A client is entitled to delivery of a bill of costs, and has a statutory right to challenge his solicitor’s charges, even in case where fixed recoverable costs have been received by the solicitor under CPR 45.17 and CPR 45.18
ALLEN v BRETHERTONS LLP [2018] EWHC B15 (COSTS)
CPR 67.2 : DELIVERY OF FINAL BILL : FIXED COSTS : s68 SOLICITORS ACT 1974
As a footnote to his judgment Master Leonard referred to the defendant’s refusal to deal with the claimant’s costs lawyer, instead writing directly to the claimant himself:
“Ms Moore, when acting as a Costs Lawyer with a right to conduct litigation, is at the least entitled to expect from the Defendant the same professional courtesy as a solicitor would expect. It does not seem to me that she has received it.” [62]
This was an application by the claimant for the delivery of a bill of costs (along with a cash account) in the exercise of the jurisdiction referred to in section 68 of the Solicitors Act 1974 and at CPR 67.2.
The application was opposed.
The claimant retained the defendant to represent him in a claim for compensation following a Road Traffic Accident on 12 December 2015.
The defendant agreed to act for the claimant on a conditional fee basis, its profit costs in the event of success being determined on a standard time-costed basis.
In the event of success, the claimant was contractually responsible for all costs and disbursements (of which part would normally be recovered from the claimant’s opponent) but the defendant agreed to limit its total charges and disbursements, including VAT, to 25% of damages recovered plus whatever was recovered from the opponent.
In correspondence with the claimant (in its letter of 19 January 2016 and subsequently) the defendant referred to that 25% maximum as it is “success fee”.
In October 2016 the claimant accepted an offer to settle his damages claim in the sum of £7146.50.
On 24 November 2016 the defendant wrote to the claimant:
“I confirm that I have received the payment from the insurers… Unfortunately the insurers have only paid the sum of £610 for the medical report… and the hospital and GP records… The total cost of the medical report medical records was in fact £760…. You have previously kindly paid the sum of £90 and if you wish me to accept the offer of £610 then I will not be able to reimburse you with the cost of the records totalling £90 and will also [sic] to deduct the sum of £70 from your compensation which will leave you with the sum of £5289.87.
“If you do not wish me to accept the offer that has been made for the medical report and medical records I can, on your behalf, pursue payment of the full amount but this will only increase the costs incurred and I think it is very unlikely that, unfortunately, Ageas will increase the payment without us having to commence court proceedings… Could you please confirm whether you wish me to send you the above amount of £5289.87 in full and final settlement?”
The arithmetic in this letter was incorrect. The defendant wished to take from the claimant £160 to cover a reported shortfall in disbursement recovery of £150. However, this went unnoticed.
The matter was concluded on the basis that the claimant received £5289.87 from the defendant.
The defendant’s file contained three invoices addressed to the claimant.
Those bills were addressed to the claimant at his home address but described as “Payable by Ageas Insurance Ltd”. It was common ground that neither was delivered to the claimant.
“I confirm that the total settlement was £7146.50 from which I have deducted my success fee of 25% (£1786.63 receipted invoice enclosed) and the sum of £70 which I was unable to recover from the insurers regarding the cost of the medical report…”
None of the disbursements incurred upon the claimant’s behalf were included in any bill, whether delivered or not.
As at November 2016, the defendant had received from the claimant or from his opponent a total of £3,156.63 to meet costs, disbursements and VAT, of which £1,786.63 had been billed to the claimant, described as a “success fee”.
The claimant had been overcharged by £160, but the overcharge did not appear in any bill.
On 23 March 2017 the defendant wrote to the claimant again:
“Further to my letter of the 1 December 2016, now that all the disbursements have been paid I am now able to forward you the further sum of £20 in respect of the payments you made for the release of your medical records…”
No explanation was given for the discrepancy between this and the defendant’s earlier account of the amount due to the claimant.
In October 2017 the claimant consulted Kerry-Anne Moore, a Costs Lawyer employed by checkmylegalfees.com. Ms Moore wrote to the defendant on 12 October 2017 requesting copies of documents from their file. These were finally provided on 19 December 2017.
On 16 January 2018 Ms Moore requested delivery of a final bill. In the absence of any response, on 29 January she sent to the court the claimant’s application for delivery of a bill and notified the Defendant that that had been done.
