Sprey v Rawlison Butler LLP

The principal issue in this appeal is whether the monthly bills delivered by a solicitor to his client under a discounted conditional fee agreement are ‘statute bills’ and therefore capable of detailed assessment under s.70 Solicitors Act 1974.

On 13 September 2017, Master Rowley decided that the relevant monthly bills served by the Respondent solicitors in this case were ‘statute bills’ and, in consequence of the passage of time since their original service, the Appellant had lost the right to seek a detailed assessment of some of those bills. With the permission of the Master, the Appellant seeks to appeal that decision.

A solicitor’s retainer is an entire contract and, in the ordinary way, the solicitor is entitled to be paid by the client only at the end of the retainer (whether the completion of the transaction or the conclusion of the litigation). There are two exceptions: (1) where the solicitor and client have agreed that the solicitor may render interim bills; and (2) at a natural break in lengthy litigation: In re Romer & Haslam [1893] 2 QB 286. Agreement may be inferred from conduct, such as where the solicitor renders interim bills which the client accepts and pays: Abedi –v- Penningtons [2000] 2 Costs LR 205.

A bill rendered by a solicitor to his client may be one of 3 things:

A statute bill cannot subsequently be amended without the consent of the parties or an order of the court, which will be granted only in exceptional circumstances: Polak –v- Marchioness of Winchester [1956] 1 WLR 819. Statute bills are final bills in respect of the work that they cover, in that there can be no subsequent adjustment “in light of the outcome of the business”. They are complete self-contained bills of costs to date: Bari -v- Rosen [2012] EWHC 1782 (QB); [2012] 5 Costs LR 851 [15].

Applications by a former client for an order for detailed assessment of the solicitor’s bill under s.70 Solicitors Act 1974 are subject to time limits. If the application is made more than 12 months after the client has paid the bill, no order can be made: s.70(4). If the application is made more than 12 months after the bill is delivered, or after the bill has been paid (but within 12 months of payment), the client must show special circumstances: s.70(3). If the application is made within 12 months of delivery of the bill, the court may impose terms when making an order for assessment, unless the application was made within 1 month of delivery, when it may not: s.70(2).

The Respondent firm of solicitors acted for the Appellant in a claim for damages for professional negligence. From January 2012 to March 2013 they acted under a conventional retainer. From March 2013 to September 2015 they acted under a discounted conditional fee agreement (“CFA”). The Appellant and the Respondent parted company and the Appellant instructed new solicitors. The Appellant’s claim was ultimately settled in October 2015 for £525,000 inclusive of costs.

The CFA provided that the Appellant would be liable to pay the Respondent at discounted rates (40% of the normal rates) if he lost the claim. If he won, he was liable to pay the Respondent at their normal rates plus a success fee of 50%.

The Respondent billed the Appellant monthly, at the full rate during the conventional retainer, and at the 40% discounted rate during the period covered by the CFA (“the 40% invoices”). In October 2015, the Respondent billed the Appellant for the balance between the normal rate and the discounted rate (“the balancing invoice”) and, in January 2016, for the success fee. The Appellant paid all of the bills apart from (a) the last four of the 40% invoices, (b) the balancing invoice and (c) the success fee.

The Appellant applied for an order for assessment of all of the bills, but later withdrew his claim for assessment of the 13 bills that had been delivered under the conventional retainer. In relation to the 40% invoices, Master Rowley concluded that they were interim statute bills. On that basis, those rendered between March 2013 and September 2014, which had been paid more than 12 months before the application was issued (13 November 2015), were out of time and no order could be made for their assessment. The Master ordered that the bills dated from September 2014 should be the subject of assessment. He found special circumstances for the assessment of the 9 bills delivered more than 12 months before the application was issued (but paid within that 12 months) and directed that a further £10,000 be paid by the Appellant on account of the 3 unpaid discounted bills delivered less than 12 months but more than one month before the issue of the application. In respect of the balancing invoice he directed that, for the period covered by the time-barred bills, the assessment would be limited to the reasonableness of the hourly rate (and not the reasonableness of the time/work done).

The Appellant challenges the Master’s decision on three grounds. He contends that the Master was wrong to find:

that the 40% invoices were interim statute bills because such invoices “were not intended to be and could not have been final bills in respect of the work covered by them”;

that the Respondent firm had the right to deliver interim statute bills under the CFA; and

that the balancing invoice could not be assessed by reference to the reasonableness of the work done where that work was covered by earlier (time-barred) invoices.

The third ground only arises if the Appellant fails with the first two grounds.

Logically this issue comes first. If the agreement between the parties did not permit the rendering of interim statute bills, then that would be the end of the matter.

