English is not good, he appears at all relevant times to have had the assistance of a translator. The learned judge Mr Stephen Bellamy QC described the Claimant in paragraph 52 of his judgment (Tab 5 – 0369) as ‘sophisticated and urbane’ and ‘very successful’. For these reasons I do not consider that the Defendants have treated him unfairly or that they owed it to him to explain what was happening any more clearly than they did. His consent to the payment of the ISBs delivered to him and to the terms of the Retainer was, in my judgment, informed consent such as is required by the judgment of Mr Justice Holland in MacDougall v Boote Edgar Esterkin.

In his closing submissions Mr Williams mentioned that Miss Ayling had not responded to his submission that there must now (following the introduction of the Solicitors’ Costs Information and Client Care Code 1999) be a written retainer which cannot be varied without informed consent or (presumably) without a written memorandum of such variation. I have studied the 1999 Code and the Solicitors’ Code of Conduct 2007. It seems to me that neither paragraph 3 of the 1999 Code nor paragraph 2.03(5) of the 2007 Code requires anything more than that information about costs must be clear and confirmed in writing. There does not appear to be any rule that a solicitor’s retainer or any variation of the retainer has to be in writing. Further, there is no mention of any penalty for a failure to confirm costs information in writing although no doubt there could be disciplinary consequences.

Accordingly, in my judgment the first three bills delivered to the Claimant by the Defendants were valid ISBs and having been paid more than twelve months before the Claimant’s claim for assessment was issued, the court cannot make an order for their assessment (see section 70(4) of the Solicitors’ Act 1974.

With regard to the four bills which have been paid less than a year before the claim for detailed assessment was made, special circumstances have to be shown (see section 70(3)(a) of the Solicitors’ Act 1974).

There is no hard and fast rule as to what are special circumstances; each case must stand on its own circumstances. Lord Justice Bowen said in Re Boycott [1885] 29 Ch D) at 579,580:-

“special circumstances, I think, are those which appear to the judge so special and exceptional as to justify taxation”.

The Claimant has alleged that the Defendants charged him at incorrect hourly rates (see paragraphs 24 to 28 of his first witness statement: Tab 2 – 0010 to 0011). The Defendants responded to this in paragraph 22 of Sofia Moussaoui’s witness statement Tab 4 – 0234 and the attendance note at “SDM12”.

In my judgment, the Claimant was, on the balance of probabilities having regard to the evidence, well aware of the hourly rates which he was being charged throughout this matter and no special circumstances arises.

The Claimant alleges in paragraph 20 of his first witness statement that the Defendant made a secret arrangement with his wife’s solicitors to sanction the bills rendered by the other. No evidence of such an arrangement has been supplied and no special circumstances can therefore be shown.

He alleges in paragraph 21 of his first witness statement that he was put under pressure to sanction a payment of £20,000 from the “escrow account” to cover counsel’s fees for the hearing the next day. In my judgment a solicitor who instructs counsel to attend a hearing where he does not have the funds to pay him is not behaving in a professional manner. I am satisfied that the Claimant was well aware that counsel’s fees had to be paid and so no special circumstances can be shown.

The Claimant says that there was duplication between fee earners and between fee earners and counsel (see paragraphs 29 to 32 of his first witness statement). The Defendants respond to this in paragraphs 23 to 25 of Sofia Moussaoui’s witness statement. In my judgment no special circumstances have been shown.

The Claimant says that Mr Stephen Bellamy QC stated in his judgment (Tab 5 – 0358 to 0375):

“I was appalled to learn that the overall costs are estimated at some £300,000. That is an astonishing amount for what is essentially a preliminary issue”.

In her witness statement Sofia Moussaoui says at paragraph 27:

“The judge did indeed comment about the costs of the case however those included costs over and above his legal costs. In any event the Claimant had been advised on a number of occasions that his constant need for meetings and telephone calls were driving up his costs and that those would ultimately be unrecoverable by him if successful at court.”

In my judgment the remarks of the learned judge do not amount to “special circumstances”.

Mr Williams referred to the letters written by the Defendant to the Claimant dated 28^th February 2008 and 9^th May 2008. He submitted that these letters constituted termination of the retainer by the solicitors because the Claimant was not prepared to take their advice. If this was the case, the solicitor would have been in breach of their retainer and so disentitled from recovering their fees from the Client. He referred to the judgment of Mr Justice Mackay in Richard Buxton -v- Mills-Owens [2008] EWHC 1831 (QB).

On reading these letters, however, it is clear that they did not in fact terminate the retainer. The Defendants went on working for the Claimant until the end of June 2008 (see the bill dated 2^nd July 2008 and the computer print-out for the relevant period (Tab 2 – 0022 and Tab 2 – 0213). In any case, it is clear from these letters that there was a total breakdown of mutual trust and confidence between solicitor and client which would have justified termination of the retainer.

Mr Williams pointed out that the client care letter states that there will be a charge of £35 per page for letters/documents received (Tab 2 – 0005). He submitted that on an assessment between the parties a charge for letters in would not be allowed. Accordingly he submitted CPR48(2)(c) would apply unless the Claimant had been informed that as a result he might not recover this charge from the other party. In my judgment this does not appear to me to be a matter which is ‘so special and exceptional as to justify taxation’.

My conclusion is that there are no special circumstances relating to these four bills which would justify a detailed assessment of them.

There then remain the six further bills which are unpaid or (in one case) only partly paid. An order for the detailed assessment of those bills can be made although the court has a discretion to make that order on terms.

Unless the parties can agree the terms of the order which the court should make I will fix a date for a hearing at which outstanding matters can be resolved.