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Craig Ralph and Erica Bedford successful in Court of Appeal in Menzies v Oakwood Solicitors Ltd [2023] EWCA Civ 844.

By Appellant’s Notice filed on 4 January 2023, the Defendant solicitors appealed against the order made by Bourne J dated 14/12/22 ([2022] EWHC 3199 (KB)) allowing the Claimant’s appeal from a decision of Costs Judge Rowley.

The issue between the parties, and one having wide significance for solicitors generally, being when payment of a solicitors’ bill by deduction from monies received from the opponent amounts to “payment” for the purposes of s.70 Solicitors Act 1974

Costs Judge Rowley ruled that C’s application for detailed assessment of costs was time-barred by s.70(4) of the 1974 Act because it was made more than one year after the relevant costs had been paid.

Bourne J, on first appeal, disagreed, finding that the law required that there be a “settlement of account” between the parties (in effect a ‘pounds and pence’ agreement), “rather than a mere statement of account” and that such could be achieved by the delivery of a statutory bill and thereafter permitting the client a ‘reasonable time” in which to raise a dispute or be assumed to have agreed the pounds and pence deduction.

Oakwood Solicitors appealed to the Court of Appeal. Oakwood’s case being that payment by deduction, in circumstances where the deduction is provided for in principle by the retainer and is foreshadowed by notice and quantified in a sum certain within a delivered statutory bill is ‘payment’ within the meaning of that term in s.70 Solicitors Act 1974.

The Court of Appeal, Sir Geoffrey Vos, Master of the Rolls, Lord Justice Lewison and Lady Justice Simler, agreed.

41. ..”payment of the bill”…..ought to be no different to the action of payment of any other bill. We are content to adopt the meaning proposed by Aldous LJ in Gough, namely that payment for the purposes of section 70 is a transfer of money (or its equivalent) in satisfaction of a bill with the knowledge and consent of the payer.

42. In order for a transfer of money to be in satisfaction of a bill, there must be a bill to be satisfied. A “bill” in this context means a bill that complies with the requirements of section 69. The delivery of a compliant bill will give the client the necessary knowledge. The requirement of consent does not, in our view, require that consent be given after the delivery of the bill, if the client has already validly authorised the solicitor to recoup his fees by deduction from funds in his hands. What the client needs to consent to, in order for payment to take place, is “the transfer of money”, not necessarily the precise amount to be transferred. We reject the submission that the client must agree to a deduction quantified in pounds and pence. It is the process of assessment that fixes the precise amount that the client is required to pay.

43. The statute itself lays down the timetable, which is triggered by the delivery of a compliant bill. It is wrong in principle for judge-made law to qualify that timetable by the introduction of such indeterminate concepts as “a reasonable time” after delivery of a compliant bill. Either payment has taken place, or it has not.

44. It must not be forgotten that, even if money has been transferred with the consent or authority of the client, the client still has the right to challenge the precise amount through the medium of section 70, subject to the time limits laid down in the statutory timetable. That right exists whether or not the client has agreed the precise amount, whether before or after the transfer.

45. Whether the client has authorised the solicitor to recoup fees by way of a deduction from funds in hand is a question of interpretation of the written contract of retainer. In our judgment it is clear that the CFA in this case, and its accompanying documents, specifically authorised the Solicitors to recoup their fees out of the Client’s compensation, up to a maximum of 25% of that compensation. Payment of the bill took place when, after delivery of the bill, the Solicitors made that deduction. It follows, in our view, that payment of the bill took place more than one year before the bill was challenged and that, consequently, the court’s power of assessment was barred by section 70(4).

The court said the phrase ‘settlement of the accounts’ should no longer be used in this context.

“It is not a phrase that is used in section 70. Its meaning is unclear, and its origin lies in cases in which there was no written contract of retainer.”

The court concluded by criticizing the Solicitors Act 1974:

“This court has previously said in Belsner that the 1974 Act, the wording of which has barely changed in many relevant respects since the Solicitors Act 1843, is in need of reconsideration. We repeat that view. The world of 2023 is a far cry from the early days of Queen Victoria’s reign. The balance between the protection of consumers on the one hand and certainty on the other needs to be re-evaluated in order to produce a system fit for the current century.”

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