The ‘client care’ or as it was called ‘engagement’ letter, sent by the Respondent firm to the Appellant on 23 January 2012 (“the Client Care Letter”), so far as material, provided:

Included with that letter were the Respondent firm’s standard terms of business. In the section ‘Fees’, it included:

The CFA was agreed on 22 March 2013. I have been referred to the following parts of the CFA:

Under the section “Fees and Disbursements”:

“Rawlison Butler LLP’s fees” are defined as: “The amounts which Rawlison Butler LLP charges for the work it does on the Client’s Claim, whether charged at the Normal Rates or Discounted Rates set out below, but not including the Success Fee”

Under the section: “What happens if the Client Wins”

Under the section: “What happens if the Client Loses”

Under the section “Success Fee”

“Success Fee” is defined as “the percentage of Rawlison Butler LLP’s fees at the Normal Rates which are added to the Client’s bill if the Client Wins the Claim”; “Conditional Fees” are defined as “the difference between the fees at the Normal Rates and the fees at the discounted rates”.

Under the section “Right to apply for an assessment”

Under the section “Termination”

The CFA is silent as to the method by which the balancing invoice would be rendered to the Appellant in the event that the Appellant became liable to pay the fees at Normal Rates and (if applicable) the Success Fee.

The Master found that, read together, clauses 4.3 and 11.1, provided for the delivery of interim statute bills. He rejected the Appellant’s argument that clause 4.3 was ambiguous and should be read, applying the contra proferentem rule, as not providing a right to deliver interim statute bills. The balancing invoice was, the Master held, akin to an invoice for a success fee in a CFA; it was not adjusting the underlying bill, it was seeking the payment of a further sum the calculation of which was based on the original (unadjusted) 40% invoices.

In this appeal, Mr Marven contends that the Master’s decision should be upheld for the reasons he gave. Alternatively, he submits that, even if the CFA did not establish an agreement that the 40% invoices were statute bills, there was in any event an inferred agreement to this effect. In support of this submission he relies upon Abedi -v- Penningtons per Simon Brown LJ (quoting with approval a passage from Cordery on Solicitors):

During his submissions, I asked Mr Marven whether it was his contention that the terms of the CFA upon which he relied meant that all the bills rendered to the Appellant were interim statute bills or merely permitted interim statute bills to be rendered. He was initially inclined to submit that it was the latter, but he revised that submission to the former.

Mr Carpenter’s submission is that the Master’s interpretation of the CFA was wrong. On proper analysis, he submits, the CFA does not permit interim statute bills to be rendered. His submission is neatly encapsulated in his skeleton argument:

He submits that this analysis is supported by:

consideration of the inherent nature of the balancing invoice;

the express wording of the CFA;

the fact that the outcome should not depend on or be affected by how the Respondent chose to bill the Appellant; and

the decision in Bari.

I do not agree with the Master’s reading of clauses 4.3 and 11.1 and his conclusion that the CFA permitted the Respondent firm to render monthly statute bills. In my judgment, clause 4.3 is neutral as to whether the 40% invoices were statute bills or not. The agreement to pay at the 40% rate is equally consistent with the Appellant making payments on account at that rate. I am satisfied, however, clause 11.1 gives a clear indication that the 40% invoices submitted by the Respondent were not statute bills. Clause 11.1 informed the Appellant that he had the right to challenge the bills rendered by the Respondent firm under s.70 Solicitors Act 1974. This was described as the “right to an assessment by the court of the amount of the fees, Success Fee and/or Disbursements which are payable by the Client under this Agreement.”

The Success Fee could only by payable in the event of success (i.e. at the conclusion of the case, whether or not the CFA had been brought to an end at an earlier point). Unless the three billable items referred to in this clause are read disjunctively, the right to challenge those items arose only at the end of the case. That would mean that the interim bills were not statute bills but requests for payment on account or (more likely in the circumstances) Chamberlain bills.

In my judgment, further support for this conclusion comes clearly from the wording of clauses 5.1 and 6.1. These clauses provided what would happen in the event, respectively, that the client won or lost the claim. However, both clauses referred to fees being payable upon the final result: “If the Client Wins/Loses the Claim, the Client will be liable for Rawlison Butler LLP’s fees at the Normal/Discounted Rates…” Likewise, clause 14.1 provided that upon termination of the agreement (when the claim did not continue), “the Client must pay Rawlison Butler LLP’s fees at the Normal Rates for the work done up to the termination date”. On Mr Marven’s construction of the agreement as a whole, the Appellant was liable to pay the Respondent’s discounted fees (in the sense of being enforceable under a series of interim statute bills) each month as the claim went along. If the Appellant had been paying interim statute bills each month, then, in the event of success or early termination (when the claim did not continue), the Appellant’s liability was not to pay the Respondent’s “Normal Rates”, but to pay the “Normal Rates” minus the “Discounted Rates” that had already been paid. If, however, the interim bills that were rendered were for payments on account or Chamberlain bills, then the terms of the Agreement were correct. The Appellant’s liability to pay crystallised on the happening of that event (success, loss or termination). Only at that point did the Appellant become liable to pay at the Respondent’s fees either at the Normal or Discounted rates. Sums that had been already paid by the Appellant each month would be deducted from that sum.