On 14 February 2018 the Defendant wrote directly to the Claimant, copying its letter to checkmylegalfees.com:
“We were disappointed to hear that ‘Checkmylegalfees’ have initiated legal proceedings in connection with the claim… concluded on your behalf in December 2016. Our understanding from Checkmylegalfees is that you simply wish to have your fees explained so that they might assist in advising you whether or not you have inappropriately charged… We would very much appreciate an opportunity to directly address any concerns you might have about our charges in respect of work completed in pursuing your claim …”
The letter went on to recite the history of the contractual relationship between the parties and of the personal injury claim. In the course of the letter the defendant explained for the first time that the £20 sent to the claimant in March 2017 had been a refund, sent due to an earlier miscalculation of total disbursements.
Mr Robbins for the defendant accepted that as a general principle (subject to exceptions where special circumstances justify it) the costs recovered from another party are the client’s costs, not the solicitor’s: Cobbett v Wood [1908] 2 KB 420.
From that, he said, was derived the indemnity principle, under which a receiving party cannot recover from a paying party more than the amount which the client must pay his own legal advisers.
That there are exceptions to the indemnity principle is recognised in Thornley v Lang [2003] EWCA Civil 1484 at paragraph 5:
“… There is… a well established principle, known as the indemnity principle, that governs the basis upon which a court can properly make an award of costs. Subject to any statutory exceptions, an award of costs can only be made in order to indemnify a litigant against legal costs and expenses that he has paid, or become liable to pay….”
Mr Robbins argued that the Stage I and Stage II costs recovered by the defendant fell within such statutory exceptions. They are fixed costs recoverable under CPR 45.17 and CPR 45.18 and as such are the solicitor’s costs, not the costs of the client.
He relied upon the description of the costs recovered, at CPR 45.18, as “the legal representative’s costs”.
For those reasons, he submitted that Bill 54687 qualified as a valid, complete and final statute bill, representing all the costs payable by the claimant to the defendant.
In the alternative, he said that the power to order delivery of a bill or a cash account was a discretionary power. There is no need, he said, for either of those to be delivered. The claimant had received all the information he needed to seek advice as to, and if so advised, to exercise his right to apply for assessment of their bills.
Even if, contrary to his submissions, the fixed costs recovered by the defendant should have been included in an invoice and delivered to the claimant, that would not be information required for the claimant to seek advice upon the exercise of his rights.
He also submitted that the court had no jurisdiction to order delivery of both a bill and a cash account: CPR 67.2(1)(a) provided only that the solicitor may be ordered “to deliver a bill or cash account”.
The Claimant’s section 68 application had, he said, been made 15 months after the delivery of bill 54687, and no explanation had been given for the delay. The defendant contended that the claimant was relying upon a technicality to avoid being caught by the time limits imposed by the 1974 Act. He had not only received a full account of the basis upon which he had been charged and of monies paid and received, but he had received the defendant’s full file of papers and there was no explanation as to why he required a further bill.
51. I do not accept that that the fixed costs recovered by the Defendant from the Claimant’s opponent belonged to the Defendant. I believe that Mr Robbins is right in saying that
where the amount of recoverable costs is prescribed by statute, those costs are not open to challenge by a paying party under the indemnity principle. It does not however follow that they thereby become the costs of the solicitor rather than the costs of the client.
52. The Stage I and Stage II costs recovered by the Defendant from the Claimant’s opponent are described at CPR 45.18 as “the legal representative’s costs” only to distinguish them from an advocate’s costs (“advocate” being defined, by CPR 45.18(3) and CPR 45.37(2)(a), as a person exercising a right of audience).
CPR 45 does not purport to, nor does it, create any exception to the principle referred to in Cobbett v Wood.
53. Robbins’ submission is also inconsistent with the terms of retainer between the parties, which, in the usual way, made the Claimant responsible for all of the Defendant’s costs and disbursements on the basis that his liability would be reduced by costs recoverable from his opponent. An estimate was given (and, in correspondence, updated) on that basis.
The Defendant cannot on the one hand hold the Claimant contractually responsible for all its costs and disbursements (even on a capped basis) and on the other assert that he is not entitled to receive a bill for, or challenge, part of them because they are not his costs.
54. The retainer terms also made specific provision to the effect that the Defendant would be entitled to payment of the full amount of fixed costs recovered even if the Defendant’s time charges did not justify it. If the Defendant were already in a position to claim such costs as its own, that contractual provision would have been redundant.
