The Supreme Court has been increasingly willing to intervene on issues of costs and litigation funding. The most recent instance of that is Oakwood Solicitors v Menzies [2024] UKSC 34. The decision may be of particular significance for those involved in personal injury or clinical negligence litigation.
In this brief article, I consider some practical takeaways from Menzies for litigants and their solicitors.
The Legal Background
Menzies concerned solicitor-client costs assessments under Section 70 of the Solicitors Act 1974 (“the Act”). Section 70 states (emphasis added):
(1) Where before the expiration of one month from the delivery of a solicitor’s bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.
(2) Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment, order—
(a) that the bill be assessed; and
(b) that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.
(3) Where an application under subsection (2) is made by the party chargeable with the bill—
(a) after the expiration of 12 months from the delivery of the bill, or
(b) after a judgment has been obtained for the recovery of the costs covered by the bill, or
(c ) after the bill has been paid, but before the expiration of 12 months from the payment of the bill.
No order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the assessment as the court may think fit.
(4) The power to order assessment conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill.
(5) An order for the assessment of a bill made on an application under this section by the party chargeable with the bill shall, if he so requests, be an order for the assessment of the profit costs covered by the bill.
The Decision
The decision, which overturns that of the Court of Appeal, will be buoying for litigants who intend to challenge their solicitors’ fees.
The dispute concerned Section 70(4) of the Act, in bold above. In particular, the dispute concerned the time bar that restricts litigants from challenging a bill under Section 70, turning on the meaning of “payment”.
The Supreme Court’s press summary states (emphasis added):
“The court concluded that the authorities show a long established understanding as to what payment by deduction or retention requires in this context both generally and with specific reference to section 70 and its statutory predecessors. The need for a settlement of account has been consistently stated in cases from In re Bignold in 1845 to Harrison v Tew in 1987. This requires an agreement to the sum taken or to be taken by way of payment of the bill of costs. Such an agreement may in an appropriate case be inferred from the parties’ conduct and in particular from the client’s acceptance of the balance claimed in the delivered bill. The authorities therefore provide strong support for the Client’s case of the need for an agreement as to the amount to be paid in respect of the bill of costs and that mere delivery of the bill does not suffice”
Lord Hamblen, giving the lead judgment, also noted:
“[I]t would be surprising if payment was to occur without there being any opportunity for the client to consider the detail of the bill of costs and to decide whether and to what extent it should be paid.”
In short, clients must now agree to the payment of a bill from the client account or, for example, perhaps make a transfer to the solicitor upon receipt of the bill, before the Section 70 limitation period will start to run.
It does not seem that Menzies affects the application of the Solicitors Accounts Rules in relation to the transfer of monies out of the client account. However, some take the view that there is now a surprising distinction between those rules and the operation of the Section 70 limitation period. It appears possible that a transfer from the client account to the office account can be lawfully made without “payment” having been made for the purposes of Section 70(4). Many questions remain unanswered, though, and further litigation is likely to follow.
Important Takeaways
Solicitors were, prior to Menzies, already required to be upfront about the likely costs to be incurred. Although the statutory scheme for the assessment of costs is concerned with client protection, many solicitors may see Menzies as a challenge to solicitors’ right to finality.
Lord Hamblen nonetheless recognised that “it is open to solicitors to agree terms with their client that will assist in establishing acceptance of and agreement to the bill”. Many will consider that recognition to be guiding. Menzies will undoubtedly require solicitors to reconsider and, likely, revise their terms and conditions and billing practices. Solicitors must be careful to ensure that the limitation period for Section 70 assessments begins promptly (or at all). The Court has left open the possibility of prospective agreement as to some or all of the fees to be charged, which may prove to be an important safeguard for solicitors.
The impact of Menzies is profound. The efficacy of the standard term in the Law Society Model CFA [1] may well have been undermined. This leaves solicitors, particularly those involved in personal injury or clinical negligence litigation, facing a potentially endless limitation period for Section 70 costs assessments.
Solicitors must act promptly to reconsider their terms and conditions and billing practices. Particular care must be taken in relation to ongoing cases. Solicitors should expect that clients, past and present, may be increasingly ready to seek Section 70 assessments in light of potentially ongoing limitation periods.
[1] Note, this was already withdrawn from the Law Society website in or around 2021.
Whilst every effort has been taken to ensure that the law in this article is correct, it is intended to give a general overview of the law for educational purposes. Readers are respectfully reminded that it is not intended to be a substitute for specific legal advice and should not be relied upon for this purpose. Please also note that this article represents the opinion of the author and does not necessarily reflect the view of any other member of St Philips Chambers.