It was also at that point that the Appellant’s right of assessment arose under clause 11.1. This is also consistent with my construction of the CFA as a whole. At the heart of an assessment is whether the sum charged by the solicitors to the client is reasonable. The charge for work done at 40% of the normal rates might well be reasonable, but at 100% not reasonable. A client would not know until the end of the claim (or earlier termination) at which rate he was being charged. On Mr Marven’s construction of the CFA, the Appellant progressively lost the right to challenge the bills as the claim went on.

In Richard Slade & Co Solicitors -v- Boodia & Another [2017] EWHC 2699 (QB); [2017] 6 Costs LO 827 Slade J held that bills submitted by the Claimant firm had not been statute bills on a proper reading of the agreement. The point of construction turned on the treatment of disbursements, but the principles have wider application. The following paragraphs of her judgment appear to me clearly to set out both the relevant principles and the policy reason for her conclusion:

It is true that, in the balancing invoice, the Respondent firm did in fact seek payment of the difference between Normal and Discounted Rates. Mr Carpenter submits that, in light of the terms of the CFA I have set out, it would have been more appropriate for the Respondent to have billed for the total fees at the Normal Rates and then given credit for the sums that had been received from the Appellant at the Discounted Rates. I accept his point, however, that the terms in which the Respondent constructed the balancing invoice is not determinative of the proper construction of the CFA. The point is unlikely to have been appreciated by the person drawing up the balancing invoice.

Finally, this construction of the CFA is consistent with the principle that a statute bill cannot subsequently be amended (see paragraph 5 above). The effect of the clauses I have identified was that the 40% invoices were liable to be later changed. What was ultimately to be paid for the work that was the subject of any 40% invoice would not be known until the Appellant won or lost the claim or terminated the CFA. Mr Marven submits that this construction would mean that the Respondent was not entitled to be paid. If by that he means that the Respondent lacked an enforceable right to payment of its fees (under s.69 Solicitors Act 1974), then that is right. But the consequences of that principle are not as harsh as they might appear. It does not mean that the Respondent was not entitled to some form of payment. The Respondent could always insist that the Appellant make payments on account under the express terms of the Client Care Letter.

In my judgment, therefore, the proper construction of the CFA was that it did not permit (or anticipate) the rendering of interim statute bills.

I turn therefore to Mr Marven’s alternative submission: that the parties had nevertheless agreed by their conduct that the interim bills rendered were statute bills.

Mr Marven’s submissions principally rely upon the terms of the 40% invoices, their amounts and the Appellant’s response to them when they were delivered. He points to the following:

the invoices were for precise, but varied, sums each month;

each invoice described what was being invoiced as “our professional charges as a final bill for the period [the relevant month]. Please see attached narrative”;

each was stated to be “payable on delivery”;

the wording on the pro forma invoice stated: “There are provisions to sections 70, 71 and 72 of the Solicitors Act 1974 relating to the assessment of costs which gives you the right to have the bill checked by an Officer of the High Court”; and

for the invoices rendered by the Respondent firm from 29 September 2014 to 19 May 2015 (inclusive), the Appellant settled each invoice in full each month.

He relies on the judgment of Simon Brown LJ in Abedi (p.219) in which the Judge relied upon and applied the earlier authorities of Davidsons -v- Jones-Fenleigh [1980] 124 Solicitors Journal 204:

Mr Carpenter readily accepts that if the inquiry is limited to looking solely at the 40% invoices and the Appellant’s response to them, then ordinarily the Court would have little difficulty in concluding that they were interim statute bills. However, he submits that it is not possible to draw the inferences that would otherwise support this conclusion in light of the CFA and its terms (as I have held them to be). I agree. In Abedi there was no CFA or other agreement to shed light on the nature of the payments that would be made by the client to the solicitors. Here, the weight that might normally be attached to the fact that the 40% invoices were expressed to be “final”, were submitted in precise sums, were to be paid immediately and were for defined work that had been carried out in the relevant period has to be assessed in the context of the CFA. It was obvious to the parties that, under the CFA, come what may, the Appellant was going to be liable to pay the Respondent firm’s fees at the Discounted Rate. However, the nature of the CFA meant that sums paid in purported settlement of the 40% invoices were necessarily payments on account and the bills themselves Chamberlain bills. In my judgment, the behaviour of the parties cannot, in this case, alter the express agreement that they had reached in the CFA as to the status of the bills that were rendered.

I therefore reject Mr Marven’s submission that there was an inferred agreement between the parties that the 40% invoices that were rendered would be statute bills. Such an agreement would have been inconsistent with the terms of the CFA as I have held them to be and inconsistent with the principle from Bari that the bills had to be final bills in respect of the work that they purported to cover (because they were liable to be increased if the claim were won or the CFA terminated). In fact, there was nothing inconsistent (given the nature of the CFA) with the 40% invoices being rendered in the form that they were and paid by the Appellant as payments on account. Given the fundamental liability to pay at the 40% rate that made good sense for both the Appellant and Respondent. It does not, however, change the 40% invoices into statute bills.

Given the conclusions that I have reached, I do not need to deal with Mr Carpenter’s third ground of appeal.

For these reasons, I allow the appeal. I will invite Counsel to agree the consequential order.