55. The true position is recognised by the Defendant in the evidence of Mr Rees. In relying on the Defendant’s letter of 14 February 2018 in support the proposition that the Defendant has complied with rule 17.2 of the SRA Accounts Rules, he accepts that the fixed costs recovered by the Defendant were, in the words of the rule, “held for a client”.
56. Another, in my view insurmountable, obstacle to Mr Robbins’ argument is that none of the disbursements expended on the Claimant’s behalf and charged to him have been included in any bill. For a bill to be complete, they must be included. In the words of Farwell LJ in Cobbett v Wood:
“… The bill of fees, charges, and disbursements contemplated…” (by statute) “… is, I think, a complete bill of the whole of the fees, charges, and disbursements in respect of the particular business done….”
57. Robbins rightly argues, referring to paragraphs 57 and 58 of the judgment of Soole J in Parvez v Mooney Everett, that the content of a solicitor’s final bill is ultimately a matter for the solicitor. This does however miss the point that the solicitor is bound by that final bill and cannot charge to the client any item of costs or disbursements omitted from the bill. If the Defendant, as it does, claims the right to retain all of the money received by it for the Claimant’s costs and disbursements, then it must render a complete and final bill which includes them.
58. This brings me to Mr Robbins’ alternative argument to the effect that there is no need to make an order for delivery of a bill, because the Claimant has been provided with all the information he needs to judge the reasonableness of the Defendant’s charges. Again that seems to me to miss the point.
The Client has a statutory right to challenge the Defendant’s charges by an application for detailed assessment, and he cannot exercise that right until a final, complete statute bill has been delivered to him. It is for him to decide whether to make such a challenge. It not for the Defendant to say that he should not have the choice.
59. Mr Robbins’ argument might have more force had the information provided to the Claimant as to the Defendant’s costs and disbursements, given in the course of the Defendant’s retainer, been complete, clear and accurate. It was not. The breach of SRA Accounts Rule 17.2 (designed to ensure that a client is fully informed of monies being appropriated by a solicitor in payment of fees), the confusing misuse by the Defendant of the term “success fee” and the inaccurate information provided to the Claimant as to his contractual entitlement, all demonstrate that.
60. For the reasons I have given, I will make the order for delivery of a bill sought by the Claimant. I will not, however, order the delivery of a cash account. That is not because, as Mr Robbins contends, I do not have the power to do so: I do not accept that CPR 67.2 stands to be read in the restrictive way he advocates. The point is rather that (as the Claimant accepted in written submissions) a cash account would add nothing to the information already provided in the Defendant’s letter of 14 February 2018.
61. Ms Moore, the Claimant’s professional adviser, is a Costs Lawyer, that is to say a person regulated by the Costs Lawyer Standards Board and with the right, in cases such as this, to conduct litigation and to exercise a right of audience. In correspondence with the Defendant, she identified herself as such from an early stage and from the outset requested that the Defendant communicate with Checkmylegalfees.com, rather than with the Claimant directly
62. That seems to me to be consistent with the current provisions of the Solicitors’ Code of Conduct (at chapter 11), which indicate that a solicitor should not contact a party directly where that solicitor is aware that that party has instructed “a lawyer”, defined in the glossary to the Code of Conduct to include “a profession whose members are authorised to carry on legal activities by an approved regulator other than the SRA”
63. If the Defendant had been any doubt about Ms Moore’s status, a quick check of the public register maintained by the CLSB, and freely available on the Internet, would have confirmed it
64. The Defendant refused to comply with Ms Moore’s request not to contact the Claimant directly. Its response to Ms Moore’s initial communication was to write directly to the Claimant on the basis that Checkmylegalfees.com is not a firm of solicitors. Even after its file had been released to Checkmylegalfees.com and it had received notice that the Claimant’s application had been filed, the Defendant wrote its letter of 18 February 2018 directly to the Claimant, encouraging him to deal with the Defendant directly
65. I appreciate that the Defendant may have had some initial concerns about its authority to release papers to Checkmylegalfees.com, but by 18 February 2018 can have been no mistake about the Claimant’s wishes or Ms Moore’s professional status
66. Whether the Defendant has complied with the Code of Conduct is not a matter for me, but I would offer the view that
Ms Moore, when acting as a Costs Lawyer with a right to conduct litigation, is at the least entitled to expect from the Defendant the same professional courtesy as a solicitor would expect. It does not seem to me that she has received it.
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Toby Moreton
Increase in value of claim not a significant development under s7.6 PD3E